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China Pharma Holdings - Q2 2009 Earnings Call Transcript

|Includes: China Pharma Holdings, Inc. (CPHI)

Full transcript here.

Call Date:  12-Aug-2009
Ticker:  CPHI
Name:  China Pharma Holdings
Quarter:  Q2
Year:  2009
Transcribed by:  Hull Research

This transcript is a textual representation of the applicable company's conference call, conference presentation or other audio presentation, and while efforts are made to provide an accurate transcription, there may be Material errors, omissions, or inaccuracies in the reporting of the substance of audio presentations. Hull Research does not assume any responsibility for any investment or other decisions made based upon the information provided in any transcript.

Conference call date: August 12th, 2009 at 8:00 a.m. Eastern Time.

Operator: Good evening ladies and gentlemen and welcome to the second quarter, 2009 China Pharma Holdings Inc. Earnings Conference Call. My name is Anne and I will be your coordinator for today's call. If you need assistance at any time during the call, please press 'star' followed by 'zero' and an operator will be happy to assist you. As a reminder this conference is being recorded for replay purposes. At this time all participants are in listen only mode. We will be facilitating a question and answer session following the presentation. And we will be limiting the questioners to one at a time, after which you can return to the que.

I would now like to turn the presentation over to Mr. Sam Sing, Vice President. Please proceed sir.

Sam Sing: Good evening everyone. I am pleased to welcome you to China Pharma Holdings 2nd quarter 2009 earnings conference call. By now everyone should have access to the earnings release, in which we detailed our financial performance. Before we continue, please bare with me as I take you through the companies safe harbor policy.

The statements contained in this earnings call, which are not historical fact, may be deemed to constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in such statements due to the number of risks and uncertainties. All of which are described in the company's filings with the SEC. China Pharma does not take any obligation to update forward looking statements except as required by the applicable law.

I am joined today by Mr Lee, our President and CEO. Frank, CFO.

I will speak on behave of the key financial highlights in the second quarter. Daniel will provide translation for the question and answer session

First I would like to thank all our shareholders for their continued support and believe in us. In this discussion we will give you some perspective on our performance during the second quarter of 2009.

We are pleased to report a quarter with a continued revenue growth, supported by the increased marketing effort and distribution expansion. In the 2nd quarter of 2009, several newly launched products started to create potential in sales and our existing products continued to increase their contributions to revenue. Our 2nd quarter performance also reflects the significant purpose to manage our receivables collection efforts. We believe our efforts will result in improved collection in the coming quarter. In the 2nd quarter of 2009, we have several developments, including: first, we received official approval from China's State Food and Drug Administration to enter clearance trial for Rosuvastatin, a generic form of Crestor for treating high cholesterol level in patients with a hyper endemic. Because of the large number of patients currently suffering from high cholesterol in China, we are really excited about bringing such a promising product to the Chinese market. We are currently conducting clinical trials, which are anticipated to be completed by middle-year 2010. Secondly, as announced previously, this quarter we launch Tiopronin, a new drug for acute and chronic Hepatitis B, one of the most prevalent disease in China. The sales performance is progressing as planned, which generates over $500,000 USD of revenue for this quarter. Lastly, I will be very pleased to announce that we achieved significant improvements in our accounts receivable collections during the second quarter. Compared to the previous quarter, while our AR remained large at present time, AR collections will continue to be the focus on the management and we expect further improvements in the second half of the year.

China Pharma is well positioned in the growing Chinese healthcare market. The growth of the China pharmaceutical market is driven by China's rapid economic growth. The record high in economic history increased spending supported by the Chinese Gov't to reform the healthcare system has already greatly improved the accessibility to and desire for medical care. Additional important factors includes the aging of the population and the resulting increase in age-related disorders, the urban migration of the population and the improved awareness of the self-healthcare. According to Intercontinental Marketing Service (NYSE:IMS), China with become the 7th largest pharmaceutical market in the world in 2009 and the 2nd largest in 2020. With a market of approximately $220 Billion USD, recent Chinese healthcare reform program will have real and significant impact on all healthcare related industries in China, including the pharmaceutical industry. While the final plan is still in draft, the guideline is very clear to us. Overall the Gov't plans to provide the basic universal healthcare system to all Chinese citizens. Pharmaceutical companies will be impacted mostly by a proposed Essential Drug List (EDL), on which the Gov't will publish the most often prescribed drugs. It is assumed the sales price of the EDL drugs will be strictly controlled. Despite of the obvious volume advantage, we believe the affect of the reform will be significant if not immediate. We are making ourself more nimble and be ready to adjust our marketing and product strategy according to the new environment when it becomes reality. Meanwhile, we are adjusting ourselves a marketing strategy to further penetrate rural care healthcare facilities market which is one of the focuses of the current healthcare reform.

And at this time I will turn the call over to Mr Frank Wuang, our CFO, who will review some key points from our 2nd quarter financial results.

Frank Wuang: Thank you Sam. Good morning. Now that you've had an overview of our business, I'd like to review key financial results for the 3 month ended June 30th, 2009.

Revenue for the 2nd quarter of 2009 increased approximately 20.6% to 13.6 million USD from 11.3 million USD in the 2nd quarter of 2008. The increase in revenue was driven by antiviral and infection product category, which increased 19% to 5.2 million USD over the same period last year. Sales of CNS, cerebral and cardiovascular drugs, increased 4% to 5.1 million USD. Digestive products sales increased 101% to 0.94 million USD, mainly due to the sales contribution from the new product Tiopronin. In the other products category, including tumor drug Granisetron and various other products, sales increased 36% to 2.3 million.

Gross profit for the 2nd quarter of 2009 was 5.9 million, same as in the 2nd quarter of 2008. Gross margin was 43.5% compared with to 52.8% in the 2nd quarter of 2008. Gross margin reflects increased proportions of sales of lower margin products. Operating expenses for the 2nd quarter of 2009 decreased 31.7% to 1.1 million from 1.6 million the same period of 2008. Selling expenses increased 32.3% to 603,924 USD from 456,630 USD in the 2nd quarter of 2008, due to the company's substantial expanding investment into distribution channels and overall marketing efforts.

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