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China Nuokang Bio-Pharmaceutical Inc. Reports First Quarter 2011 Financial Results

1Q11 Revenue of RMB64.5 Million ($9.9 Million)
/ Source: GlobeNewswire

1Q11 Revenue of RMB64.5 Million ($9.9 Million)

1Q11 Net Income of RMB10.9 Million ($1.7 Million)


Live Conference Call to be Held Thursday, May 26, 2011 at 8:00 am ET

BEIJING, May 25, 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 first quarter of 2011.

Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "For the full year of 2011, we are confident in our ability to deliver 15% top-line growth. Our first quarter 2011 financial results were in line with our expectations for the quarter, generating strong profitability of RMB10.9 million in net income and a 17% net margin. At the same time, with the Chinese New Year holiday, our first quarter revenue is seasonally the weakest quarter of the year. We expect our sales performance to ramp up during the second half of the year. Furthermore, we implemented a significant restructuring initiative to increase the efficiency of our direct sales team, which led to certain near term volatility."

Chairman Xue continued, "We are confident that our restructuring initiative will strengthen our sales performance in the long run. Our new model allows us to better link marketing costs to sales performance and tailor promotional efforts to local needs to drive faster sales growth. We have replaced the majority of our salaried internal direct sales team with nine regional contract sales partners. These partners will control allocation of marketing resources and be rewarded based on their sales performance, which gives them an incentive to control costs while achieving higher sales. From a financial standpoint, product pricing as well as sales and marketing expenses as a percentage of sales will remain comparable to current levels but the new structure gives management greater flexibility in rewarding strong performance and controlling costs when sales goals are not met. Looking forward, we are confident that Nuokang will become a leading, multi-product bio-pharmaceutical company."

First Quarter 2011 Financial Highlights

  • Revenue was RMB64.5 million ($9.9 million) [1] compared to RMB69.7 million in the prior year period;
  • Baquting revenue was RMB60.8 million ($9.3 million) compared to RMB65.8 million in the prior year period;
  • Gross profit was RMB56.3 million ($8.6 million) compared to RMB62.4 million in the prior year period;
  • Gross margin was 87.2% compared to 89.5% in the prior year period;
  • Operating income was RMB17.9 million ($2.7 million); and
  • Net income was RMB10.9 ($1.7 million) or RMB0.55 ($0.08) per diluted ADS [2].

First Quarter 2011 Financial Performance

Revenue was RMB64.5 million ($9.9 million) compared to RMB69.7 million in the prior year period. Revenue from Baquting was RMB60.8 million ($9.3 million) compared to RMB65.8 million in the prior year period as a result of a revenue mix shift towards a greater proportion of marketing agent sales. Total sales volume remained the same. Revenue from other products was RMB3.8 million ($0.6 million) compared to RMB3.9 million in the prior year period.

Gross profit was RMB56.3 million ($8.6 million) compared to RMB62.4 million in the prior year period. Gross margin was 87.2% compared to 89.5% in the prior year period. 

Operating income was RMB17.9 million ($2.7 million) in the first quarter of 2011 compared to RMB21.3 million in the prior year period. Operating margin for the first quarter of 2011 was 27.8%, compared to 30.6% in the prior year period and 5.3% in the fourth quarter of 2010.  Operating expenses as a percentage of revenue is expected to remain stable, growing in proportion with revenue, as the Company continues to invest in the sales and marketing efforts required to successfully bring to market its new products.

Research and development expenses increased to RMB4.2 million ($0.6 million) in the first quarter of 2011 from RMB3.1 million in the prior year period. These costs accounted for 6.5% of revenue this quarter but remained in line with the Company's full year research and development expense expectations.

Selling, marketing and distribution expenses decreased to RMB21.2 million ($3.2 million) in the first quarter of 2011 from RMB25.0 million in the prior year period. The decrease reflects the Company's new compensation structure for its direct sales team, which more effectively links compensation to sales performance. Accordingly, selling expenses will fluctuate with revenue going forward. As efforts to broaden the market recognition and acceptance of new products like Kaitong continue, the Company expects selling, marketing and distribution expenses to continue to account for a greater percentage of total operation expenses.

General and administrative expenses remained steady at RMB12.9 million ($2.0 million) in the first quarter of 2011 from the prior year period.

Provision for income taxes was RMB4.6 million ($705,000) in the first quarter of 2011, representing an effective tax rate of 29.8%, compared to RMB4.4 million in the prior year period.

Net income was RMB10.9 million ($1.7 million) or RMB0.55 ($0.08) per diluted ADS in the first quarter of 2011 compared to RMB17.1 million or RMB0.86 per diluted ADS, in the prior year period.

For the quarter ended March 31, 2011, the Company had approximately 159.2 million weighted average diluted ordinary shares, or 19.9 million ADSs.

As of March 31, 2011, the Company had cash and cash equivalents of RMB191.0 million ($29.2 million), compared to RMB191.8 million as of December 31, 2010.

New Product Performance

The Company continues to diversify its product portfolio through the following product launch and in-licensing efforts:

Kaitong: The Company continues to focus on the commercialization of Kaitong through a nationwide marketing campaign to drive awareness and understanding of Kaitong. Throughout 2011, the Company will continue to host outreach events and build out its distribution channels to support these efforts.  The Company has won the bidding process for five provinces thus far and continues to actively participate in additional bids. The first quarter of 2011 showed nascent revenue contribution but material revenue contribution is expected to begin in late 2011.

Dipyridamole Aspirin: The Company plans to begin marketing efforts and launch the bidding process for Dipyridamole Aspirin in the second quarter of 2011. These efforts are expected to lead to revenue contribution in late 2011.

Mr. Baizhong Xue commented, "We are confident that 2011 will be a landmark year for us. Our product portfolio has already begun to take on the diversified structure that our management team has been diligently pursuing in the past few quarters. Looking forward, we believe Baquting will continue to be a main source of revenue but as a more mature product. Kaitong will gradually ramp up into another main revenue contributor. Then, we expect to build out a suite of cardiovascular products, for which Dipyridamole Aspirin was our entry point. The past few quarters have been a financially and operationally challenging transition period. However, we are confident that Nuokang will emerge through this gradual transformation as a leading, diversified bio-pharmaceutical company in China."

Financial Outlook

Mr. Robert Pu, Chief Financial Officer of the Company, said, "We continue to expect 15% top-line growth for the full year of 2011, driven by revenue growth in the second half of 2011. Our direct sales team reorganization and continued product launch efforts add certain near-term volatility but we are confident that the second half of 2011 will demonstrate significant growth as we begin to realize the benefits of our new structure and revenue contribution from our product launches grow."

Conference Call

The Company will hold a conference call at 8:00 am ET on Thursday, May 26, 2011 to discuss first quarter 2011 results. Listeners may access the call by dialing:

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 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 March 31, 2011, were made at the noon buying rate of RMB6.5483 to USD1.00 on March 31, 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]    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 De Simone: 1-646-277-1227 In China: Wen Lei Zheng: 86-10-6583-7510