BMP Sunstone Corporation (BJGP) reported that its subsidiary, Sunstone (Tangshan) Pharmaceutical Co., Ltd. of Hebei, was given high tech status. High tech status brings with it a preferential tax rate of 15%, a significant reduction from the 25% rate the company would otherwise pay.
Because of its new rate, BMP Sunstone will recognize a tax refund of between $1 million and $1.5 million in the fourth quarter of 2008. This refund raises the company’s guidance for its 2008 full-year non-GAAP net income to between $6 million and $7 million. The non-GAAP figure excludes non-cash expenses such as stock-based compensation and amortization of acquisitions. The 15% tax rate will also apply to the company’s 2009 and 2010 taxes.
High tech status is given to companies that invest in new product development and generate a substantial amount of their revenues from proprietary patented or innovative products. In BMP Sunstone’s complicated corporate structure, Sunstone (Tangshan) Pharmaceutical Co. is a wholly owned subsidiary of Sunstone China Limited. BMP Sunstone also owns Shanghai Rongheng Pharmaceutical, Ltd (Rongheng) and its original company, Beijing Medpharm Co, Ltd.
In late December, BMP Sunstone entered an agreement to pay 20 million RMB ($3 million) for a 50% stake in Zhangjiakou Shengda Pharmaceutical Co., Ltd., a company that makes pediatric drugs with a special focus in antibiotics. The transaction has not yet closed. BMP Sunstone intends to buy the entire company in the future.