Simcere Pharmaceutical Group Reports Unaudited Fourth Quarter and Fiscal Year 2010 Results

Mar 08, 2011, 05:39 ET from Simcere Pharmaceutical Group

NANJING, China, March 8, 2011 /PRNewswire-Asia/ -- Simcere Pharmaceutical Group ("Simcere" or the "Company") (NYSE: SCR), a leading pharmaceutical company specializing in the development, manufacturing, and marketing of branded and proprietary pharmaceuticals in China, today reported unaudited financial results for the fourth quarter and fiscal year ended December 31, 2010.

Highlights

  • Total revenue was RMB587.7 million (US$89.1 million) for the fourth quarter of 2010, which represented an increase of 7.6% from RMB546.5 million for the same period in 2009. For the full year of 2010, total revenue was RMB2,141.1 million (US$324.4 million), which represented an increase of 15.3% from RMB1,857.1 million for the full year of 2009.
  • Income from operations was RMB62.8 million (US$9.5 million) for the fourth quarter of 2010, compared to a loss of RMB25.8 million for the same period in 2009*. For the full year of 2010, operating income was RMB217.9 million (US$33.0 million), which represented an increase of 113.2% from RMB102.2 million for the same period in 2009.
  • Net income attributable to Simcere was RMB58.7 million (US$8.9 million) for the fourth quarter of 2010, compared to a loss of RMB75.4 million for the same period in 2009*. For the full year of 2010, net income was RMB172.4 million (US$26.1 million), which represented an increase of 552.4% from RMB26.4 million for the same period in 2009.
  • Gross margin for the fourth quarter of 2010 was 84.1%, compared to 83.6% for the same period in 2009. For the full year of 2010, gross margin was 84.0%, increasing from 82.7% for the full year of 2009.  

*In fiscal year 2009 after the fourth quarter press release on March 16, 2010, the Company recognized a goodwill impairment charge of RMB76.4 million and an equity loss of RMB55.6 million associated with the acquisition of Jiangsu Yanshen.  Accordingly, the unaudited financial data of the fourth quarter 2009 were adjusted in the financial statements for the year ended December 31, 2009 filed in the Form 20-F on June 30, 2010 to reflect the revised purchase price allocation in respect of the acquisition of Jiangsu Yanshen in 2009.

"During the fourth quarter, Simcere's revenue and net income continued the stable growth trend of the previous three quarters, and we were especially encouraged by Endu's sales performance," said Mr. Jinsheng Ren, Chairman and Chief Executive Officer of Simcere Pharmaceutical Group. "Highlighting the success of Simcere's R&D efforts, during the year, we filed four clinical trial applications with the SFDA."

Mr. Ren added, "Looking ahead, we believe that China's fast-developing pharmaceutical market combined with Simcere's established and expanding national sales force and our growing product portfolio should help drive sustainable development in 2011 and beyond."

2010 Fourth Quarter Financial Results

Total revenue for the fourth quarter of 2010 was RMB587.7 million (US$89.1 million), which represented an increase of 7.6% from RMB546.5 million for the same period in 2009. For the full year of 2010, total revenue was RMB2,141.1 million (US$324.4 million), which represented an increase of 15.3% from RMB1,857.1 million for the full year of 2009.

Revenue from edaravone injection products under the brand names Bicun and Yidasheng totaled RMB222.4 million (US$33.7 million) for the fourth quarter of 2010, which was 37.9% of the Company's product revenue for the fourth quarter of 2010, an increase of 5.1% from RMB211.7 million for the same period in 2009. For the full year of 2010, revenue from Bicun and Yidasheng totaled RMB791.9 million (US$120.0 million), an increase of 6.2% from RMB745.4 million for the full year of 2009.

Revenue from Endu, the Company's patented anti-cancer biotech product, amounted to RMB67.9 million (US$10.3 million) in the fourth quarter of 2010, which was 11.6% of the Company's product revenue for the fourth quarter of 2010, an increase of 99.7% from RMB34.0 million for the same period in 2009. For the full year of 2010, revenue from Endu totaled RMB223.1 million (US$33.8 million), an increase of 79.6% from RMB124.2 million for the full year of 2009.

Revenue from Sinofuan, a 5-FU sustained release implant for the treatment of cancer, amounted to RMB36.1 million (US$5.5 million) for the fourth quarter of 2010, which was 6.1% of the Company's product revenue for the fourth quarter of 2010, an increase of 17.9% from RMB30.6 million for the same period in 2009. For the full year of 2010, revenue from Sinofuan totaled RMB151.8 million (US$23.0 million), an increase of 20.2% from RMB126.3 million for the full year of 2009.

Revenue from other branded generic products including Zailin and Yingtaiqing amounted to RMB255.4 million (US$38.7 million), which was 43.5% of the Company's product revenue for the fourth quarter of 2010, an increase of 20.4% from RMB212.1 million for the same period in 2009. For the full year of 2010, revenue from other branded generic products totaled RMB896.3 million (US$135.8 million), which represented an increase of 13.3% from RMB791.0 million for the full year of 2009.

Gross margin for the fourth quarter of 2010 was 84.1%, increasing from 83.6% for the same period in 2009. For the full year of 2010, gross margin was 84.0%, increasing from 82.7% for the full year of 2009.  

Research and development expenses for the fourth quarter of 2010 totaled RMB31.4 million (US$4.8 million), which represented a decrease of 37.3% from RMB50.1 million for the same period in 2009. This decrease was primarily due to a government research and innovation subsidy recognized in the fourth quarter of 2010 which offset part of the Company's research and development expenses and several concentrated payments by the Company in the same period of 2009 for several research and development projects. As a percentage of total revenue, research and development expenses were 5.4% for the fourth quarter of 2010, compared to 9.2% for the same period in 2009. For the full year of 2010, research and development expenses totaled RMB125.7 million (US$19.1 million), compared to RMB133.0 million for the full year of 2009.

Sales, marketing and distribution expenses for the fourth quarter of 2010 were RMB330.6 million (US$50.1 million), which represented an increase of 10.2% from RMB299.9 million for the same period in 2009. As a percentage of total revenue, sales, marketing and distribution expenses were 56.3% for the fourth quarter of 2010, compared to 54.9% for the same period in 2009. This increase was primarily due to the expansion of our sales team and higher promotion expenses for new-to-market drugs. For the full year of 2010, sales, marketing and distribution expenses were RMB1,186.1 million (US$179.7 million), which represented an increase of 18.3% from RMB1,002.4 million for the full year of 2009.

General and administrative expenses were RMB69.6 million (US$10.5 million) for the fourth quarter of 2010, which represented an increase of 23.6% from RMB56.3 million for the same period in 2009. As a percentage of total revenue, general and administrative expenses increased to 11.8% for the fourth quarter of 2010 from 10.3% for the same period in 2009. For the full year of 2010, general and administrative expenses were RMB269.5 million (US$40.8 million), which represented an increase of 21.3% from RMB222.1 million for the full year of 2009.

Share-based compensation expense, which was allocated to research and development expenses, sales, marketing and distribution expenses, and general and administrative expenses, based on the nature of the work that the employee was assigned to perform, totaled RMB8.1 million (US$1.2 million) for the fourth quarter of 2010. Share-based compensation expenses for the fourth quarter of 2009 were RMB6.0 million. For the full year of 2010, share-based compensation expenses totaled RMB31.1million (US$4.7 million), which represented an increase of 31.3% from RMB23.7 million for the full year of 2009.

Income from operations was RMB62.8 million (US$9.5 million) for the fourth quarter of 2010, compared to a loss of RMB25.8 million for the same period in 2009. The loss in the fourth quarter of 2009 was due to the recognition of a goodwill impairment charge of RMB76.4 million arising from the acquisition of Jiangsu Yanshen, which was included in earnings for the year ended December 31, 2009. For the full year of 2010, operating income was RMB217.9 million (US$33.0 million), which represented an increase of 113.2% from RMB102.2 million for the full year of 2009.

Income tax benefit for the fourth quarter of 2010 was RMB6.8 million (US$1.0 million), compared to income tax expense of RMB8.1 million for the same period in 2009. The income tax benefit recognized in the fourth quarter of 2010 was primarily due to the recognition of the deferred tax assets on the tax losses noted by one of the Group's PRC subsidiaries during 2010.  For the full year of 2010, income tax expense was RMB10.6 million (US$1.6 million) compared to RMB16.9 million for the full year of 2009.

Net income attributable to Simcere was RMB58.7 million (US$8.9 million) for the fourth quarter of 2010, compared to a loss of RMB75.4 million for the same period in 2009. Net margin was 10.0% for the fourth quarter of 2010, compared to negative 13.8% for the fourth quarter of 2009. For the full year of 2010, net income was RMB172.4 million (US$26.1 million), which represented an increase of 552.4% from RMB26.4 million for the full year of 2009. Net margin for the full year of 2010 was 8.1% as compared to 1.4% for the full year of 2009.

Basic and diluted earnings per American Depository Share ("ADS") for the fourth quarter of 2010 were RMB1.10 (US$0.17) and RMB1.06 (US$0.16) respectively. Basic and diluted earnings per ADS for the full year of 2010 were RMB3.18 (US$0.48) and RMB3.10 (US$0.47) respectively. One ADS represents two ordinary shares of the Company.

As of December 31, 2010, the Company had cash, cash equivalents and restricted cash of RMB278.7 million (US$42.2 million), compared to RMB458.1 million as of December 31, 2009.

Financial Statements

The unaudited condensed consolidated statements of income and balance sheets accompanying this press release have been prepared by management using U.S. GAAP. These financial statements are not intended to fully comply with U.S. GAAP because they do not present all of the financial statements and disclosures required by U.S. GAAP.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions. In particular, the quotations from management in this press release and the section under "Financial Outlook" contain forward-looking statements. These forward looking statements are based upon management's current views and expectations with respect to future events and are not a guarantee of future performance. Furthermore, these statements are, by their nature, subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a number of factors. Further information regarding these and other risks is included in Simcere's filings with the U.S. Securities and Exchange Commission at www.sec.gov. Simcere does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Conference Call

Simcere Pharmaceutical Group will host a conference call to discuss the Company's results for the  fourth quarter and fiscal year 2010 on Tuesday, March 8 at 8 a.m. Eastern Time (Tuesday, March 8, at 9 p.m. Beijing/Hong Kong time). The management team will be on the call to discuss the results for fourth quarter and fiscal year 2010 and to answer questions.

To access the conference call, please dial:

United States toll-free:

1-866-831-5605

International:

1-617-213-8851

China Telecom:

10-800-130-0399 / 10-800-120-2655 / 10-800-152-1490

China Netcom:

10-800-852-1490 / 10-800-712-2655

China 400 (for mobile users):          

400-881-1630 / 400-881-1629

Hong Kong:

852-3002-1672

Please ask to be connected to Q4 2010 Simcere Pharmaceutical Group Earnings Conference Call and provide the following passcode: 56440566. Simcere will also broadcast a live audio webcast of the conference call. The broadcast will be available by visiting the "Investor Relations" section of the Company's web site at www.simcere.com.

Following the earnings conference call, an archive of the call will be available by dialing:

United States toll-free dial-in number:                

1-888-286-8010

United States dial-in number:

1-617-801-6888

The passcode for replay participants is: 22405893. The telephone replay also will be archived on the "Investor Relations" section of the Company's web site for seven days following the earnings announcement.

About Simcere Pharmaceutical Group

Simcere Pharmaceutical Group ("Simcere") (NYSE: SCR) is a leading pharmaceutical company specializing in the development, manufacturing, and marketing of branded and proprietary pharmaceuticals in China. Simcere concentrates its research and development efforts on the treatment of diseases with high incidence and/or mortality rates and for which there is a clear demand for more effective pharmacotherapy such as cancer, strokes, cardiovascular disease, infectious diseases and pain. For more information about Simcere Pharmaceutical Group, please visit www.simcere.com.

Investor and Media Contacts:

Email: ir@simcere.com

In Nanjing:

Yehong Zhang

President

Simcere Pharmaceutical Group                                                

Tel: 86-25-8556-6666 ext 8811

In the United States:

Kate Tellier

Brunswick Group

Tel: 1-212-333-3810

In Beijing:

Ruirui Jiang

Brunswick Group

Tel: 86-10-5960-8600                                                                

In Hong Kong:

Joseph Lo Chi-Lun

Brunswick Group

Tel: 852-3512-5000  

Simcere Pharmaceutical Group

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts expressed IN THOUSANDS, EXCEPT SHARE AND ADS DATA)

Three months ended December 31,

Year ended December 31,

2009 Adjusted* RMB

2010 RMB

2010 USD

2009 RMB

2010 RMB

2010 USD

Product revenue

545,174

587,368

88,995

1,843,685

2,125,977

322,118

Other revenue

1,279

365

55

13,386

15,121

2,291

Total revenue

546,453

587,733

89,050

1,857,071

2,141,098

324,409

Cost of materials and production

(89,468)

(93,244)

(14,128)

(320,945)

(341,787)

(51,786)

Gross profit

456,985

494,489

74,922

1,536,126

1,799,311

272,623

Operating expenses:

Research and development

(50,129)

(31,448)

(4,765)

(132,981)

(125,737)

(19,051)

Sales, marketing and distribution

(299,890)

(330,608)

(50,092)

(1,002,419)

(1,186,144)

(179,719)

General and administrative

(56,339)

(69,617)

(10,548)

(222,118)

(269,512)

(40,835)

Impairment loss on goodwill

(76,398)

           -

          -

(76,398)

            -

           -

Income (loss) from operations

(25,771)

62,816

9,517

102,210

217,918

33,018

Interest income

1,458

1,010

153

8,861

4,214

638

Interest expense

(3,446)

(5,465)

(828)

(12,126)

(19,920)

(3,018)

Foreign currency exchange gains

32

1,877

284

382

5,511

835

Other income

1,880

136

21

2,971

2,286

346

Equity in losses of equity method affiliated          companies

(56,532)

(3,479)

(527)

(56,532)

(14,716)

(2,230)

Earnings (loss) before income taxes

(82,379)

56,895

8,620

45,766

195,293

29,589

Income tax expense

(8,066)

6,834

1,035

(16,897)

(10,640)

(1,612)

Net Income (loss)

(90,445)

63,729

9,655

28,869

184,653

27,977

Less: Net (income) loss attributable to the         noncontrolling interest

15,028

(5,033)

(763)

(2,441)

(12,242)

(1,855)

Net income (loss) attributable to Simcere

(75,417)

58,696

8,892

26,428

172,411

26,122

Earnings (loss) per share attributable to Simcere:

Basic

(0.68)

0.55

0.08

0.23

1.59

0.24

Diluted

(0.66)

0.53

0.08

0.23

1.55

0.23

Earnings (loss) per ADS attributable to Simcere:

Basic

(1.36)

1.10

0.17

0.46

3.18

0.48

Diluted

(1.33)

1.06

0.16

0.45

3.10

0.47

Weighted average number of common shares: Basic

111,042,270

106,815,562

106,815,562

115,099,258

108,321,562

108,321,562

Diluted

113,458,171

110,266,193

110,266,193

116,604,919

111,357,796

111,357,796

* In fiscal year 2009 after the fourth quarter press release on March 16, 2010, the Company recognized a goodwill impairment charge of RMB76.4 million and an equity loss of RMB55.6 million associated with the acquisition of Jiangsu Yanshen.  Accordingly, the unaudited financial data of the fourth quarter 2009 were adjusted in the financial statements for the year ended December 31, 2009 filed in the Form 20-F on June 30, 2010 to reflect the revised purchase price allocation in respect of the acquisition of Jiangsu Yanshen in 2009.

SIMCERE PHARMACEUTICAL GROUP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS EXPRESSED IN THOUSANDS)

December 31,

December 31,

December 31,

2009

2010

2010

RMB

RMB

USD

Assets

Current assets

Cash, cash equivalents and restricted cash

458,145

278,716

42,230

Accounts and bills receivable, net

704,321

884,738

134,052

Inventories

106,655

89,732

13,596

Other current assets

102,743

135,301

20,500

Total current assets

1,371,864

1,388,487

210,378

Property, plant and equipment, net

758,246

866,262

131,251

Land use rights

146,158

142,910

21,653

Goodwill and intangible assets, net

695,267

658,139

99,718

Investments in and advance to affiliated companies

121,865

121,220

18,366

Other assets

44,502

41,234

6,248

Total assets

3,137,902

3,218,252

487,614

Liabilities

Current liabilities

Short-term borrowings and current portion of long-term debts

76,000

360,000

54,545

Accounts payable

41,439

49,638

7,521

Bills payable

110,810

-

-

Other payables and accrued liabilities

464,616

596,208

90,335

Total current liabilities

692,865

1,005,846

152,401

Long-term debts, excluding current portion

122,685

19,306

2,925

Deferred tax liabilities

93,108

68,811

10,426

Other liabilities

21,561

22,593

3,423

Total liabilities

930,219

1,116,556

169,175

Redeemable noncontrolling interest

-

47,453

7,190

Shareholders' equity

Simcere shareholders' equity

Ordinary shares at par

8,716

8,422

1,276

Additional paid-in capital

1,170,687

890,950

134,992

Accumulated other comprehensive loss

(43,886)

(31,972)

(4,844)

Retained earnings

846,707

1,011,272

153,223

Total equity attributable to Simcere

1,982,224

1,878,672

284,647

Noncontrolling interest

225,459

175,571

26,602

Total shareholders' equity

2,207,683

2,054,243

311,249

Commitments and contingencies

Total liabilities, redeemable noncontrolling interest and shareholders' equity

3,137,902

3,218,252

487,614

Note: The conversions of Renminbi (RMB) into United States dollars (USD) as at the reporting dates are based on the noon buying rate of USD1.00 = RMB6.600 on December 31, 2010 as set forth in the H. 10 statistical release of the Federal Reserve Board. No representation is intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on the reporting dates.

SOURCE Simcere Pharmaceutical Group



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