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The third quarter was highlighted by continued strong performance in theCompany's wholesale business. Profitability increased due to increased salesdemand and successful cost-reduction actions.
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"I'm pleased with our strong third-quarter results," said Dr. Zhong Yi Liu,chairman and chief executive officer. "By slowing down our buildup of newmanufacturing facility in Inner Mongolia, we have set our priority inimproving our operational efficiency in Beijing by preparing for moving theseparated operation units into one single location. We will maintain ourfocus on improving operation efficiency and maintaining client relationships,and believe we will finish the year well-positioned to enter 2010."
Outlook
Lotus believes it is on track to meet its earnings guidance for 2009. TheCompany improved its cash position in the third quarter, which stood at $2.6million as of September 30th, 2009, as compared to $1.3 million as of December31, 2008.
In the wholesale segment which accounted for 80% of net revenues in thethird quarter, the Company believes demand will continue to increase given theincreases in distributor and product offerings, as well as increasing demandfrom existing distributors. In response to market conditions, unit averageprice of wholesale drugs in this segment decreased to follow deflation in rawmaterial costs from the beginning of this year. As a result of our success inreducing purchase prices for drugs we sell but produced by third parties,prices we offer to our distributors have reduced and remained stable since thebeginning of 2009, indirectly increasing incentives for them to promote ourdrugs. In addition, our cost reductions have proven to be effective as wemanaged to reduce selling expenses by reducing commissions paid to our salesrepresentatives. Offsetting the impact of a 42% decrease in average unitselling price resulted in higher sales volume by 39% in the past nine months.The impact of these combined efforts resulted in EBIT margin in this quarterbeing 41%, compared to 22% in the same period last year.
In the retail segment which accounted for 19% of net revenues in the thirdquarter, although there was a 4% decrease from the same period last year,Lotus believes the demand for drugs treating influenza is expected to increasethrough the remainder of 2009 due to the upcoming of influenza season.
About Lotus Pharmaceuticals, Inc. ( http://www.lotuspharma.com )
Lotus Pharmaceuticals, Inc. is a growing developer and producer ofprescription drugs and a licensed national seller of pharmaceutical items inthe People's Republic of China. Lotus operates Liang Fang Pharmaceutical, Ltd.and En Ze Jia Shi Pharmaceutical, Ltd. Lotus's current drug developmentpipeline is focused on the treatment of cerebro-cardiovascular disease, asthma,and diabetes. More than 8,000 products are sold by Liang Fang directly andindirectly through its national sales channels to hospitals, clinics and drugsstores in 30 provinces.
Safe Harbor Statement
This press release contains "forward-looking statements" within themeaning of the "safe-harbor" provisions of the Private Securities LitigationReform Act of 1995. Forward-looking statements include, without limitation,any statement that may predict, forecast, indicate, or imply future results,performance or achievements, and may contain the words "estimate," "project,""intent," "forecast," "anticipate," "plan," "planning," "expect," "believe,""will likely," "should," "could," "would," "may," or words or expressions ofsimilar meaning. Such statements are not guarantees of future performance andcould cause the actual results of the Company to differ materially from theresults expressed or implied by such statements, including, but not limited to,changes from anticipated levels of sales, future national or regional economicand competitive and regulatory conditions, changes in relationships withcustomers, access to capital, increased costs, difficulties in developing andmarketing new products, marketing existing products, customer acceptance ofexisting and new products, the time to get new drugs approved by the SFDA andother factors. Additional information regarding risks can be found in theCompany's Annual Report on Form 10K and its older filings with the SEC.Accordingly, although the Company believes that the expectations reflected insuch forward-looking statements are reasonable, there can be no assurance thatsuch expectations will prove to be correct. The Company has no obligation toupdate the forward-looking information contained in this press release.Third-Quarter 2009 Results -- Earnings Before Interest and Taxes (EBIT) for the third quarter ended September 30, 2009, were $6.0 million, compared with EBIT of $3.7 million during the same period in 2008. -- EBIT was $15.3 million for the first nine months of 2009, compared with EBIT of $7.8 million during the same period of 2008. -- Gross margin as a percentage of net revenues was 59 percent in the third quarter of 2009, compared with 51 percent in the same period of 2008. -- Selling expenses were $1.9 million, less than for the same period in 2008.
SOURCE Lotus Pharmaceuticals, Inc.
