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China Medical Technologies Reports Financial Results for Fourth Fiscal Quarter and Full Year ended March 31, 2010
Date:6/4/2010

BEIJING, June 4 /PRNewswire-Asia-FirstCall/ -- China Medical Technologies, Inc. (the "Company") (Nasdaq: CMED), a leading China-based advanced in-vitro diagnostic ("IVD") company, today announced its unaudited financial results for the fourth fiscal quarter ("4Q FY2009") and the full fiscal year ended March 31, 2010 ("FY2009").

    4Q FY2009 Highlights
    -- Revenues decreased by 29.3% year-over-year to RMB175.7 million (US$25.7
       million) but increased by 2.0% sequentially.
    -- Income from continuing operations and net income was RMB9.1 million
       (US$1.3 million).
    -- Non-GAAP income from continuing operations, as defined below, decreased
       by 57.2% year-over-year to RMB51.5 million (US$7.5 million) but
       increased by 12.8% sequentially.
    -- Diluted earnings from continuing operations per ADS* was RMB0.35
       (US$0.05).
    -- Non-GAAP diluted earnings from continuing operations per ADS*, as
       defined below, decreased by 56.7% year-over-year to RMB1.98 (US$0.29)
       but increased by 13.8% sequentially.
    -- Net cash generated from operations was RMB59.8 million (US$8.8 million).
    -- Approximately 110,000 ADSs* were repurchased under the Company's share
       repurchase program.
    -- Approximately RMB76.8 million (US$11.2 million) 4% convertible notes
       were purchased and cancelled by the Company. Approximately 192,000
       ADSs* were returned to the Company under the share lending agreement in
       connection with the issuance of 4% convertible notes in August 2008.

    FY2009 Highlights
    -- Revenues decreased by 12.9% year-over-year to RMB723.1 million
       (US$105.9 million).
    -- Loss from continuing operations and net loss was RMB57.0 million
       (US$8.4 million).
    -- Non-GAAP income from continuing operations, as defined below, decreased
       by 55.5% year-over-year to RMB187.3 million (US$27.4 million).
    -- Diluted loss from continuing operations per ADS* was RMB2.17 (US$0.32).
    -- Non-GAAP diluted earnings from continuing operations per ADS*, as
       defined below, decreased by 55.5% year-over-year to RMB7.13 (US$1.04).

    Targets for 1Q FY2010
    -- Target revenues are expected to be not less than RMB185.0 million
       (US$27.1 million).
    -- Target non-GAAP income from continuing operations is expected to be not
       less than RMB56.0 million (US$8.2 million).
    -- Target non-GAAP diluted earnings from continuing operations per ADS* is
       expected to be not less than RMB2.14 (US$0.31).

    Targets for FY2010
    -- Target quarterly revenues are expected to increase in a range of 5%-7%
       on a quarter-over-quarter basis during FY2010.
    -- Target quarterly non-GAAP income from continuing operations and target
       quarterly non-GAAP diluted earnings from continuing operations per ADS*
       are expected to increase at a rate higher than that of target quarterly
       revenues.

    * One American Depositary Share ("ADS") = 10 ordinary shares

See "Non-GAAP Measure Disclosures" below, where the impact of certain items on reported results is discussed.

"We continued to achieve organic growth in the past quarter despite the impact of two important public holidays in China," commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. "Our business turnaround is demonstrated by the solid progress we made on every line of business, as well as imminent cost synergies we expect to come as we broaden our product offering. While the first half of FY2009 proved to be eventful for us, we executed well in the past quarter on our three strategic imperatives including formal launch of our SPR analyzer, expansion in product portfolio and investment in research and development for future growth. Our initial SPR launch has resulted in penetrating a number of our top tier hospital customers and we will start to generate revenue from sales of HPV DNA chips this quarter. Turning to our FISH business, we continue to see significant uptake in a number of applications including prenatal, urology, gynecology and hematological malignancies. We also saw momentum in companion diagnostic tests for targeted cancer drugs such as our HER-2 gene test for the use of Herceptin in breast cancer patients and stomach cancer patients as well as our EGFR gene test for the use of Iressa and Tarceva in non-small cell lung cancer patients. Our direct sales force has been focusing on these high growth areas with our existing top tier hospital customers. As for our ECLIA business, we received SFDA approval for our fully-automated analyzer in April, 2010. Our major target end users will be top tier hospitals as well as high volume users among mid size hospitals of our ECLIA existing users, which we expect to be another growth driver for our relatively maturing ECLIA business starting in 2011. Finally, we continue to invest in research and development and anticipate additional SFDA approvals in the coming quarters, most notably our HPV DNA chip in the near term. With more extensive product offering and broader coverage of top tier hospitals, we believe that we are well positioned for a phase of accelerated growth starting this quarter."

Mr. Sam Tsang, Chief Financial Officer of the Company commented, "To address certain concerns raised by some of our shareholders and potential investors regarding our high level of leverage, we have taken various measures during the past few months including the purchases of our 3.5% tranche as well as 4% tranche of convertibles notes from the open market at significant discounts on the face value of the convertible notes, the termination of our share repurchase program and the suspension of our annual dividend. We intend to continue to reduce our leverage by accumulating cash generated from our operations. When we reduce our leverage to an appropriate level, we will resume our annual dividend. Nevertheless, we will not reduce our investment in the expansion of our direct sales network serving top tier hospitals and the internal product development on our three technology platforms which will sustain our growth in the mid to long term."

4Q FY2009 Unaudited Financial Results

The Company reported revenues of RMB175.7 million (US$25.7 million) for 4Q FY2009, representing a 29.3% decrease from the corresponding period of FY2008 but a 2.0% increase from 3Q FY2009.

The Company's revenues are currently generated from two segments, molecular diagnostic systems and immunodiagnostic systems. The molecular diagnostic system segment includes FISH products and is expected to include SPR products in 1Q FY2010 while the immunodiagnostic system segment consists of ECLIA products.

Molecular diagnostic system sales for 4Q FY2009 were RMB100.9 million (US$14.8 million), representing an 8.0% decrease from the corresponding period of FY2008 but a 4.9% increase from 3Q FY2009. The year-over-year decrease was primarily due to the sales of remaining inventory of fluorescent microscopes during 4Q FY2008 while there were no such sales since 1Q FY2009.

Immunodiagnostic system sales for 4Q FY2009 were RMB74.8 million (US$11.0 million), representing a 46.2% decrease from the corresponding period of FY2008 and a 1.7% decrease from 3Q FY2009. The year-over-year decrease was primarily due to the price reduction for ECLIA reagent kits in September 2009.

Gross margin was 64.9% for 4Q FY2009 which decreased year-over-year from 75.1% for the corresponding period of FY2008 but improved sequentially from 63.4% for 3Q FY2009. The year-over-year decrease in gross margin was primarily due to the impact of the price reduction for ECLIA reagent kits. The sequential increase in gross margin was primarily due to the purchase price reduction for major raw materials used in the production of ECLIA reagent kits from January 2010.

Research and development expenses were RMB10.4 million (US$1.5 million) for 4Q FY2009, representing a 3.0% year-over-year decrease and a 3.6% sequential decrease.

Sales and marketing expenses were RMB16.7 million (US$2.4 million) for 4Q FY2009, representing a 39.6% year-over-year increase but a 12.4% sequential decrease. The year-over-year increase was primarily due to the increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB26.7 million (US$3.9 million) for 4Q FY2009, representing a 30.2% year-over-year increase and a 3.5% sequential increase. The year-over-year increase was primarily due to the increase in staff expenses.

Amortization of SPR intangible assets was RMB27.3 million (US$4.0 million) for 4Q FY2009.

Interest expense on convertible notes was RMB34.8 million (US$5.1 million) for 4Q FY2009. As of March 31, 2010, the Company's outstanding convertible notes of US$150.0 million and US$264.8 million bear interest at 3.5% and 4.0% per annum, respectively and will mature in November 2011 and August 2013, respectively. Due to the adoption of new authoritative guidance governing the accounting for convertible instruments that can be settled in cash or partially in cash upon conversion effective on April 1, 2009, the Company recorded additional non-cash interest expense of RMB7.6 million (US$1.1 million) for the US$150.0 million 3.5% convertible notes in 4Q FY2009. The Company also made an adjustment related to these convertible notes for the corresponding period of FY2008 by increasing non-cash interest expense by RMB7.2 million to adopt this guidance retrospectively. This new guidance is not applicable to the US$264.8 million 4% convertible notes.

Interest expense on amortization of convertible notes issuance costs was RMB4.3 million (US$0.6 million) for 4Q FY2009.

Other income was RMB26.3 million (US$3.8 million) for 4Q FY2009. The significant year-over-year increase was primarily due to the gain from the purchase of the Company's convertible notes on the open market.

Income tax expense was RMB15.2 million (US$2.2 million) for 4Q FY2009.

Income from continuing operations and net income was RMB9.1 million (US$1.3 million) for 4Q FY2009.

Non-GAAP income from continuing operations excluding stock compensation expense, amortization of acquired intangible assets, non-cash interest expense of convertible notes arising from the adoption of the new guidance related to convertible instruments that can be settled in cash or partially in cash upon conversion and gain on purchase of its convertible notes was RMB51.5 million (US$7.5 million) for 4Q FY2009, representing a 57.2% decrease from the corresponding period of FY2008 but a 12.8% increase from 3Q FY2009.

Stock compensation expense for 4Q FY2009 was RMB10.7 million (US$1.6 million), of which RMB1.4 million was allocated to research and development expenses and RMB9.3 million to general and administrative expenses.

Amortization of acquired intangible assets for 4Q FY2009 was RMB49.8 million (US$7.3 million), of which RMB22.4 million was allocated to cost of revenues and RMB27.4 million to operating expenses.

As of March 31, 2010, the Company's cash and cash equivalents was RMB815.5 million (US$119.5 million). Net cash generated from operating activities for 4Q FY2009 was RMB59.8 million (US$8.8 million).

As of March 31, 2010, the Company's net accounts receivable was RMB303.4 million (US$44.4 million), representing an increase of 0.8% from the balance at December 31, 2009.

FY2009 Unaudited Financial Results

Revenues were RMB723.1 million (US$105.9 million) for FY2009, representing a 12.9% year-over-year decrease.

Molecular diagnostic system sales for FY2009 were RMB384.8 million (US$56.4 million), representing an 18.3% year-over-year increase. Immunodiagnostic system sales for FY2009 were RMB338.3 million (US$49.5 million), representing a 33.0% year-over-year decrease. The year-over-year increase in molecular diagnostic system sales was primarily due to the increase in usage of the Company's FISH probes by existing and new hospital customers served by the Company's direct sales personnel. The year-over-year decrease in immunodiagnostic system sales was primarily due to the price reduction of ECLIA reagent kits from September 2009.

Gross margin decreased to 67.1% for FY2009 as compared to 72.0% for FY2008 primarily due to the price reduction of ECLIA reagent kits.

Research and development expenses were RMB42.3 million (US$6.2 million) for FY2009, representing a 34.5% year-over-year increase. The increase was primarily due to the development of FISH probes, SPR-based chips, ECLIA reagent kits as well as fully-automated ECLIA analyzers.

Sales and marketing expenses were RMB64.1 million (US$9.4 million) for FY2009, representing a 49.9% year-over-year increase. This increase was primarily due to the increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB144.7 million (US$21.2 million) for FY2009, representing a 48.2% year-over-year increase. The increase was primarily due to the costs for the independent internal investigation as well as provision for bad debts related to certain ECLIA customers.

Interest expense on convertible notes was RMB141.1 million (US$20.7 million) for FY2009, representing a 26.2% year-over-year increase. The increase was primarily due to the issuance of US$276.0 million 4% convertible notes in August 2008.

Interest expense on amortization of convertible notes issuance costs was RMB17.4 million (US$2.5 million) for FY2009, representing a 30.6% year-over-year increase. The increase was primarily due to the issuance of US$276.0 million 4% convertible notes in August 2008.

Other income was RMB26.5 million (US$3.9 million) for FY2009. The significant year-over-year increase was primarily due to the gain from the purchase of the Company's convertible notes on the open market.

Income tax expense was RMB63.6 million (US$9.3 million) for FY2009. The significant income tax expense was primarily because certain expenses of the Company such as stock compensation expense, amortization of acquired intangible assets and interest expense of convertible notes were not deductible for income tax purpose. In addition, the Company is required to accrue for withholding income tax on distributable earnings generated in China during the year.

Loss from continuing operations and net loss was RMB57.0 million (US$8.4 million) for FY2009.

Non-GAAP income from continuing operations excluding stock compensation expense, amortization of acquired intangible assets, non-cash interest expense of convertible notes arising from the adoption of the new guidance related to convertible instruments that can be settled in cash or partially in cash upon conversion and gain on purchase of its convertible notes was RMB187.3 million (US$27.4 million) for FY2009, representing a 55.5% year-over-year decrease.

Stock compensation expense for FY2009 was RMB40.4 million (US$5.9 million), of which RMB6.3 million was allocated to research and development expenses and RMB34.1 million to general and administrative expenses. The Company approved the grant of 3,250,000 restricted stock, equivalent to 325,000 ADSs to certain directors, officers and employees on May 21, 2010 which was approximately 1.0% of the Company's issued shares. The restricted stock vests at the end of a three-year period.

Amortization of acquired intangible assets for FY2009 was RMB199.1 million (US$29.2 million), of which RMB89.7 million was allocated to cost of revenues and RMB109.4 million to operating expenses.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.8258 to US$1.00, the noon buying rate in New York City for cable transfers of RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board, as of Wednesday, March 31, 2010. No representation is made that the RMB amounts could have been or could be converted into U.S. dollars at that rate or at any other rate on March 31, 2010 or at any other dates.

Share Repurchase Program

In September 2009, the Company's board of directors authorized a share repurchase program, under which the Company may repurchase up to US$30 million worth of its outstanding ADSs from the open market or in block trades for a period of one year, commencing on October 1, 2009. As of March 31, 2010, the Company repurchased a total of 500,000 ADSs at a cost of approximately US$6.4 million (including transaction costs). The Company has terminated the program.

Convertible Notes

The Company purchased 4% convertible notes with principal amount of about RMB76.8 million (US$11.2 million) for a total consideration of RMB50.5 million (US$7.4 million) during 4Q FY2009. As of March 31, 2010, the Company had US$264.8 million 4% convertible notes and US$150 million 3.5% convertible notes outstanding. The Company purchased additional 3.5% and 4% convertible notes subsequent to March 31, 2010.

Outlook for 1Q FY2010

The Company expects the molecular diagnostic system segment to continue its growth momentum and the immunodiagnostic system segment to rebound from its low level in 1Q FY2010.

The Company estimates the target revenues for 1Q FY2010 to be not less than RMB185.0 million (US$27.1 million).

The Company estimates the target non-GAAP income from continuing operations for 1Q FY2010 to be not less than RMB56.0 million (US$8.2 million).

The Company estimates the target non-GAAP diluted earnings from continuing operations per ADS for 1Q FY2010 to be not less than RMB2.14 (US$0.31).

The above targets are based on the Company's current views on the operating and market conditions, which are subject to change.

Outlook for FY2010

The Company expects the sales of HPV DNA chips used with its SPR analyzers to increase rapidly in later quarters of FY2010 following the increasing number of SPR analyzers placed with its hospital customers during the fiscal year. The Company also expects a higher non-GAAP net margin for FY2010 compared with that of FY2009 primarily due to increasing revenue contribution from sales of FISH probes and HPV DNA chips which generate higher non-GAAP gross margin among the Company's products.

The Company estimates the target quarterly revenues to increase in a range of 5%-7% on a quarter-over-quarter basis during FY2010.

The Company estimates the target quarterly non-GAAP income from continuing operations and target quarterly non-GAAP diluted earnings from continuing operations per ADS to increase at a rate higher than that of target quarterly revenues.

The above targets are based on the Company's current views on the operating and market conditions, which are subject to change.

Non-GAAP Measure Disclosures

To supplement its consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company uses non-GAAP measures of gross profit, operating income, income from continuing operations and earnings from continuing operations per ADS, which are adjusted from the results based on GAAP to exclude the impact of stock compensation expense, amortization of acquired intangible assets, acquired in-process research and development, non-cash interest expense of convertible notes arising from the adoption of the new guidance related to convertible instruments that can be settled in cash or partially in cash upon conversion and gain on purchase of its convertible notes. Non-GAAP financial measures are used by the Company in their financial and operating decision- making because management believes they reflect the Company's ongoing business in a manner that allows meaningful period-to-period comparison. The Company's management believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company's current operating performance and future prospects in the same manner as management does, if they so choose.

The presentation of this additional financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the financial information included with this earnings announcement.

Conference Call

The Company's senior management team will host an earnings conference call at 8:00a.m. U.S. Eastern Time on June 4, 2010 (or 8:00p.m. Beijing/Hong Kong time on the same date) to discuss the results following this earnings announcement.

    The dial-in details for the live conference call are as follows:

    -- U.S. Toll Free Number 1-866-543-6403
    -- International Dial-in Number 1-617-213-8896
    Passcode: CMEDCALL

A live webcast of the conference call will be available on http://ir.chinameditech.com .

A replay of this webcast will be available for one month on this website.

A telephone replay of the call will be available after the conclusion of the conference call through 10:00a.m. U.S. Eastern Time on June 5, 2010.

    The dial-in details for the replay are as follows:

    -- U.S. Toll Free Number 1-888-286-8010
    -- International Dial-in Number 1-617-801-6888
    Passcode: 63341451

About China Medical Technologies, Inc.

China Medical Technologies, Inc. is a leading China-based advanced IVD company using molecular diagnostic technologies including Fluorescent in situ Hybridization (FISH) and Surface Plasmon Resonance (SPR) and an immunodiagnostic technology, Enhanced Chemiluminescence Immunoassay (ECLIA), to develop, manufacture and distribute diagnostic products used for the detection of various cancers, diseases and disorders as well as companion diagnostic tests for targeted cancer drugs. The Company generates all of its revenues in China through the sale of diagnostic consumables including FISH probes, SPR-based DNA chips and ECLIA reagent kits to hospitals which are recurring users of the consumables for their patients. The Company sells FISH probes and SPR chips to large hospitals through its direct sales force and ECLIA reagent kits to small and mid-size hospitals through distributors. For more information, please visit http://www.chinameditech.com .

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 "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the quotations from management in this press release, the Company's strategic operational plans, as well as its outlook for 1Q FY2010 and FY2010, contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

    For more information, please contact:

     Sam Tsang and Winnie Yam
     Tel:   +852-2511-9808
     Email: IR@chinameditech.com



                       China Medical Technologies, Inc.
               Unaudited Condensed Consolidated Balance Sheets

                                                     As of
                                      March 31, 2009       March 31, 2010
                                              RMB          RMB         US$
                                                    (in thousands)
    Assets
    Current assets
    Cash and cash equivalents             1,456,410      815,453     119,466
    Trade accounts receivable, net          343,037      303,368      44,444
    Inventories                              16,932       24,889       3,646
    Prepayments and other receivables        20,425       21,508       3,151
    Due from a related party                204,987      204,774      30,000
        Total current assets              2,041,791    1,369,992     200,707

    Property, plant and equipment, net      169,422      155,825      22,829
    Land use rights                           7,239        7,049       1,033
    Goodwill                                  8,654        8,654       1,268
    Intangible assets, net                3,487,474    3,285,190     481,290
    Convertible notes issuance costs         65,816       46,681       6,839
        Total assets                      5,780,396    4,873,391     713,966

    Liabilities
    Current liabilities
    Trade accounts payable                   27,863       20,126       2,948
    Accrued liabilities and other
     payables                               892,905      183,498      26,883
    Income taxes payable                     77,112       57,529       8,428
        Total current liabilities           997,880      261,153      38,259

    Convertible notes                     2,826,348    2,777,086     406,851
    Deferred income taxes                    29,898       67,134       9,836
        Total liabilities                 3,854,126    3,105,373     454,946

    Shareholders' equity
    Ordinary shares US$0.1 par value:
     500,000,000 authorized; 321,066,661
     issued and outstanding as of March
     31, 2009 and 322,680,001 issued and
     outstanding as of March 31, 2010       257,738      258,840      37,921
    Additional paid-in capital              709,949      752,862     110,297
    Treasury stock                               --      (45,143)     (6,614)
    Accumulated other comprehensive
     loss                                   (69,957)     (70,316)    (10,302)
    Retained earnings                     1,028,540      871,775     127,718
        Total shareholders' equity        1,926,270    1,768,018     259,020
        Total liabilities and
         shareholders' equity             5,780,396    4,873,391     713,966



                       China Medical Technologies, Inc.
            Unaudited Condensed Consolidated Statements of Income

                                        For the Three Months Ended
                                  March 31, December 31,       March 31,
                                    2009        2009             2010
                                     RMB         RMB        RMB         US$
                               As adjusted (5)
                                 (in thousands except for per ADS information)
    Revenues, net (1)              248,635     172,320    175,728       25,745
    Cost of revenues (2)           (61,834)    (62,996)   (61,624)      (9,028)
    Gross profit                   186,801     109,324    114,104       16,717
    Operating expenses:
    Research and development
     (2)(3)                        (10,670)    (10,738)   (10,352)      (1,517)
    Acquired in-process
     research and development           --          --         --           --
    Sales and marketing (2)        (11,963)    (19,058)   (16,695)      (2,446)
    General and administrative
     (2)(3)                        (20,538)    (25,844)   (26,743)      (3,918)
    Amortization of SPR
     intangible assets (2)         (27,379)    (27,343)   (27,343)      (4,006)
    Total operating expenses       (70,550)    (82,983)   (81,133)     (11,887)
    Operating income               116,251      26,341     32,971        4,830
    Interest income                  5,608       4,332      4,155          609
    Interest expense -
     convertible notes (5)         (34,993)    (35,421)   (34,831)      (5,103)
    Interest expense -
     amortization of
     convertible notes
     issuance costs (5)             (4,383)     (4,378)    (4,263)        (624)
    Interest expense - other          (785)         --         --           --
    Other income/ (expense),
     net                              (168)        225     26,267        3,848
    Income/ (loss) before
     income tax                     81,530      (8,901)    24,299        3,560
    Income tax expense             (32,143)    (13,088)   (15,206)      (2,228)
    Income/ (loss) from
     continuing operations          49,387     (21,989)     9,093        1,332
    Income from discontinued
     operation (2)                      --          --         --           --
    Net income/ (loss)              49,387     (21,989)     9,093        1,332
    Earnings/ (loss) from
     continuing operations per
     ADS
    - basic                           1.88       (0.84)      0.35         0.05
    - diluted                         1.87       (0.84)      0.35         0.05
    Earnings from discontinued
     operations per ADS
    - basic                            N/A         N/A        N/A          N/A
    - diluted                          N/A         N/A        N/A          N/A
    Weighted average number of
     ADS
    - basic                     26,287,974  26,262,471 25,993,349   25,993,349
    - diluted                   26,347,906  26,262,471 26,050,599   26,050,599

    Notes:
    (1) Revenues, net              RMB'000     RMB'000    RMB'000      US$'000
    - Molecular diagnostic
       systems                     109,640      96,166    100,897       14,782
    - Immunodiagnostic systems     138,995      76,154     74,831       10,963
                                   248,635     172,320    175,728       25,745

    (2) Depreciation and
        amortization               RMB'000     RMB'000     RMB'000     US$'000
    - Cost of revenues              25,328      25,862      25,881       3,792
    - Research and development         421         845         857         126
    - Sales and marketing               32          39         116          17
    - General and administrative     1,322       1,244       1,157         170
    - Amortization of SPR
       intangible assets            27,379      27,343      27,343       4,006
    - Income from discontinued
       operation                        --          --          --          --
                                    54,482      55,333      55,354       8,111

    (3) Stock compensation
        expense                    RMB'000     RMB'000     RMB'000     US$'000
    - Research and development       2,338       1,592       1,440         211
    - General and administrative    11,581       8,642       9,252       1,355
                                    13,919      10,234      10,692       1,566

    (4) In computing diluted earnings from continuing operations per ADS,
        interest expense and amortization in connection with convertible notes
        were not added back in computing diluted earnings from continuing
        operations per ADS because they were anti-dilutive.

    (5) As a result of the adoption of new authoritative guidance changing the
        accounting for convertible instruments that can be settled in cash or
        partially in cash upon conversion, the Company adjusted relevant
        numbers in the condensed consolidated statement of income for the
        three months ended and the year ended March 31, 2009 retrospectively
        in accordance with GAAP.


                       China Medical Technologies, Inc.
        Unaudited Condensed Consolidated Statements of Income (cont.)

                                                For the Year Ended
                                     March 31, 2009        March 31, 2010
                                           RMB            RMB          US$
                                     As adjusted (5)
                                  (in thousands except for per ADS information)
    Revenues, net (1)                    829,950        723,071      105,932
    Cost of revenues (2)                (232,571)      (237,550)     (34,801)
    Gross profit                         597,379        485,521       71,131
    Operating expenses:
    Research and development (2)(3)      (31,450)       (42,293)      (6,196)
    Acquired in-process research
     and development                    (244,872)            --           --
    Sales and marketing (2)              (42,722)       (64,055)      (9,384)
    General and administrative (2)
     (3)                                 (97,596)      (144,671)     (21,195)
    Amortization of SPR intangible
     assets (2)                          (36,511)      (109,395)     (16,027)
    Total operating expenses            (453,151)      (360,414)     (52,802)
    Operating income                     144,228        125,107       18,329
    Interest income                       32,354         13,456        1,971
    Interest expense - convertible
    notes (5)                           (111,852)      (141,123)     (20,675)
    Interest expense -
     amortization of
     convertible notes
     issuance costs (5)                  (13,323)       (17,402)      (2,549)
    Interest expense - other              (4,240)            --           --
    Other income/ (expense), net          (3,732)        26,477        3,879
    Income/ (loss) before income
     tax                                  43,435          6,515          955
    Income tax expense                   (73,042)       (63,556)      (9,311)
    Income/ (loss) from continuing
    operations                           (29,607)       (57,041)      (8,356)
    Income from discontinued
     operation (2)                       364,409             --           --
    Net income/ (loss)                   334,802        (57,041)      (8,356)
    Earnings/ (loss) from
     continuing operations per ADS
    - basic                                (1.13)         (2.17)       (0.32)
    - diluted                              (1.13)         (2.17)       (0.32)
    Earnings from discontinued
     operations per ADS
    - basic                                13.87            N/A          N/A
    - diluted                              13.87            N/A          N/A
    Weighted average number of ADS
    - basic                           26,277,629     26,254,639   26,254,639
    - diluted                         26,277,629     26,254,639   26,254,639

    Notes:

    (1) Revenues, net                    RMB'000        RMB'000      US$'000
    - Molecular diagnostic
       systems                           325,294        384,762       56,369
    - Immunodiagnostic systems           504,656        338,309       49,563
                                         829,950        723,071      105,932

    (2) Depreciation and                 RMB'000        RMB'000      US$'000
        amortization
    - Cost of revenues                    99,678        102,801       15,060
    - Research and development             1,204          3,833          562
    - Sales and marketing                    139            255           37
    - General and administrative           5,253          4,968          728
    - Amortization of SPR intangible
       assets                             36,511        109,395       16,027
    - Income from discontinued
       operation                           3,953             --           --
                                         146,738        221,252       32,414

    (3) Stock compensation               RMB'000        RMB'000      US$'000
        expense
    - Research and development             8,190          6,335          928
    - General and administrative          41,989         34,102        4,996
                                          50,179         40,437        5,924

    (4) In computing diluted earnings from continuing operations per ADS,
        interest expense and amortization in connection with convertible notes
        were not added back in computing diluted earnings from continuing
        operations per ADS because they were anti-dilutive.

    (5) As a result of the adoption of new authoritative guidance changing the
        accounting for convertible instruments that can be settled in cash or
        partially in cash upon conversion, the Company adjusted relevant
        numbers in the condensed consolidated statement of income for the
        three months ended and the year ended March 31, 2009 retrospectively
        in accordance with GAAP.



                       China Medical Technologies, Inc.
          Unaudited Condensed Consolidated Statements of Cash Flows

                                                  For the Year Ended
                                         March 31, 2009     March 31, 2010
                                                RMB         RMB        US$
                                                      (in thousands)
    Net cash provided by operating
     activities                               490,758     279,877     41,003

    Net cash used in investing
     activities                            (1,467,195)   (715,522)  (104,826)

    Net cash provided by/ (used in)
     financing activities                   1,751,297    (205,061)   (30,042)

    Effect of foreign currency exchange
     rate change on cash                       (1,129)       (251)       (37)
    Net increase/ (decrease) in cash
     and cash equivalents                     773,731    (640,957)   (93,902)

    Cash and cash equivalents:
    At beginning of year                      682,679   1,456,410    213,368
    At end of year                          1,456,410     815,453    119,466



                       China Medical Technologies, Inc.
            Reconciliations of GAAP measures to Non-GAAP measures

                                       For the Three Months Ended
                              March 31,    December 31,         March 31,
                                2009           2009                2010
                                 RMB            RMB         RMB          US$
                           As adjusted (2)
                                (in thousands except for per ADS information)
    Gross profit              186,801        109,324      114,104       16,717
    Adjustment:
    Amortization of
     acquired intangible
     assets                    22,444         22,412       22,423        3,285
    Non-GAAP gross profit     209,245        131,736      136,527       20,002
    Gross margin                75.1%          63.4%        64.9%        64.9%
    Non-GAAP gross margin       84.2%          76.4%        77.7%        77.7%

    Operating income          116,251         26,341       32,971        4,830
    Adjustment:
    Stock compensation
     expense                   13,919         10,234       10,692        1,566
    Amortization of
     acquired intangible
     assets                    49,823         49,755       49,766        7,291
    Acquired in-process
     research and
     development                   --             --           --           --
    Non-GAAP operating
     income                   179,993         86,330       93,429       13,687
    Operating margin            46.8%          15.3%        18.8%        18.8%
    Non-GAAP operating
     margin                     72.4%          50.1%        53.2%        53.2%

    Income/(loss) from
     continuing operations     49,387        (21,989)       9,093        1,332
    Adjustment:
    Stock compensation
     expense                   13,919         10,234       10,692        1,566
    Amortization of
     acquired intangible
     assets                    49,823         49,755       49,766        7,291
    Acquired in-process
     research and
     development                   --             --           --           --
    Non-cash interest
     expense of convertible
     notes arising from the
     adoption of new
     guidance                   7,153          7,618        7,618        1,116
    Gain on purchase of
     convertible notes             --             --      (25,693)      (3,764)
    Non-GAAP income from
     continuing operations    120,282         45,618       51,476        7,541
    GAAP net margin             19.9%             --         5.2%         5.2%
    Non-GAAP net margin         48.4%          26.5%        29.3%        29.3%

    Earnings/ (loss) from
     continuing operations
     per ADS
    - basic                      1.88          (0.84)        0.35         0.05
    - diluted                    1.87          (0.84)        0.35         0.05



    Non-GAAP earnings from
     continuing operations
     per ADS
    - basic                      4.58            1.74        1.98         0.29
    - diluted (1)                4.57            1.74        1.98         0.29
    Weighted average number
     of ADS
    - basic                26,287,974      26,262,471  25,993,349   25,993,349
    - diluted (1)          26,347,906      26,262,471  26,050,599   26,050,599

    Notes:

    (1) Interest expense and amortization in connection with convertible notes
        were not added back in computing non-GAAP diluted earnings from
        continuing operations per ADS because they were anti-dilutive.

    (2) As a result of the adoption of new authoritative guidance changing the
        accounting for convertible instruments that can be settled in cash or
        partially in cash upon conversion, the Company adjusted relevant
        numbers for the three months ended and the year ended March 31, 2009
        retrospectively in accordance with GAAP.


                       China Medical Technologies, Inc.
        Reconciliations of GAAP measures to Non-GAAP measures (cont.)

                                             For the Year Ended
                                   March 31, 2009         March 31, 2010
                                         RMB            RMB            US$
                                   As adjusted (2)
                                 (in thousands except for per ADS information)
    Gross profit                       597,379        485,521         71,131
    Adjustment:
    Amortization of acquired
     intangible assets                  90,077         89,720         13,144
    Non-GAAP gross profit              687,456        575,241         84,275
    Gross margin                         72.0%          67.1%          67.1%
    Non-GAAP gross margin                82.8%          79.6%          79.6%

    Operating income                   144,228        125,107         18,329
    Adjustment:
    Stock compensation expense          50,179         40,437          5,924
    Amortization of acquired
     intangible assets                 126,588        199,115         29,171
    Acquired in-process
     research and development          244,872             --             --
    Non-GAAP operating income          565,867        364,659         53,424
    Operating margin                     17.4%          17.3%          17.3%
    Non-GAAP operating margin            68.2%          50.4%          50.4%

    Income/(loss) from
     continuing operations             (29,607)       (57,041)        (8,356)
    Adjustment:
    Stock compensation expense          50,179         40,437          5,924
    Amortization of acquired
     intangible assets                 126,588        199,115         29,171
    Acquired in-process
     research and development          244,872             --             --
    Non-cash interest expense
     of convertible notes
     arising from the adoption
     of new guidance                    28,614         30,477          4,465
    Gain on purchase of
     convertible notes                      --        (25,693)        (3,764)
    Non-GAAP income from
     continuing operations             420,646        187,295         27,440
    GAAP net margin                         --             --             --
    Non-GAAP net margin                  50.7%          25.9%          25.9%

    Earnings/ (loss) from continuing
     operations per ADS
    - basic                              (1.13)         (2.17)         (0.32)
    - diluted                            (1.13)         (2.17)         (0.32)

    Non-GAAP earnings from continuing
     operations per ADS
    - basic                              16.01           7.13           1.04
    - diluted (1)                        16.01           7.13           1.04
    Weighted average number of ADS
    - basic                         26,277,629     26,254,639     26,254,639
    - diluted (1)                   26,277,629     26,254,639     26,254,639


    Notes:

    (1) Interest expense and amortization in connection with convertible notes
        were not added back in computing non-GAAP diluted earnings from
        continuing operations per ADS because they were anti-dilutive.

    (2) As a result of the adoption of new authoritative guidance changing the
        accounting for convertible instruments that can be settled in cash or
        partially in cash upon conversion, the Company adjusted relevant
        numbers for the three months ended and the year ended March 31, 2009
        retrospectively in accordance with GAAP.


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SOURCE China Medical Technologies, Inc.
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