GUANGZHOU, China, April 4 /Xinhua-PRNewswire-FirstCall/ --
Fourth Quarter Highlights:
-- Revenue increased 66% to $8.6 million
-- Gross Profit increased 75% to $3.4 million
-- Operating income increased 80% to $2.9 million
-- Net Income increased 48.1% to $2.4 million
Full Year Highlights
-- Revenue was $24.0 million a 60.7% increase
-- Gross Profit was $9.0 million, a 43.2% increase
-- Company significantly increased proprietary product revenue by 51%
to $3.2 million
China Medicine Corporation (OTC Bulletin Board: CHME), a leading distributor of medical products, traditional pharmaceutical and Chinese medicines, herbs and dietary supplements today announced financial results for the fourth quarter and year ending December 31, 2006.
For the fourth quarter of 2006, revenue increased 65.4 percent to $8.6 million compared to $5.2 million for the same period in 2005, as a result of a broader product portfolio, sales network and improved sales of proprietary products. China Medicine is actively developing an extended line of proprietary products and as a result of these efforts experienced a 181.4 percent increase in medical formula sales to $1.6 million. The Company previously recorded proprietary product revenue as other operating income which was not included in reported revenue. Gross profit was $3.4 million and increased 74.8 percent from the fourth quarter 2005 with gross margins of 40.3 percent and 38.1 percent respectively. The year over year increase in gross margin was related to a greater percentage of higher margin medical formula sales which offset increasing price controls by the Chinese government on some antibiotic products the Company distributes.
"During the fourth quarter we delivered a meaningful increase in medical formula revenue as we expanded sales of our proprietary product offering specifically for our Hemsleyadin capsule, a natural herbal anti-infection and anti-inflammatory for acute bacterial diarrhea, enteritis, bronchitis, pneumonia and urinary trace infection in addition to our Extract confound soft gel of Ageratum used to treat dizziness, upset stomach, vomiting and diarrhea," commented Mr. Shenshan Yang, CEO of China Medicine. "The prospects for future proprietary product growth remain robust as we have two existing patents on oral medications to treat heat exhaustion and indigestion while having patents pending on five additional products and 14 trademarks. Our ADTZ product initiative for the treatment of aflatoxins in corn feed and crops is beginning to gain traction in the market. Separately, we expect to file an application with the Chinese FDA in May 2007 for approval of our Yutian Capsule which is a traditional Chinese medicine used in the treatment of lung cancer. We believe that proprietary products will be a critical and growing component of our business and will look to allocate the necessary resources to ensure future success."
Operating expenses increased to $0.5 million for the three months ended December 31, 2006 compared to roughly $0.3 million for the fourth quarter of 2005, with the increase primarily related to higher selling and general administrative expenses to support growth. Operating income was $2.9 million, an 80.2 percent increase from $1.6 million in the fourth quarter of 2005. Operating margins were 34.3 percent and 31.5 percent for 2005 with the increase in margin a result of greater operational leverage and an increase in medical formula sales. Net income for the fourth quarter of 2006 was $2.4 million compared to $1.6 million in 2005, an increase of 48.1 percent. The Company incurred $0.5 million in taxes compared to no such expense last year. Earnings per weighted average diluted share were $0.31 compared to $0.25 last year. However, because of the timing of the reverse merger late in 2006 the number of weighted average fully diluted shares used in this calculation of 7.6 million is not reflective of the current capital structure. The Company currently has 19.5 million fully diluted shares outstanding which includes all warrants with strike prices below the current market price
Revenue for 2006 increased 60.7 percent to $24.0 million compared to $14.9 million in 2005. This increase was due to a 36 percent increase in products for sale from 1,100 in 2005 to approximately 1,500 at the end of 2006 in addition to the 50.8 percent increase in medical formula sales. Gross profit for 2006 increased 43.2 percent to $9.0 million from $6.3 million last year. This resulted in gross margins of 37.4 percent and 42.0 percent respectively with the decrease related to aforementioned price decreases on some of the Company's products.
China Medicine purchases most of its products from five PRC drug manufacturers and in some instances is the exclusive distributor for these products throughout China. Prescription and over the counter medicines accounted for $15.3 million or 64.0 percent of 2006 revenue while traditional Chinese medicines accounted for $5.4 million or 22.6 percent. The top selling product for the Company was Iopamidol, a traditional pharmaceutical used in stomach radiography which accounted for 16.7 percent of total sales. The Company's top five products accounted for 32.3 percent of revenue with China Medicine holding exclusive distribution rights to Iopamidol.
Operating income was $6.2 million for the year, an increase of 17.1 percent compared to the $5.3 million in 2005 with operating margins of 25.8 percent compared to 35.4 percent last year. Operating income was impacted in 2006 by a $0.9 million non cash expense related to reverse acquisition expenses. Net income was $4.8 million or $0.63 per weighted average fully diluted share compared to $5.7 million in net income or $0.87 per weighted average fully diluted share in 2005 based on 7.7 million and 6.5 million shares respectively. During 2006, the Company incurred $1.2 million in taxes as compared to no such expense in 2005. Excluding the reverse merger expense net income would have been $5.7 million which was unchanged from the prior year despite the 2006 tax expense.
Mr. Yang continued, "We have the ability to selectively distribute products that are in high demand while avoiding long term price compression. This flexibility allows us to continuously review our product offering and target the most profitable drugs to distribute while capitalizing on our key asset which is our customer relationships and expansive network."
China Medicine ended the year with $0.4 million in cash compared to $0.1 million in 2005. Accounts receivable increased 191.8 percent to $7.0 million compared to $2.4 million for the year ended December 31, 2005. The Company experienced an increase in receivables as a result of higher sales and lengthening payment terms with customers. Management believes current receivables are of high quality, held with long term customers, and is confident in the ability to collect. Working capital at the end of the year was $12.8 million. Shareholder equity increased 176.0 percent to $13.1 million compared to $4.8 million in 2005. In 2006 the Company used $2.2 million in cash flow for operations. There are 7.4 million warrants outstanding which if converted would bring the Company $15.7 million in proceeds.
"We are pleased with our overall performance this year and expect for the momentum in our business to continue," commented Mr. Yang. "Many industry experts estimate the Chinese pharmaceutical market is growing approximately 20 percent per year and could reach $120 billion by 2020. With our growing platform of products, ability to identify highly desirable drugs and extensive distribution base we believe we are well positioned to outpace overall industry growth."
About China Medicine Corporation:
China Medicine is a distributor of medical products, traditional pharmaceutical medicines, traditional Chinese medicines, Chinese herbs and dietary supplements to over 28 provinces and 800 customers within China. The Company sells more than 1,500 products and is actively building a pipeline of proprietary traditional and Chinese herbal remedy products targeting oncology, high blood pressure and the removal of Aflatoxins from food and animal feed. For more information visit the Company's website at http://www.chinamedicinecorp.com .
Safe Harbor Statement:
This press release contains forward-looking statements concerning China Medicine Corporation's business and products. The actual results may differ materially depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company's reports filed with the Securities and Exchange Commission. China Medicine Corporation undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
Consolidated Balance Sheets
For the Period Ended December 31, 2006 and 2005
$US
Assets
2006 2005
Cash 371,480 91,964
Accounts Receivable 7,034,911 2,410,824
Inventories 1,900,467 1,382,929
Advance to Suppliers 4,077,412 1,075,546
Other Current Assets 42,136 38,301
Total Current Assets 13,426,406 4,999,564
EQUIPMENT, net 1,215,311 330,015
OTHER ASSETS
Intangible Assets 682
Total Assets 14,642,399 5,329,579
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable, trade 188,877 170,196
Short-term loans 95,480
Other payable - related parties 30,000
Other payables and accrued liabilities 23,265 97,449
Customer deposits 17,980 37,292
Taxes payable 295,902 170,456
Liquidated damages payable 44,003
Total current liabilities 600,027 570,873
MINORITY INTERESTS 908,480
SHAREHOLDERS' EQUITY
Preferred stock 234
Common stock 816 653
Paid-in capital 4,396,971 120,347
Contribution receivable (961,500)
Statutory reserves 1,345,206 722,909
Retained earnings 7,979,242 3,813,665
Accumulated other comprehensive income 372,923 101,132
Total shareholders' equity 13,133,892 4,758,706
Total liabilities and shareholders equity 14,642,399 5,329,579
Consolidated Statement of Operations
For the Period Ended December 31, 2006 and 2005
$US (Except for share amounts)
Three Months Ended Year Ended
2006 2005 2006 2005
REVENUES
Product sales 6,916,225 4,584,968 20,772,783 $ 12,791,031
Medical formula sales 1,630,031 579,179 3,219,167 2,134,872
Total revenues 8,546,256 5,164,147 23,991,950 14,925,903
COST OF GOOD SOLD 5,106,769 3,196,900 15,017,100 8,656,873
GROSS PROFIT 3,439,487 1,967,247 8,974,850 6,269,030
OPERATING EXPENSES
Research and
development expenses 23,378 164,010 294,080 478,590
Selling, general and
administrative expenses 481,094 174,759 1,565,288 511,170
Reverse acquisition
expense 931,270 --
Total operating
expenses 504,472 338,769 2,790,638 989,760
INCOME FROM OPERATIONS 2,935,015 1,628,478 6,184,212 5,279,270
OTHER INCOME (EXPENSE) (56,188) 725 (199,945) 410,900
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 2,878,827 1,629,203 5,984,267 5,690,170
PROVISION FOR INCOME TAXES 499,857 -- 1,229,688 --
INCOME BEFORE MINORITY
INTEREST 2,378,970 1,629,203 4,754,579 5,690,170
MINORITY INTEREST 33,295 -- 33,295 --
NET INCOME 2,412,265 1,629,203 4,787,874 5,690,170
OTHER
COMPREHENSIVE
INCOME
Foreign currency
translation adjustment 70,951 53,283 271,791 101,132
COMPREHENSIVE INCOME 2,484,216 1,682,486 5,059,665 $ 5,791,302
Earning per share -
basic 0.32 0.25 0.65 $ 0.87
Earning per share -
diluted 0.31 0.25 0.63 $ 0.87
Weighted average
number
of shares outstanding -
basic 7,635,111 6,530,000 7,352,082 6,530,000
Weighted average
number
of shares outstanding -
diluted 7,788,000 6,653,000 7,653,584 6,530,000