BMP Sunstone's Q3: Revenues on the Rise

Nov.13.08 | About: BMP Sunstone (BJGP)

BMP Sunstone Corporation (BJGP), a company that has been building itself through acquisitions over the last two years, announced very strong Q3 results. It was the first quarter in which results included participation from BMP Sunstone’s acquisition of drug distributor Rongheng. Sunstone announced it acquired a 63.3% stake in Rongheng in April of 2007, but the deal did not close until July 4 of this year. Rongheng gives Sunstone entry into drug distribution in China’s biggest market, Shanghai.

BMP Sunstone said its Q3 revenues were a record $30.5 million, up 240% from a year earlier. Non-GAAP net income reached $1.9 million (it was a loss of $1.5 million last year), though GAAP net income remained negative, a loss of $816,000. Stock-based compensation costs of $636,000, amortization of debt of $977,000 plus amortization of acquisition of $1.1 million were the non-cash expenses that took Sunstone’s GAAP net income negative.

Another big reason for Sunstone’s increased revenues was the Sunstone acquisition, announced in 2007 but completed in February of this year. Although Sunstone had a small retail distribution arm, its major focus is branded OTC pharmaceuticals, which complements the distribution focus of BMP’s existing businesses. Sunstone contributed $15.5 million in revenues during Q3, and Rongheng $5 million, according to company officials speaking in the analysts’ call.

BMP Sunstone said Q3 is a slow season for the company because much of its business is in the cold and flu sector. This year was especially difficult because of the Olympics and the restrictions placed on trade around Beijing, it said.

The company said that Rongheng gives the company access to the three top pharmaceutical markets in China – Beijing, Shanghai and Guangdong Province. BMP Sunstone now distributes products to more than 1,800 hospitals and 50,000 pharmacies.

BMP Sunstone reiterated guidance that it would achieve full-year 2008 revenues of $110 to $120 million and non-GAAP net income of $4.0 to 5.0 million.

The company ended Q3 with $3.8 million of cash and notes receivable of $15.5 million, totaling $19.3 million. In October, after the close of the third quarter, it placed 433,000 shares at $5, raising a net $2 million. In July, the company signed a non-binding letter of intent to acquire 75% of Zhangjiakou Shengda Pharmaceutical Co., Ltd for up to 30 million RMB ($4.4 million). Shengda focuses on the oral pediatric market.

BMP must complete some financial maneuvers soon, because it has $29 million in notes coming due next April, plus a $4 million acquisition to pay for. In the conference call, the company said it is talking with lenders and looking at alternatives. But it refused to indicate a probable direction for its refinancing, promising an answer when it issues its year-end financial report.

BMP Sunstone Corporation markets a portfolio of eight products under exclusive multi-year licenses in China, primarily focused on women's health and pediatrics. Sunstone Pharmaceutical also serves the pediatric and women's health market.

Disclosure: none.