2Q10 Revenue up 8.8% to RMB82.4 Million YOY
2Q10 Non-GAAP Net Income as Adjusted up 11.8% to RMB21.1 Million YOY
Live Conference Call to be Held Thursday, August 26, 2010 at 8:00 am ET
BEIJING, Aug. 25, 2010 (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 second quarter of 2010.
Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "Our second quarter financial results reflect our operational strength and the ongoing demand for Baquting. Heading into the second half of the year, we continue to expect to reach our revenue guidance and we anticipate that our profitability will remain in line with historical margin performance. We are also executing a proactive sales and marketing strategy to bolster our number one leadership position in the hemocoagulase market. This includes active participation in marketing events, enhancing sales coverage across China and further aligning sales force incentives with performance. We also look forward to entering 2011 with a broader product portfolio to further drive growth and profitability over the long-term."
Second Quarter 2010 Financial Highlights
- Revenue increased 8.8% year over year to RMB82.4 million ($12.2 million)1 from RMB75.8 million in the prior year period;
- Baquting revenue increased 8.2% to RMB77.8 million ($11.5 million) from RMB71.9 million in the prior year period;
- Gross margin was approximately 88.8%;
- Operating margin was 29.2%, reflecting operating income of RMB24.1 million ($3.5 million), up 7.4% from RMB22.4 million in the prior year period;
- Net income increased 10.1% to RMB19.4 million ($2.9 million), or RMB0.98 ($0.14) per diluted ADS2, from RMB17.6 million, or RMB0.97 per diluted ADS in the prior period; and
- Non-GAAP net income as adjusted, excluding non-cash foreign exchange gains/losses and share-based compensation expenses, increased 11.8% to RMB21.1 million ($3.1 million) from RMB18.9 million in the prior period.
Second Quarter 2010 Financial Performance
Second quarter 2010 revenue increased 8.8% to RMB82.4 million ($12.2 million) from RMB75.8 million in the second quarter of 2009. Revenue from Baquting increased 8.2% to RMB77.8 million ($11.5 million) from RMB71.9 million in the prior year's period. Revenue from Adenosine (Aiduo and Aiwen) was flat at RMB1.4 million ($212,000) compared to RMB1.4 million in the prior year period, and revenue from other products increased to RMB3.2 million ($470,000) from RMB2.5 million in the prior year period.
For the second quarter of 2010, gross profit increased 10.8% to RMB73.2 million ($10.8 million) from RMB66.1 million in the prior year's period. Gross margin for the second quarter of 2010 was 88.8%, compared to 87.2% in the second quarter of 2009.
Operating income increased 7.4% to RMB24.1 million ($3.5 million) in the second quarter of 2010, from RMB22.4 million in the prior year period. Operating margin for the second quarter of 2010 was 29.2%, compared to 29.6% in the prior year period.
Selling, marketing and distribution expenses increased 6.3% to RMB34.6 million ($5.1 million) in the second quarter of 2010, from RMB32.5 million in the prior period. Research and development expenses remained steady at RMB2.8 million ($408,000) in the second quarter of 2010, compared to RMB2.8 million in the prior period. Selling, marketing and distribution expenses and research and development expenses remained approximately flat as a percentage of revenue. General and administrative expenses increased 41.2% to RMB11.8 million ($1.7 million) in the second quarter of 2010, from RMB8.3 million in the prior year's period. This increase primarily reflects share-based compensation expense as well as additional costs related to the growth of the Company's business, including recruitment of new professionals and compliance-related costs to support the Company's operations as a U.S.-listed public company.
Provision for income taxes in the second quarter of 2010 was RMB2.0 million ($294,000), representing an effective tax rate of 9.3%, compared to RMB3.9 million, representing an effective tax rate of 18.3% in the prior year period. The decrease in effective tax rate reflects account true-up taxation adjustments related to permanent differences in the prior year period, which are not present in the current period.
Net income increased 10.1% to RMB19.4 million ($2.9 million), or RMB0.98 ($0.14) per diluted ADS in the second quarter of 2010, from RMB17.6 million, or RMB0.97 per diluted ADS, in the prior period. Non-GAAP net income, as adjusted, excluding non-cash foreign exchange gains/losses and share-based compensation expenses, increased 11.8% to RMB21.1 million ($3.1 million) from RMB18.9 million in the prior period.
As of June 30, 2010, the Company had approximately 158.6 million weighted average diluted shares, or 19.8 million ADSs, compared to 96.3 million weighted average diluted shares, equivalent to 12.0 million ADSs, outstanding as of June 30, 2009.
As of June 30, 2010, the Company had cash and cash equivalents of RMB292.3 million ($43.1 million), compared to RMB351.3 million as of December 31, 2009.
Six Months Ended June 30, 2010 Financial Performance
For the six months ended June 30, 2010, revenue increased 12.3% to RMB152.1 million ($22.4 million) from RMB135.5 million for the six months ended June 30, 2009. During this same time period, gross profit increased 13.6% to RMB135.6 million ($20.0 million) from RMB119.4 million and operating income increased 20.6% to RMB45.4 million ($6.7 million) from RMB37.6 million.
Net income increased 26.6% to RMB36.5 million ($5.4 million), or RMB1.84 ($0.27) per diluted ADS, for the six months ended June 30, 2010, from RMB28.8 million, or RMB1.40 per diluted ADS, for the six months ended June 30, 2009. During this same time period, non-GAAP net income, as adjusted, excluding non-cash foreign exchange gains/losses and share-based compensation expenses, increased 29.0% to RMB39.9 million ($5.9 million) from RMB30.9 million. Weighted average number of diluted shares outstanding was approximately 159.0 million for the six months of 2010, compared to 96.1 million weighted average number of diluted shares outstanding for the six months of 2009.
Foreign Exchange and Non-Cash Share-Based Compensation Expense Discussion
The Company recognized non-cash share-based compensation expense of approximately RMB1.7 million ($247,000) for the second quarter of 2010, compared to RMB1.3 million for the prior year period. For the six months ended June 30, 2010, the Company recognized non-cash share-based compensation expense of approximately RMB3.4 million ($507,000), compared to RMB2.2 million for the prior year period.
Please refer to the non-GAAP presentation provided in the appendix for a year over year comparison of non-cash share-based compensation expense.
Recent Events
The Company has continued new product development and licensing efforts. Recent events in these efforts include the following:
- Kaitong's Technical Review Completed: The SFDA completed its technical review of Kaitong and Kaitong's development is moving forward as planned. The Company's development partner for Kaitong, Jilin Yuhua, received a notice from the SFDA in August 2010 to progress to the on-site inspection of its manufacturing facilities. The Company continues to expect to receive the manufacturing license for Kaitong by the end of 2010.
- Onsite Inspection for Dipyridamole Aspirin Completed: The SFDA recently completed its on-site inspection, a final step in the SFDA review process. The Company continues to expect to receive the manufacturing license for Dipyridamole Aspirin by the end of 2010.
- Agreement to Market Dianatal® Obstetric Gel in Greater China Region: In June 2010, the Company entered into a distribution agreement with the Swiss company, HCB Happy Child Birth Holding Inc. Under this agreement, the Company will receive an exclusive license to register, market and distribute Dianatal® Obstetric Gel in Mainland China, Hong Kong and Macao. The Company expects to launch the product in Hong Kong and Macao by early 2011, and expects product registration in Mainland China to take up to 18 months.
Mr. Baizhong Xue continued, "We are excited about our diversifying product portfolio, which is on track to include sales of Kaitong, Dipyridamole Aspirin and Dianatal® Obstetric Gel in 2011."
Financial Outlook
Mr. Robert Pu, Chief Financial Officer of the Company, said, "In 2010, we will continue to execute on our growth strategies by focusing on marketing initiatives and deepening and broadening our hospital coverage. Our first half revenue performance typically comprises less than half of our full year results, and we reiterate that we are targeting revenue in the range of $51 to $53 million in 2010, driven primarily by our ongoing organic growth and leadership in the hemocoagulase market."
This forecast does not include potential revenue contributions from products not yet launched, such as Kaitong, and reflects the Company's current and preliminary view, which is subject to change.
Conference Call
The Company will hold a conference call at 8:00 am ET on Thursday, August 26, 2010 to discuss second quarter 2010 results.
| United States toll free: | 1-866-788-0542 |
| China toll free: | 10-800-7122655 |
| Hong Kong toll free: | 800-963844 |
| United Kingdom toll free: | 0808-2347616 |
| International: | 1-857-350-1680 |
| Conference ID: | 50147156 |
|
A telephone replay will be available beginning two hours after the conclusion of the call and will be available through September 2, 2010. Listeners may access the replay by dialing: |
|
| United States toll free: | 1-888-286-8010 |
| International: | 1-617-801-6888 |
| Conference ID: | 19232320 |
| 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 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 new product portfolio 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.
Use of Non-GAAP Financial Measures
The Company has included in this press release the non-GAAP net income as adjusted, which is defined as net income excluding the effect of foreign exchange gains related to the re-valuation of the Company's U.S. dollar denominated preference shares issued in December 2007 against the Renminbi, the Company's functional currency, as well as the share-based compensation expenses. The Company believes that both management and investors benefit from referring to the non-GAAP net income as adjusted in assessing the performance of the Company and when planning and forecasting future periods. The Company believes that the non-GAAP net income as adjusted provides meaningful supplemental information regarding its operating results and the Company will continue to monitor such non-GAAP presentation in the future. The use of non-GAAP net income as adjusted has limitations and the readers should not consider non-GAAP net income as adjusted in isolation from or as alternatives to consolidated income data prepared in accordance with U.S. GAAP, or as a measure of profitability, and should refer to the reconciliation of non-GAAP net income as adjusted with net income also included herein.
1 This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars as of and for the quarter ended June 30, 2010, were made at the noon buying rate of RMB6.7815 to USD1.00 on June 30, 2010 in the City of New York for cable transfers in Renminbi per U.S. 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 U.S. dollar amounts referred to in this press release could have been or could be converted into U.S. 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 SIX MONTHS ENDED JUNE 30, 2009 AND 2010 | ||||||
| Six Months 2009 | Six Months 2010 | 2Q 2009 | 2Q 2010 | |||
| (RMB'000) | (RMB'000) | (US$'000) | (RMB'000) | (RMB'000) | (US$'000) | |
| Net revenue | 135,493 | 152,144 | 22,435 | 75,763 | 82,405 | 12,151 |
| Cost of revenue | (16,115) | (16,585) | (2,446) | (9,705) | (9,240) | (1,363) |
| Gross profit | 119,378 | 135,559 | 19,989 | 66,058 | 73,165 | 10,788 |
| Operating expenses | ||||||
| Research and development costs | (4,611) | (5,899) | (870) | (2,790) | (2,770) | (408) |
| Selling, marketing and distribution expenses | (59,034) | (59,571) | (8,784) | (32,514) | (34,555) | (5,095) |
| General and administrative expenses | (18,116) | (24,707) | (3,643) | (8,345) | (11,782) | (1,737) |
| Total operating expenses | (81,761) | (90,177) | (13,297) | (43,649) | (49,107) | (7,240) |
| Operating profit | 37,617 | 45,382 | 6,692 | 22,409 | 24,058 | 3,548 |
| Interest income | 732 | 606 | 89 | 583 | 321 | 47 |
| Interest expense | (3,251) | (3,942) | (581) | (1,510) | (2,024) | (298) |
| Other (expenses) income, net | 400 | 830 | 122 | 84 | (968) | (143) |
| Income before income tax expense | 35,498 | 42,876 | 6,322 | 21,566 | 21,387 | 3,154 |
| Income tax expense | (6,679) | (6,413) | (946) | (3,946) | (1,994) | (294) |
| Net income | 28,819 | 36,463 | 5,376 | 17,620 | 19,393 | 2,860 |
| Net loss attributable to non-controlling interest | -- | 14 | 2 | -- | 13 | 2 |
| Net income | 28,819 | 36,477 | 5,378 | 17,620 | 19,406 | 2,862 |
| Accretion of Series A convertible redeemable preference shares | (7,348) | -- | -- | (3,672) | -- | -- |
| Allocation to Series A convertible redeemable preference shares for participating rights to dividends | (4,647) | -- | -- | (2,322) | -- | -- |
| Net income attributed to ordinary shares | 16,824 | 36,477 | 5,378 | 11,626 | 19,406 | 2,862 |
| Net income per share | ||||||
| Basic | 0.18 | 0.23 | $0.03 | 0.12 | 0.12 | $0.02 |
| Diluted | 0.18 | 0.23 | $0.03 | 0.12 | 0.12 | $0.02 |
| Shares used in net income per share computation | ||||||
| Basic | 95,447,648 | 158,441,508 | 158,441,508 | 95,447,648 | 158,457,111 | 158,457,111 |
| Diluted | 96,096,398 | 158,973,110 | 158,973,110 | 96,264,739 | 158,629,958 | 158,629,958 |
| Net income per ADS | ||||||
| Basic | 1.41 | 1.84 | $0.27 | 0.97 | 0.98 | $0.14 |
| Diluted | 1.40 | 1.84 | $0.27 | 0.97 | 0.98 | $0.14 |
| Shares used in net income per ADS computation | ||||||
| Basic | 11,930,956 | 19,805,189 | 19,805,189 | 11,930,956 | 19,807,139 | 19,807,139 |
| Diluted | 12,012,050 | 19,871,639 | 19,871,639 | 12,033,092 | 19,828,745 | 19,828,745 |
| CONSOLIDATED BALANCE SHEETS | |||
| AS OF DECEMBER 31, 2009 and JUNE 30, 2010 | |||
| December 31, | JUNE 30, | ||
| 2009 | 2010 | ||
| (RMB'000) | (RMB'000) | (US$'000) | |
| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | 351,258 | 292,257 | 43,096 |
| Restricted cash | 34,200 | 34,200 | 5,043 |
| Other investment - Current | 2,000 | -- | -- |
|
Accounts receivable (net of allowance for doubtful accounts of RMB393,860 as of December 31, 2009 and June 30, 2010) |
103,719 | 126,934 | 18,718 |
| Bills receivable | 34,346 | 29,619 | 4,368 |
| Inventories | 14,765 | 15,988 | 2,358 |
| Prepayments and other receivables | 26,976 | 49,853 | 7,351 |
| Prepaid income tax | 6,397 | 8,097 | 1,194 |
| Amounts due from a related party | -- | 3,561 | 525 |
| Deferred tax assets | 1,171 | 540 | 80 |
| Total current assets | 574,832 | 561,049 | 82,733 |
| Non-current assets: | |||
| Property, plant and equipment, net | 163,915 | 194,092 | 28,621 |
| Land use rights, net | 26,212 | 25,982 | 3,831 |
| Intangible assets, net | 8,369 | 8,098 | 1,194 |
| Other Investments-Non current | 3,414 | 3,414 | 503 |
| Deferred tax assets | 4,712 | 5,060 | 746 |
| Total non-current assets | 206,622 | 236,646 | 34,895 |
| TOTAL ASSETS | 781,454 | 797,695 | 117,628 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Current liabilities: | |||
| Short-term bank loans | 125,618 | 122,435 | 18,054 |
| Accounts payable | 1,924 | 1,662 | 245 |
| Accrued expenses and other payables | 29,994 | 15,193 | 2,240 |
| Income tax payable | 8,885 | 2,618 | 386 |
| Unrecognized tax benefits | 809 | 809 | 119 |
| Deferred tax liability | 16 | -- | -- |
| Total current liabilities | 167,246 | 142,717 | 21,044 |
| Non-current liabilities: | |||
| Deferred tax liabilities | 1,858 | 1,992 | 294 |
| Deferred government grants | 19,258 | 19,355 | 2,855 |
| Long-term payable | 10,557 | 10,928 | 1,612 |
| Total non-current liabilities | 31,673 | 32,275 | 4,761 |
| Commitments and contingencies | -- | -- | -- |
| Shareholders' equity: | |||
|
Ordinary shares (par value US$0.0005 per share, 474,200,000 shares authorized and 158,420,142 and 158,490,942 shares issued and outstanding as of December 31, 2009 and June 30, 2010, respectively) |
597 | 597 | 88 |
| Additional paid-in capital | 451,716 | 455,412 | 67,155 |
| Retained earnings | 128,071 | 164,548 | 24,264 |
| Total shareholders' equity | 580,384 | 620,557 | 91,507 |
| Non-controlling interests | 2,151 | 2,146 | 316 |
| TOTAL EQUITY | 582,535 | 622,703 | 91,823 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 781,454 | 797,695 | 117,628 |
| -- | -- | -- | |
| RECONCILIATION OF NON-GAAP NET INCOME AS ADJUSTED WITH NET INCOME | |||
| Six months ended | |||
| June 30, | |||
| 2009 | 2010 | 2010 | |
| RMB'000 | RMB '000 | USD '000 | |
| Net Income | 28,819 | 36,477 | 5,378 |
| Foreign exchange gains from re-valuation of preference shares | (52) | -- | -- |
| Share-based compensation expenses | 2,169 | 3,438 | 507 |
| Non-GAAP adjusted net income | 30,936 | 39,915 | 5,885 |
| Three months ended | |||
| June 30, | |||
| 2009 | 2010 | 2010 | |
| RMB'000 | RMB '000 | USD '000 | |
| Net Income | 17,620 | 19,406 | 2,860 |
| Foreign exchange gains from re-valuation of preference shares | (28) | -- | -- |
| Share-based compensation expenses | 1,266 | 1,678 | 247 |
| Non-GAAP adjusted net income | 18,858 | 21,084 | 3,107 |