3Q10 Revenue Up 30.6% YOY to RMB84.3 Million ($12.6 million)
3Q10 Net Income Was RMB9.3 Million ($1.4 million)
9M10 Revenue Up 18.2% YOY to RMB236.5 million ($35.3 million)
9M10 Net Income Up 10% YOY to RMB45.8 million ($6.8 million)
Live Conference Call to be Held Thursday, November 18, 2010 at 8:00 am ET
BEIJING, Nov. 17, 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 third quarter and the first nine months of 2010.
Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "We have achieved strong revenue and profit growth in the first nine months of 2010 through the hard work of our management team and employees. However, we recognize that we are operating in a challenging competitive landscape for our leading product Baquting. Thus, we believe that it is prudent not to sacrifice profits for volume growth and we have adjusted our internal goal for the fourth quarter accordingly. As a result, we are now targeting revenue in the range of $45 million to $48 million for the full year of 2010."
Chairman Xue continued, "At the same time, we believe that the most difficult period is behind us. We are looking forward to regaining rapid growth through significant new product launches and potential in-licensing and M&A opportunities in the coming year. For example, we have recently obtained the exclusive right to market an imported cardiovascular product in China. With a seasoned management team, an extensive hospital-based sales team and a strong cash balance to support our growth, we are confident that Nuokang will become one of China's leading pharmaceutical companies supported by a diverse product portfolio of leading brands and profitability over the long-term."
Third Quarter 2010 Financial Highlights
- Revenue increased by 30.6% to RMB84.3 million ($12.6 million)1 from RMB64.6 million in the prior year period;
- Baquting revenue increased by 30.3% to RMB77.1 million ($11.5 million) from RMB59.2 million in the prior year period;
- Gross profit increased by 30.6% to RMB73.0 million ($10.9 million) from RMB55.9 million in the prior year period;
- Gross margin remained stable at 86.5% compared to the prior year period;
- Operating income was RMB16.3 million ($2.4 million);
- Net income was RMB9.3 million or RMB0.47 ($0.07) per diluted ADS2
Third Quarter 2010 Financial Performance
Revenue increased by 30.6% to RMB84.3 million ($12.6 million) from RMB64.6 million in the prior year period. Revenue from Baquting increased 30.3% to RMB77.1 million ($11.5 million) from RMB59.2 million in the prior year period, driven primarily by volume growth. Revenue from other products was RMB7.2 million ($1.1 million) compared to RMB5.4 million in the prior year period.
Gross profit increased 30.6% to RMB73.0 million ($10.9 million) from RMB55.9 million in the prior year period. Gross margin remained steady on a year over year basis at 86.5% as our pricing strategy and product mix remained largely unchanged.
Operating income was RMB16.3 million ($2.4 million) in the third quarter of 2010 compared to RMB16.6 million in the prior year period. Operating margin for the third quarter of 2010 was 19.4%, compared to 25.7% in the prior year period. The decrease in operating profit and operating margin reflects increased operating costs in the third quarter of 2010.
Research and development expenses increased to RMB3.4 million ($516,000), from RMB1.8 million in the prior year period, demonstrating the Company's commitment to drive long-term portfolio diversification through investment in development of pipeline products. Research and development costs as a percentage of revenue were 4.1%, in line with our expectation.
Selling, marketing and distribution expenses increased to RMB37.8 million ($5.6 million) from RMB25.0 million in the prior year period, as a result of higher levels of marketing and promotional activities as well as the Company's efforts to prepare for Kaitong's launch in 2011. Selling, marketing and distribution expenses for the third quarter of 2010 as a percentage of revenue remained within the high end of the Company's normalized range at 44.8%.
General and administrative expenses increased to RMB15.4 million ($2.3 million), from RMB12.5 million in the prior year period. This increase reflects increased due diligence costs from business development efforts as well as expense growth commensurate with overall business expansion. In additional to these expected increases, general and administrative expenses as a percentage of revenue also rose above the normal range to 18.3% as a result of compliance costs related to being a U.S. – listed public company incurred in the third quarter of 2010.
Provision for income taxes was RMB2.6 million ($395,000), representing an effective tax rate of 22.2%, compared to RMB3.0 million in the prior year period.
Net income was RMB9.3 million ($1.4 million), or RMB0.47 ($0.07) per diluted ADS, compared to RMB12.8 million, or RMB0.56 per diluted ADS, in the prior year period. This decrease reflects the recognition of a non-operating foreign exchange loss of approximately RMB3.7 million ($550,000) due to the appreciation of the US dollar against the RMB this quarter.
For the quarter ending September 30, 2010, the Company had approximately 159.1 million weighted average diluted shares, or 19.9 million ADSs.
As of September 30, 2010, the Company had cash and cash equivalents of RMB253.6 million ($37.9 million), compared to RMB351.3 million as of December 31, 2009.
Nine Months Ended September 30, 2010 Financial Performance
For the nine months ended September 30, 2010, revenue increased by 18.2% to RMB236.5 million ($35.3 million) from RMB200.1 million in the prior year period. During this same time period, gross profit increased by 19.0% to RMB208.5 million ($31.2 million) from RMB175.2 million in the prior year period. Operating income increased by 13.8% to RMB61.7 million ($9.2 million) from RMB54.2 million in the prior year period.
Net income increased by 10.0% to RMB45.8 million ($6.8 million) from RMB41.6 million in the prior year period. Net income per diluted ADS was RMB2.31 ($0.34), compared to RMB1.96 per diluted ADS in the prior year period. For the nine months ended September 30, 2010, the Company had approximately 158.9 million weighted average diluted shares outstanding, or 19.9 million ADSs.
The Company continues to be on track to diversify its product portfolio through the following new product development and licensing efforts:
Kaitong: The SFDA completed its technical review and on-site inspection of Kaitong in the third quarter of 2010 and Kaitong's development is moving forward as expected. The Company continues to expect the manufacturing license for the Company's in-licensed product Kaitong to be issued by the end of 2010.
Dipyridamole Aspirin: The SFDA completed its on-site inspection in the third quarter of 2010 and the Company continues to expect to receive a manufacturing license for Dipyridamole Aspirin by the end of 2010.
Dianatal® Obstetric Gel: The Company has initiated the registration of this product candidate with the SFDA and expects to receive approval to launch this product in 2012.
New Cardiovascular Product: The Company has recently obtained the exclusive right to market an imported cardiovascular product in China. This product is currently undergoing clinical trials and the Company expects to launch this product in early 2012 after it receives the import license from the SFDA.
Mr. Baizhong Xue continued, "We believe 2011 will be a landmark year for us as revenue contributions from Kaitong and Dipridamole Aspirin gradually grow Nuokang into a diversified pharmaceutical company supported by multiple leading brands. Furthermore, as can be seen through our expenditures this quarter, we have made significant progress on the M&A front and believe that in the forthcoming months, we will reach agreements to further enhance our revenue stream with additional market-leading brands."
Mr. Robert Pu, Chief Financial Officer of the Company, said, "As the Chairman remarked, we are now targeting full year revenue in the range of $45 to $48 million in 2010. Looking beyond these near term challenges, however, we are optimistic about the future potential of our business as we continue to diversifying our product portfolio and deepen and broaden our hospital coverage to drive long-term growth."
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.
The Company will hold a conference call at 8:00 am ET on Thursday, November 18, 2010 to discuss third quarter 2010 results. Listeners may access the call by dialing:
A telephone replay will be available beginning two hours after the conclusion of the call and will be available through November 25, 2010. Listeners may access the replay by dialing:
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.
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.
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, 2010, were made at the noon buying rate of RMB6.6905 to USD1.00 on September 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.
CONTACT: ICR, LLC In the U.S.: Ashley M. Ammon Christine Duan 1-646-277-1227 In China: Wen Lei Zheng 86-10-6583-7510