China Medical Technologies Reports Second Quarter Financial Results

Wednesday, November 21, 2007 General News
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BEIJING, Nov. 20 China MedicalTechnologies, Inc. (the "Company") (Nasdaq: CMED), a leading China-basedmedical device company that develops, manufactures and markets advanced in-vitro diagnostic products and high intensity focused ultrasound tumor therapysystem, today announced its unaudited financial results for the second quarterended September 30, 2007 (''2Q FY2007''). The Company's 2007 fiscal year endson March 31, 2008.

See ''Non-GAAP Measure Disclosures'' below, where the impact of certainitems on reported results is discussed.

''We are pleased to report another strong quarter,'' commented Mr.Xiaodong Wu, Chairman and CEO of the Company. ''Our FISH equipment has beenplaced with over 100 leading hospitals and has generated recurring reagentrevenue in September quarter. We expect the FISH reagent revenue to increaserapidly in the following quarters. We are also encouraged by the approval ofthe Korean FDA on our HIFU system after receipt of the conditional approvalfrom the US FDA for our IDE application. We believe the benefits of HIFUtreatment for cancer patients will be gradually recognized by the globalmedical community over time.''

2Q FY2007 Financial Results

The Company reported net revenues of RMB214.9 million (US$28.7 million)for 2Q FY2007, representing a 63.5% increase from the corresponding period ofFY2006.

The Company's revenues are currently generated from three product lines,ECLIA diagnostic systems, FISH diagnostic systems and HIFU tumor therapysystems. ECLIA and FISH system sales include the sales of equipment andreagent kits.

ECLIA system sales for 2Q FY2007 were RMB92.6 million (US$12.4 million),representing an 80.0% increase from the corresponding period of FY2006. Thestrong year-over-year growth in the ECLIA system sales reflected theincreasing utilization of ECLIA analyzers by hospitals and the introduction ofnew reagents, both of which drove increasing demand for reagent kits.

FISH system sales for 2Q FY2007 were RMB30.8 million (US$4.1 million)after the launch of our FISH systems in June quarter.

HIFU tumor therapy system sales for 2Q FY2007 were RMB91.5 million(US$12.2 million), representing a 14.4% increase from the corresponding periodof FY2006. The year-over-year growth in this sector was driven primarily byincreases in unit sales and selling price.

Gross margin decreased to 61.5% for 2Q FY2007 as compared to 71.9% for thecorresponding period of FY2006. The decrease in gross margin was due to theamortization of FISH intangible assets of RMB18.5 million (US$2.5 million) andFISH equipment sales which generated lower gross margin. Future FISH reagentsales will generate recurring revenue and higher gross margin for the Company.Excluding the impact of FISH amortization, gross margin would be 70.1%.

Research and development expenses were RMB8.1 million (US$1.1 million) for2Q FY2007, representing a 3.4% year-over-year decrease. The slight decreasewas primarily due to the completion of pre-clinical trials in the UnitedStates. The Company is in the preparation for the clinical trials in theUnited States and expects to conduct the trials in early 2008.

Sales and marketing expenses were RMB6.6 million (US$0.9 million) for 2QFY2007, representing a 48.5% year-over-year increase. The increase wasprimarily due to more participation in exhibitions and more promotional eventsrelating to the FISH business.

General and administrative expenses were RMB20.9 million (US$2.8 million)for 2Q FY2007, representing a 74.0% year-over-year increase. The increase wasprimarily due to an increase in relevant employees to accommodate theCompany's rapid growth and stock compensation expense arising from a grant ofrestricted stocks and stock options in June 2007.

Interest income was RMB7.8 million (US$1.0 million) for 2Q FY2007,representing a 2.3% de

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