Sihuan Pharmaceutical Announces 2012 Interim Results

HONG KONG, Aug. 30, 2012 /PRNewswire-Asia/ -- Sihuan Pharmaceutical Holdings Group Ltd. (HKEx: 0460) ("Sihuan Pharmaceutical" or the "Company"), a leading pharmaceutical company with the largest cardio-cerebral vascular drug franchise in China's prescription drug market, today announced its interim results for the six months ended 30 June 2012.

Financial Highlights

During the period under review, the Company continued to strengthen its cardio-cerebral vascular ("CCV") drug business while promoting sales of its products in other therapeutic areas. The Company continued to achieve sustainable growth, with revenue increasing by 40.3% to RMB1,389.3 million and gross profit rising 38.3% year-on-year to RMB1,071 million. Net profit attributable to the Company's equity owners increased by 21.2% to RMB461.4 million. The Board of Directors has also recommended an interim dividend of RMB3.1 cents per share (2011: RMB1.9 cents) for the six months ended 30 June 2012.

Dr. Che Fengsheng, Chairman and CEO of the Company, said, "Despite a challenging operating environment in the first half of the year, we maintained our growth momentum and this was largely driven by our diversified and optimized product portfolio and strengthened sales and marketing strategies. We made significant progress in deepening penetration in current markets as well as expanding into new markets, enhancing our sales and marketing network, and strengthening our R&D and production capabilities. Further, we effectively promoted the sales of various established and promising products such that ten major products achieved sales growth of over 50%, and further strengthened our leading position as the largest CCV franchise in China. We have also grown to the be the ninth largest pharmaceutical company in the prescription drug market in China which positions us to maximize the immediate and long-term market opportunities."

Robust Growth for Major Products

CCV Products

Benefitting from the broader revenue base from a further diversified product portfolio, sales of CCV products recorded satisfactory growth of 46.1% to RMB1,277.4 million, accounting for 91.9% of total revenue.

Sihuan Pharmaceutical has stepped up its efforts to further penetrate existing markets with its established products while expanding the presence of its promising products in new markets. As a result, sales revenue for Qingtong, GM1, Qu'Ao and Chuanqing grew by 72.2%, 63.0%, 38.4% and 11.0% to RMB29.1 million, RMB96.1 million, RMB40.8 million and RMB42.8 million, respectively. Sales of various promising products, such as Aoliankang, Yuanzhijiu, Yimaining and Yeduojia, also increased significantly by 272.6%, 238.8%, 157.7% and 76.6%, respectively. Sales volume of Kelinao and Anjieli were impacted by slower-than-expected progress in the lifting of medical reimbursement restrictions. As for Oudimei, delays in provincial drug tendering and the alignment of the Company's distribution network affected its growth.

Nevertheless, the Company believes that the impact is temporary. In the second half of the year, outstanding provincial drug tenders are expected to complete gradually and the mentioned factors are expected to fade. Further, sales of these products are expected to gradually improve during the second half of the year. At the same time, the Company plans to enhance efforts in academic promotions and expand its sales and marketing team. Taken together, this will enhance the Company's overall performance in the balance of the year and going forward.

Non-CCV Products

Despite that sales of anti-infective drugs decreased due to stricter restrictions on clinical use, the Company avhieved robust sales growth of its nervous system, respiratory and metabolism drugs. As a result, sales of these drugs grew by approximately 19.6% to RMB71.0 million compared to the same period of last year, accounting for approximately 5.1% of the Company's total revenue. Sales of Ren'Ao, Zhuo'Ao and Bi'Ao surged 101.3%, 61.8% and 35.8%, respectively.

Sound Progress in Research and Development ("R&D")

To strengthen its industry-leading position, the Company continued to further its efforts in R&D. Various projects have made solid progress during the first half of 2012. For example, Roxatidine Acetate Hydrochloride for Injection, Sihuan Pharmaceutical's first-to-market generic drug, passed on-site inspection conducted by the State Food and Drug Administration ("SFDA") in May 2012. With approval for production expected in the near future, the Company plans to launch the product in the second half of the year.

In addition, two other drugs, the exclusive Category IV new drug Cinepazide Mesilate and the Category I innovative drug L-Phencynonate Hydrochloride, have both progressed into more advanced phases of clinical trial. Another generic drug, Nalmefene Hydrochloride, is pending on-site inspection by the SFDA. As of the end of June 2012, the Company has obtained eight new patents.

Strengthened Production and Quality Management

The Company has commenced upgrades of its production bases in Beijing, Jilin and Liaoning in compliance with the new Good Manufacturing Practice ("GMP") standards. Langfang Sihuan Gaobo Pharmaceutical Co., Ltd, the Company's active pharmaceutical ingredient ("API") plant, passed the new GMP standards in 2011 and commenced production thereafter. During the Period, API plant produced over 10 APIs with aggregate production exceeding 15 tonnes. In addition, the Company has lowered costs and improved production yield and capacity of its newly acquired facilities.

Outlook for the Second Half of 2012

Despite the macro policy headwinds brought on by various medical reform measures, the Company believes that the pharmaceutical industry will continue to be one of the fastest-growing sectors in 2012. Rising per capita subsidy standards for medical insurance and the maximum reimbursements for medical treatments are expected to be catalysts in driving industry growth in 2012 and beyond. Other favourable factors such as the accelerated pace of urbanization and the aging population, along with the 12th Five-year Plan stipulated by the Chinese government, will further fuel robust market growth over the long-term.

Looking into the second half of the year, the Company will continue its two-pronged sales and marketing strategy to boost sales of its established and fast-growing promising products by furthering its penetration into current provincial markets and entering new markets. To that end, the Company will increase marketing efforts by expanding its sales force and stepping up academic promotion to further brand recognition. It will also strive to secure tenders for established products at stable price levels to expand market coverage of promising products.

To diversify its product offering, the Company plans to make further investments in the R&D of key projects in the pipeline, particularly for first-to-market generic drugs. The aim is to shorten the time needed to commercialize the Company's products. Meanwhile, the Company will seek to explore collaborative opportunities to maximize sources of new R&D projects, shorten the product development cycle, further enhance technology platforms, and strengthen its overall R&D capabilities.

Dr. Che concluded, "2012 is expected to be the most challenging year thus far for the Company and while it is proving to be a time of transition and adaptation, we are doing a very good job navigating through this. Facing intensified market competition as well as macro headwinds, the Company's strategic internal alignment and adjustments in 2012 constitute vital groundwork for our further development in the second half of this year and beyond. We are confident that by leveraging our highly-diversified product portfolio and strong R&D capabilities, we will be able to deliver strong and consistent returns to our shareholders over the long-term." 

About Sihuan Pharmaceutical Holdings Group Ltd.

Founded in 2001, Sihuan Pharmaceutical Holdings Group Ltd. is a leading pharmaceutical company and the largest cardio-cerebral vascular drug franchise in China's prescription drug market by market share. The success of the Group can be attributed to its differentiated and proven sales and marketing model, diversified portfolio of market leading drugs, extensive nationwide distribution network, and strong research and development capabilities. The company's current products encompass the top five medical therapeutic areas in China: cardio cerebral vascular system, central nervous system, metabolism, oncology and anti-infectives. Their major products such as Kelinao, Anjieli, Chuanqing, Qu'Ao GM1 and Oudimei are widely used in the treatment of various cardio-cerebral vascular diseases.

SOURCE Sihuan Pharmaceutical Holdings Group Ltd.