Simcere Pharmaceutical Group Reports Preliminary Unaudited Second Quarter 2013 Results

Simcere Pharmaceutical Group Reports Preliminary Unaudited Second Quarter 2013
                                   Results

PR Newswire

NANJING, China, Aug. 13, 2013

NANJING, China, Aug.13, 2013 /PRNewswire/ --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, 2013.

Highlights

  Revenue from continuing operations for the second quarter of 2013 was
  RMB483.0million (US$78.7million), a decrease of 3.0% compared to RMB498.1
  million for the same period in 2012. Revenue from continuing operations for
  the first six months of 2013 was RMB986.9 million (US$160.8million), an
  increase of 2.9% from RMB959.1 million for the same period in 2012.

  Gross margin from continuing operations for the second quarter of 2013
  decreased to 83.1% compared to 84.5% for the same period in 2012. For the
  first six months of 2013, gross margin decreased to 81.5% compared to 83.8%
  for the same period in 2012.

  Operating income from continuing operations was RMB10.7million
  (US$1.7million) for the second quarter of 2013, a decrease of 67.5% from
  RMB33.0 million for the same period in 2012. Operating income from
  continuing operations was RMB52.3million (US$8.5million) for the first six
  months of 2013, a decrease of 27.3% from RMB72.0 million for the same period
  in 2012.

  Net income attributable to Simcere was RMB22.7million (US$3.7 million) for
  the second quarter of 2013, a decrease of 15.7% from RMB27.0 million for the
  same period in 2012. Net income attributable to Simcere was RMB52.7million
  (US$8.6 million) for the first six months of 2013, a decrease of 5.2% from
  RMB55.6 million for the same period in 2012.

  Net income attributable to Simcere from continuing operations for the second
  quarter of 2013 was RMB8.2 million (US$1.3 million), a decrease of 57.6%
  from RMB19.4 million for the same period in 2012. Net income attributable to
  Simcere from continuing operations for the first six months of 2013 was
  RMB30.9 million (US$5.0 million), a decrease of 32.5% from RMB45.8 million
  for the same period in 2012.

On June 17, 2013, the Company entered into a share transfer agreement to sell
its approximately 99.99% equity interest in Jilin Boda Pharmaceutical Co.,
Ltd. ("Boda") to Zhuhai Rongding Equity Investment Partnership L.P. for a
total cash consideration of RMB400 million (US$65.2 million). Boda is
currently the manufacturer of Yidasheng.In accordance with U.S. GAAP, assets
and liabilities associated with the sale have been classified as "held for
sale" and Boda's quarterly operating results are presented as discontinued
operations. The preliminary unaudited condensed consolidated statements of
income have been retrospectively modified to distinguish between continuing
operations and discontinued operations.

"In the second quarter of 2013, our total revenue was impacted by the
government's pricing policy, government restrictions on the use of antibiotics
and market competition," said Mr. Hongquan Liu, Executive Director and Chief
Executive Officer of Simcere Pharmaceutical Group. "Due to the changing market
environment, we expect that the second half of the year will remain
challenging."

Mr. Liu added, "We are encouraged by the collaboration announced in June of
this year between Simcere and Bristol-Myers Squibb on the development of the
subcutaneous (SC) formulation Orencia® (abatacept) for the treatment of
rheumatoid arthritis. We have submitted a clinical trial application for
Orenica® which has been accepted by the CFDA."

2013 Second Quarter Financial Results

Revenue from continuing operations for the second quarter of 2013 was
RMB483.0million (US$78.7million), compared to RMB498.1 million for the
second quarter of 2012, representing a decrease of 3.0%. Revenue from
continuing operations for the first six months of 2013 was RMB986.9 million
(US$160.8million), representing an increase of 2.9% from RMB959.1million for
the same period in 2012.

The tables below set forth the Company's top 10 products, excluding Yidasheng
which is manufactured by Boda, a subsidiary to be disposed by the Company, by
revenue for the three months ended June 30, 2013 and the six months ended June
30, 2013:

In Thousands
                              Three months ended June 30,   Three months ended June 30,
                              2013                          2012
                              RMB      USD      %oftotal  RMB      %oftotal  Change
                                                revenue              revenue
Products    Therapeutic Area
Bicun       Neuroscience      124,376  20,265   25.8%       152,622  30.6%       (18.5%)
Endu        Oncology          88,322   14,391   18.3%       66,779   13.4%       32.3%
Sinofuan    Oncology          45,786   7,460    9.5%        41,683   8.4%        9.8%
Yintaiqing  Inflammation      45,117   7,351    9.3%        43,928   8.8%        2.7%
Zailin      Infectious        42,726   6,962    8.8%        61,630   12.4%       (30.7%)
            Disease
Biqi        Gastroenterology  27,174   4,428    5.6%        26,812   5.4%        1.4%
Jiebaishu   Oncology          18,917   3,082    3.9%        19,507   3.9%        (3.0%)
Anxin       Infectious        12,508   2,038    2.6%        14,775   3.0%        (15.3%)
            Disease
Faneng      Anti-Osteoporosis 12,490   2,035    2.6%        8,775    1.8%        42.3%
Lowvo       Oncology          9,667    1,575    2.0%        8,385    1.7%        15.3%
Others                        55,912   9,110    11.6%       53,168   10.6%       5.2%
Total                         482,995  78,697   100.0%      498,064  100.0%      (3.0%)
                              Six months ended June 30,     Six months ended June 30,
                              2013                          2012
                              RMB      USD      % of total  RMB      % of total  Change
                                                revenue              revenue
Products    Therapeutic Area
Bicun       Neuroscience      250,569  40,827   25.4%       288,015  30.0%       (13.0%)
Endu        Oncology          168,550  27,463   17.1%       123,128  12.8%       36.9%
Zailin      Infectious        105,295  17,156   10.7%       121,662  12.7%       (13.5%)
            Disease
Yintaiqing  Inflammation      93,573   15,246   9.5%        77,075   8.0%        21.4%
Sinofuan    Oncology          78,430   12,779   7.9%        80,973   8.4%        (3.1%)
Biqi        Gastroenterology  51,593   8,406    5.2%        48,720   5.1%        5.9%
Jiebaishu   Oncology          36,070   5,877    3.7%        34,734   3.6%        3.8%
Anxin       Infectious        29,134   4,747    3.0%        30,289   3.2%        (3.8%)
            Disease
Faneng      Anti-Osteoporosis 25,993   4,235    2.6%        17,646   1.8%        47.3%
Kechuanning Respiratory       23,399   3,813    2.4%        24,542   2.6%        (4.7%)
Others                        124,340  20,259   12.5%       112,269  11.8%       10.8%
Total                         986,946  160,808  100.0%      959,053  100.0%      2.9%

Gross margin from continuing operations was 83.1% for the second quarter of
2013 compared to 84.5% for the second quarter of 2012. The decrease was mainly
due to a drop in sales of products with higher gross margins as a percentage
of total sales. Gross margin from continuing operations was 81.5% for the
first six months of 2013 compared to 83.8% for the same period in 2012.

Research and development expenses from continuing operations for the second
quarter of 2013 totaled RMB45.2 million (US$7.4 million) which represented a
decrease of 16.5% from RMB54.1 million for the same period in 2012. The
decrease occurred as the Company completed development ofits influenza
vaccineand began commercial manufacturing. As a percentage of revenue from
continuing operations, research and development expenses from continuing
operations decreased to 9.3% for the second quarter of 2013 from 10.9% for the
same period in 2012. For the first six months of 2013, research and
development expenses from continuing operations totaled RMB89.3million
(US$14.5 million), compared to RMB101.3million for the same period in 2012.

Sales, marketing and distribution expenses from continuing operations for the
second quarter of 2013 were RMB280.3million (US$45.7million), which
represented a decrease of 0.8% from RMB282.7million for the same period in
2012. As a percentage of total revenue from continuing operations, sales,
marketing and distribution expenses from continuing operations increased to
58.0% for the second quarter of 2013 from 56.7% for the same period in 2012.
For the first six months of 2013, sales, marketing and distribution expenses
from continuing operations were RMB536.4million (US$87.4 million), which
represented an increase of 0.4% from RMB534.2million for the same period in
2012.

General and administrative expenses from continuing operations were RMB65.3
million (US$10.6 million) for the second quarter of 2013, which represented an
increase of 27.1% from RMB51.4 million for the same period in 2012. The
increase was primarily due to legal and professional fees incurred during the
Company's going-private process and the share-based compensation expenses as
noted in the paragraph below. As a percentage of revenue from continuing
operations, general and administrative expenses increased to 13.5% for the
second quarter of 2013 from 10.3% for the same period in 2012. For the first
six months of 2013, general and administrative expenses from continuing
operations were RMB126.6 million (US$20.6 million), which represented an
increase of 12.8% from RMB112.2 million for the same period in 2012.

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 RMB8.5million (US$1.4 million) for
the second quarter of 2013. Share-based compensation expenses for the second
quarter of 2012 were RMB2.7million. For the first six months of 2013,
share-based compensation expenses totaled RMB18.2million (US$3.0million),
which represented an increase of 179% from RMB6.5million for the same period
in 2012. The increase was primarily due to restricted shares granted to our
management in the second half of 2012.

Operating income from continuing operations was RMB10.7million
(US$1.7million) for the second quarter of 2013, which represented a decrease
of 67.5% from RMB33.0 million for the same period in 2012. For the first six
months of 2013, operating income from continuing operations was
RMB52.3million (US$8.5million), which represented a decrease of 27.3% from
RMB72.0million for the same period in 2012.

Income tax benefit from continuing operations for the second quarter of 2013
was RMB10.3million (US$1.7million), resulting from the reversal of the
unrecognized tax benefits and related accrued cumulative interest as a result
of a lapse of the statute of limitations in accordance to the PRC Tax
Administration and Collection Law, compared to income tax expense of RMB0.5
million for the second quarter in 2012. For the first six months of 2013,
income tax benefit from continuing operations was RMB4.8million (US$ 0.8
million) compared to income tax expense of RMB2.7 million for the same period
in 2012.

Income from discontinued operations, net of tax, was RMB14.5 million (US$2.4
million) and RMB7.6 million for the second quarter of 2013 and 2012,
respectively. For the first six months of 2013, income from discontinued
operations, net of tax, was RMB21.8 million (US$3.5 million), up 122.0% from
RMB9.8 million for the same period in 2012.

Net income attributable to Simcere was RMB22.7million (US$3.7million) for
the second quarter of 2013, which consists of net income attributable to
Simcere from continuing operations of RMB8.2 million (US$1.3 million) and net
income attributable to Simcere from discontinued operations of RMB14.5 million
(US$2.4 million). Net income attributable to Simcere from continuing
operations for the second quarter of 2013 decreased by 57.6% from RMB19.4
million for the same period in 2012. Net margin from continuing operations,
which represents net income attributable to Simcere from continuing operations
divided by revenue from continuing operations, was 1.7% for the second quarter
of 2013, compared to 3.9% for the second quarter of 2012. For the first six
months of 2013, net income attributable to Simcere was RMB52.7million
(US$8.6million) which consists of net income attributable to Simcere from
continuing operations of RMB30.9 million (US$5.0 million) and net income
attributable to Simcere from discontinued operations of RMB21.8 million
(US$3.5 million). For the first six months of 2012, net income attributable to
Simcere was RMB55.6million which consists of net income attributable to
Simcere from continuing operations of RMB45.8 million and net income
attributable to Simcere from discontinued operations of RMB9.8 million. Net
margin from continuing operations was 3.1% for the first six months of 2013,
compared to 4.8% for the same period in 2012.

Basic and diluted earnings per American Depository Share ("ADS") from
continuing operations for the second quarter of 2013 were RMB0.16 (US$0.03)
and RMB0.15 (US$0.02), respectively. Basic and diluted earnings per ADS from
continuing operations for the first six months of 2013 were RMB0.59 (US$0.10)
and RMB0.58 (US$0.09), respectively. Basic and diluted earnings per ADS from
discontinued operations for the second quarter of 2013 were RMB0.28 (US$0.05)
and RMB0.27 (US$0.04), respectively. Basic and diluted earnings per ADS from
discontinued operations for the first six months of 2013 were RMB0.41
(US$0.07) and RMB0.41 (US$0.07), respectively. One ADS represents two ordinary
shares of the Company.

As of June 30, 2013, the Company had cash and restricted cash of
RMB643.4million (US$104.8million), compared to RMB201.6million as of
December31, 2012. The increase was primarily due to cash consideration
received related to sell of equity interest in Shanghai Celgen.

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 2013 on August 13th 2013, at 8:00
a.m. Eastern Time (Tuesday, August 13th 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 2013 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:         +1.845.675.0437
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 2013 Simcere Pharmaceutical Group Earnings
Conference Call and provide the following passcode: 23263347.

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. 855.452.5696
United States toll:      +1. 646.254.3697

The passcode for replay participants is 23263347. 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:                  In the United States:
Jie Liu D'Elia               Cindy Zheng
Vice President               Brunswick Group
Simcere Pharmaceutical Group Tel: 1-212-333-3810
Tel: 86-25-8556-6666*8857
In Beijing:
Yue Yu
Brunswick Group
Tel: 86-10-5960-8600

SIMCERE PHARMACEUTICAL GROUP
PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT SHARE AND ADS DATA)
                Three months ended June 30,          Six months ended June 30,
                2012        2013        2013         2012        2013        2013
                RMB         RMB         USD          RMB         RMB         USD
Product revenue 498,064     482,995     78,697       959,053     986,946     160,808
Total revenue   498,064     482,995     78,697       959,053     986,946     160,808
Cost of
materials and   (76,976)    (81,540)    (13,286)     (155,007)   (182,390)   (29,717)
production
Gross profit    421,088     401,455     65,411       804,046     804,556     131,091
Operating
expenses and
other operating
income:
Research and    (54,060)    (45,150)    (7,356)      (101,283)   (89,298)    (14,550)
development
Sales,
marketing and   (282,650)   (280,277)   (45,667)     (534,216)   (536,369)   (87,394)
distribution
General and     (51,378)    (65,314)    (10,642)     (112,229)   (126,554)   (20,620)
administrative
Other operating -           -           -            15,650      -           -
income
Income from     33,000      10,714      1,746        71,968      52,335      8,527
operations
Interest income 1,125       991         161          1,958       1,845       301
Interest        (18,394)    (10,961)    (1,786)      (36,891)    (23,707)    (3,863)
expense
Foreign
currency        (546)       (350)       (57)         (603)       (376)       (61)
exchange losses
Other income   108         3,571       582          4,189       4,711       767
Equity in
losses of
equity method   (2,383)     (11,273)    (1,837)      (4,926)     (23,126)    (3,768)
affiliated
company
Earnings
(losses) from
continuing      12,910      (7,308)     (1,191)      35,695      11,682      1,903
operations
before income
taxes
Income tax
(expenses)      (506)       10,310      1,680        (2,738)     4,819       786
benefits
Net Incomefrom
continuing      12,404      3,002       489          32,957      16,501      2,689
operations
Earnings from
discontinued
operations      7,337       17,264      2,813        9,962       25,535      4,160
before income
taxes
Income tax
benefits        250         (2,748)     (448)        (155)       (3,763)     (613)
(expenses)
Income from
discontinued    7,587       14,516      2,365        9,807       21,772      3,547
operations,
net of tax
Net Income      19,991      17,518      2,854        42,764      38,273      6,236
Net loss
attributable to
the             6,983       5,226       852          12,834      14,414      2,349
non-controlling
interests
Net income
attributable to                                                         
Simcere
Pharmaceutical  26,974      22,744      3,706        55,598      52,687      8,585
Group
shareholder
Net income
attributable to
Simcere
Pharmaceutical
Group           19,387      8,229       1,341        45,792      30,917      5,038
shareholder
from
continuing
operations
Net income
attributable to
Simcere
Pharmaceutical
Group           7,587       14,515      2,365        9,806       21,770      3,547
shareholder
from
discontinued
operations
Earnings per
share
attributable to
 Simcere from
continuing
 operations:
Basic           0.18        0.08        0.01         0.42        0.29        0.05
Diluted         0.18        0.08        0.01         0.42        0.29        0.05
Earnings per
share
attributable to
 Simcere from
discontinued
 operations:
Basic           0.07        0.14        0.02         0.09        0.21        0.03
Diluted         0.07        0.14        0.02         0.09        0.21        0.03
Earnings per
ADS
attributable to
 Simcere from
continuing
 operations:
Basic           0.36        0.16        0.03         0.85        0.59        0.10
Diluted         0.36        0.15        0.02         0.85        0.58        0.09
Earnings per
ADS
attributable to
 Simcere from
discontinued
 operations:
Basic           0.14        0.28        0.05         0.18        0.41        0.07
Diluted         0.14        0.27        0.04         0.18        0.41        0.07
Weighted
average number
of ordinary
shares:


Basic           107,834,280 105,308,644 105,308,644  108,136,224 105,233,637 105,233,637
Diluted         107,961,891 107,103,181 107,103,181  108,329,408 106,691,583 106,691,583



SIMCERE PHARMACEUTICAL GROUP
PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS EXPRESSED IN THOUSANDS)
                                               December 31, June 30,  June 30,
                                               2012         2013      2013
                                               RMB          RMB       USD
Assets
Current assets
Cash and pledged bank deposits                 201,556      643,388   104,831
Assets held for sale                           90,550       267,185   43,534
Bills receivable                               679,630      607,575   98,996
Accounts receivable, net                       413,481      479,308   78,096
Inventories                                    120,932      117,511   19,147
Other current assets                           237,248      215,508   35,113
Total current assets                           1,743,397    2,330,475 379,717
Property, plant and equipment, net             853,546      785,904   128,052
Land use rights                                128,220      118,285   19,273
Goodwill and intangible assets, net            519,334      427,315   69,625
Investment in equity method investments        56,785       34,408    5,606
Other non-current assets                       71,381       111,990   18,247
Total assets                                   3,372,663    3,808,377 620,520
Liabilities
Current liabilities
Short-term borrowings                          675,779      742,290   120,945
Accounts payable                               47,136       50,567    8,239
Bills payable                                  15,000       20,000    3,259
Other payables and accrued liabilities         471,603      767,919   125,122
Liabilities directly associated with assets    -            35,843    5,840
held for sale
Total current liabilities                      1,209,518    1,616,619 263,405
Long-term borrowings                           2,000        2,000     326
Deferred tax liabilities                       56,120       39,958    6,510
Other liabilities                              32,657       21,195    3,453
Total liabilities                              1,300,295    1,679,772 273,694
Shareholders' equity
Simcere shareholders' equity
Ordinary shares at par                         8,258        8,266     1,347
Additional paid-in capital                     853,551      871,837   142,053
Accumulated other comprehensive loss           (104,147)    (104,476) (17,022)
Retained earnings                              1,254,464    1,307,151 212,981
Total equity attributable to Simcere           2,012,126    2,082,778 339,359
Non-controlling interest                       60,242       45,827    7,467
Total shareholders' equity                     2,072,368    2,128,605 346,826
Commitments and contingencies
Total liabilities and shareholders' equity     3,372,663    3,808,377 620,520

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 = RMB6.1374
on June 28, 2013 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

Website: http://www.simcere.com
 
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