Lotus Pharma Reports Solid 2008 but Still Lacks Cash

Lotus Pharmaceuticals, Inc. (LTUS.OB) filed its 2008 financial report, showing the company’s revenues, which totaled $73.8 million, were up 30% while net income rose 14% to $12.8 million or 27 cents per fully diluted share. The company said it expected to see “steady” growth in 2009.

On the revenue front, Lotus said the increase was derived from increased sales of its own Brimonidine Tartrate Eye Drops and a number of third-party manufactured drugs. Revenues from Lotus’ Levofloxacin Lactate for Injection and Valsartan Capsules were lower.

Operating expenses rose 54% to $18,292,997 led by a large 131% increase in selling costs, which totaled $14.9 million. The company offered higher commissions to its sales force and paid $2.5 million in bonuses to improve collection of its accounts receivable. That initiative resulted in a healthy decline in accounts receivable from $14.9 million to $6.5 million over the course of the year. The company now offers discounts on its sales price if its customers pay quickly.

Unfortunately, Lotus ended 2008 with just $1.3 million in cash and working capital of $4.4 million. It has two large-dollar projects in the works. It put down a deposit toward a $38.2 million acquisition of a China Class I treatment for ulcers, and it signed a $32.6 million agreement to acquire land use rights in Inner Mongolia, where it will construct a manufacturing facility and biopharma park. After land rights expense, Lotus expects construction costs of $17.51 million, production line costs of $33.6 million and working capital needs of $7.3 million. The two projects ate approximately $35 million in cash during 2008.

To complete the projects, Lotus needs new sources of funding, either bank loans or government grants, it says. It admitted that bank loans are difficult to secure in the current environment. Lotus lists five drug products awaiting SFDA approval, plus one in clinical trials and seven more in development stage.

Lotus did not file a press release about its 2008 results, though the report is available on the SEC website. Following the filing, Lotus was trading a modest two cents higher at $.32 per share. At this price, the company has a market capitalization of just $15 million.

Disclosure: none.