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China Nuokang Bio-Pharmaceutical Inc. Reports Third Quarter 2012 Financial Results

Sunday, November 25, 2012 9:00 AM


3Q12 Revenue was RMB75.4 Million ($12.0 Million)

3Q12 Net Income was RMB2.5 Million ($0.4 Million)

3Q12 Non-GAAP Adjusted Net Income was RMB11.6 Million ($1.8 Million)

Live conference call to be held Monday, November 26, 2012 at 8:00 am ET

BEIJING, Nov. 25, 2012 (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 its unaudited financial results for the third quarter of 2012.

Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "We are pleased to report a solid third quarter that has demonstrated steady sales performance and continuing progress with non-GAAP profitability. Revenue of RMB69.9 million from Baquting, our flagship product, was largely in line with our target. Sales volume of Baquting has consistently increased during the first three quarters of this year. We are encouraged by overall longitudinal improvements that the Company has made so far for 2012."

Chairman Xue continued, "We recently celebrated the 15th anniversary of Nuokang. During the past decade and a half, our management and staff have striven to make Nuokang one of China's leading biopharmaceutical companies. We are extremely grateful for the support of our investors and very proud of the market-leading position we have achieved in the hemocoagulase sector. We also see tremendous potential with our increasingly diversified product portfolio. We remain committed to investing in R&D to support innovation of novel products as well as improvements to our proven product lines."

Third Quarter 2012 Financial Highlights

  • Revenue was RMB75.4 million ($12.0 million)1, compared to RMB87.2 million in the prior year period;
  • Baquting revenue was RMB69.9 million ($11.1 million), compared to RMB83.9 million in the prior year period;
  • Gross profit was RMB66.4 million ($10.6 million), compared to RMB75.5 million in the prior year period;
  • Gross margin was 88.0%, compared to 86.6% in the prior year period;
  • Operating income was RMB5.1 million ($0.8 million), compared to RMB16.5 million in the prior year period;
  • Net income was RMB2.5 million ($0.4 million), or RMB0.13 ($0.02) per diluted ADS2, compared to RMB7.6 million, or RMB0.39 per diluted ADS, in the prior year period; and
  • Non-GAAP adjusted net income was RMB11.6 million ($1.8 million), compared to RMB13.1 million in the prior year period.

Third Quarter 2012 Financial Performance

Revenue for the third quarter of 2012 was RMB75.4 million ($12.0 million), compared to RMB87.2 million in the third quarter of 2011. Revenue from Baquting decreased to RMB69.9 million ($11.1 million) in the third quarter of 2012 from RMB83.9 million in the third quarter of 2011 but was in line sequentially with RMB68.9 million in the second quarter of 2012. In terms of volume, Baquting sales saw both annual and sequential increases during the reporting period. The year-on-year decrease in Baquting revenue was primarily attributable to changes in the Company's sales channel mix during the period. Baquting revenue as a percentage of total revenue was 92.7% in the third quarter of 2012, compared to 96.1% in the third quarter of 2011. Revenue from other products was RMB5.5 million ($0.9 million) in the third quarter of 2012, compared to RMB3.3 million in the third quarter of 2011, mainly attributable to increased Kaitong sales.

Gross profit for the third quarter of 2012 was RMB66.4 million ($10.6 million), compared to RMB75.5 million for the third quarter of 2011. Gross margin for the third quarter of 2012 was 88.0%, an increase from 86.6% in the third quarter of 2011.

Operating income for the third quarter of 2012 was RMB5.1 million ($0.8 million), compared to RMB16.5 million for the third quarter of 2011. The year-over-year decrease was primarily attributable to expenses relating to the Company's going-private transaction.

Research and development expenses for the third quarter of 2012 were RMB4.1 million ($0.7 million), compared to RMB4.6 million for the third quarter of 2011. Research and development expenses as a percentage of revenue was 5.5% for the third quarter of 2012, which was largely in line with 5.3% for the third quarter of 2011 and within the Company's expected range.

Selling, marketing and distribution expenses for the third quarter of 2012 were RMB37.6 million ($6.0 million), compared to RMB41.6 million for the third quarter of 2011. Selling, marketing and distribution expenses as a percentage of revenue for the third quarter of 2012 was 49.9%, which was largely in line with 47.7% in the third quarter of 2011. Selling, marketing and distribution expenses for the third quarter of 2012 primarily consisted of the Company's investment in sales and marketing for Baquting as well as the Company's continued investment in the commercialization of Kaitong and ALA.

General and administrative expenses for the third quarter of 2012 were RMB19.5 million ($3.1 million), compared to RMB12.8 million for the third quarter of 2011. The increase in general and administrative expenses was primarily attributable to the Company's privatization expenses amounting to RMB7.6 million ($1.2 million).

Provision for income taxes for the third quarter of 2012 was RMB3.6 million ($0.6 million), compared to RMB7.1 million for the third quarter of 2011. The Company's effective tax rate was 58.9% during the third quarter of 2012, compared to 48.3% during the third quarter of 2011, primarily as a result of more non-deductible expenses such as privatization expenses incurred in this period.

Net income for the third quarter of 2012 was RMB2.5 million ($0.4 million), or RMB0.13 ($0.02) per diluted ADS, compared to RMB7.6 million, or RMB0.39 per diluted ADS, for the third quarter of 2011.

Non-GAAP adjusted net income for the third quarter of 2012, excluding foreign exchange losses, ESOP related charges, ASC 740 adjustment and privatization expenses, was RMB11.6 million ($1.8 million), compared to RMB13.1 million for the third quarter of 2011.

For the third quarter of 2012, the Company had approximately 154.4 million weighted average diluted ordinary shares outstanding, or 19.3 million weighted average diluted ADSs.

As of September 30, 2012, the Company had cash and cash equivalents and other short-term investments of RMB185.9 million ($29.8 million), compared to RMB179.4 million as of December 31, 2011.

Nine Months Ended September 30, 2012 Financial Performance

Revenue decreased 9.8% to RMB208.6 million ($33.2 million) for the nine months ended September 30, 2012 from RMB231.3 million for the nine months ended September 30, 2011. During this same time period, gross profit decreased 9.8% to RMB182.7 million ($29.1 million) from RMB202.7 million and operating income decreased by 65.7% to RMB19.1 million ($3.0 million) from RMB55.5 million.

Net income decreased 58.0% to RMB13.7 million ($2.2 million), or RMB0.09 ($0.01) per diluted ADS from RMB32.7 million, or RMB0.21 per diluted ADS, for the nine months ended September 30, 2011. Weighted average number of diluted ordinary shares outstanding was approximately 154.2 million for the nine months of 2012, or 19.3 million ADSs.

Non-GAAP Measures

Adjusted net income is presented to better illustrate the Company's ongoing and core operational results. Adjusted net income is defined as net income excluding foreign exchange losses, ESOP related charges, ASC 740 adjustment and the Company's privatization expenses. Adjusted net income may be calculated differently, and therefore the Company's adjusted net income may not be comparable to similarly titled measures of other companies. Adjusted net income is not a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and should not be considered in isolation or as an alternative to net income, cash flows from operating activities and other measures determined in accordance with GAAP. Items excluded from adjusted net income are significant and necessary components to the operations of the Company's business, and, therefore, adjusted net income should only be used as a supplemental measure of operating performance.

Conference Call

The Company will hold a conference call at 8:00 a.m. ET on Monday, November 26, 2012 to discuss the third quarter 2012 financial results. Listeners may access the call by dialing:

United States toll free: 1-855-500-8701
China toll free:    400-1200654
Hong Kong toll free:    800-903737
United Kingdom toll free:   0800-0159724
International:     65-6723-9385
Conference ID:   64309501

A live webcast and replay of the earnings call 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 4,200 hospitals in China. Nuokang's principal products include Baquting®, China's leading hemocoagulase product by market share, Kaitong®, a lipid emulsion alprostadil product for the treatment of peripheral vascular diseases, cardiocerebral microcirculation disorders and post-surgery thrombosis; and alpha lipoic acid capsules, or ALA, an antioxidant product that addresses diabetic neuropathy. 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 management quotations and the statements relating to the Company's new product development, 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.

1This 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, 2012, were made at the noon buying rate of RMB6.2848 to USD1.00 on September 28, 2012 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.

2The Company's American Depositary Shares, which are traded on the NASDAQ, each of which represents eight ordinary shares of the Company.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30, 2011 AND 2012
             
   3Q 2011 3Q 2012 Nine Months
2011
Nine Months 2012
  (RMB'000) (RMB'000) (US$'000) (RMB'000) (RMB'000) (US$'000)
             
Net revenue  87,247  75,397  11,997  231,253  208,587  33,189
Cost of revenue  (11,716)  (9,019)  (1,435)  (28,602)  (25,857)  (4,114)
             
Gross profit  75,531  66,378  10,562  202,651  182,730  29,075
             
Operating expenses            
Research and development costs  (4,605)  (4,136)  (658)  (12,102)  (11,537)  (1,836)
Selling, marketing and distribution expenses  (41,620)  (37,628)  (5,987)  (99,407)  (105,219)  (16,742)
General and administrative expenses  (12,787)  (19,514)  (3,105)  (35,657)  (46,918)  (7,465)
             
Total operating expenses  (59,012)  (61,278)  (9,750)  (147,166)  (163,674)  (26,043)
             
Operating profit  16,519  5,100  812  55,485  19,056  3,032
Interest income  606  1,184  188  1,218  2,789  444
Interest expense  (831)  (236)  (38)  (2,970)  (710)  (113)
Foreign exchange (losses) gain   (1,579)  100  16  (4,475)  362  58
Other loss, net  (78)  (28)  (4)  (175)  (64)  (10)
             
Income before income tax expense   14,637  6,120  974  49,083  21,433  3,411
Income tax expense  (7,069)  (3,605)  (574)  (16,472)  (7,727)  (1,229)
             
Net income  7,568  2,515  400  32,611  13,706  2,182
             
Net (income) loss attributable to non-controlling interest  45  (2)  --   105  (3)  -- 
             
Net income attributed to ordinary shares  7,613  2,513  400  32,716  13,703  2,182
             
Net income per share            
Basic   0.05  0.02  --   0.21  0.09  0.01
Diluted  0.05  0.02  --   0.21  0.09  0.01
             
Shares used in net income pershare computation          
Basic  156,359,522  153,681,734  153,681,734  156,350,951  153,560,668  153,560,668
Diluted  157,631,522  154,390,734  154,390,734  157,231,116  154,246,544  154,246,544
             
Net income per ADS            
Basic   0.39  0.13  0.02  1.67  0.71  0.11
Diluted  0.39  0.13  0.02  1.66  0.71  0.11
             
Shares used in net income per ADS computation          
Basic 19,544,940 19,210,217 19,210,217 19,543,869 19,195,084 19,195,084
Diluted 19,703,940 19,298,842 19,298,842 19,653,890 19,280,818 19,280,818
 
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2011 and SEPTEMBER 30, 2012
       
  December 31, September
30,
  2011 2012
  (RMB'000) (RMB'000) (US$'000)
       
ASSETS      
Current assets:      
Cash and cash equivalents  179,385  120,212  19,240
Restricted cash  5,410  --   -- 
Short-term investments  --   65,690  10,513
Accounts receivable (net of allowance for doubtful accounts of RMB393,860 and RMB393,860 (US$63,034) as of December 31, 2011 and September 30, 2012, respectively)  60,767  52,776  8,446
Bills receivable  109,256  99,013  15,846
Inventories  15,846  20,157  3,226
Prepayments  18,020  22,003  3,521
Other receivables  7,203  5,229  837
Prepaid income tax  8,179  14,838  2,375
Deferred tax assets  1,040  446  71
       
Total current assets 405,106 400,364 64,075
       
Non-current assets:      
Property, plant and equipment, net 214,171 230,478 36,887
Land use rights, net 35,121 34,611 5,539
Intangible assets, net 21,212 19,429 3,109
Other Investments 3,414 3,414 546
Prepayments 15,884 31,640 5,064
Deferred tax assets 7,406 7,326 1,172
       
Total non-current assets 297,208 326,898 52,317
       
TOTAL ASSETS 702,314 727,262 116,392
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Short-term bank loans 7,000 7,000 1,120
Accounts payable 1,501 3,031 485
Accrued expenses and other payables 34,863 38,799 6,209
Income tax payable 3,312 2,968 475
Unrecognized tax benefits 2,656 5,763 922
Total current liabilities 49,332 57,561 9,211
       
Non-current liabilities:      
Deferred tax liabilities 2,036 2,336 374
Deferred government grants 23,185 26,697 4,273
Long-term payable 12,934 13,494 2,160
Total non-current liabilities 38,155 42,527 6,807
       
Commitments and contingencies  --   --   -- 
       
Shareholders' equity:      
Ordinary shares (par value US$0.0005 per share, 474,200,000 shares authorized and 157,906,470 shares issued and outstanding as of December 31, 2011; 474,200,000 shares authorized and 157,330,734 shares issued and outstanding as of September 30, 2012) 581 580 93
Additional paid-in capital 469,107 469,297 75,107
Retained earnings 143,180 155,335 24,860
Total shareholders' equity 612,868 625,212 100,060
       
Non-controlling interests 1,959 1,962 314
       
TOTAL EQUITY 614,827 627,174 100,374
       
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 702,314 727,262 116,392
             
NKBP            
Non GAAP Net Income            
             
  Nine Months 2011 Nine Months 2012 3Q 2011 3Q 2012
  (RMB'000) (RMB'000) (USD$'000) (RMB'000) (RMB'000) (USD$'000)
             
GAAP Net Income 32,716 13,703 2,180 7,613 2,513 400
             
Adjusting             
Foreign Exchang Loss/(Gain) 4,475 (362) (58) 1,579 (100) (16)
ESOP  5,972 191 30 3,868 0 0
ASC 740 adjustment 0 3,107 494 0 1,607 256
Privatization expense 0 10,979 1,747 0 7,584 1,207
             
Non GAAP Net Income 43,163 27,618 4,394 13,060 11,604 1,846
CONTACT:  China Nuokang Bio-Pharmaceutical Inc. 
          Mr. Steven Duan
          Vice President of Investor Relations 
          Email: dsz@nkbp.com
          ICR, Inc.
          Mr. Rob Koepp
          Tel: (+86) 10-6583-7516 or (646) 405-5180
          Email: robert.koepp@icrinc.com

(Source: PrimeZone )
(Source: Quotemedia)

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