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David Gao, Chief Executive Officer of BMP Sunstone, stated, "We aredelighted to see the initial benefits of the organizational changes we madeearlier in the year. With Mr. Tong at the helm, our manufacturing business isnow operating with increased efficiency, particularly within our sales andmarketing department, where the reorganization helped drive increased sales ofSunstone's products. We also are starting to see improved margin performancein our distribution business as we continued our push to focus on highermargin products. The managerial and operational improvements we made in thefirst half of the year are proving to be worthwhile, and we are optimisticabout our ability to continue strong growth of revenue and profit for ourshareholders in the back part of the year."
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Second Quarter 2010 Financial Results
Revenue in the second quarter of 2010 increased 25.8% to $40.9 millionfrom $32.5 million in the second quarter of 2009. Revenue from manufacturingwas $22.5 million, up 33.8% from the prior year period, reflecting continueddemand for the Company's leading products and the initial benefits of thesalesforce reorganization completed earlier in the year. Additionally, as ofthe first quarter of 2010, financial contributions from Sunstone ShengdaZhangjiakou Pharmaceutical Co., Ltd., were consolidated in the Company'smanufacturing division and accounted for $1.9 million. Revenue from licensedproducts increased 24.8% year over year to $1.9 million, primarily due tosuccessful sales and marketing efforts for Propess, Anpo and Ferriprox andfurther hospital coverage expansion. Revenue from distribution was $16.4million, up 16.3% on a year over year basis.
Gross profit in the second quarter of 2010 increased to $18.7 million from$14.4 million in the second quarter of 2009. Gross margin was 45.7%, comparedto 44.3% in the prior year period. Gross margin performance was driven byincreased sales of manufactured and licensed products, which carried grossmargins of 71.7% and 64.6% respectively. Additionally, revenue mix in thesecond quarter of 2010 reflects anticipated seasonality in Sunstone's business,as well as improved gross margin performance in the distribution business, asmanagement continued its plan to proactively cease distribution of certain lowmargin wholesale products. Revenue from distribution contributed to a higherportion of total revenue than in the first quarter of 2010, and did so at agross margin of 7.9%, up from 7.6% in the first quarter of 2010.
The Company's operating income increased to $2.3 million in the secondquarter of 2010 from $93,000 in the second quarter of 2009. The Company'ssales and marketing expenses, particularly at Sunstone, as well as general andadministration expenses, were closely aligned with revenue performance in thesecond quarter of 2010. Operating expenses include approximately $821,000 ofpurchase accounting adjustments related to prior acquisitions, as well asapproximately $491,000 of stock compensation expense, which reflects feweroptions granted to senior management and board members on a year over yearbasis. Excluding purchase accounting adjustments and stock compensation, non-GAAP operating income improved 138.0% to $3.8 million from $1.6 million in theprior year period.
Adjusted EBITDA was $4.3 million in the second quarter of 2010, comparedto $1.7 million in the second quarter of 2009. Improvement in adjusted EBITDAperformance reflects enhanced revenue performance and operational efficienciesacross the Company.
Non-GAAP net income was $2.2 million, or $0.05 per diluted share, comparedto $300,000, or $0.01 per diluted share, in the second quarter of 2009. On aGAAP basis, the Company reported net income of $660,000, or $0.02 per dilutedshare, compared to a net loss of $1.7 million, or ($0.04) per diluted share,in the second quarter of 2009. The earnings per share calculation is based on51.1 million diluted shares outstanding, compared to 50.7 million dilutedshares outstanding in the prior year period.
Non-GAAP net income and earnings per share exclude stock basedcompensation expense, amortization related to acquisitions, amortization ofdebt discount and issuance cost, loss on early extinguishment of debt and gainon the embedded derivative value on convertible notes. Adjusted EBITDA is anon-GAAP measure which provides earnings before interest, taxes, depreciationand amortization and excludes loss on early extinguishment of debt and gain onthe embedded derivative value on convertible notes. Please refer to thefinancial tables provided in this news release for a reconciliation of GAAPresults to non-GAAP results for the three month periods ended June 30, 2010and 2009.
Balance Sheet
The Company paid down roughly $2.4 million of bank debt during the quarter,while keeping cash and cash equivalents fairly consistent with prior quarters,at $22.3 million as of June 30, 2010. The Company had cash and cashequivalents of $23.0 million at March 31, 2010, and ended 2009 withapproximately $21.5 million in cash and cash equivalents. As of June 30, 2010,and including notes receivable of $15.1 million, total cash and cashequivalents including notes receivable totaled $37.4 million. Notesreceivables from customers for the settlement of trade receivable balances areguaranteed by established banks in China and have maturities of six months orless.
First Half 2010 Financial Results
For the six months ended June 30, 2010, revenue increased 11.3% to $79.9million from $71.7 million in the first six months of 2009. During this sametime period, gross profit increased 13.2% to $39.7 million from $35.1 million.Income from operations increased 60.9% to $5.3 million, compared to $3.3million in the first six months of 2009. Adjusted EBITDA was $8.9 million inthe first six months of 2010, compared to $6.3 million in the prior yearperiod. Non-GAAP net income was $4.8 million, or $0.11 per diluted share,compared to $3.3 million, or $0.08 per diluted share, in the prior year period.On a GAAP basis, net income was $1.3 million, or $0.03 per share, compared toa net loss of $3.7 million, or ($0.09) per share, in the first six months of2009. The EPS calculation is based on 51.0 million diluted shares outstanding,compared to 46.9 million diluted shares outstanding in the prior year period.
Full Year 2010 Financial Guidance
The Company continues to expect revenue to reach between $160 million and$170 million in fiscal 2010. Additionally, during fiscal 2010, the Companycontinues to expect adjusted EBITDA to reach between $16 million and $17million and non-GAAP net income to reach between $9 million and $10 million.
Conference Call
The Company will hold a conference call at 5:00 pm ET on August 9, 2010 todiscuss its results. Listeners may access the call by dialing 1-866-713-8310or 1-617-597-5308 for international callers, access code: 12154394.Preregistration and a webcast will be available through the Company's websiteat http://www.bmpsunstone.com . A replay of the call will be accessiblethrough August 16, 2010 by dialing 1-888-286-8010 or 1-617-801-6888 forinternational callers, access code: 59487271.
About BMP Sunstone Corporation
BMP Sunstone Corporation is a specialty pharmaceutical company that isbuilding a proprietary portfolio of branded pharmaceutical and healthcareproducts in China. Through Sunstone the Company manufactures leadingpediatric and women's health products, including two of China's mostrecognized brands, "Hao Wawa" and "Confort," sold in pharmacies throughout thecountry. The Company also markets a portfolio of products under exclusivemulti-year licenses into China, primarily focused on women's health andpediatrics, as well as provides pharmaceutical distribution services throughsubsidiaries in Beijing and Shanghai. BMP Sunstone's main office is inBeijing, with a U.S. office in Plymouth Meeting, PA. For more information,please visit http://www.bmpsunstone.com .
Safe Harbor Statement
This news release contains forward-looking statements as defined by thePrivate Securities Litigation Reform Act of 1995. Forward-looking statementsinclude statements concerning, the Company's expected financial performance infiscal 2010 and the Company's expectations for its business units in fiscalyear 2010. These statements are subject to uncertainties and risks including,but not limited to, the impact from the Company's recent organizationalchanges, changes in the Company's sales, marketing and distribution plans,changes in the Company's operating performance, general financial, economic,and political conditions affecting the biotechnology and pharmaceuticalindustries and the Chinese pharmaceutical market, the ability to timelymanufacture and distribute the Company's products and other risks contained inreports filed by the Company with the Securities and Exchange Commission. Inaddition, the Company disclaims any obligation to update any forward-lookingstatements to reflect events or circumstances after the date hereof.-- Revenue increased to $40.9 million from $32.5 million in the prior year period, an increase of 25.8%. -- Gross profit rose to $18.7 million from $14.4 million in the second quarter of 2009, coupled with gross margin expansion to 45.7% from 44.3% in the prior year period. -- Operating income grew substantially to $2.3 million from $93,000 in the prior year period. -- Adjusted EBITDA was $4.3 million compared to $1.7 million in the prior year period. Non-GAAP net income was $2.2 million, or $0.05 per diluted share, compared to $300,000, or $0.01 per diluted share, in the second quarter of 2009.
SOURCE BMP Sunstone Corporation
