(Source: Business Wire)
Tongjitang Chinese Medicines Company (NYSE: TCM) ("Tongjitang" or the "Company"), a leading specialty pharmaceutical company focusing on the development, manufacturing, marketing and selling of modernized traditional Chinese medicine in China, today announced its financial results for the quarter ended June 30, 2009.
Financial Results for the Quarter Ended June 30, 2009
Net revenues increased 12.1% to RMB134.1 million ($19.6 million)1 from RMB119.6 million the year before, reflecting sales in Xianling Gubao ("XLGB") of RMB80.7 million ($11.8 million) which remained at approximately the same level as the second quarter of 2008, a 39.7% increase in sales of other core products to RMB18.2 million ($2.7 million), and revenue contribution of RMB14.4 million ($2.1 million) from Anhui Jingfang ("Jingfang"), which was acquired at the end of the first quarter of 2009.
Gross margin was 61.0% in the second quarter of 2009, compared to 66.7% in the same period of 2008, and 58.2% in the first quarter of 2009.
Net income attributable to the Company increased 117.6% to RMB17.2 million ($2.5 million), which yielded net income per ADS of RMB0.53 ($0.08), and net income per share2 of RMB0.13 ($0.02).
Non-GAAP adjusted EBITDA per share was RMB0.21 ($0.03), compared to RMB0.20 in the second quarter of 2008 and RMB(0.01) in the first quarter of 2009.
Net revenues for the second quarter of 2009 were RMB134.1 million ($19.6 million), up by 12.1% from RMB119.6 million in the second quarter of 2008, and up by 48.7% from RMB90.2 million in the first quarter of 2009. XLGB sales were RMB80.7 million ($11.8 million) in the second quarter of 2009, compared to RMB81.5 million in the second quarter of 2008. Net revenues of the Company's other core products, including Moisturizing & Anti-itching Capsules and Zaoren Anshen Capsules, increased 39.7% to RMB18.2 million ($2.7 million) from RMB13.0 million in the second quarter of 2008. Revenue contribution from Guizhou Long-Life Pharmaceutical Company Limited ("Guizhou LLF") was RMB2.2 million ($322,000), compared to RMB2.3 million in the first quarter of 2009. Revenue contribution from Qinghai Pulante Pharmaceutical Co., Ltd. ("Pulante") was RMB1.0 million ($146,000). Revenue contribution from Jingfang, which was acquired at the end of the first quarter of 2009, was RMB14.4 million ($2.1 million).
Gross profit increased by 2.5% to RMB81.7 million ($12.0 million) in the second quarter of 2009 from RMB79.7 million in the second quarter of 2008. Gross margin was 61.0% in the second quarter of 2009, compared to 66.7% in the same period of 2008 and 58.2% in the first quarter of 2009. Tongjitang's cost of revenues and the decreased gross margin reflect the reduced revenues from Guizhou LLF (which enjoys a higher margin), lower selling prices of certain non-XLGB core products, and the increased cost of some of the raw materials for products other than XLGB. The price of barrenwort, used in the production of XLGB, remained stable in the second quarter of 2009.
Operating income in the second quarter of 2009 increased 28.8% to RMB11.7 million ($1.7 million) from RMB9.1 million in the second quarter of 2008, primarily reflecting the aforesaid increase in gross profit.
Net income attributable to the Company increased 117.6% to RMB17.2 million ($2.5 million), which yielded net income per ADS of RMB0.53 ($0.08), and net income per share2 of RMB0.13 ($0.02).
Non-GAAP adjusted EBITDA in the second quarter of 2009 was RMB27.1 million ($4.0 million), compared to RMB27.4 million in the second quarter of 2008, and a loss of RMB1.9 million in the first quarter of 2009. Non-GAAP adjusted EBITDA per share was RMB0.21 ($0.03), compared to RMB0.20 in the second quarter of 2008 and RMB(0.01) in the first quarter of 2009. The number of shares used in the computation of GAAP net income per share and Non-GAAP adjusted EBITDA per share was 128.3 million. Please refer to the Company's GAAP to Non-GAAP reconciliation table provided below.
Xiaochun Wang, Chief Executive Officer and Chairman of Tongjitang, stated, "We are very pleased to report a quarter with improved revenue growth driven by our more diversified product portfolio. Our increased sales benefitted from our newly-integrated business, Jingfang, and our existing branded product lines. Revenue performance also reflects initial progress of our ongoing sales team restructuring."
Financial Results for the Six Months Ended June 30, 2009
For the six months ended June 30, 2009, revenues were RMB224.2 million ($32.8 million), down from RMB225.4 million in the first six months of 2008. During this same time period, gross profit was RMB134.2 million ($19.7 million), down from RMB144.3 million. Income from operations increased 95.3% to RMB1.5 million ($0.2 million) from RMB0.7 million in the first six months of 2008. Net income attributable to the Company was RMB5.8 million ($0.9 million), or RMB 0.04 ($0.01) per share, compared to net income attributable to the Company of RMB19.8 million, or RMB0.15 per share, in the first six months of 2008. Net income per ADS was RMB0.18 ($0.03) in the first six months of 2009, compared with net income per ADS of RMB0.59 in the first six months of 2008. On a year over year basis, weighted average number of shares outstanding for the first six months of 2009 was 129.5 million.
Balance Sheet
As of June 30, 2009, the Company had cash and cash equivalents of RMB473.7 million ($69.4 million). This compares to RMB488.4 million as of March 31, 2009, and RMB731.1 million as of June 30, 2008.
About Non-GAAP Financial Measures
To supplement the Company's unaudited condensed consolidated financial information presented in accordance with the United States Generally Accepted Accounting Principles ("GAAP"), the Company also provides non-GAAP financial measures, non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA per share, all of which exclude share-based compensation expenses recorded under Statement of Financial Accounting Standards 123R, "Share-Based Payment." The Company's management believes the non-GAAP financial measures facilitate better understanding of operating results from quarter to quarter and allows the management team to better plan and forecast future periods, as the non-GAAP financial measures provide additional information to the investors. The non-GAAP information is not in accordance with GAAP and may be different from non-GAAP methods of accounting and reporting used by other companies. The presentation of this additional information should not be considered a substitute for the GAAP results. A limitation of using these non-GAAP financial measures is that these non-GAAP measures exclude share-based compensation expenses that have been and will continue to be significant recurring expenses in the Company's business for the foreseeable future. Reconciliations of the Company's non-GAAP financial data to the most comparable GAAP data are included at the end of this press release.
Conference Call
The Company will hold a conference call on August 17, 2009, at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Beijing/Hong Kong time) following the announcement. Listeners may access the call by dialing the following numbers:
United States toll free: 1-866-564-7439 Hong Kong toll free: 1-800-968103 Northern China toll free: 10 800 712 0046 Southern China toll free: 10 800 120 0046 International: 1-719-325-2224 Listeners may access the replay through August 24, 2009, by dialing the following numbers: United States toll free: 1-888-203-1112 International: 1-719-457-0820 Password: 1412369 -------------------------------------------------------------------------------
An audio webcast of the call will also be available through the Company's website at www.tongjitang.com.
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 June 30, 2009 were made at the noon buying rate on June 30, 2009 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, which was RMB6.8302 to USD1.00. Tongjitang makes no representation that the Renminbi or US dollar amounts referred to in this release could have been or could be converted into US dollars or Renminbi, as the case may be, at any particular rate or at all.
2. All references to shares' are to our ordinary shares. Each of our American Depositary Shares, which are traded on the New York Stock Exchange, represents four ordinary shares.
About Tongjitang Chinese Medicines Company
Tongjitang Chinese Medicines Company, through its operating subsidiaries Tongjitang Pharmaceutical, Tongjitang Distribution, Tongjitang Chain Stores, Guizhou Long-Life Pharmaceutical Company Limited, Qinghai Pulante and Anhui Jingfang, is a vertically integrated and profitable specialty pharmaceutical company focused on the development, manufacturing, marketing and selling of modernized traditional Chinese medicine in China. Tongjitang's principal executive offices are located in Shenzhen, China.
Tongjitang's flagship product, Xianling Gubao, is the leading traditional Chinese medicine for the treatment of osteoporosis in China as measured by sales in Renminbi. In addition to Xianling Gubao, the Company manufactures and markets 36 other modernized traditional Chinese medicine products and 37 western medicines. Please visit www.tongjitang.com for more information.
Safe Harbor Statements
This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from those described in the forward-looking statements in this press release. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's heavy dependence on the success of Xianling Gubao; the Company's ability to market Xianling Gubao to hospitals and to retail pharmacies; the retail prices of its principal products' being subject to price control by the government authorities in China; the inclusion of the Company's products in national and provincial medical catalogs of the National Medical Insurance Program in China; the Company's ability to obtain approval from the State Food and Drug Administration in China to convert a provisional national production standard of the Company's principal products to a national final production standard; the Company's ability to continue having the exclusive production rights for its products; the Company's ability to further improve its barrenwort extraction efficiency; the presence of certain side effects in the Company's current products and the Company's ability to identify side effects associated with its current or future products prior to their marketing and sale; the Company's ability to obtain manufacturing or marketing approval for its future products; the Company's dependence on a limited number of distributors for a significant portion of its net revenues; the Company's exposure to the risk of product liability claims and its limited insurance coverage; the Company's ability to manage the expansion of its operations and its future research and development projects successfully; the Company's ability to protect its intellectual property rights and defend infringement or misappropriation claims by third parties; intense competition in the pharmaceutical market in China; the supply of quality medicinal raw materials; the Company's U.S. tax status as a passive foreign investment company ("PFIC") for the taxable year ended December 31, 2008 and the significant risk that the Company will be a PFIC for the current taxable year ending December 31, 2009; uncertainties with respect to the legal system in China, including uncertainty with respect to potential regulatory changes in China's healthcare industry; if disruptions in the financial markets and other macro-economic challenges currently affecting the economy of the United States and other parts of the world continue or even worsen, it may adversely impact the economy and consumer confidence in China; a further slowdown in the growth of China's economy; and the Company's ability to expand its business through organic growth and strategic acquisitions and investments. Further information regarding these and other risks is and will be included in the Company's registration statement on Form F-1, its annual report on Form 20-F and other documents filed and to be filed with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release is as of the date of this press release, and the Company undertakes no duty to update such information, except as required under applicable law.
Tongjitang Chinese Medicines Company Unaudited Condensed Consolidated Statements of Operations (In thousands, except share and per share data) Second Quarter Ended June 30 Half Year Ended June 30 2008 2009 2009 2008 2009 2009 RMB RMB US$ RMB RMB US$ (Note) (Note) Net revenues 119,607 134,069 19,629 225,389 224,248 32,832 Cost of revenues 39,873 52,334 7,662 81,131 89,999 13,177 Gross profit 79,734 81,735 11,967 144,258 134,249 19,655 Advertising expenses (26,035 ) (3,517 ) (515 ) (43,425 ) (16,400 ) (2,401 ) Other selling and marketing expenses (18,029 ) (36,994 ) (5,416 ) (43,275 ) (67,560 ) (9,891 ) General and administrative expenses (24,342 ) (26,011 ) (3,808 ) (50,930 ) (43,021 ) (6,299 ) Research and development expenses (2,595 ) (3,992 ) (584 ) (6,607 ) (6,805 ) (996 ) Other operating income 360 492 72 722 988 145 Income from operations 9,093 11,713 1,716 743 1,451 213 Other income (expenses): Interest income 3,312 1,236 181 8,346 2,673 391 Interest expense (4,793 ) (2,133 ) (312 ) (8,215 ) (4,265 ) (624 ) Government grants 2,042 1,045 153 4,329 2,420 354 Investment (loss) / gain (460 ) 631 92 (1,059 ) 615 90 Other income / (expenses), net 1,141 6,324 926 19,014 6,627 970 Income before income taxes 10,335 18,816 2,756 23,158 9,521 1,394 Provision for income taxes (2,495 ) (1,618 ) (237 ) (3,528 ) (3,660 ) (536 ) Net income 7,840 17,198 2,519 19,630 5,861 858 Less: Net income (loss) attributable to the non-controlling interests (43 ) 41 6 (129 ) 66 10 Net income attributable to the Company 7,883 17,157 2,513 19,759 5,795 848 Earnings per share Ordinary shares -Basic 0.06 0.13 0.02 0.15 0.04 0.01 -Diluted 0.06 0.13 0.02 0.15 0.04 0.01 Shares used in computation of earnings per share Ordinary shares -Basic 134,588,513 128,279,051 128,279,051 134,586,618 129,512,746 129,512,746 -Diluted 134,588,513 128,279,051 128,279,051 134,586,618 129,512,746 129,512,746 (Note) The condensed consolidated financial statements of Tongjitang Chinese Medicines Company are stated in Renminbi ("RMB"). The translation of RMB amounts as of and for the period ended June 30, 2009 into United States dollar ("US$") is included solely for the convenience of readers and has been made at the rate of RMB6.8302 to US$1.00, which is based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York at June 30, 2009. Such translations should not be construed as representations that RMB amounts could be converted into US$ at that rate or any other rate. ------------------------------------------------------------------------------- Exception caught in main.
Tongjitang Chinese Medicines Company Reconciliation of GAAP net income to Non-GAAP adjusted EBITDA (In thousands, except share and per share data) Second Quarter Ended June 30 Half Year Ended June 30 2008 2009 2009 2008 2009 2009 RMB RMB US$ RMB RMB US$ (Note 1) (Note 1) GAAP net income 7,883 17,157 2,513 19,759 5,795 848 Share-based compensation expenses (Note 2) 9,094 2,033 298 18,416 4,068 596 Depreciation and amortisation 6,444 5,345 783 12,368 10,014 1,466 Interest (income) expense, net 1,481 897 131 (131 ) 1,592 233 Provision for income taxes 2,495 1,618 237 3,528 3,660 536 Non-GAAP adjusted EBITDA 27,397 27,050 3,962 53,940 25,129 3,679 GAAP earnings per share Ordinary shares -Basic 0.06 0.13 0.02 0.15 0.04 0.01 -Diluted 0.06 0.13 0.02 0.15 0.04 0.01 Non-GAAP adjusted EBITDA per share Ordinary shares -Basic 0.20 0.21 0.03 0.40 0.19 0.03 -Diluted 0.20 0.21 0.03 0.40 0.19 0.03 Shares used in computation of GAAP / Non-GAAP adjusted EBITDA per share Ordinary shares -Basic 134,588,513 128,279,051 128,279,051 134,586,618 129,512,746 129,512,746 -Diluted 134,588,513 128,279,051 128,279,051 134,586,618 129,512,746 129,512,746 (Note 1) A service of YellowBrix, Inc.
