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Simcere Pharmaceutical Group Reports Unaudited Fourth Quarter and Fiscal Year 2008 Results
Date:3/12/2009

NANJING, China, March 12 /PRNewswire-Asia/ -- Simcere Pharmaceutical Group ("Simcere" or the "Company') (NYSE: SCR), a leading manufacturer and supplier of branded generic pharmaceuticals and manufacturer of the patented anti-cancer biotech product Endu in China, today reported unaudited financial results for the quarter and fiscal year ended December 31, 2008.

    Highlights

    -- Total revenue increased to RMB 466.9 million (US$68.4 million) for the
       fourth quarter of 2008, representing 17.1% year-over-year growth; for
       the full year of 2008, total revenue was RMB 1,741.1 million (US$255.2
       million), an increase of 27.2% from RMB 1,368.7 million for the full
       year of 2007;
    -- Income from operations was RMB 72.7 million (US$10.6 million) for the
       fourth quarter of 2008, compared to RMB 73.2 million for the
       corresponding period in 2007. For the full year of 2008, operating
       income was RMB 357.0 million (US$52.3 million), an increase of 35.3%
       from RMB 263.9 million for the full year of 2007;
    -- Net income was RMB 51.7 million (US$7.6 million) for the fourth quarter
       of 2008, representing 33.8% year-over-year decrease; for the full year
       of 2008, net income was RMB 350.2 million (US$ 51.3 million), an
       increase of 16.2% from RMB 301.3 million for the full year of 2007;
    -- Gross margin for the fourth quarter of 2008 increased to 83.1%,
       compared to 82.2% for the corresponding period in 2007. For the full
       year of 2008, gross margin was 81.6%, compared to 82.4% in 2007.

Mr. Jinsheng Ren, Chairman and Chief Executive Officer of Simcere Pharmaceutical Group, commented: "We are pleased that Simcere achieved overall steady growth in 2008. While the sales growth of Endu has remained below our expectations, both Bicun and Yidasheng have continued to deliver strong sales growth despite the emergence of competitors in the edaravone market. We are also encouraged by the continued strong performance from our branded generics.

"In 2009, we believe that our edaravone products and Sinofuan will be the key growth drivers for the Company. With Simcere's strong balance sheet and prudent approach to selecting acquisition targets, we will continue to pursue opportunities that enrich our product pipeline and support our long-term development."

The Company announced that it recently acquired the remaining 10% of Shandong Simcere Medgenn Bio-Pharmaceutical Co. Ltd, the manufacturer of Endu, that it did not already own, bringing Simcere's total ownership to 100%.

2008 Fourth Quarter and Full Year Financial Results

Total revenue for the fourth quarter of 2008 was RMB 466.9 million (US$68.4 million), an increase of 17.1% from RMB 398.6 million for the corresponding period in 2007. For the full year of 2008, total revenue was RMB 1,741.1 million (US$255.2 million), an increase of 27.2% from RMB 1,368.7 million for the full year of 2007.

Revenue from Endu, the Company's patented anti-cancer biotech product launched in July 2006, totaled RMB 58.1 million (US$8.5 million) in the fourth quarter of 2008, representing 12.4% of the Company's product revenue for the quarter and a decrease from RMB 64.0 million for the corresponding period in 2007. For the full year of 2008, revenue from Endu totaled RMB 239.4 million (US$35.1 million), an increase of 10.8% from RMB216.2 million for the full year of 2007.

Revenue from first-to-market edaravone injection products under the brand names Bicun and Yidasheng totaled RMB 192.8 million (US$28.2 million) in the fourth quarter of 2008, an increase of 31.1% from RMB 147.0 million for the corresponding period in 2007. For the full year of 2008, revenue from Bicun and Yidasheng totaled RMB 651.2 million (US$95.4 million), an increase of 46.8% from RMB 443.4 million for the full year of 2007. While the number of competing edaravone products increased during 2008, Simcere's Bicun and Yidasheng remained the established market leaders in China's first and second tier markets and continued to achieve penetration in third tier markets.

Revenue from other first-to-market products; Jiebaishu, a nedaplatin product, Sinofuan, a 5-FU sustained release implant for the treatment of cancer, and Anxin, a biapenem injection, totaled RMB 25.7 million (US$3.8 million) in the fourth quarter of 2008. For the full year of 2008, revenue from these products totaled RMB 59.8 million (US$8.8 million).

Revenue from other branded generic products totaled RMB 190.2 million (US$27.9 million) in the fourth quarter of 2008, an increase of 2.7% from RMB 185.3 million for the corresponding period in 2007. For the full year of 2008, revenue from other branded generic products totaled RMB 786.4 million (US$115.3 million), an increase of 12.1% from RMB 701.7 million for the full year of 2007.

Gross margin for the fourth quarter of 2008 increased to 83.1%, compared to 82.2% for the corresponding period in 2007. For the full year of 2008, gross margin was 81.6%.

Research and development expenses for the fourth quarter of 2008 totaled RMB 34.0 million (US$5.0 million), an increase of 113.5% from RMB 15.9 million for the corresponding period in 2007. The increase was primarily due to the expansion of the research and development team and the initiation of new research projects. As a percentage of total revenue, research and development expenses were 7.3% for the fourth quarter of 2008, compared to 4.0% for the corresponding period in 2007. For the full year of 2008, research and development expenses totaled RMB 86.1 million (US$12.6 million), compared to RMB 68.3 million for the full year of 2007.

Sales marketing and distribution expenses for the fourth quarter of 2008 were RMB 225.8 million (US$33.1 million), an increase of 17.1% from RMB 192.7 million for the corresponding period in 2007. As a percentage of total revenue, sales, marketing and distribution expenses were 48.4% for the fourth quarter of 2008, compared to 48.3% for the corresponding period in 2007. For the full year of 2008, sales, marketing and distribution expenses were RMB 783.0 million (US$114.8 million), an increase of 23.4% from RMB 634.4 million for the full year of 2007.

General and administrative expenses were RMB 55.6 million (US$8.2 million) for the fourth quarter of 2008, an increase of 21.5% from RMB 45.8 million for the corresponding period in 2007. The increase was primarily due to increased administrative headcount and higher professional service fees associated with the compliance requirements of Section 404 of the Sarbanes-Oxley Act of 2002. As a percentage of total revenue, general and administrative expenses increased to 11.9% for the fourth quarter of 2008 from 11.5% for the corresponding period in 2007. For the full year of 2008, general and administrative expenses were RMB 194.2 million (US$28.5 million), an increase of 20.6% from RMB 161.1 million for the full year of 2007.

Share-based compensation expenses, which were 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 Company's employees were assigned to perform, totaled RMB 5.7 million (US$0.8 million) for the fourth quarter of 2008. Share-based compensation expenses for the fourth quarter of 2007 were RMB 8.7 million. For the full year of 2008, share-based compensation expenses totaled RMB 25.5 million (US$3.7 million), a decrease of 17.0% from RMB 30.8 million for the full year of 2007.

Income from operations was RMB 72.7 million (US$10.6 million) for the fourth quarter of 2008, compared to RMB 73.2 million for the corresponding period in 2007. For the full year of 2008, operating income was RMB 357.0 million (US$52.3 million), an increase of 35.3% from RMB263.9 million for the full year of 2007.

Income tax expense for the fourth quarter of 2008 totaled RMB 13.0 million (US$1.9 million), compared to RMB 16.3 million for the corresponding period in 2007. For the full year of 2008, income tax expense was RMB 49.3 million (US$7.2 million), compared to RMB 13.5 million for the full year of 2007. In addition to the overall increase in taxable income, the increased income tax expense in the full year of 2008 was primarily due to the expiration of tax holidays enjoyed by two PRC subsidiaries.

Net income was RMB 51.7 million (US$7.6 million) for the fourth quarter of 2008, compared to RMB 78.1 million for the corresponding period in 2007, a decrease of 33.8%. Net income margin was 11.1% for the fourth quarter of 2008, compared to 19.6% for the fourth quarter of 2007. For the full year of 2008, net income was RMB 350.2 million (US$51.3 million), an increase of 16.2% from RMB 301.3 million for the full year of 2007. Net income margin was 20.1% for the full year of 2008, compared to 22.0% for the full year of 2007.

Basic earnings per share for the fourth quarter of 2008 and the full year of 2008 were RMB 0.42 (US$0.06) and RMB 2.80 (US$0.41), respectively, and diluted earnings per share for the fourth quarter and the full year of 2008 were RMB 0.42 (US$0.06) and RMB 2.80 (US$0.41), respectively. One American Depository Share (ADS) represents two ordinary shares of the Company. Basic earnings per ADS for the fourth quarter of 2008 and the full year of 2008 were RMB 0.83 (US$0.12) and RMB 5.61 (US$0.82), respectively, and diluted earnings per ADS for the fourth quarter of 2008 and the full year of 2008 were RMB 0.83 (US$0.12) and RMB 5.60 (US$0.82), respectively.

As of December 31, 2008, the Company had cash and cash equivalents (including pledged bank deposits) and held-to-maturity investment securities, of RMB 813.8 million (US$119.3 million) and nil, respectively, compared to RMB 498.3 million and RMB 470.0 million, respectively, as of December 31, 2007.

Company Outlook

Simcere expects that China's upcoming medical reform and increasing industry consolidation will benefit Simcere in the long-term. However, due to short-term uncertainties, including whether Endu and our edaravone products will be covered in the national insurance catalogue, the Company believes that the most prudent approach is not to provide full-year or quarterly guidance on revenue and income at this time.

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 disclosures required by U.S. GAAP. The December 31, 2007 balance sheet was derived from the audited consolidated financial statements of the Company.

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 filing with the U.S. Securities and Exchange Commission at http://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 full year of 2008 on Thursday, March 12, at 8:30 a.m. Eastern Time (Thursday, March 12 at 8:30 p.m. Beijing/Hong Kong time). The management team will be on the call to discuss the results for fourth quarter and full year of 2008 and to answer questions.

    To access the conference call, please dial:

    United States toll-free dial-in number: +1-866-700-7477
    United States dial-in number:           +1-617-213-8840
    North China toll-free dial-in number:   +86-10-800-152-1490
    South China toll-free dial-in number:   +86-10-800-130-0399
    Hong Kong dial-in number:               +852-3002-1672

Please ask to be connected to Simcere's Q4 2008 earnings call and provide the following passcode: 77163710. 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 http://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: 92927155. 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 (NYSE: SCR, Simcere) is a leading manufacturer and supplier of branded generic pharmaceuticals and manufacturer of the patented anti-cancer biotech product Endu in the rapidly growing China market. In recent years, Simcere has been focusing its strategy on the development of innovative pharmaceuticals and first-to-market generics, and has introduced an innovative anti-cancer medication Endu, a first-to-market medication Sinofuan, and first-to-market generics such as Bicun and Anxin. Simcere manufactures and sells more than 50 pharmaceutical products including antibiotics, anti-cancer medication and stroke management medication and is the exclusive distributor of three additional pharmaceuticals that are marketed under its brand names. 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, orthopaedics and infectious diseases and currently has more than 12 pipeline products. For more information about Simcere Pharmaceutical Group, please visit http://www.simcere.com .

    Simcere Pharmaceutical Group
    UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
    (Amounts expressed IN THOUSANDS, EXCEPT SHARE AND ADS DATA)

                                             Three months ended December 31,
                                             2007          2008         2008
                                              RMB           RMB          USD

    Product revenue                       397,993       466,849       68,428
    Other revenue                             654            55            8
    Total revenue                         398,647       466,904       68,436

    Cost of materials and production      (71,071)      (78,880)     (11,562)
    Gross profit                          327,576       388,024       56,874

    Operating expenses:
    Research and development expenses     (15,914)      (33,969)      (4,979)
    Sales, marketing and distribution
     expenses                            (192,727)     (225,772)     (33,092)
    General and administrative
     expenses                             (45,778)      (55,631)      (8,154)
    Income from operations                 73,157        72,652       10,649

    Interest income                         8,937         4,198          615
    Interest expense                         (535)         (998)        (146)
    Foreign currency exchange gains
     (losses)                              19,176        (1,348)        (198)
    Other income                               --            --           --
    Earnings before income taxes and
     minority interests and minority
     interests                            100,735        74,504       10,920

    Income tax expense                    (16,346)      (12,961)      (1,900)
    Income before minority interests       84,389        61,543        9,020

    Minority interests                     (6,316)       (9,832)      (1,441)
    Net income                             78,073        51,711        7,579

    Earnings per share:
    Basic                                    0.62          0.42         0.06
    Diluted                                  0.60          0.42         0.06

    Earnings per ADS:
    Basic                                    1.25          0.83         0.12
    Diluted                                  1.21          0.83         0.12

    Weighted average number of
     common shares:                   125,001,267   124,491,009
    Basic
    Diluted                           129,347,876   124,491,009


                                                 Year ended December 31,
                                              2007         2008         2008
                                               RMB          RMB          USD

    Product revenue                      1,363,014    1,736,832      254,574
    Other revenue                            5,734        4,311          632
    Total revenue                        1,368,748    1,741,143      255,206

    Cost of materials and production      (241,081)    (320,882)     (47,033)
    Gross profit                         1,127,667    1,420,261      208,173

    Operating expenses:
    Research and development expenses      (68,295)     (86,089)     (12,618)
    Sales, marketing and
     distribution expenses                (634,449)    (782,960)    (114,762)
    General and administrative expenses   (161,061)    (194,233)     (28,469)
    Income from operations                 263,862      356,979       52,324

    Interest income                         24,361       34,302        5,028
    Interest expense                        (6,346)      (4,693)        (688)
    Foreign currency exchange gains
     (losses)                               24,670       39,879        5,845
    Other income                            20,526        1,104          162
    Earnings before income taxes and
     minority interests and minority
     interests                             327,073      427,571       62,671

    Income tax expense                     (13,527)     (49,285)      (7,224)
    Income before minority interests       313,546      378,286       55,447

    Minority interests                     (12,285)     (28,135)      (4,124)
    Net income                             301,261      350,151       51,323

    Earnings per share:
    Basic                                     2.56         2.80         0.41
    Diluted                                   2.48         2.80         0.41

    Earnings per ADS:
    Basic                                     5.13         5.61         0.82
    Diluted                                   4.95         5.60         0.82

    Weighted average number of
     common shares:                    117,534,566  124,921,934
    Basic
    Diluted                            121,667,507  125,005,803



    Simcere Pharmaceutical Group
    UNAUDITED CONSOLIDATED CONDENSED Balance Sheets
    (Amounts expressed IN THOUSANDS)

                                           December   December     December
                                             31,         31,         31,
                                             2007        2008        2008
                                             RMB         RMB         USD
    Assets
    Current assets
    Cash and cash equivalents (including
     pledged bank deposits)                498,262     813,766     119,276
    Held-to-maturity investment
     securities                            470,000           -          --
    Accounts and bills receivables,
     net of allowance for doubtful
     accounts                              488,374     748,997     109,783
    Inventories                             65,241      95,948      14,063
    Other current assets                    35,276      49,048       7,190
    Total current assets                 1,557,153   1,707,759     250,312
    Property, plant and equipment,
     less accumulated depreciation         374,058     463,059      67,872
    Land use rights                        116,386     114,624      16,801
    Goodwill and intangible
     assets, net                           412,717     453,455      66,465
    Other assets                            11,894      39,325       5,764
    Total assets                         2,472,208   2,778,222     407,214

    Liabilities
    Current liabilities
    Short term bank loans and
     borrowings                             29,000       6,000         879
    Accounts and bills payables             23,711      25,219       3,696
    Other payables and accrued
     liabilities                           289,926     303,794      44,528
    Total current liabilities              342,637     335,013      49,103
    Long-term loans                         52,000      62,000       9,088
    Deferred income taxes                   61,690      59,358       8,700
    Other long term liabilities             19,928      20,529       3,009
    Total liabilities                      476,255     476,900      69,900

    Minority interests                      12,137      48,297       7,079

    Shareholders' equity
    Ordinary shares at par                   9,840       9,624       1,411
    Additional paid-in capital           1,550,697   1,505,252     220,631
    Accumulated other
     comprehensive loss                    (46,849)    (82,130)    (12,038)
    Retained earnings                      470,128     820,279     120,231
    Total shareholders' equity           1,983,816   2,253,025     330,235
    Commitments and contingencies
    Total liabilities, minority
     interests and shareholders'
     equity                              2,472,208   2,778,222     407,214

    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 = RMB6.8225 on December 31, 2008 in The City of New York
          for cable transfers of Renminbi as certified for customs purposes
          by the Federal Reserve. 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.

    For further information, please contact:

    In Nanjing:
    Simcere Pharmaceutical Group
     Frank Zhao
     Chief Financial Officer
     Tel:   +86-25-8556-6666 ext 8818
     Email: ir@simcere.com

    In the United States:
    Brunswick Group LLC
     Michael Guerin
     Tel: +1-212-333-3810

    In Beijing:
    Brunswick Group
     Kejia Wu
     Tel: +86-10-6566-2256

    In Hong Kong:
    Brunswick Group
     Joseph Lo Chi-Lun
     Tel: +852-3512-5000

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SOURCE Simcere Pharmaceutical Group
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