3SBio Inc. Announces Unaudited Second Quarter Results
Three months ended June 30, 2010 Unaudited Financial Results
Net revenues. Net revenues increased by 29.5% to RMB105.5 million(US$15.6 million) for the second quarter of 2010 from RMB81.5 million (US$11.9million) for the same period in 2009. This increase was largely due tocontinued strength from EPIAO and TPIAO products which increased by 22.9% and44.6%, respectively, over the same period in 2009. TPIAO remained theCompany's second largest revenue contributor in the quarter, accounting for30.5% of total net revenues. Export sales declined by 16.9% to RMB2.9 million(US$0.4 million), and revenues from our IV Iron Sucrose supplement rose 51.1%to RMB4.5 million (US$0.7 million).
Gross profit. As a result of continued sales growth from key products,gross profit for the second quarter of 2010 increased by 26.4% to RMB94.8million (US$14.0 million) from RMB75.0 million (US$11.0 million) for the sameperiod in 2009. Gross margin decreased by 2.2% to 89.8% for the second quarterof 2010 from 92.0% for the same period in 2009. The decrease in gross marginis mainly due to higher depreciation charges attributable to the newproduction facilities in Shenyang.
Operating expenses. Operating expenses were RMB66.8 million (US$9.9million) for the second quarter of 2010, or 63.4% of net revenues, compared tooperating expenses of RMB49.2 million (US$7.2 million), or 60.3% of netrevenue for the same period in 2009. The increase in operating expenses as apercentage of net revenues was largely driven by higher SG&A expenses.
Operating income. Operating income was RMB27.9 million (US$4.1 million)for the second quarter of 2010, an increase of 8.2% from operating income ofRMB25.8 million (US$3.8 million) for the same period in 2009. Operatingmargin for the second quarter of 2010 was 26.5% as compared to 31.7% for thesame period in 2009.
Interest income. The Company recorded net interest income of RMB2.4million (US$0.3 million) for the second quarter of 2010, compared to RMB2.5million (US$0.4 million) for the same period in 2009.
Net income. GAAP net income was RMB25.5 million (US$3.8 million) for thesecond quarter of 2010, 5.4% lower than net income of RMB27.0 million (US$0.4million) for the same period in 2009. GAAP net income per ADS on a fully-diluted basis for the second quarter of 2010 increased to RMB1.16 (US$0.17)from RMB1.25 (US$0.18) for the same period in 2009. GAAP net margin for thesecond quarter of 2010 was 24.2% as compared to 33.1% for the same period in2009.
Non-GAAP net income for the second quarter of 2010 was RMB25.5 million(US$3.8 million), 0.6% higher than non-GAAP net income of RMB25.4 million(US$3.7 million) for the same period in 2009.
Non-GAAP net income per ADS on a fully-diluted basis for the secondquarter of 2010 decreased to RMB1.16 (US$0.17) from RMB1.18 (US$0.17) for thesame period in 2009. Non-GAAP net margin for the second quarter of 2010 was24.2% as compared to 31.1% for the same period in 2009.
Six months ended June 30, 2010 Unaudited Financial Results
Net revenues. Net revenues for the first half of 2010 increased by 34.5%to RMB201.9 million (US$29.8 million), from RMB150.1 million (US$22.0 million)for the same period in 2009. The increase was primarily attributable toincreased sales from our EPIAO and TPIAO products, underpinned by continuedstrong demand in the oncology and nephrology markets.
Net revenues from EPIAO for the first half of 2010 increased by 27.7% toRMB120.0 million (US$17.7 million) from RMB94.0 million (US$13.8 million) forsame period in 2009. Net revenues from TPIAO in the first half of 2010increased by 51.8% to RMB62.1 million (US$9.2 million) from RMB41.0 million(US$6.0 million) for the same period in 2009. In addition, revenue from ourexport business was RMB6.0 million (US$0.9 million), representing a decreaseof 12.7% over the first half of 2009, while revenue from our IV Iron Sucrosesupplement was RMB8.6 million (US$1.3 million), representing an increase of71.6% over the first half of 2009.
Gross profit. Gross profit for the first half of 2010 increased by 33.2%to RMB183.3 million (US$27.0 million) from RMB137.6 million (US$20.1 million)for the same period in 2009. Gross margin decreased by 0.9% to 90.8% for thefirst half month months of 2010 from 91.7% for the same period in 2009.
Operating income. For the first half ended June 30, 2010, operating incomeincreased by 22.3% to RMB56.1 million (US$8.3 million), compared to RMB45.9million (US$6.7 million) for the same period in 2009. Operating margin for thefirst half ended June 30, 2010 was 27.8% as compared to 30.6% for the halfmonths ended June 30, 2010.
Net income. GAAP net income for the first half of 2010 increased by 21.7%to RMB52.2 million (US$7.7 million) compared with RMB42.9 million (US$6.3million) for the same period in 2009. GAAP net margin for the first half endedJune 30, 2010 was 25.8% as compared to 28.6% for the same period in 2009.GAAP net income per ADS on a fully-diluted basis for the first half of 2010increased to RMB2.37 (US$0.35) from RMB1.99 (US$0.29) for the same period in2009.
Non-GAAP net income for the first half of 2010 increased by 13.7% toRMB52.2 million (US$7.7 million) compared with RMB45.9 million (US$6.7 million)for the same period in 2009. Non-GAAP net margin for the first half endedJune 30, 2010 was 25.8% as compared to 30.6% for the same period in 2009.Non-GAAP net income per ADS for the first half of 2010 increased to RMB2.37 (US$0.35) from RMB 2.13 (US$0.31) for the same period in 2009.
Cash and cash equivalents / Time deposits. 3SBio had positive operatingcash flows of RMB34.3 million (US$5.1 million) for the second quarter 2010,and as of June 30, 2010 retained a strong balance sheet with cash, cashequivalents, restricted cash and time deposits of RMB749.3 million (US$110.5million), a 0.1% increase from RMB740.5 million (US$108.5 million) as ofDecember 31, 2009.
2010 Full Year Guidance
Based on current market conditions and visibility provided during thesecond quarter, the Company reiterates its total net revenue target for thefull year of 2010 of between US$56 million to US$60 million, resulting in ayear-over-year increase of approximately 21% to 29%.
3SBio's senior management will host a conference call at 5:00 am (Pacific)/ 8:00 am (Eastern) / 8:00 pm (Beijing/Hong Kong) on August 18, 2010 todiscuss its 2010 second quarter financial results and recent business activity.The conference call may be accessed using the dial-in numbers below:
A live webcast of the conference will be available on the investorrelations page of 3SBio's website athttp://bbs.3sbio.com/en/News/xinvestors.aspx and athttp://tinyurl.com/3SBio2010Q2 .
A replay of the webcast will be available within one hour after theconclusion of the call.
Non-GAAP Financial Measures: Reconciliation of GAAP to Non-GAAP
To supplement the Company's financial information presented in accordancewith general accepted accounting principles ("GAAP"), the Company has utilizedsome non-GAAP financial measures to provide investors and management withsupplemental measures that facilitate comparisons of operating performance andtrends with prior and future operating performance, and that may not otherwisebe apparent on a GAAP basis. These non-GAAP financial measures include non-GAAP net income, non-GAAP net income per share, and non-GAAP net income perADS. These measures may be different from non-GAAP financial measures used byother companies. The presentation of this financial information, which is notprepared under any comprehensive set of accounting rules or principals, is notintended to be considered in isolation or as a substitute for the financialinformation prepared and presented in accordance with GAAP. Non-GAAP measureshave limitations in that they do not reflect all of the amounts associatedwith the Company's results of operations as determined in accordance with GAAP.These measures should only be used to evaluate the Company's results ofoperations in conjunction with the corresponding GAAP measures. Please see theattached reconciliation of GAAP to non-GAAP for an explanation of the amountsexcluded to arrive at non-GAAP financial measures for the three-month periodsended June 30, 2009 and June 30, 2010 and for the half month periods endedJune 30, 2009 and June 30, 2010.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is preliminary andsubject to adjustments and modifications. The audited financial statements andrelated notes are to be included in our annual report on Form 20-F for theyear ending December 31, 2010. Adjustments and modifications to the financialstatements may be identified during the course of the audit work, which couldresult in significant differences from this preliminary unaudited financialinformation.
Currency Convenience Translation
For the convenience of readers, certain RMB amounts have been translatedinto US dollars at the rate of RMB6.7815 to US$1.00, the noon buying rate forUS dollars in effect on June 30, 2010 for cable transfers of RMB per US dollaras certified for customs purposes by the Federal Reserve Bank of New York. Arate of 6.8302 was used for comparative purposes as of June 30, 2009.
About 3SBio Inc.
3SBio Inc. is a leading, fully integrated biotechnology company focused onresearching, developing, manufacturing and marketing biopharmaceuticalproducts, primarily in China. For more information, please visit 3SBio on theweb at http://www.3sbio.com .
Safe Harbor Statement
Certain statements in the disclosures of 3SBio, Inc. (the "Company" or"3SBio") for the second quarter of fiscal 2010 ("Disclosures") that are notpurely historical in nature may constitute "forward-looking statements" withinthe meaning of the Private Securities Litigation Reform Act of 1995. TheDisclosures include the press release, the conference call and anyaccompanying materials, and any other information issued, released orpublicized by the Company with respect to fiscal 2010 and the second quarter.
These forward-looking statements address activities, events, conditions,or developments that we currently expect or anticipate may occur in the future,and include, but may not be limited to, discussions and statements regardingrevenue guidance; product development; impact of the government policies andregulation; regulatory approval process; regulatory action as to productpricing; timing of plant certification and production launch; export growthand expansion; product demands; production capacity; capital expense estimate;and future operations and strategies. Forward-looking statements can beidentified by such terminology as "believe," "expect," "plans," "strategy,""potential", "prospects," "forecast," "estimate," "project," "anticipate,""aim," "will" or "would", "may" or "might", and words, phrases, expressions,and usages of similar meaning or substance or the negative of such words,phrases, expressions and usages.
Forward-looking statements are based on management's current assumptions,beliefs, expectations, and projections, in light of the information currentlyavailable to it, and actual results, performances, or achievements coulddiffer materially from those implied or expressed by the forward-lookingstatements. Among the factors that could cause 3SBio's actual results todiffer from what the Company currently anticipates may include changes in thehealthcare industry in PRC, including changes in the healthcare policies,regulations, and regulatory practice, and changes in the healthcare insurancesystem; competition from other domestic and foreign pharmaceutical companies;market growth for pharmaceutical products in China; the completion of 3SBio'songoing clinical trials as planned; receipt and timing of regulatory approvalsfor 3SBio's products; receipt and timing of regulatory certifications;products inclusion in government reimbursement; 3SBio's ability to expand itsproduction, sales and distribution network and other aspects of its operations;effects of partnerships and acquisitions; market acceptance of 3SBio products;actual hospital or patient demand for our products; ability to effectivelyprotect our intellectual properties; and fluctuations in general economic andbusiness conditions in China.
For additional information on factors identified above and other riskfactors, uncertainties and assumptions that may affect 3SBio's business,financial conditions and results of operations, please refer to the Company'sfilings with the Securities and Exchange Commission at http://www.sec.gov ,and, in particular, "Introduction - Cautionary Statement concerning ForwardLooking Statements", Item 3.D "Risk Factors", Item 5. "Operating and FinancialReview and Prospects", and other applicable discussions in 3SBio's annualreport on Form 20-F for the year ended December 31, 2009.
All the statements in the Disclosures speak as of the date of the initialrelease, even if subsequently made available on the 3SBio website or otherwise.3SBio undertakes no obligation to update or revise these forward-lookingstatements, whether as a result of new information, subsequent events orotherwise, after the date of this press release.SHENYANG, China, Aug. 17 /PRNewswire-Asia-FirstCall/ -- -- 2Q revenues grew 29.5% Y-o-Y to RMB105.5 million (US$15.6million) -- 1H revenues grew 34.5% Y-o-Y to RMB201.9 million (US$29.8 million) -- Company reiterates FY2010 revenue guidance -- New plant is granted GMP certification by SFDA
SOURCE 3SBio Inc.
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