3Q11 Revenue up 3.5% YOY to RMB87.2 Million ($13.7 Million)
3Q11 Net Income was RMB7.6 Million ($1.2 Million)
9M11 Revenue was RMB231.3 Million ($36.3 Million)
9M11 Net Income was RMB32.7 Million ($5.1 Million)
Live conference call to be held Friday, November 18, 2011 at 8:00 am ET
BEIJING, Nov. 17, 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 third quarter of 2011.
Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "We are pleased to announce both year-over-year and sequential revenue growth for our third quarter of 2011. Baquting revenue rose to $83.9 million, growing 8.8% year-over-year and 10.2% quarter-over-quarter. Baquting sales volume similarly rose to 4.3 million units from 3.9 million units in both the prior year period and in the prior quarter. We also maintained a leading market share of 38% as of July 2011. We believe these are indicators of the strength of our commercialization platform, through which we have achieved sustained market leadership for Baquting and hope to drive the success of our new-to-market products. Looking forward, we aim to continue strengthening our business model and commercialization of new products to drive long-term growth and increase shareholder value."
Third Quarter 2011 Financial Highlights
- Revenue increased 3.5% to RMB87.2 million ($13.7 million)1 from RMB84.3 million in the prior year period;
- Baquting revenue increased 8.8% to RMB83.9 million ($13.2 million) from RMB77.1 million in the prior year period;
- Gross profit increased 3.5% to RMB75.5 million ($11.8 million) from RMB73.0 million in the prior year period;
- Gross margin remained flat at 86.6%, compared to 86.5% in the prior year period;
- Operating income was RMB16.5 million ($2.6 million); and
- Net income was RMB7.6 million ($1.2 million) or RMB0.39 ($0.06) per diluted ADS2.
Third Quarter 2011 Financial Performance
Revenue for the third quarter of 2011 increased 3.5% to RMB87.2 million ($13.7 million) from RMB84.3 million in the prior year period. Revenue from Baquting increased 8.8% to RMB83.9 million ($13.2 million) from RMB77.1 million in the prior year period. Sequentially, Baquting revenue increased 10.2% from RMB76.1 million in the second quarter of 2011. Revenue from other products was RMB3.4 million ($0.5 million), compared to RMB7.2 million in the prior year period.
Gross profit increased 3.5% to RMB75.5 million ($11.8 million) from RMB73.0 million in the prior year period. Gross margin remained flat at 86.6%, compared to 86.5% in the prior year period, as Baquting continued to be the Company's primary revenue contributor.
Operating income rose to RMB16.5 million ($2.6 million) from RMB16.3 million in the prior year period. Operating margin was 18.9%, compared to 19.4% in the prior year period. Operating expenses as a percentage of revenue is expected to remain stable in the long term and grow in line with revenue as the Company continues to invest in the commercialization of its new products.
Research and development expenses were in the high end of the Company's expected range of 3% to 5% of total revenue, at RMB4.6 million ($0.7 million), compared to RMB3.5 million in the prior year period. Research and development expenses as a percentage of revenue was 5.3%, in line with the Company's full year research and development expense expectations.
Selling, marketing and distribution expenses were RMB41.6 million ($6.5 million), compared to RMB37.8 million in the prior year period. Selling, marketing and distribution expenses as a percentage of revenue was 47.7%, reflecting the Company's continued focus on Baquting's marketing and promotional activities as well as efforts to market new products.
General and administrative expenses decreased to RMB12.8 million ($2.0 million) from RMB15.4 million in the prior year period, reflecting continued efforts to streamline administrative expenses.
Provision for income taxes was RMB7.1 million ($1.1 million), compared to RMB2.6 million in the prior year period. The increase is primarily due to a one-time non-cash tax accrual related to the conversion of Nuokang Medicine from a variable interest entity to a wholly-owned subsidiary. The Company expects the tax rate will normalize moving forward.
Net income was RMB7.6 million ($1.2 million), or RMB0.39 ($0.06) per diluted ADS, compared to RMB9.3 million, or RMB0.47 per diluted ADS, in the prior year period.
For the quarter ended September 30, 2011, the Company had approximately 157.6 million weighted average diluted ordinary shares outstanding, or 19.7 million weighted average diluted ADSs.
Nine Months Ended September 30, 2011 Financial Performance
For the nine months ended September 30, 2011, revenue was RMB231.3 million ($36.3 million), compared to RMB236.5 million for the nine months ended September 30, 2010. Gross profit was RMB202.7 million ($31.8 million), compared to RMB208.5 million in the prior year period. Operating income was RMB55.5 million ($8.7 million), compared to RMB61.7 million in the prior year period. Net income was RMB32.7 million ($5.1 million), or RMB1.66 ($0.26) per diluted ADS, compared to RMB45.8 million, or RMB2.31 per diluted ADS, for the prior year period.
For the nine months ended September 30, 2011, the Company had approximately 157.2 million weighted average diluted ordinary shares outstanding, or 19.7 million weighted average diluted ADSs.
As of September 30, 2011, the Company had cash and cash equivalents of RMB166.8 million ($26.2 million), compared to RMB191.8 million as of December 31, 2010.
New Product Performance
The Company continues to make progress on the commercialization of the following pipeline products:
Kaitong: The Company continues to drive awareness and understanding of Kaitong through nationwide marketing campaign. As of this quarter, the Company has succeeded in bidding processes for a total of six provinces and three military zones. The Company continues to invest in building market recognition for Kaitong.
In-licensed Products: For Dianatal®, the Company expects to submit testing results for the final stage of import license approval to the SFDA at the end of 2011. For its cardiovascular product, the Company is awaiting SFDA review of testing results for the final stage before receiving the import license. The Company continues to expect SFDA approval in 2012 for both products.
Mr. Baizhong Xue commented, "Our recent performance has been affected by our exploration of certain strategic alternatives to enhance shareholder value. These efforts required the incurrence of certain expenses, diverted resources and management attention and detracted from our staff's focus on everyday operations. Although we remain open to strategic alternatives that enhance shareholder value, we recognize the distracting effects that they can have our business and are now focused on stabilizing our commercialization platform to overcome this temporary impact on our operations. For the fourth quarter, we expect these distracting effects will continue to be reflected in our financial performance. Going forward, we are committed to mitigating these effects, returning to normal operations and further increasing shareholder value."
Other Developments
The Company announced that Dr. Kevin Li, the Company's Chief Scientific Officer, has submitted his resignation, effective November 16, 2011, to pursue other professional opportunities. Dr. Li will remain an advisor for the Board of Directors. The Company currently does not have plans to fill the position of Chief Scientific Officer.
Mr. Baizhong Xue commented, "We wish to thank Dr. Li for his contributions to Nuokang. In his time with us, Dr. Li has been an important member of our team in communicating the Nuokang story to the investment community, strengthening our product portfolio and numerous other aspects. We believe his expertise in sourcing new products and navigating the transaction and approval process has been invaluable. We wish him all the best in his future endeavors. Moving forward, we expect to focus on the market entry of our current portfolio products."
Conference Call
The Company will hold a conference call at 8:00 am ET on Friday, November 18, 2011 to discuss third quarter 2011 results. Listeners may access the call by dialing:
| United States toll free: | 1-855-500-8701 |
| United States toll: | 1-646-254-3515 |
| China toll free: | 400-1200654 |
| Hong Kong toll free: | 800-903737 |
| United Kingdom toll free: | 0800-0159724 |
| Conference ID: | 24534162 |
A telephone replay will be available beginning two hours after the conclusion of the call and will be available through December 2, 2011. Listeners may access the replay by dialing:
| United States toll free: | 1-866-214-5335 |
| International: | 1-718-354-1232 |
| Conference ID: | 24534162 |
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 3,000 hospitals in China. Nuokang's principal products include Baquting®, China's leading hemocoagulase product by market share, and Kaitong®, a lipid emulsion alprostadil product for the treatment of peripheral vascular diseases, cardiocerebral microcirculation disorders and post-surgery thrombosis. 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 September 30, 2011, were made at the noon buying rate of RMB6.378 to USD1.00 on September 30, 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 The Company's American Depositary Shares, which are traded on the NASDAQ, each of which represents eight ordinary shares of the Company.
| CONSOLIDATED STATEMENTS OF INCOME | ||||||
| FOR THE MONTHS ENDED SEPTEMBER 30, 2010 AND 2011 | ||||||
|
Nine Months 2010 |
Nine Months 2011 | 3Q 2010 | 3Q 2011 | |||
| (RMB'000) | (RMB'000) | (US$'000) | (RMB'000) | (RMB'000) | (US$'000) | |
| Net revenue | 236,472 | 231,253 | 36,258 | 84,328 | 87,247 | 13,679 |
| Cost of revenue | (27,956) | (28,602) | (4,484) | (11,371) | (11,716) | (1,837) |
| Gross profit | 208,516 | 202,651 | 31,774 | 72,957 | 75,531 | 11,842 |
| Operating expenses | ||||||
| Research and development costs | (9,348) | (12,102) | (1,897) | (3,449) | (4,605) | (722) |
| Selling, marketing and distribution expenses | (97,353) | (99,407) | (15,586) | (37,782) | (41,620) | (6,525) |
| General and administrative expenses | (40,109) | (35,657) | (5,591) | (15,402) | (12,787) | (2,005) |
| Total operating expenses | (146,810) | (147,166) | (23,074) | (56,633) | (59,012) | (9,252) |
| Operating profit | 61,706 | 55,485 | 8,700 | 16,324 | 16,519 | 2,590 |
| Interest income | 881 | 1,218 | 191 | 275 | 606 | 95 |
| Interest expense | (6,054) | (2,970) | (466) | (2,112) | (831) | (130) |
| Exchange losses | (3,684) | (4,475) | (702) | (2,468) | (1,579) | (248) |
| Other income, net | 1,949 | (175) | (27) | (97) | (78) | (12) |
| Income before income tax expense | 54,798 | 49,083 | 7,696 | 11,922 | 14,637 | 2,295 |
| Income tax expense | (9,059) | (16,472) | (2,583) | (2,646) | (7,069) | (1,108) |
| Net income | 45,739 | 32,611 | 5,113 | 9,276 | 7,568 | 1,187 |
| Net loss attributable to non-controlling interest | 45 | 105 | 16 | 31 | 45 | 7 |
| Net income attributed to | ||||||
| ordinary shares | 45,784 | 32,716 | 5,129 | 9,307 | 7,613 | 1,194 |
| Net income per share | ||||||
| Basic | 0.29 | 0.21 | 0.03 | 0.06 | 0.05 | 0.01 |
| Diluted | 0.29 | 0.21 | 0.03 | 0.06 | 0.05 | 0.01 |
| Shares used in net income pershare computation | ||||||
| Basic | 158,458,167 | 156,350,951 | 156,350,951 | 158,490,942 | 156,359,522 | 156,359,522 |
| Diluted | 158,866,304 | 157,231,116 | 157,231,116 | 159,147,942 | 157,631,522 | 157,631,522 |
| Net income per ADS | ||||||
| Basic | 2.31 | 1.67 | 0.26 | 0.47 | 0.39 | 0.06 |
| Diluted | 2.31 | 1.66 | 0.26 | 0.47 | 0.39 | 0.06 |
| Shares used in net income per ADS computation | ||||||
| Basic | 19,807,271 | 19,543,869 | 19,543,869 | 19,811,368 | 19,544,940 | 19,544,940 |
| Diluted | 19,858,288 | 19,653,890 | 19,653,890 | 19,893,493 | 19,703,940 | 19,703,940 |
| CONSOLIDATED BALANCE SHEETS | |||
| AS OF DECEMBER 31, 2010 and SEPTEMBER 30, 2011 | |||
| 31-Dec | 30-Sep | ||
| 2010 | 2011 | ||
| (RMB'000) | (RMB'000) | (US$'000) | |
| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | 191,822 | 166,784 | 26,150 |
| Other investment - Current | 29,868 | -- | -- |
| Accounts receivable (net of allowance for doubtful accounts of RMB393,860 and RMB393,860 (US$61,753) as of December 31, 2010 and September 30, 2011, respectively) | 132,504 | 87,863 | 13,776 |
| Bills receivable | 86,587 | 138,042 | 21,643 |
| Inventories | 16,789 | 16,848 | 2,642 |
| Prepayments and other receivables | 20,116 | 32,085 | 5,031 |
| Prepaid income tax | 5,117 | 6,597 | 1,034 |
| Deferred tax assets | 1,518 | 2,947 | 462 |
| Total current assets | 484,321 | 451,166 | 70,738 |
| Non-current assets: | |||
| Property, plant and equipment, net | 155,786 | 200,432 | 31,426 |
| Land use rights, net | 35,800 | 35,291 | 5,533 |
| Intangible assets, net | 23,587 | 21,807 | 3,419 |
| Other Investments-Non current | 3,414 | 3,414 | 535 |
| Prepayment for the exclusive distribution right | 37,713 | 21,773 | 3,414 |
| Deferred tax assets | 4,258 | 4,470 | 701 |
| Total non-current assets | 260,558 | 287,187 | 45,028 |
| TOTAL ASSETS | 744,879 | 738,353 | 115,766 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Current liabilities: | |||
| Short-term bank loans | 47,000 | 7,000 | 1,098 |
| Accounts payable | 1,764 | 2,425 | 380 |
| Accrued expenses and other payables | 22,281 | 22,843 | 3,582 |
| Income tax payable | 253 | 8,741 | 1,371 |
| Unrecognized tax benefits | 809 | 809 | 127 |
| Total current liabilities | 72,107 | 41,818 | 6,558 |
| Non-current liabilities: | |||
| Deferred tax liabilities | 2,054 | 2,189 | 343 |
| Deferred government grants | 21,621 | 22,006 | 3,450 |
| Long-term payable | 11,299 | 11,856 | 1,859 |
| Total non-current liabilities | 34,974 | 36,051 | 5,652 |
| 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 156,350,951 shares issued and outstanding as of September 30, 2010) | 597 | 587 | 92 |
| Additional paid-in capital | 460,981 | 451,068 | 70,722 |
| Retained earnings | 174,133 | 206,849 | 32,432 |
| Total shareholders' equity | 635,711 | 658,504 | 103,246 |
| Non-controlling interests | 2,087 | 1,980 | 310 |
| TOTAL EQUITY | 637,798 | 660,484 | 103,556 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 744,879 | 738,353 | 115,766 |