updated 3/16/2011 4:19:06 PM ET 2011-03-16T20:19:06

FY10 Revenue Up 11.6% YOY to RMB315.8 Million ($47.8 Million)

FY10 Net Income of RMB46.1 Million ($7.0 Million)

4Q10 Revenue of RMB79.3 Million ($12.0 Million)

4Q10 Net Income of RMB0.3 Million ($42,000)

Live Conference Call to be Held Thursday, March 17, 2011 at 8:00 am ET

BEIJING, March 16, 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 fourth quarter and full year of 2010.

Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "We are proud of our revenue achievements for the full year of 2010. Driven by the steady growth of our established Baquting franchise, we have increased our full year 2010 revenue by over 11.6% to $47.8 million, the high end of our revenue guidance range provided last quarter. Our quarterly revenue continues to fluctuate due to seasonality but we believe the steady growth of our annual revenue is a testament to the long-term revenue potential of our business."

Chairman Xue continued, "We recognize, at the same time, that this is a crucial period of transition for Nuokang. As we have communicated previously, we are in the process of transforming Nuokang into one of China's leading and diversified bio-pharmaceutical companies. In the near term, we will need to continue to invest in our marketing and sales functions to support the launch of our portfolio pipeline products. However, with a seasoned management team and a strong cash balance in place, we are confident that our efforts will propel Nuokang onto a path of sustained growth and long-term profitability through our diversified product portfolio."

Fourth Quarter 2010 Financial Highlights

  • Revenue was RMB79.3 million ($12.0 million)1 compared to RMB82.9 million in the prior year period;
  • Baquting revenue remained flat at RMB76.7 million ($11.6 million) compared to RMB76.3 million in the prior year period;
  • Gross profit was RMB70.0 million ($10.6 million) compared to RMB72.0 million in the prior year period;
  • Gross margin increased to 88.2% compared to 86.9% the prior year period;
  • Operating income was RMB4.2 million ($0.6 million); and
  • Net income was RMB278,000 or RMB0.01 ($0.00) per diluted ADS2.

Fourth Quarter 2010 Financial Performance

Revenue was RMB79.3 million ($12.0 million) compared to RMB82.9 million in the prior year period. Revenue from Baquting remained flat at RMB76.7 million ($11.6 million) compared to RMB76.3 million in the prior year period, driven primarily by volume growth. Revenue from other products was RMB2.7 million ($0.4 million) compared to RMB6.6 million in the prior year period.

Gross profit was RMB70.0 million ($10.6 million) compared to RMB72.0 million in the prior year period. Gross margin increased on a year over year basis to 88.2%.

Operating income was RMB4.2 million ($0.6 million) in the fourth quarter of 2010 compared to RMB26.7 million in the prior year period. Operating margin for the fourth quarter of 2010 was 5.3%, compared to 32.2% in the prior year period. The decrease in operating profit and operating margin reflects the Company's significant sales and marketing investments and efforts to build out its distribution reach in preparation for future product launches.

Research and development expenses increased to RMB4.2 million ($0.6 million) in the fourth quarter of 2010 from RMB1.9 million in the prior year period. These costs accounted for 5.2% of revenue, the high end of the Company's expected range for research and development expenses, as a result of the timing of the Company's portfolio diversification efforts.

Selling, marketing and distribution expenses increased to RMB48.2 million ($7.3 million) in the fourth quarter of 2010 from RMB26.5 million in the prior year period, primarily due to the Company's efforts to prepare for the launch of Kaitong and other products in 2011. As a result, selling, marketing and distribution expenses for the fourth quarter of 2010 as a percentage of revenue was abnormally high at 60.8%. In the upcoming quarters, the Company will continue to build out its sales and marketing teams and distribution channels at more gradual levels as more of its pipeline products come to market.

General and administrative expenses decreased to RMB13.4 million ($2.0 million) in the fourth quarter of 2010 from RMB17.0 million in the prior year period. The prior year quarter's expenses reflected one-time costs associated with the Company's listing process while this quarter's expenses reflect more normalized expense levels commensurate with overall business expansion and being a U.S.-listed public company.

Provision for income taxes was RMB1.5 million ($234,000) in the fourth quarter of 2010, representing an effective tax rate of 85.7%, compared to RMB7.2 million in the prior year period.

Net income was RMB278,000 ($42,000) or RMB0.01 ($0.00) per diluted ADS in the fourth quarter of 2010 compared to RMB20.6 million or RMB1.44 per diluted ADS, in the prior year period.

For the quarter ending December 31, 2010, the Company had approximately 159.1 million weighted average diluted shares or 19.9 million ADSs.

As of December 31, 2010, the Company had cash and cash equivalents of RMB191.8 million ($29.1 million), compared to RMB351.3 million as of December 31, 2009.

Full Year Ended December 31, 2010 Financial Performance

For the full year ended December 31, 2010, revenue increased by 11.6% to RMB315.8 million ($47.8 million) from RMB282.9 million in the prior year period. During this same time period, gross profit increased by 12.6% to RMB278.5 million ($42.2 million) from RMB247.3 million in the prior year period. Operating income was RMB65.9 million ($10.0 million) compared to RMB80.9 million in the prior year period.

Net income was RMB46.1 million ($7.0 million) in 2010 compared to RMB51.2 million in the prior year period. Net income per diluted ADS was RMB2.32 ($0.35), compared to RMB4.11 per diluted ADS in the prior year period. For the full year ended December 31, 2010, the Company had approximately 158.8 million weighted average diluted shares outstanding or 19.8 million ADSs.  

New Product Updates

The Company continues to be on track to diversify its product portfolio through the following new product development and licensing efforts: 

Kaitong: The manufacturing license for the Company's in-licensed product Kaitong was issued in December of 2010. The Company has undertaken a significant marketing campaign to drive awareness and understanding of Kaitong and continues to invest in outreach events and building out its distribution channels to support these efforts. The Company also continues to expect nascent revenue contribution in early 2011 but believes material revenue contribution will begin in late 2011.

Dipyridamole Aspirin: The Company received the manufacturing license for Dipyridamole Aspirin at the end of December 2010 and continues to expect to begin marketing the product in the second quarter of 2011. This product will mark its entry into the cardiovascular market and, as such, the Company has assembled a marketing team and sales force dedicated to this new product area.

Mr. Baizhong Xue continued, "We believe 2011 will be a landmark year for us as revenue contributions from Kaitong and Dipridamole Aspirin gradually transform Nuokang into a diversified pharmaceutical company supported by multiple leading brands. This transition period will be reflected through margin compression in the near term. However, as these products mature, we believe that they, along with Baquting, will become the main drivers behind Nuokang's long-term, sustained growth momentum."

Financial Outlook

Mr. Robert Pu, Chief Financial Officer of the Company, said, "With two new products lined up in the coming year, 2011 will be an exciting time for Nuokang. At the same time, it is difficult to assess the market acceptance of our new product launches. We are confident, however, that our mature Baquting franchise will maintain its steady growth momentum. We will provide a more specific update once we are better able to assess the near term market potential of our pipeline products."

Conference Call

The Company will hold a conference call at 8:00 am ET on Thursday, March 17, 2011 to discuss fourth quarter and full year 2010 results. Listeners may access the call by dialing:

United States toll free: 1-866-519-4004
China toll free:  400-6208038
Hong Kong toll free:  800-930346
United Kingdom toll free: 0808-2346646
International: 1-718-354-1231
Passcode: 50742371

A telephone replay will be available beginning two hours after the conclusion of the call and will be available through March 31, 2011. Listeners may access the replay by dialing:

United States toll free:  1-866-214-5335
International:  1-718-354-1232
Passcode: 50742371

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 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.

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 December 31, 2010, were made at the noon buying rate of RMB6.600 to USD1.00 on December 30, 2010 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 MONTHS ENDED DECEMBER 31, 2009 AND 2010
             
             
  Full Year 2009 Full Year 2010 4Q 2009 4Q 2010
  (RMB'000) (RMB'000) (US$'000) (RMB'000) (RMB'000) (US$'000)
             
Net revenue  282,911  315,789  47,847  82,853  79,317  12,018
Cost of revenue  (35,625)  (37,304)  (5,652)  (10,816)  (9,348)  (1,416)
             
Gross profit  247,286  278,485  42,195  72,037  69,969  10,602
             
Operating expenses            
Research and development costs  (8,297)  (13,504)  (2,046)  (1,905)  (4,156)  (630)
Selling, marketing and distribution expenses  (110,513)  (145,549)  (22,053)  (26,470)  (48,196)  (7,302)
General and administrative expenses  (47,582)  (53,527)  (8,110)  (16,986)  (13,418)  (2,033)
             
Total operating expenses  (166,392)  (212,580)  (32,209)  (45,361)  (65,770)  (9,965)
             
Operating profit  80,894  65,905  9,986  26,676  4,199  636
Interest income  1,372  1,198  182  491  317  48
Interest expense  (3,327)  (7,147)  (1,083)  905  (1,093)  (166)
Exchange gain/(losses)  178  (5,825)  (883)  105  (2,141)  (324)
Other income, net  2,836  2,473  375  2,494  524  79
             
Income before income tax expense   81,953  56,604  8,577  30,671  1,806  273
Income tax expense  (16,858)  (10,606)  (1,607)  (7,213)  (1,547)  (234)
             
Net income  65,095  45,998  6,970  23,458  259  39
             
Net loss attributable to non-controlling interest  --   64  10  --   19  3
               
Net income  65,095  46,062  6,980  23,458  278  42
             
Accretion of Series A convertible redeemable preference shares  (13,886)  --   --   (2,865)  --   -- 
Allocation to Series A convertible redeemable preference shares for participating rights to dividends  --   --   --   --   --   -- 
              
Net income attributed to ordinary shares  51,209  46,062  6,980  20,593  278  42
             
Net income per share            
Basic   0.52  0.29 $0.04  0.19  0.00 $0.00
Diluted  0.51  0.29 $0.04  0.18  0.00 $0.00
             
Shares used in net income per share computation          
Basic  98,885,045  158,466,428  158,466,428  109,085,147  158,490,942  158,490,942
Diluted  99,725,253  158,797,628  158,797,628  130,541,237  159,147,942  159,147,942
             
Net income per ADS            
Basic   4.14  2.33 $0.35  1.51  0.01 $0.00
Diluted  4.11  2.32 $0.35  1.44  0.01 $0.00
             
Shares used in net income per ADS computation          
Basic 12,360,631 19,808,304 19,808,304  13,635,643 19,811,368 19,811,368
Diluted 12,465,657 19,849,704 19,849,704  16,317,655 19,893,493 19,893,493
 
 
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 and 2010
       
  December 31, December

31,
  2009 2010
  (RMB'000) (RMB'000) (US$'000)
       
ASSETS      
Current assets:      
Cash and cash equivalents  351,258  191,822  29,064
Restricted cash  34,200  --   -- 
Other investment - Current  2,000  29,868  4,525
Accounts receivable (net of allowance for doubtful accounts of RMB393,860 and RMB393,860 (US$59,676) as of December 31, 2009 and 2010, respectively)  103,719  132,504  20,076
Bills receivable  34,346  86,587  13,119
Inventories  14,765  16,789  2,544
Prepayments and other receivables  26,976  20,116  3,048
Prepaid income tax  6,397  5,117  775
Deferred tax assets  1,171  1,518  230
       
Total current assets 574,832 484,321 73,382
       
Non-current assets:      
Property, plant and equipment, net 163,915 183,499 27,803
Land use rights, net 26,212 35,800 5,424
Intangible assets, net 8,369 23,587 3,574
Other Investments-Non current 3,414 3,414 517
Prepayment for the exclusive distribution right -- 10,000 1,515
Deferred tax assets 4,712 4,258 645
       
Total non-current assets 206,622 260,558 39,478
       
TOTAL ASSETS 781,454 744,879 112,860
       
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Short-term bank loans 125,618 47,000 7,121
Accounts payable 1,924 1,764 267
Accrued expenses and other payables 29,994 22,281 3,376
Income tax payable 8,885 253 38
Unrecognized tax benefits 809 809 123
Deferred tax liability 16    
       
Total current liabilities 167,246 72,107 10,925
       
Non-current liabilities:      
Deferred tax liabilities 1,858 2,054 311
Deferred government grants 19,258 21,621 3,276
Long-term payable 10,557 11,299 1,712
       
Total non-current liabilities 31,673 34,974 5,299
       
Commitments and contingencies  --   --   -- 
       
       
Shareholders' equity:      
Ordinary shares (par value US$0.0005 per share, 474,200,000 shares authorized and 158,420,142 share issued and outstanding as of December 31, 2009; 474,200,000 shares authorized and 158,490,942 share issued and outstanding as of December 31, 2010) 597 597 90
Additional paid-in capital 451,716 460,981 69,846
Retained earnings 128,071 174,133 26,384
       
Total shareholders' equity 580,384 635,711 96,320
       
Non-controlling interests 2,151 2,087 316
       
TOTAL EQUITY 582,535 637,798 96,636
       
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 781,454 744,879 112,860
CONTACT: ICR, LLC
         In the U.S.:
         Ashley M. Ammon 
         1-646-277-1227
         
         In China:
         Wen Lei Zheng
         86-10-6583-7510

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