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Benda Pharmaceutical Reports Third Quarter 2008 Financial Results
HUBEI PROVINCE, China, Nov. 18 /PRNewswire-FirstCall/ --Benda Pharmaceutical, Inc. (OTC Bulletin Board: BPMA), a China-basedpharmaceutical company producing both Gendicine(R), a commercialized genetherapy medicine for the treatment of cancer, and traditional Chinese andconventional medicines, today announced financial results for the three andnine month periods ended September 30, 2008. The Company intends to file itsForm 10-Q with the SEC today.
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Nine Months Ended September 30, 2008
Revenue in the first nine months of 2008 increased 25.7% to $19.9 millionfrom $15.8 million in the first nine months of 2007, primarily reflectingincreased sales at Benda Ebei. SiBiono generated revenue of $1.8 million inthe first nine months of 2008, down from $3.3 million in the prior year period.The decline in SiBiono-related revenue reflects the Company's reorganizationof personnel in the department.
Gross profit in the first nine months of 2008 was $7.2 million, a 5.7%decrease from $7.7 million in the first nine months of 2007. Gross margin was36.5%, compared with 48.7% in the same period in 2007. Gross marginperformance reflected a drop in sales of Gendicin, which has historicallygenerated a comparatively higher gross margin.
Operating expense in the first nine months of 2008 was approximately $7.9million, compared with $13.0 million in the first nine months of 2007.Operating expense reflects promotional fees for Gendicine and the introductionof new products in Benda Ebei, as well as a $1.1 million penalty incurred butnot yet paid to investors for registration delays, and a $0.3 million expenseincurred for shares issued as Make Good Compensation for non-achievement ofcertain 2007 performance thresholds. The Company incurred significantlyhigher operating costs in the prior year period related to the acquisition ofSiBiono.
Net loss in the first nine months of 2008 improved to $4.7 million, or$0.05 per diluted share, from a net loss of $7.3 million, or $0.06 per dilutedshare, in the first nine months of 2007. Net loss in the first nine months of2008 includes the impact of approximately $3.3 million in interest expensesrelated to the Company's outstanding convertible notes and the $1.4 millionpayment to investors related to the timing of the effectiveness of itsregistration statement on Form S-1. The Company was granted effectiveness onthe S-1 filing and does not anticipate further penalty payments related tothis S-1 filing going forward.
Three Months Ended September 30, 2008
Revenue in the third quarter of 2008 decreased 12.2% to $6.6 million from$7.6 million in the third quarter of 2007, primarily reflecting increasedsales at Benda Ebei, offset by sales declines at SiBiono related to theCompany's reorganization of personnel in the department. Benda managementconcluded the reorganization during the third quarter of 2008, and SiBiono hasresumed production and sales. In the third quarter of 2008, the Company sold3,021 vials of Gendicine, a sequential increase from sales of 1,087 vials soldin the first quarter of 2008 and 2,439 vials sold in the second quarter of2008.
Gross profit in the third quarter of 2008 was $2.4 million, a decrease of36.1% from $3.8 million in the third quarter of 2007. Gross margin was 36.5%,compared with 50.1% in the same period of 2007. The decline in gross marginwas primarily due to a re-engineering of SiBiono's production department,which affected the sales of Gendicine. However, management believes that there-engineering will lead to revenue growth in the coming quarters.
Operating income in the third quarter of 2008 decreased to $0.6 millionfrom $1.7 million in the third quarter of 2007. Operating expense in thethird quarter was approximately $1.8 million, compared with $2.1 million inthe third quarter of 2007, reflecting the penalty payment of $0.3 millionreferenced above as well as advertising expenditure at SiBiono and Benda Ebei.
Net loss in the third quarter of 2008 was $0.8 million, or a net loss of$0.01 per basic and diluted share, compared to net income of $1.0 million, ornet income of $0.01 per basic and diluted share, in the third quarter of 2007.
Charles Wan, Chairman and Chief Executive Officer of Benda, commented,''We continue to be focused on enhancing our revenue performance at SiBiono,as well as our gross margin performance across the organization. Thereorganization of personnel at SiBiono was completed in the third quarter andfull-scale production is expected to resume in the fourth quarter of 2008. Wecontinue to be optimistic about the market opportunities for SiBiono in thefuture.''
About Benda Pharmaceutical, Inc.
Benda Pharmaceutical, Inc. ( http://www.bendapharma.com ), a China-basedpharmaceutical company, produces traditional Chinese and conventionalmedicines, as well as Gendicine(R), a commercialized gene therapy medicine forthe treatment of cancer.
Safe Harbor Statement
The information contained herein includes forward-looking statements.These statements relate to future events or to our future financialperformance, and involve known and unknown risks, uncertainties and otherfactors that may cause our actual results, levels of activity, performance, orachievements to be materially different from any future results, levels ofactivity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-lookingstatements since they involve known and unknown risks, uncertainties and otherfactors which are, in some cases, beyond our control and which could, andlikely will, materially affect actual results, levels of activity, performanceor achievements. Any forward-looking statement reflects our current views withrespect to future events and is subject to these and other risks,uncertainties and assumptions relating to our operations, results ofoperations, growth strategy and liquidity. We assume no obligation to publiclyupdate or revise these forward-looking statements for any reason, or to updatethe reasons actual results could differ materially from those anticipated inthese forward-looking statements, even if new information becomes available inthe future. The safe harbor for forward-looking statements contained in theSecurities Litigation Reform Act of 1995 protects companies from liability fortheir forward-looking statements if they comply with the requirements of theAct.Business Update -- Management update: The Company appointed George Zhou as Chief Operating Officer, effective August 13, 2008. -- Jiangling Benda plant update: On April 9, 2008, Jiangling Benda received the GMP Certificate from the Chinese State Food and Drug Administration ("SFDA"), authorizing the production of Ribavirin. The Company believes the certification is a major step toward commercializing Ribavirin in the domestic market. To achieve full-scale production and further expansion, management is working with local banks to negotiate financing. -- Yidu Benda plant update: Yidu Benda completed its upgrade of the waste water system and passed the government's verification and testing of equipment in October 2007 and received "Environmental Influence Report" and "Safety Assessment Report" from the Yichang Environmental Protection Bureau and Yichang Safety Supervision Bureau in November and December of 2007, respectively. With this approval, Yidu Benda is allowed to perform trial production and test the production process at the plant, which will be followed by a test of the production results, held by the government bodies. While those tests are performed, the management has been searching for high-margin products that will be accretive once production has fully resumed. -- SiBiono Arbitration: On November 27, 2007, Benda Ebei received an arbitration award from Shenzhen Arbitration Commission which determined that it should purchase a 6.24% stake in SiBiono from Xiaozhi Zhang, one of the shareholders of SiBiono, with the total consideration at RMB12.48 million, plus the penalty and related legal and arbitration expenses, totaling approximately RMB12.8 million. However, following this arbitration award, Benda Ebei found that Xiaozhi Zhang does not own all 6.24% of SiBiono's common stock and actually only owns 3.28%. Therefore, based on this ground, Benda Ebei filed an application to Shenzhen Peoples' Court on May 22, 2008 to terminate the above mentioned arbitration award. The application has been accepted by the Shenzhen Peoples' Court and is waiting for its further investigation. -- Intellectual Property Lawsuit: On August 27, 2008, SiBiono received Case Acceptance Letters from the Guangdong Province Shenzhen City (Middle) Peoples' Court accepting a lawsuit against Zhaohui Peng, one of the shareholders of SiBiono and the inventor of Gendicine, to transfer title of all patents to SiBiono. The patent, "A new method for manufacturing recombinant adenovirus", one of the main patents used to produce Gendicine(R), has been assigned to SiBiono; however, the other 5 approved patents in PRC still have not been assigned to SiBiono. The Company believes that all the above mentioned patents should be rightfully transferred to SiBiono.
SOURCE Benda Pharmaceutical, Inc.
