Simcere Pharmaceutical Gains on Strong Earnings

Simcere Pharmaceutical Group (NYSE: SCR), a Nanjing, China-based manufacturer and supplier of branded generic and patent pharmaceuticals yesterday reported unaudited financial results for the quarter ended December 31, 2007 and fiscal year ended December 31, 2007.

The company reported strong revenue growth and EPS beat expectations.Total revenue for Q4 2007 was RMB 398.6 million (US$54.7 million), an increase of 56% from the same period in 2006. For the full year, total revenue was RMB 1,389.3 million (US$190.5 million), up 46.1% from the RMB 950.6 million reported for 2006. Net income was RMB 78.1 million (US$10.7 million) for the fourth quarter, up 44% from FY2006. For the full net income was RMB 301.3million (US$41.3million), up 75% compared to RMB 172.3 million for the full year of 2006. Net income margin for the full year of 2007 was 21.7% as compared to 18.1 % for the full year of 2006.

The basic earnings per American Depository Share [ADS] for the fourth quarter of 2007 and full year of 2007 were RMB 1.25 (US$0.17) and RMB 5.13 (US$0.70) respectively, and the diluted earnings per ADS for the fourth quarter of 2007 and full year of 2007 were RMB 1.21 (US$0.17) and RMB 4.95 (US$0.68) respectively.

Consensus estimates for the fourth quarter and full year revenues were US$47 million and US$183.8 million respectively. EPS expectations were at US$0.12 and US$0.66 for the fourth quarter and full year. With this report the company beat expectations on both the top and bottom lines.

“I am delighted to say Simcere achieved strong growth in 2007,” said Jinsheng Ren, Chairman and CEO of Simcere Pharmaceutical Group. "Endu, our innovative anti-cancer drug continues to be rapidly recognized and accepted by an increasing number of specialist physicians and patients during the second year of its launch; Bicun, our first-to-market stroke management drug is being prescribed by a growing number of doctors, and gaining entry into additional hospital departments. Both Endu and Bicun sales growth exceeded our 2007 expectations.”

The company’s revenue growth continues to be driven by its 2 main products, Endu and injectable endaravone. Endu, recombinant human endostatin used in the treatment of advanced lung cancer, had revenues of RMB 64.0 million (US$8.8 million) in Q4, representing 16.1% of the Company's product revenue for the quarter and an increase of 170% from the same period in 2006. For the full year of 2007, revenue from Endu totaled RMB 216.2 million (US$29.6 million), representing 15.9% of the Company's product revenue.

Sales of Bicun and Yidasheng (endaravone), used in the management of acute stroke, rose 96% to RMB 147.0 million (US$20.1 million) in the fourth quarter of 2007, representing 36.9% of the Company's product revenue for the quarter compared to 29.4% in the comparative period of prior year. For the full year of 2007, revenue from Edaravone products increased by 92% to RMB 443.4 million (US$60.8 million), representing 32.5% of the Company's product revenue for the full year of 2006.

Looking forward, company management is targeting total revenues for the full year of 2008 to be between RMB 2.0 billion to RMB 2.1 billion (US$280 to 294 million) and Simcere's targeted annual net income for the full year 2008 is expected to be between RMB 390 million and RMB 400 million (US$54.6 to 56 million). Prior to the reports, Reuters reports FY 2008 revenue estimates of US$233.9 million with net income of US$52.3 million.

Beating expectations on the top and bottom line and raising forward expectations makes investors happy. At midday, Simcere shares rose 2.44% to US$10.77 on above average volume.

Disclosure: none