China Pharma Raises Much-Needed Capital

May.29.08 | About: China Pharma (CPHI)

China Pharma Holdings, Inc. (NYSEMKT:CPHI) completed a private placement that raised gross proceeds of $10 million. The company sold 5 million shares at a price of $2 each and sweetened the deal with 1.25 million three-year warrants to buy stock at $2.80 per share.

The company said it would use its newly raised capital to develop drugs already in its pipeline, expand the product line and for general working capital. In a statement, Ms. Zhilin Li, President and CEO of the company, said China Pharma would also use the money to launch several new drugs and expand its distribution network.

As of March 31, 2008, the company reported it had just $682,000 in cash. As we said in reviewing the company’s Q1 financial report, China Pharma started off 2008 by reporting a healthy 62% growth in revenues, but Accounts Receivable grew by 32% or $6.2 million. This took Accounts Receivable from an already high $18.6 million to an even more significant $24.8 million. Although the growth in revenue was robust, the gain in Accounts Receivable is a high price to pay for the growth because it drained the company of its cash. Now China Pharma has had to dilute the holdings of existing shareholders in order to raise its cash levels.

China Pharma makes and markets generic and branded bio-pharmaceutical products.

The $2 price of the new shares constituted a 14% discount to Tuesday’s closing quote of $2.29 per share. In Wednesday’s trading, China Pharma moved lower by 10 cents or 4% to $2.19 per share.

Disclosure: none.