Simcere Pharmaceutical Group Reports Preliminary Unaudited Second Quarter 2012 Results

PR Newswire

NANJING, China, Aug. 10, 2012 /PRNewswire-Asia/ -- Simcere Pharmaceutical Group ("Simcere" or the "Company") (NYSE: SCR), a leading pharmaceutical company specializing in the development, manufacturing, and marketing of branded generic and proprietary pharmaceuticals in China, today reported preliminary unaudited financial results for the quarter ended June30, 2012.

Highlights

Total revenue was RMB528.7 million (US$83.2million) for the second quarter of 2012, compared to RMB546.4 million for the same period in 2011, representing a decrease of 3.2%. For the first six months of 2012, total revenue was RMB1,016.3million (US$160.0million), representing a decrease of 1.2% from RMB1,028.6million for the same period in 2011. Gross margin for the second quarter of 2012 was 83.9%, compared to 84.9% for the same period in 2011. For the first six months of 2012, gross margin was 83.0%, compared to 84.4% for the first six months of 2011. Income from operations was RMB41.6million (US$6.5 million) for the second quarter of 2012, compared to RMB79.9 million for the same period in 2011, representing a decrease of 48.0%. For the first six months of 2012, income from operations was RMB84.8million (US$13.4million), which represented a decrease of 22.6% from RMB109.6million for the same period in 2011. Net income attributable to Simcere was RMB27.0million (US$4.2 million) for the second quarter of 2012, a decrease of 63.4% from RMB73.7 million for the same period in 2011. For the first six months of 2012, net income attributable to Simcere was RMB55.6million (US$8.8million), which represented a decrease of 45.3% from RMB101.6million for the same period in 2011.

Mr. Jinsheng Ren, Chairman and Chief Executive Officer of Simcere Pharmaceutical Group said, "In the second quarter of 2012, Simcere's revenue and gross margin remained largely stable. While sales of edaravone, Endu and Sinofuan continued to grow compared with the first quarter of 2012, year-over-year sales performance was below our expectation. During the quarter, we increased our marketing efforts for branded generic drugs such as Zailin, Yingtaiqing and Biqi which helped drive sales growth in these key products but impacted profitability."

"In the second quarter, we were encouraged by sales of our new Category 1 drug Iremod and Shanghai Celgen's biogeneric drug Qiangke," continued Mr. Ren. "We also received approval to initiate clinical studies for our oncology drug candidate Thiophenib and continue to see strong progress with the four additional new drug candidates currently under clinical trials."

2012 Second Quarter Financial Results

Total revenue for the second quarter of 2012 was RMB528.7million (US$83.2 million), compared to RMB546.4 million for the same period in 2011, representing a decrease of 3.2%. For the first six months of 2012, total revenue was RMB1,016.3 million (US$160.0 million), representing a decrease of 1.2% from RMB1,028.6million for the same period in 2011.

The tables below set forth the Company's top 10 products by revenue for the three months ended June 30, 2012 and six months ended June 30, 2012:

In Thousands

Three months ended June 30, 2012

Three months ended June 30, 2011

RMB

USD

% of total

RMB

% of total

Change

Products

Therapeutic Area

revenue

revenue

Edaravone

Neuroscience

177,825

27,991

33.6%

217,934

39.90%

(18.4%)

Endu

Oncology

66,779

10,511

12.6%

70,021

12.80%

(4.6%

Zailin

Infectious Disease

61,630

9,701

11.7%

43,762

8.00%

40.8%

Yingtaiqing

Inflammation

43,928

6,915

8.3%

45,909

8.40%

(4.3%)

Sinofuan

Oncology

41,683

6,561

7.9%

52,974

9.70%

(21.3%)

Biqi

Gastroenterology

26,812

4,220

5.1%

19,689

3.60%

36.2%

Jiebaishu

Oncology

19,507

3,071

3.7%

16,438

3.00%

18.7%

Anqi

Infectious Disease

14,881

2,342

2.8%

18,043

3.30%

(17.5%)

Anxin

Infectious Disease

14,775

2,326

2.8%

14,371

2.60%

2.8%

Kechuanning

Respiratory

10,672

1,680

2.0%

10,453

1.90%

2.1%

Others

50,242

7,908

9.5%

36,769

6.80%

36.6%

Total

528,734

83,226

100.0%

546,363

100.00%

(3.2%)

Six months ended June 30, 2012

Six months ended June 30, 2011

RMB

USD

% of total

RMB

% of total

Change

Products

Therapeutic Area

revenue

revenue

Edaravone

Neuroscience

338,728

53,318

33.3%

406,662

39.50%

(16.7%)

Endu

Oncology

123,128

19,381

12.1%

119,656

11.60%

2.9%

Zailin

Infectious Disease

121,662

19,150

12.0%

105,245

10.20%

15.6%

Sinofuan

Oncology

80,973

12,746

8.0%

82,355

8.00%

(1.7%)

Yingtaiqing

Inflammation

77,075

12,132

7.6%

86,635

8.40%

(11.0%)

Biqi

Gastroenterology

48,720

7,669

4.8%

41,816

4.10%

16.5%

Jiebaishu

Oncology

34,734

5,467

3.4%

29,820

2.90%

16.5%

Anqi

Infectious Disease

30,655

4,825

3.0%

34,910

3.40%

(12.2%)

Anxin

Infectious Disease

30,289

4,768

3.0%

25,668

2.50%

18.0%

Kechuanning

Respiratory

24,542

3,863

2.4%

23,960

2.30%

2.4%

Others

105,837

16,659

10.4%

71,838

7.10%

47.3%

Total

1,016,343

159,978

100.0%

1,028,565

100.00%

(1.2%)

For more information about the above products, please visit our corporate website: www.simcere.com.

Gross margin for the second quarter of 2012 was 83.9%, compared to 84.9% for the same period in 2011. For the first six months of 2012, gross margin was 83.0%, compared to 84.4% for the first six months of 2011.

Research and development expenses for the second quarter of 2012 totaled RMB55.0 million (US$8.7 million), which represented an increase of 36.9% from RMB40.1 million for the same period in 2011. This increase was due primarily to the increased expenditure on on-going research and development projects, as well as a reduction of RMB5.5 million in government research and development grants recognized compared with the same period in 2011. As a percentage of total revenue, research and development expenses increased to 10.4% for the second quarter of 2012 from 7.3% for the same period in 2011. For the first six months of 2012, research and development expenses totaled RMB103.2million (US$16.3 million), compared to RMB82.7million for the same period in 2011.

Sales, marketing and distribution expenses for the second quarter of 2012 were RMB291.4 million (US$45.9million), which represented an increase of 0.9% from RMB288.9million for the same period in 2011. As a percentage of total revenue, sales, marketing and distribution expenses increased to 55.1% for the second quarter of 2012 from 52.9% for the same period in 2011. This increase was due primarily to increased spending on promotional activities for branded generic pharmaceutical products, such as Zailin, Yingtaiqing and Biqi. For the first six months of 2012, sales, marketing and distribution expenses were RMB550.2million (US$86.6 million), which represented a decrease of 0.6% from RMB553.3million for the same period in 2011.

General and administrative expenses were RMB55.7million (US$8.8million) for the second quarter of 2012, which represented a decrease of 25.3% from RMB74.7million for the same period in 2011. As a percentage of total revenue, general and administrative expenses decreased to 10.5% for the second quarter of 2012 from 13.7% for the same period in 2011. For the first six months of 2012, general and administrative expenses were RMB120.8million (US$19.0million), which represented a decrease of 15.4% from RMB142.8million for the same period in 2011.

Share-based compensation expenses, which were allocated to research and development expenses, sales, marketing and distribution expenses, and general and administrative expenses, based on the nature of the work that the relevant employee was assigned to perform, totaled RMB2.7 million (US$0.4 million) for the second quarter of 2012. Share-based compensation expenses for the second quarter of 2011 were RMB7.8million. The decrease was primarily due to the expiration of the first and second batches of restricted shares. For the first six months of 2012, share-based compensation expenses totaled RMB6.5million (US$1.0million), which represented a decrease of 56.7% from RMB15.1million for the same period in 2011.

Income from operations was RMB41.6million (US$6.5million) for the second quarter of 2012, representing a decrease of 48.0% from RMB79.9 million for the same period in 2011, which was primarily due to a decrease in revenue. The Company recorded other operating income of RMB20.0 million in the second quarter of 2011 in connection with the settlement with former shareholders of Jiangsu Quanyi Biological Technology Stock Co., Ltd ("Jiangsu Quanyi") regarding the Company's 2009 acquisition of a 37.5% equity interest in Jiangsu Quanyi. For the first six months of 2012, income from operations was RMB84.8million (US$13.4million), which represented a decrease of 22.6% from RMB109.6million for the same period in 2011.

Income tax expense for the second quarter of 2012 was RMB0.3million (US$0.04million), compared to income tax expense of RMB0.7 million for the same period in 2011. For the first six months of 2012, income tax expense was RMB2.9million (US$0.5million), compared to RMB5.8million for the same period in 2011.

Net income attributable to Simcere was RMB27.0million (US$4.2million) for the second quarter of 2012, compared to RMB73.7million for the same period in 2011. Net margin, representing net income attributable to Simcere divided by total revenue, was 5.1% for the second quarter of 2012, compared to 13.5% for the same period in 2011. For the first six months of 2012, net income attributable to Simcere was RMB55.6 million (US$8.8 million), which represented a decrease of 45.3% from RMB101.6million for the same period in 2011. Net margin for the first six months of 2012 was 5.5%, compared to 9.9% for the same period in 2011.

Basic and diluted earnings per American Depository Share ("ADS") for the second quarter of 2012 were RMB0.50 (US$0.08) and RMB0.50 (US$0.08), respectively. Basic and diluted earnings per ADS for the first six months of 2012 were RMB1.03 (US$0.16) and RMB1.03 (US$0.16), respectively. One ADS represents two ordinary shares of the Company.

As of June 30, 2012, the Company had cash, cash equivalents and restricted cash of RMB288.7million (US$45.4million), compared to RMB262.6million as of December31, 2011.

Financial Information

The preliminary unaudited condensed consolidated statements of income and balance sheets accompanying this press release have been prepared by management using U.S. GAAP. This preliminary financial information is not intended to fully comply with U.S. GAAP because it does not present all of the financial information and disclosures required by U.S. GAAP.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions. In particular, the quotations from management in this press release contain forward-looking statements. These forward looking statements are based upon management's current views and expectations with respect to future events and are not a guarantee of future performance. Furthermore, these statements are, by their nature, subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a number of factors. Further information regarding these and other risks is included in Simcere's filings with the U.S. Securities and Exchange Commission at www.sec.gov. Simcere does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Conference Call

Simcere Pharmaceutical Group will host a conference call to discuss the Company's results for the second quarter of 2012 on Friday, August 10 at 8:00 a.m. Eastern Time (Friday, August 10 at 8:00 p.m. Beijing/Hong Kong time). The management team will be on the call to discuss the results for the second quarter of 2012 and to answer questions.

To access the conference call, please dial:

International toll:

+65.6723.9381

United States toll-free:

+1.866.519.4004

United States toll:

+1.718.354.1231

China Domestic toll:

800.819.0121

China Domestic mobile toll:

400.620.8038

Hong Kong toll:

+852.2475.0994

Please ask to be connected to Q2 2012 Simcere Pharmaceutical Group Earnings Conference Call and provide the following passcode: 15292591.

Simcere will also broadcast a live audio webcast of the conference call. The broadcast will be available by visiting the "Investor Relations" section of the company's web site at www.simcere.com.

Following the earnings conference call, an archive of the call will be available by dialing:

United States toll-free:

+1.866.214.5335

United States toll:

+1.718.354.1232

The passcode for replay participants is 15292591. The telephone replay also will be archived on the "Investor Relations" section of the company's web site for seven days following the earnings announcement.

About Simcere Pharmaceutical Group

Simcere Pharmaceutical Group (NYSE:SCR, Simcere) is a leading pharmaceutical company specializing in the development, manufacturing, and marketing of branded and proprietary pharmaceuticals in China. Simcere concentrates its research and development efforts on the treatment of diseases with high incidence and/or mortality rates and for which there is a clear demand for more effective pharmacotherapy such as cancer, strokes, cardiovascular disease, infectious diseases and pain. For more information about Simcere Pharmaceutical Group, please visit www.simcere.com.

Investor and Media Contacts: Email: ir@simcere.com

In Nanjing:Yehong ZhangPresidentSimcere Pharmaceutical GroupTel: 86-25-8556-6666 ext 8857

In the United States:Cindy ZhengBrunswick GroupTel: 1-212-333-3810

In Beijing:Yue YuBrunswick Group Tel: 86-10-5960-8600

In Hong Kong:Joseph Lo Chi-LunBrunswick GroupTel: 852-3512-5000

SIMCERE PHARMACEUTICAL GROUPPRELIMINARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT SHARE AND ADS DATA)

Three months ended June 30,

SixmonthsendedJune30,

2011

2012

2012

2011

2012

2012

RMB

RMB

USD

RMB

RMB

USD

Product revenue

546,363

528,734

83,226

1,028,565

1,016,343

159,978

Total revenue

546,363

528,734

83,226

1,028,565

1,016,343

159,978

Cost of materials and production

(82,761)

(85,115)

(13,398)

(160,234)

(172,953)

(27,223)

Gross profit

463,602

443,619

69,828

868,331

843,390

132,755

Operating expenses:

Research and development

(40,147)

(54,956)

(8,650)

(82,729)

(103,242)

(16,251)

Sales, marketing and distribution

(288,855)

(291,366)

(45,863)

(553,250)

(550,158)

(86,598)

General and administrative

(74,661)

(55,740)

(8,774)

(142,798)

(120,822)

(19,018)

Other operating income

20,000

-

-

20,000

15,650

2,463

Income from operations

79,939

41,557

6,541

109,554

84,818

13,351

Interest income

1,310

1,180

186

2,362

2,041

321

Interest expense

(10,001)

(19,669)

(3,096)

(19,405)

(39,862)

(6,274)

Foreign currency exchange gains (losses)

2,142

(546)

(86)

3,717

(603)

(95)

Other income

1,099

108

17

7,522

4,189

659

Equity in losses of equity method affiliated

company

(3,427)

(2,383)

(375)

(6,599)

(4,926)

(775)

Earnings before income taxes

71,062

20,247

3,187

97,151

45,657

7,187

Income tax expense

(711)

(256)

(40)

(5,802)

(2,893)

(456)

Net Income

70,351

19,991

3,147

91,349

42,764

6,731

Less: Net loss attributable to thenoncontrolling interest

3,355

6,983

1,099

10,247

12,834

2,020

Net income attributable to Simcere

73,706

26,974

4,246

101,596

55,598

8,751

Earnings per share attributable to Simcere:

Basic

0.69

0.25

0.04

0.95

0.51

0.08

Diluted

0.67

0.25

0.04

0.92

0.51

0.08

Earnings per ADS attributable to Simcere:

Basic

1.38

0.50

0.08

1.90

1.03

0.16

Diluted

1.33

0.50

0.08

1.84

1.03

0.16

Weighted average number of common shares: Basic

106,903,665

107,834,280

107,834,280

106,857,024

108,136,224

108,136,224

Diluted

110,578,606

107,961,891

107,961,891

110,501,057

108,329,408

108,329,408

SIMCERE PHARMACEUTICAL GROUPPRELIMINARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS EXPRESSED IN THOUSANDS)

December31,

June 30,

June 30,

2011

RMB

2012

RMB

2012

USD

Assets

Current assets

Cash, cash equivalents and restricted cash

262,557

288,671

45,439

Bills receivable

814,822

632,564

99,569

Accounts receivable, net

462,050

421,883

66,407

Inventories

126,708

124,392

19,580

Other current assets

181,196

185,411

29,185

Total current assets

1,847,333

1,652,921

260,180

Property, plant and equipment, net

925,815

905,436

142,521

Land use rights

139,707

138,106

21,739

Goodwill and intangible assets, net

648,408

631,394

99,385

Investmentsinandadvancetoanaffiliatedcompany

91,355

86,857

13,672

Other non-current assets

81,499

89,401

14,072

Total assets

3,734,117

3,504,115

551,569

Liabilities

Current liabilities

Short-term borrowings and current portion of long-termborrowings

816,150

755,000

118,842

Accounts payable

52,191

40,782

6,419

Bills payable

28,379

20,000

3,148

Other payables and accrued liabilities

565,827

429,067

67,538

Total current liabilities

1,462,547

1,244,849

195,947

Long-term borrowings, excluding current portion

-

2,000

315

Deferred tax liabilities

46,248

43,751

6,887

Other liabilities

31,625

32,141

5,059

Total liabilities

1,540,420

1,322,741

208,208

Shareholders' equity

Simcere shareholders' equity

Ordinary shares at par

8,532

8,401

1,322

Additional paid-in capital

954,750

899,850

141,642

Accumulated other comprehensive loss

(104,608)

(104,384)

(16,431)

Retained earnings

1,197,507

1,252,825

197,202

Total equity attributable to Simcere

2,056,181

2,056,692

323,735

Noncontrolling interest

137,516

124,682

19,626

Total shareholders' equity

2,193,697

2,181,374

343,361

Commitments and contingencies

Total liabilities and shareholders' equity

3,734,117

3,504,115

551,569

Note: The conversions of Renminbi (RMB)into United States dollars (USD)as at the reporting dates are based on the noon buying rate of USD1.00 = RMB6.3530 on June 30, 2012 as set forth in the H. 10 statistical release of the Federal Reserve Board. No representation is intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on the reporting dates.

SOURCE Simcere Pharmaceutical Group