1Q10 Revenue up 16.8% to RMB69.7 Million YOY
1Q10 Non-GAAP Net Income As Adjusted up 54.9% to RMB18.8 Million YOY
Live Conference Call to be Held Thursday, June 3, 2010 at 8:00 am ET
BEIJING, June 2, 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 hematological and cardiovascular products, today announced financial results for the first quarter of 2010.
Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "We are very pleased with our first quarter 2010 financial results, which demonstrate our continued market leadership and operational strength, driven by our high product quality, efficient operating platform and national presence."
First Quarter 2010 Financial Highlights
- Revenue increased 16.8% year over year to RMB69.7 million ($10.2 million(1)) from RMB59.7 million in the prior year period;
- Baquting revenue increased 15.1% to RMB65.8 million ($9.6 million) from RMB57.2 million in the prior year period;
- Gross margin was approximately 89.5%;
- Operating income increased 40.2% to RMB21.3 million ($3.1 million) from RMB15.2 million in the prior year period;
- Net income increased 52.4% to RMB17.1 million ($2.5 million), or RMB0.86 ($0.13) per diluted ADS(2), from RMB11.2 million, or RMB0.43 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 55.9% to RMB18.8 million ($2.8 million) from RMB12.1 million in the prior period.
(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 March 31, 2010, were made at the noon buying rate of RMB6.8258 to USD1.00 on March 31, 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.
First Quarter 2010 Financial Performance
First quarter 2010 revenue increased 16.8% to RMB69.7 million ($10.2 million) from RMB59.7 million in the first quarter of 2009. Revenue from Baquting increased 15.1% to RMB65.8 million ($9.6 million) from RMB57.2 million in the prior year's period. Revenue from Adenosine (Aiduo and Aiwen) was RMB0.8 million ($123,443) compared to RMB1.3 million in the prior year period, and revenue from other products increased to RMB3.1 million ($447,504) from RMB1.2 million in the prior period.
For the first quarter of 2010, gross profit increased 17.0% to RMB62.4 million ($9.1 million) from RMB53.3 million in the prior year's period. Gross margin for the first quarter of 2010 was 89.5%, compared to 89.3% in the first quarter of 2009.
Operating income increased 40.2% to RMB21.3 million ($3.1 million) in the first quarter of 2010, from RMB15.2 million in the comparable period of 2009. Operating margin was 30.6% in the first quarter of 2010, up from 25.5% in the prior year period.
Selling, marketing and distribution expenses remained relatively flat on a year over year basis at RMB25.0 million ($3.7 million), but declined as a percentage of revenue compared to prior periods. Research and development expenses were approximately 4.5% of revenue and increased 71.8% to RMB3.1 million ($458,000) in the first quarter from RMB1.8 million in the prior period, primarily attributable to expenses related to the research and development of hemocoagulase technologies, adenosine indications and other products. General and administrative expenses increased 32.3% to RMB12.9 million ($1.9 million) in the first quarter from RMB9.8 million in the prior year's period. The increase primarily reflects share-based compensation expense as well as additional costs related to the growth of the business, including recruitment of new professionals and compliance-related costs to support operations as a U.S. listed public company.
Provision for income taxes in the first quarter of 2010 was RMB4.4 million ($647,000), representing an effective tax rate of 20.6%, up from RMB2.7 million, an effective tax rate of 19.6% in the prior year period. Income tax expenses increased in line with the increase in profit before tax.
Net income increased 52.4% to RMB17.1 million ($2.5 million), or RMB0.86 ($0.13) per diluted ADS in the first quarter of 2010, from RMB11.2 million, or RMB0.43 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 55.9% to RMB18.8 million ($2.8 million) from RMB12.1 million in the prior period.
The Company had approximately 159.5 million weighted average diluted shares, or 19.9 million ADSs, as of March 31, 2010, compared to 96.0 million weighted average diluted shares, equivalent to 12.0 million ADSs, outstanding as of March 31, 2009.
As of March 31, 2010, the Company had cash and cash equivalents of RMB308.0 million ($45.1 million), compared to RMB351 million as of December 31, 2009.
Foreign Exchange and Non-Cash Share-Based Compensation Expense Discussion
The Company recorded 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, of approximately RMB24,000 ($3,516) for the first quarter of 2009. All preference shares have been converted automatically into the Company's ordinary shares upon the completion of its initial public offering in December 2009.
The Company also recognized non-cash share-based compensation expense of approximately RMB1.8 million ($258,000) for the first quarter of 2010, compared to RMB0.9 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 and foreign exchange gains.
Update on New Product Pipeline
The Company's key product candidates currently include Kaitong, a product in-licensed from Jilin Yuhua Pharmaceutical Co., Ltd., and Dipyridamole Aspirin, a product developed internally by Nuokang.
Today the Company provided the following updates on its new product portfolio:
- Kaitong: The Company's partner, Jilin Yuhua, submitted supplementary chemical manufacturing control data ("CMC data") to the China State Food and Drug Administration ("SFDA") in the second quarter of 2010. The Company is currently awaiting results of the SFDA review.
- Dipyridamole Aspirin: As planned, the Company scheduled an on-site inspection and quality verification with the SFDA. This is the final step leading to receipt of the manufacturing license. The Company maintains its belief that approval will be obtained in 2010.
Chairman Xue concluded, "We continue to actively navigate the Kaitong approval process with our partner, Jilin Yuhua. Additionally, we are pleased that the on-site inspection and quality verification for Dipyridamole Aspirin have been scheduled and we feel comfortable that the process is moving along as planned."
Financial Outlook
Mr. Robert Pu, Chief Financial Officer of the Company, said, "In 2010, we will continue to execute on our growth strategies by deepening and broadening our hospital coverage. We reiterate that we are targeting revenue in the range of $51 to $53 million in 2010, driven 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, June 3, 2010 to discuss first quarter 2010 results.
Listeners may access the call by dialing:
| United States toll free: | 1-866-804-6929 |
| International: | 1-857-350-1675 |
| China toll free: | 800-7122655 |
| Hong Kong toll free: | 800-963844 |
| United Kingdom toll free: | 0808-2347616 |
| Conference ID: | 89012332 |
A telephone replay will be available beginning two hours after the conclusion of the call and will be available through June 10, 2010. Listeners may access the replay by dialing:
| United States toll free: | 1-888-286-8010 |
| International: | 1-617-801-6888 |
| Conference ID: | 85921734 |
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 hematological and cardiovascular 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 final prospectus, dated December 10, 2009, filed with the Securities and Exchange Commission, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Potential risks and uncertainties include, but are not limited to: the Company's dependence on its flagship product Baquting; limitations in the Company's ability to successfully maintain the selling prices of its established products or to develop and commercialize new products; the Company's reliance on a limited number of suppliers and distributors; the Company's dependence on senior management and key research and development personnel; the Company's ability to access adequate working capital; the Company's ability to protect its intellectual property, trade secrets, and proprietary know-how; the Company's ability to comply with U.S. public accounting reporting requirements, including maintenance of an effective system of internal controls over financial reporting; and the Company's susceptibility to adverse changes in political, economic and other policies of the Chinese government that could materially harm its business. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Further information regarding risks and uncertainties faced by the Company is included in its filings with the U.S. Securities and Exchange Commission, including its final prospectus, dated December 10, 2009.
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.
| CONSOLIDATED STATEMENTS OF INCOME | |||
| FOR THE QUARTER ENDED MARCH 31, 2009 AND 2010 | |||
| 1Q 2009 | 1Q 2010 | ||
| (RMB'000) | (RMB'000) | (US$'000) | |
| Net revenue | 59,730 | 69,739 | 10,217 |
| Cost of revenue | (6,410) | (7,345) | (1,076) |
| Gross profit | 53,320 | 62,394 | 9,141 |
| Operating expenses | |||
| Research and development costs | (1,821) | (3,129) | (458) |
| Selling, marketing and distribution expenses | (26,520) | (25,016) | (3,665) |
| General and administrative expenses | (9,771) | (12,925) | (1,894) |
| Total operating expenses | (38,112) | (41,070) | (6,017) |
| Operating profit | 15,208 | 21,324 | 3,124 |
| Interest income | 149 | 285 | 42 |
| Interest expense | (1,741) | (1,918) | (281) |
| Other income, net | 316 | 1,798 | 263 |
| Income before income tax expense | 13,932 | 21,489 | 3,148 |
| Income tax expense | (2,733) | (4,419) | (647) |
| Net income | 11,199 | 17,070 | 2,501 |
| Net loss attributable to non-controlling interest | -- | (1) | -- |
| Net income | 11,199 | 17,071 | 2,501 |
|
Accretion of Series A convertible redeemable preference shares |
(3,676) | -- | -- |
|
Allocation to Series A convertible redeemable preference shares for participating rights to dividends |
(2,324) | -- | -- |
|
Net income attributed to ordinary shares |
5,199 | 17,071 | 2,501 |
| Net income per share | |||
| Basic | 0.05 | 0.11 | $0.02 |
| Diluted | 0.05 | 0.11 | $0.02 |
|
Shares used in net income per share computation |
|||
| Basic | 95,447,648 | 158,425,985 | 158,425,985 |
| Diluted | 95,958,712 | 159,543,875 | 159,543,875 |
| Net income per ADS | |||
| Basic | 0.44 | 0.86 | $0.13 |
| Diluted | 0.43 | 0.86 | $0.13 |
| Shares used in net income per ADS computation | |||
| Basic | 11,930,956 | 19,803,248 | 19,803,248 |
| Diluted | 11,994,839 | 19,942,984 | 19,942,984 |
| CONSOLIDATED BALANCE SHEETS | |||
| AS OF DECEMBER 31, 2009 and MARCH 31, 2010 | |||
| December 31, | March 31, | ||
| 2009 | 2010 | ||
| (RMB'000) | (RMB'000) | (US$'000) | |
| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | 351,258 | 307,975 | 45,119 |
| Restricted cash | 34,200 | 34,200 | 5,010 |
| Other investment - Current | 2,000 | -- | -- |
|
Accounts receivable (net of allowance for doubtful accounts of RMB393,860 and RMB63,799(US$9,347) as of December 31, 2009 and March 31, 2010, respectively) |
103,719 | 125,279 | 18,354 |
| Bills receivable | 34,346 | 25,899 | 3,794 |
| Inventories | 14,765 | 16,678 | 2,443 |
| Prepayments and other receivables | 26,976 | 38,666 | 5,664 |
| Prepaid income tax | 6,397 | 8,093 | 1,186 |
| Deferred tax assets | 1,171 | 477 | 70 |
| Total current assets | 574,832 | 557,267 | 81,640 |
| Non-current assets: | |||
| Property, plant and equipment, net | 163,915 | 180,331 | 26,419 |
| Land use rights, net | 26,212 | 26,097 | 3,823 |
| Intangible assets, net | 8,369 | 8,233 | 1,206 |
| Other Investments-Non current | 3,414 | 3,414 | 500 |
| Deferred tax assets | 4,712 | 4,891 | 717 |
| Total non-current assets | 206,622 | 222,966 | 32,665 |
| TOTAL ASSETS | 781,454 | 780,233 | 114,305 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Current liabilities: | |||
| Short-term bank loans | 125,618 | 122,432 | 17,936 |
| Accounts payable | 1,924 | 1,881 | 275 |
| Accrued expenses and other payables | 29,994 | 14,034 | 2,056 |
| Income tax payable | 8,885 | 7,672 | 1,124 |
| Unrecognized tax benefits | 809 | 809 | 119 |
| Deferred tax liability | 16 | 153 | 22 |
| Total current liabilities | 167,246 | 146,981 | 21,532 |
| Non-current liabilities: | |||
| Deferred tax liabilities | 1,858 | 1,916 | 281 |
| Deferred government grants | 19,258 | 19,157 | 2,807 |
| Long-term payable | 10,557 | 10,742 | 1,573 |
| Total non-current liabilities | 31,673 | 31,815 | 4,661 |
| Commitments and contingencies | -- | -- | -- |
| Shareholders' equity: | |||
|
Ordinary shares (par value US$0.0005 per share, 474,200,000 shares authorized and 158,420,142 shares issued and outstanding as of December 31, 2009 and March 31, 2010) |
597 | 597 | 87 |
| Additional paid-in capital | 451,716 | 453,539 | 66,445 |
| Retained earnings | 128,071 | 145,142 | 21,264 |
| Total shareholders' equity | 580,384 | 599,278 | 87,796 |
| Non-controlling interests | 2,151 | 2,159 | 316 |
| TOTAL EQUITY | 582,535 | 601,437 | 88,112 |
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
781,454 | 780,233 | 114,305 |
| RECONCILIATION OF NON-GAAP NET INCOME AS ADJUSTED WITH NET INCOME | ||
|
Three months ended March 31, |
||
| 2009 | 2010 | |
| RMB'000 | RMB '000 | |
| Net Income | 11,199 | 17,071 |
|
Foreign exchange gains from re-valuation of preference shares |
(24) | -- |
| Share-based compensation expenses | 903 | 1,760 |
| Non-GAAP adjusted net income | 12,078 | 18,831 |