May 25, 2011
China Nuokang Bio-Pharmaceutical Inc. Reports First Quarter 2011 Financial Results
1Q11 Revenue of RMB64.5 Million ($9.9 Million)
1Q11 Net Income of RMB10.9 Million ($1.7 Million)
Live Conference Call to be Held Thursday, May 26, 2011 at 8:00 am ET
BEIJING, May 25, 2011 (GLOBE NEWSWIRE) -- China Nuokang Bio-Pharmaceutical Inc. (Nasdaq:NKBP) ("Nuokang" or the "Company"), a leading China-based biopharmaceutical company focused on the research, development, manufacture, marketing and sales of hospital-based medical products, today announced financial results for the first quarter of 2011.
Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "For the full year of 2011, we are confident in our ability to deliver 15% top-line growth. Our first quarter 2011 financial results were in line with our expectations for the quarter, generating strong profitability of RMB10.9 million in net income and a 17% net margin. At the same time, with the Chinese New Year holiday, our first quarter revenue is seasonally the weakest quarter of the year. We expect our sales performance to ramp up during the second half of the year. Furthermore, we implemented a significant restructuring initiative to increase the efficiency of our direct sales team, which led to certain near term volatility."
Chairman Xue continued, "We are confident that our restructuring initiative will strengthen our sales performance in the long run. Our new model allows us to better link marketing costs to sales performance and tailor promotional efforts to local needs to drive faster sales growth. We have replaced the majority of our salaried internal direct sales team with nine regional contract sales partners. These partners will control allocation of marketing resources and be rewarded based on their sales performance, which gives them an incentive to control costs while achieving higher sales. From a financial standpoint, product pricing as well as sales and marketing expenses as a percentage of sales will remain comparable to current levels but the new structure gives management greater flexibility in rewarding strong performance and controlling costs when sales goals are not met. Looking forward, we are confident that Nuokang will become a leading, multi-product bio-pharmaceutical company."
First Quarter 2011 Financial Highlights
Revenue was RMB64.5 million ($9.9 million)[1] compared to RMB69.7 million in the prior year period;
Baquting revenue was RMB60.8 million ($9.3 million) compared to RMB65.8 million in the prior year period;
Gross profit was RMB56.3 million ($8.6 million) compared to RMB62.4 million in the prior year period;
Gross margin was 87.2% compared to 89.5% in the prior year period;
Operating income was RMB17.9 million ($2.7 million); and
Net income was RMB10.9 ($1.7 million) or RMB0.55 ($0.08) per diluted ADS[2].
First Quarter 2011 Financial Performance
Revenue was RMB64.5 million ($9.9 million) compared to RMB69.7 million in the prior year period. Revenue from Baquting was RMB60.8 million ($9.3 million) compared to RMB65.8 million in the prior year period as a result of a revenue mix shift towards a greater proportion of marketing agent sales. Total sales volume remained the same. Revenue from other products was RMB3.8 million ($0.6 million) compared to RMB3.9 million in the prior year period.
Gross profit was RMB56.3 million ($8.6 million) compared to RMB62.4 million in the prior year period. Gross margin was 87.2% compared to 89.5% in the prior year period.
Operating income was RMB17.9 million ($2.7 million) in the first quarter of 2011 compared to RMB21.3 million in the prior year period. Operating margin for the first quarter of 2011 was 27.8%, compared to 30.6% in the prior year period and 5.3% in the fourth quarter of 2010. Operating expenses as a percentage of revenue is expected to remain stable, growing in proportion with revenue, as the Company continues to invest in the sales and marketing efforts required to successfully bring to market its new products.
Research and development expenses increased to RMB4.2 million ($0.6 million) in the first quarter of 2011 from RMB3.1 million in the prior year period. These costs accounted for 6.5% of revenue this quarter but remained in line with the Company's full year research and development expense expectations.
Selling, marketing and distribution expenses decreased to RMB21.2 million ($3.2 million) in the first quarter of 2011 from RMB25.0 million in the prior year period. The decrease reflects the Company's new compensation structure for its direct sales team, which more effectively links compensation to sales performance. Accordingly, selling expenses will fluctuate with revenue going forward. As efforts to broaden the market recognition and acceptance of new products like Kaitong continue, the Company expects selling, marketing and distribution expenses to continue to account for a greater percentage of total operation expenses.
General and administrative expenses remained steady at RMB12.9 million ($2.0 million) in the first quarter of 2011 from the prior year period.
Provision for income taxes was RMB4.6 million ($705,000) in the first quarter of 2011, representing an effective tax rate of 29.8%, compared to RMB4.4 million in the prior year period.
Net income was RMB10.9 million ($1.7 million) or RMB0.55 ($0.08) per diluted ADS in the first quarter of 2011 compared to RMB17.1 million or RMB0.86 per diluted ADS, in the prior year period.
For the quarter ended March 31, 2011, the Company had approximately 159.2 million weighted average diluted ordinary shares, or 19.9 million ADSs.
As of March 31, 2011, the Company had cash and cash equivalents of RMB191.0 million ($29.2 million), compared to RMB191.8 million as of December 31, 2010.
New Product Performance
The Company continues to diversify its product portfolio through the following product launch and in-licensing efforts:
Kaitong: The Company continues to focus on the commercialization of Kaitong through a nationwide marketing campaign to drive awareness and understanding of Kaitong. Throughout 2011, the Company will continue to host outreach events and build out its distribution channels to support these efforts. The Company has won the bidding process for five provinces thus far and continues to actively participate in additional bids. The first quarter of 2011 showed nascent revenue contribution but material revenue contribution is expected to begin in late 2011.
Dipyridamole Aspirin: The Company plans to begin marketing efforts and launch the bidding process for Dipyridamole Aspirin in the second quarter of 2011. These efforts are expected to lead to revenue contribution in late 2011.
Mr. Baizhong Xue commented, "We are confident that 2011 will be a landmark year for us. Our product portfolio has already begun to take on the diversified structure that our management team has been diligently pursuing in the past few quarters. Looking forward, we believe Baquting will continue to be a main source of revenue but as a more mature product. Kaitong will gradually ramp up into another main revenue contributor. Then, we expect to build out a suite of cardiovascular products, for which Dipyridamole Aspirin was our entry point. The past few quarters have been a financially and operationally challenging transition period. However, we are confident that Nuokang will emerge through this gradual transformation as a leading, diversified bio-pharmaceutical company in China."
Financial Outlook
Mr. Robert Pu, Chief Financial Officer of the Company, said, "We continue to expect 15% top-line growth for the full year of 2011, driven by revenue growth in the second half of 2011. Our direct sales team reorganization and continued product launch efforts add certain near-term volatility but we are confident that the second half of 2011 will demonstrate significant growth as we begin to realize the benefits of our new structure and revenue contribution from our product launches grow."
Conference Call
The Company will hold a conference call at 8:00 am ET on Thursday, May 26, 2011 to discuss first quarter 2011 results. Listeners may access the call by dialing:
United States toll free: 1-866-405-2350
United States toll: 1-718-354-1231
China toll free: 400-6988181
Hong Kong toll free: 800-965084
United Kingdom toll free: 0800-0322281
Conference ID: 66845827
A telephone replay will be available beginning two hours after the conclusion of the call and will be
available through June 8, 2011. Listeners may access the replay by dialing:
United States toll free: 1-866-214-5335
International: 1-718-354-1232
Conference ID: 66845827
A webcast will also be available through the Company's website www.nkbp.com.
About China Nuokang Bio-Pharmaceutical Inc.
China Nuokang Bio-Pharmaceutical Inc. (Nasdaq:NKBP) is a leading biopharmaceutical company in China focused on the research, development, manufacture, marketing and sales of hospital-based medical products. The Company provides a diversified portfolio of products across more than 2,400 hospitals in China. Nuokang's principal products include Baquting®, China's leading hemocoagulase product by market share, and Aiduo®, a cardiovascular stress imaging agent. The Company's product pipeline includes product candidates under development in hematological, cardiovascular and cerebrovascular disease diagnosis, treatment and prevention. Please visit www.nkbp.com for more information.
Safe-Harbor Statement
This press release contains statements of a forward-looking nature. These statements, including the statements relating to the Company's new product development and financial outlook, are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. These forward-looking statements may include, but are not limited to, statements containing words such as "may," "could," "would," "plan," "anticipate," "believe," "estimate," "predict," "potential," "expects," "intends" and "future" or similar expressions. Among other things, the statements relating to the Company's expected progress on the product portfolio and future financial results may contain forward-looking statements. These forward-looking statements speak only as of the date of this press release and are subject to change at any time. These forward-looking statements are based upon management's current expectations and are subject to a number of risks, uncertainties and contingencies, many of which are beyond the Company's control that may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F.
[1] This announcement contains translations of certain Renminbi amounts into US dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to US dollars as of and for the quarter ended March 31, 2011, were made at the noon buying rate of RMB6.5483 to USD1.00 on March 31, 2011 in the City of New York for cable transfers in Renminbi per US dollar as certified for customs purposes by the Federal Reserve Bank of New York. China Nuokang Bio-Pharmaceutical Inc. makes no representation that the Renminbi or US dollar amounts referred to in this press release could have been or could be converted into US dollars or Renminbi, at any particular rate or at all.
[2] American Depositary Shares, which are traded on the NASDAQ, each represents eight ordinary shares of the Company.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2011
1Q 2010 1Q 2011
(RMB'000) (RMB'000) (US$'000)
Net revenue 69,739 64,519 9,853
Cost of revenue (7,345) (8,265) (1,262)
Gross profit 62,394 56,254 8,591
Operating expenses
Research and development costs (3,129) (4,223) (645)
Selling, marketing and distribution expenses (25,016) (21,163) (3,232)
General and administrative expenses (12,925) (12,946) (1,977)
Total operating expenses (41,070) (38,332) (5,854)
Operating profit 21,324 17,922 2,737
Interest income 285 184 28
Interest expense (1,918) (1,056) (161)
Exchange gain/(losses) 101 (1,361) (208)
Other income, net 1,697 (165) (25)
Income before income tax expense 21,489 15,524 2,371
Income tax expense (4,419) (4,619) (705)
Net income 17,070 10,905 1,666
Net loss attributable to non-controlling interest 1 27 4
Net income 17,071 10,932 1,670
Net income per share
Basic 0.11 0.07 0.01
Diluted 0.11 0.07 0.01
Shares used in net income per share computation
Basic 158,425,985 158,524,942 158,524,942
Diluted 159,543,875 159,205,942 159,205,942
Net income per ADS
Basic 0.86 0.55 0.08
Diluted 0.86 0.55 0.08
Shares used in net income per ADS computation
Basic 19,803,248 19,815,618 19,815,618
Diluted 19,942,984 19,900,743 19,900,743
CONSOLIDATED BALANCE SHEETS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 and MARCH 31, 2011
December 31, March 31,
2010 2011
(RMB'000) (RMB'000) (US$'000)
ASSETS
Current assets:
Cash and cash equivalents 191,822 190,971 29,164
Restricted cash -- -- --
Other investment - Current 29,868 29,726 4,539
Accounts receivable (net of allowance for doubtful accounts of RMB393,860 and RMB393,860 (US$59,676) as of December 31, 2010 and March 31, 2011, respectively) 132,504 145,515 22,222
Bills receivable 86,587 71,191 10,872
Inventories 16,789 16,006 2,444
Prepayments and other receivables 20,116 39,093 5,970
Prepaid income tax 5,117 6,900 1,054
Deferred tax assets 1,518 782 119
Total current assets 484,321 500,184 76,384
Non-current assets:
Property, plant and equipment, net 155,786 153,150 23,389
Land use rights, net 35,800 35,630 5,441
Intangible assets, net 23,587 22,996 3,512
Other Investments-Non current 3,414 3,414 521
Prepayment for the exclusive distribution right 37,713 39,722 6,066
Deferred tax assets 4,258 4,394 671
Total non-current assets 260,558 259,306 39,600
TOTAL ASSETS 744,879 759,489 115,984
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank loans 47,000 47,000 7,177
Accounts payable 1,764 1,609 246
Accrued expenses and other payables 22,281 18,962 2,896
Income tax payable 253 5,142 785
Unrecognized tax benefits 809 809 124
Deferred tax liability -- -- --
Total current liabilities 72,107 73,522 11,228
Non-current liabilities:
Deferred tax liabilities 2,054 2,099 321
Deferred government grants 21,621 22,029 3,364
Long-term payable 11,299 11,484 1,754
Total non-current liabilities 34,974 35,612 5,439
Commitments and contingencies -- -- --
Shareholders' equity:
Ordinary shares (par value US$0.0005 per share, 474,200,000 shares authorized and 158,490,942 shares issued and outstanding as of December 31, 2010; 474,200,000 shares authorized and 158,524,942 shares issued and outstanding as of March 31, 2011) 597 597 91
Additional paid-in capital 460,981 462,633 70,649
Retained earnings 174,133 185,065 28,262
Total shareholders' equity 635,711 648,295 99,002
Non-controlling interests 2,087 2,061 315
TOTAL EQUITY 637,798 650,356 99,317
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 744,879 759,490 115,984
CONTACT: ICR, LLC
In the U.S.: Ashley De Simone: 1-646-277-1227
In China: Wen Lei Zheng: 86-10-6583-7510
Source: China Nuokang Bio-Pharmaceutical Inc.
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