Earnings reports for China biomedical companies continued to be released during the past five days, though their pace dropped markedly from the week earlier. And the tone changed as well, turning more negative.
In all, three companies reported, and Lotus Pharma (OTCBB: LTUS) produced the most positive results of the three (see story). The company said that its revenues climbed an admirable 51% to $19.4 million in Q2. Unfortunately, net income did not equal those gains, a trend we also noted last week in many companies. However, for Lotus, the shortfall was worse than most because net income actually dropped 27% from the year earlier period to $2.2 million. Lotus put the blame for the disappointment on its sales costs, which totaled $5.9 million or 85% of the company’s operating costs. To reduce its accounts receivable, Lotus offered special incentives to its sales force. The account receivables, as a result, were almost flat on the quarter, despite the rise in sales, but profitability clearly suffered. Even though Lotus has booked just $3.2 million in net income in the first six months of the year, the company believes it will hit its full-year “make good” number (a promise to investors of its 2008 profits) of $13.1 million. That would represent a remarkable turnaround.
For Sinobiomed (OTCBB: SOBM), the Q2 financial report could be described in a single word: dismal (see story). In fact, Sinobiomed did not issue a press release for its quarter, choosing instead to make several upbeat announcements about progress in its R&D program. In a way, that is appropriate, because Sinobiomed’s legacy products, chiefly the Wanferon/Wanferin drugs, are seeing their revenues dwindle down to almost nothing. Sinobiomed says that market for its current products competes on price, and clearly its products are not flourishing in that environment. The company’s only hope is that one of its current projects will succeed and bring the company respectable revenues and profitability. Sinobiomed is working on rhK1, an anti-coagulant based on recombinant kallikrein-1, a recombinant multivalent tuberculosis vaccine, a recombinant malaria candidate vaccine, and an anti-bleeding agent, recombinant Batroxobin (rBAT). A new line of cosmetic products is the company’s single financial bright spot: Sinobiomed projects they will produce $3 million of sales in the next 12 months.
The earnings release for China Shenghuo Pharmaceutical Holdings (AMEX: KUN) was a backward step (see story). The company revealed that it has uncovered reporting irregularities that prevent it from delivering its second quarter results, and the same problems will cause the company to restate the results from the past twelve months as well.
