GUANGZHOU, China, March 26 /PRNewswire-Asia / -- China Medicine Corporation (OTC Bulletin Board: CHME) ("China Medicine" or "the Company"), a developer and a leading distributor of prescription and
over-the-counter pharmaceuticals, traditional Chinese medicines ("TCM"), nutritional and dietary-supplements, medical devices, and medical formulations in the People’s Republic of China ("PRC"), today reported outstanding financial results for the fourth quarter and full year ended December 31, 2008.
Fourth Quarter 2008 Highlights
-- Revenues increased 51.2% to $24.4 million
-- Gross profit increased 30.4% to $5.8 million
-- Operating income increased 24.5% to $4.2 million
-- Net income increased 26.6% to $3.5 million
-- Received approval from the Guangdong Food & Drug Administration
("Guangdong FDA") to distribute dental equipment and instruments in
Guangdong Province
-- Once again awarded GSP (Good Supply Practice for Pharmaceutical
Products) certification from State Food and Drug Administration
(SFDA).
-- Received rADTZ patent approval for Australia, South Africa and Korea
Full Year 2008 Highlights
-- Total revenues increased 27.4% to $53.6 million
-- Gross profit increased 25.6% to $15.6 million
-- Operating income increased 30.0% to $11.0 million
-- Net income increased 32.7% to $9.1 million, or $0.60 per diluted
share
“We are very pleased with our fourth quarter and full year 2008 results despite the challenging economic environment. In the fourth quarter, revenue increased 51.2% compared to the same period last year. Any slowdown from the global economic crisis was mitigated by expansion of our distribution network and positive seasonal factors in which orders were booked just prior to the end of the year,” said Mr. Senshan Yang, CEO and Chairman of China Medicine Corporation.
“Our top selling drugs for the fourth quarter included Hongjin Xiaojie Capsule, which is used for the treatment of coughs, accounted for 5.66% of revenue; Xueshuantong injection, which is used to improve blood circulation, remove vascular stasis and dilate blood vessels, accounted for about 5.44% of revenues; Cinepazide maleate injection, which is used in the treatment of vascular sclerosis, accounted for 4.11% of revenue. During the quarter, we also received approval from the Guangdong Food and Drug Administration (FDA) to distribute dental and oral surgery equipment, which we view as an attractive market in China as the demand for dental services is expected to grow.
Our gross profit margin fell 4% compared to the fourth quarter of 2007 due to intense competition in the Chinese pharmaceutical industry. We are currently taking steps to improve our gross margin, such as upping our efforts to obtain more exclusive distribution rights on high-margin prescription products. We also plan on developing more specialty pharmaceutical products and increasing our existing product offerings. This will help us strengthen our competitive advantages and diversify business risk,” said Mr. Yang.
Fourth Quarter Results
China Medicine’s total revenues in the fourth quarter of 2008 were $24.4 million, an increase of 51.2% over the fourth quarter of 2007. This was attributable to a 66.2% increase in product sales, primarily driven by an increase in over-the-counter product sales made through the company’s increased market share in the municipal and rural areas of Guangdong Province. In addition, an earlier Chinese New Year resulted in many orders being booked prior to December 31, 2008, helping to contribute to the Company’s strong top line growth.
Product sales in the fourth quarter of 2008 totaled $24.4 million and accounted for 99.97% of total net revenues. Sales of prescription products accounted for 78.94% of total net revenues, and over-the-counter medicines accounted for 17.9% of total revenues during the quarter. Sales of dietary supplements, medical equipment and others accounted for 1.12%, 1.87% and 0.14% respectively. Medical formula sales accounted for 0.03% of total revenues, totaling $7,254, down 99.5% from the fourth quarter of 2007. The decline was due to stricter regulations by the State Food and Drug Administration (SFDA) in China, where approvals for new medical formulas were limited since the process has become more complex due to concerns over food and pharmaceutical safety.
Gross profit in the fourth quarter of 2008 was $5.8 million, an increase of 30.4% over the fourth quarter of 2007. Gross margin was 24% of total revenues, down from 28% of total revenues in the fourth quarter of 2007. The decline in gross margin was due to lower selling prices for some of the pharmaceutical products the Company distributes as the Chinese government set a price ceiling on certain generic drugs. To counter this situation, China Medicine is adjusting its portfolio to increase pharmaceutical products with exclusive distribution rights, which have a higher margin.
Operating expenses in the fourth quarter of 2008 were $1.6 million, up 48.1% from $1.1 million in the fourth quarter of 2007. This increase was due to higher selling, general and administrative expenses related to increase in revenues for the fourth quarter of 2008.
Operating expenses represented 6.7% of total revenues in the fourth quarter of 2008, slightly down from 6.9% in the fourth quarter of 2007.
The Company recorded $0.36 million in research and development expenses in the fourth quarter of 2008, compared to $0.21 million in the fourth quarter of 2007. The increase in R&D expense was due to the pre-clinical study of Yutian Capsule, a traditional Chinese medicine developed for use in the treatment of lung cancer.
Operating income was $4.2 million in the fourth quarter of 2008, up 24.5% from $3.4 million in fourth quarter of 2007. Operating margin was 17%, as compared to 21% a year ago.
Net income for the fourth quarter of 2008 was $3.5 million, or $0.23 per diluted share, compared to $2.8 million, or $0.17 per diluted share in the fourth quarter of 2007.
Full Year 2008 Results
For the full year 2008, total revenues were $53.6 million, up 27.4% from $42.1 million in 2007. Approximately 97.5% of revenue came from product sales and 2.5% came from medical formula sales. Gross profit for the full year 2008 was $15.6 million, an increase of 25.6% from $12.4 million in 2007. Gross profit margin was 29% in 2008, the same as in 2007. Operating income was $10.9 million, up 29.9% from $8.4 million in 2007. Operating margin was 20%, the same as in 2007. Net income for 2008 was $9.1 million or $0.60 per diluted share, compared to $6.9 million or $0.50 per diluted share in 2007.
Financial Condition
As of December 31, 2008, China Medicine had $2.8 million in cash and cash equivalents, and approximately $32.58 million in working capital, an increase of 14.1% from $28.5 million in 2007. For the year ended December 31, 2008, China Medicine’s cash flow from operations was $4.2 million. Stockholders’ equity as of December 31, 2008 was $42.8 million, an increase of 38.5% over the $30.9 million recorded as of December 31, 2007.
During the fourth quarter, the Company spent $2.7 million on purchasing and installing equipment for the production of rADTZ. The Company also spent $2.9 million as the deposit on the purchase of the ownership of BCG (Bacillus Calmette-Guerin) vaccine for the prevention of infection in bladder cancer patients post surgery and $2.3 million on exclusive distribution rights for multivitamin food supplement products.
2009 Outlook
"Looking forward to 2009, we expect to see continued growth from our pharmaceutical products distribution business as the Chinese government rolls out its plan to spend RMB850 billion ($123 billion) in the next three years to establish a universal health care system. As a pharmaceutical developer and a leading pharmaceutical distributor in China today, we are committed to further expanding our distribution network, increasing the number of higher margin products in our distribution catalogue, and focusing our R&D efforts on increasing our pipeline of proprietary pharmaceutical products," said Mr. Yang.
"During the first quarter of 2009, we are continuing to make progress in our efforts to introduce to the market recombinant Aflatoxin Detoxifizyme (rADTZ), our novel and innovative product that has the potential to detoxify aflatoxin (AFT), a cancer causing agent, in food and feed. We recently achieved another milestone with rADTZ, where we have successfully completed all rounds of initial rADTZ experiments and testing. The product is currently being reviewed by the Department of Agriculture, China. In addition, we have also applied for a production permit for rADTZ and expect to receive approval in the second quarter of 2009,” said Mr. Yang.
“The pharmaceutical industry in China is undergoing reform and competitors might see delays in getting new pharmaceutical products approved or receiving Good Manufacturing Practices (GMP) certification for their manufacturing facilities as a result of stricter rules and tighter regulations. However, due to the success of our distribution model, we believe China Medicine is well positioned to take advantage of the increasing demand for good quality healthcare products from the burgeoning middle class and the elderly population in China," concluded Mr. Yang.
Conference Call
China Medicine will hold its fourth quarter conference call for all interested persons at 9:00 a.m. Eastern Time on March 26, 2009 to discuss its results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1-888-419-5570. International callers should dial +1-617-896-9871. When prompted by the operator, mention conference passcode 305-148-03. If you are unable to participate in the call at its scheduled time, a replay will be available for seven days starting on Thursday, March 26 at 11:00 a.m. Eastern Time. To access the replay, dial +1-888-286-8010 (international callers dial +1-617-801-6888), and enter the passcode 278-945-21.
About China Medicine Corporation
China Medicine Corporation is a leading pharmaceutical company that discovers and develops medical formulations and distributes over 2,400 pharmaceutical products in China, including prescription and over the counter ("OTC") drugs, traditional Chinese medicine products, herbs and
dietary-supplements. The Company distributes its products to wholesale distributors including more than 300 hospitals and 500 medicine companies that sell to 1,788 drug stores in 28 provinces throughout China. The Company actively develops a number of proprietary products for a variety of uses, including oncology, high blood pressure and the removal of toxins from food and animal feeds. For more information visit the Company’s website at http://www.chinamedicinecorp.com .
Cautionary Statement
This press release contains forward-looking statements concerning the Company’s business and products. The Company’s actual results may differ materially depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, obtaining regulatory approval for new products, the expected contribution of higher margin products, government support for rural health care, 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.
-FINANCIAL TABLES FOLLOW-
CHINA MEDICINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007
Three Months ended Twelve Months Ended
December, 31 December, 31
2008 2007 2008 2007
(unaudited) (audited)
REVENUES
Product sales $24,425,182 14,694,861 $52,307,211 $39,247,130
Medical formula sales 7,254 1,464,625 1,340,595 2,858,257
Total revenues 24,432,436 16,159,486 53,647,806 42,105,387
COST OF GOOD SOLD 18,589,095 11,678,186 38,074,919 29,708,088
GROSS PROFIT 5,843,341 4,481,300 15,572,887 12,397,299
OPERATING EXPENSES
Research and
development 355,868 214,541 840,437 651,990
Selling, general and
administrative 1,289,076 895,619 3,804,585 3,330,907
Total operating
expenses 1,644,944 1,110,160 4,645,022 3,982,897
INCOME FROM OPERATIONS 4,198,397 3,371,140 10,927,865 8,414,402
OTHER INCOME, NET 40,167 11,819 85,622 15,423
INCOME BEFORE INCOME
TAXES AND MINORITY
INTEREST 4,238,564 3,382,959 11,013,487 8,429,825
PROVISION FOR INCOME
TAXES 753,304 630,371 2,006,137 1,649,114
INCOME BEFORE MINORITY
INTEREST 3,485,260 2,752,588 9,007,350 6,780,711
MINORITY INTEREST 33,179 26,012 118,266 94,658
NET INCOME 3,518,439 2,778,600 9,125,616 6,875,369
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation
adjustment 135,806 721,233 2,305,499 1,621,672
COMPREHENSIVE INCOME $3,654,245 3,499,833 $11,431,115 $8,497,041
EARNINGS PER SHARE
Basic $0.23 $0.19 $0.60 $0.56
Diluted $0.23 $0.17 $0.60 $0.50
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 15,226,742 14,668,310 15,173,113 12,346,208
Diluted 15,226,742 15,980,110 15,308,529 13,658,007
CHINA MEDICINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2007
ASSETS
2008 2007
CURRENT ASSETS
Cash $2,791,814 $5,767,774
Notes receivable 600,911 --
Accounts receivable, trade, net of
allowance for doubtful accounts of
$96,609 and $55,640 as of December
31, 2008 and 2007, respectively 19,225,091 13,626,347
Inventories 4,725,322 3,948,460
Advances to suppliers 6,121,974 5,983,277
Other current assets 192,080 81,221
Total current assets 33,657,192 29,407,079
EQUIPMENT, net 3,761,637 1,388,919
OTHER ASSETS
Long term prepayment 6,014,920 678,237
Intangible assets, net 1,247,567 1,166,003
Total other assets 7,262,487 1,844,240
Total assets $44,681,316 $32,640,238
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable, trade $61,243 $76,907
Other payables and accrued liabilities 50,559 70,343
Customer deposits 151,429 203,281
Taxes payable 772,289 468,184
Liquidated damages payable 44,003 44,003
Total liabilities 1,079,523 862,718
MINORITY INTEREST 835,532 893,337
SHAREHOLDERS’ EQUITY
Preferred stock, $0.0001 par value;
10,000,000 shares authorized, 0 and
111,649 shares issued and outstanding
at December 31, 2008 and 2007,
respectively -- 11
Common stock, $0.0001 par value;
100,000,000 shares authorized,
15,226,742 and 14,821,641 shares
issued and outstanding at December
31, 2008 and 2007, respectively 1,522 1,482
Paid-in capital 13,011,012 12,560,078
Statutory reserves 3,178,861 2,191,230
Retained earnings 22,146,572 14,008,587
Accumulated other comprehensive income 4,428,294 2,122,795
Total shareholders’ equity 42,766,261 30,884,183
Total liabilities and
shareholders’ equity $44,681,316 $32,640,238
CHINA MEDICINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $9,125,616 $6,875,369
Adjustments to reconcile net income
to cash used in operating activities:
Minority interest (118,266) (94,658)
Depreciation and amortization 420,769 303,957
Bad debt expenses 36,428 18,495
Loss on sale of assets 9,416 --
stock based compensation 88,463 333,870
Amortization of deferred expenses -- 325,687
Change in operating assets and
liabilities
Notes receivable (590,466) --
Accounts receivable, trade (4,786,654) (5,879,829)
Inventories (491,874) (1,840,170)
Advances to suppliers 461,695 (2,535,589)
Other current assets (105,081) (34,728)
Accounts payable, trade (20,683) (120,129)
Other payables - related parties -- (30,000)
Other payables and accrued
liabilities (24,555) 45,119
Customer deposits (64,938) 176,763
Taxes payable 266,606 145,730
Accrued Expenses 2,608 --
Net cash provided by (used in)
operating activities 4,209,084 (2,310,113)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equipment (2,666,014) (389,588)
Long term prepayment (5,197,253) --
Net cash used in investing
activities (7,863,267) (389,588)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from exercise of warrants
and options 362,500 7,829,681
Net cash provided by financing
activities 362,500 7,829,681
EFFECT OF EXCHANGE RATE ON CASH 315,723 266,314
(DECREASE) INCREASE IN CASH (2,975,960) 5,396,294
CASH, beginning of year 5,767,774 371,480
CASH, end of year $2,791,814 $5,767,774
For more information, please contact:
Company Contact:
Ms. Huizhen Yu
Chief Financial Officer
China Medicine Corp
Tel: +86-20-8739-1718
Email: konzern08@163.com
Investor Relations Contact:
Mr. Crocker Coulson, President
CCG Investor Relations
Tel: +1-646-213-1915 (NY Office)
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
