China Med Granted Prestigious CE Mark

China Medical Technologies, Inc. (CMED) was awarded the Conformité Européenne Mark (CE Mark) for two semi-automatic ECLIA analyzers and 15 reagents, including reagents for thyroid disorders, diabetes and tumor markers. The CE Mark indicates the product meets the provisions of the In-Vitro Diagnostic Directive [IVDD] of the European Union.

In a statement, Mr. Xiaodong Wu, Chairman and CEO of the Company, said the approval would give China Medical access to new markets and give it added prestige in China.

China Medical will continue to seek the CE Mark for its other ECLIA reagents.

In January, China Med closed the purchase of Beijing Bio-Ekon Biotechnology Co. Ltd., which included the semi-automatic ECLIA analyzers and several reagents that China Med said would be valuable additions to its own portfolio of reagents.

China Med is a very profitable enterprise, with net income running at almost 50% on a non-GAAP basis and revenues rising steadily. At the end of February, China Med disclosed its financial results for the company’s third quarter. China Med’s revenues grew by 64% to 265 million RMB ($36.3 million), while non-GAAP net income was up 35% at 125 million RMB ($17.1 million).

China Med has three product lines:

• ECLIA diagnostic systems – Q3 revenues of 97 million RMB ($13.3 million), up 74%

• FISH diagnostic system – Q3 revenues of 53 million RMB ($7.2 million)

• HIFU (High Intensity Focused Ultrasound) tumor therapy systems – Q3 revenues of 116 million RMB ($15.9 million), up 9%

In Q3, net income (including share-based compensation costs and amortization of merger-related intangibles) was 98 million RMB ($13.4 million), an 11% increase from the year-earlier period. Without those charges, China Med would have reported 125 million RMB ($17.1 million) of net income.

China Med believes it may qualify for a lower tax rate under the new China tax regulations that cut the tax rate from 25% to 15% for high-tech enterprises. The company, however, is waiting to see the regulations for the reduction before applying. At present, under interim rules, China Med pays 18%, which will increase in steps to 25% in 2012.

China Med said the heavy winter snowstorms of February will delay the delivery of two HIFU systems and keep 2008 revenues at their previously forecast levels of around 875 million RMB ($120 million) and non-GAAP net income of 415 million RMB ($57 million). Per ADS, that works out to about $2.05. China Med has a market capitalization of $1.1 billion. The stock is in the middle of a very positive trading session, rising $3.03 to $40.19, an increase of 8%.

Disclosure: none.