China Shenghuo Reports Large Loss on Higher Revenues

| About: China Shenghuo (CKUN)

China Shenghuo Pharmaceutical Holdings (NYSE Amex Equities: KUN) declared that revenues rose 23% in the first quarter of 2008 to $6.8 million. The numbers raised cash flow to $890,000, but the company reported a net operating loss of $2.9 million, much higher than the $850,000 loss incurred in the same period in 2008.

The culprit seems to be greatly increased cost of sales, which soared from $1.6 million to an astonishing $6.4 million. China Shenghuo said it is switching its market for sales on its main product, Xuesaitong Soft Capsules, a TCM product that improves blood circulation. Previously, the majority of Xuesaitong Soft Capsules were sold in hospitals, but China Shenghuo is shifting focus to the OTC market, where gross margins are higher.

China Shenghuo also said its new 12 Ways cosmetics products produced “meaningful” growth in revenues. It expects the line of cosmetic products to diversity the company’s income.

The company ended the quarter with just $909,000 in cash.

China Shenghuo pointed out that it has four prescription drugs in Phase II clinical trials. The drugs, together with their indications and projected approval dates, are:

  • Levofloxacin Hydrochloride Soft Capsule – antibiotic – 2009;
  • Brufen Soft Capsule – fever and headache caused by flu, colds and acute pharyngitis – 2009;
  • Dencichine Hemostat – anti-hemorrhagic applications – 2011;
  • Wei Dingkang Soft Capsule – peptic ulcer – 2011.

Following the announcement, China Shenghuo slipped three cents lower to $.81 per share. The market capitalization for China Shenghuo is currently $16 million.

Disclosure: none.