China Nuokang Bio-Pharmaceutical Inc. Reports Second Quarter 2011 Financial Results

2Q11 Revenue of RMB79.5 Million ($12.3 Million)

2Q11 Net Income of RMB14.2 Million ($2.2 Million)

Live Conference Call to be Held Friday, August 26, 2011 at 8:00 am ET

BEIJING, Aug. 25, 2011 (GLOBE NEWSWIRE) -- China Nuokang Bio-Pharmaceutical Inc. (Nasdaq:NKBP) ("Nuokang" or the "Company"), a leading China-based biopharmaceutical company focused on the research, development, manufacture, marketing and sales of hospital-based medical products, today announced financial results for the second quarter of 2011.

Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, stated, "We are pleased by the strong sequential growth and profitability of our second quarter 2011 performance. We believe that this is an important data point in demonstrating our success in integrating the new sales structure. The first quarter was significantly affected by the sales team reorganization process but this quarter shows that we have quickly resumed normal operations. Moving forward, we expect our reorganization to strengthen the reach and effectiveness of our distribution network."

Chairman Xue continued, "We recognize that commercialization of our new products progresses slower than expected but would like to highlight Baquting's continued strong performance. Our sales volume rose this quarter to 3.9 million units from 3.2 million units in the previous quarter and 3.8 million units in the prior year period. Furthermore, we have seen Reptilase, one of our key competitors, gradually recede from the market as it has been over a year since the expiration of its import license and its inventory in China is depleting. Concurrently, we are proud to note that our own market share has risen again to 40% as of June 2011. Looking forward, we are confident that Baquting will retain a leading market share position and will continue to grow."

Second Quarter 2011 Financial Highlights

  • Revenue was RMB79.5 million ($12.3 million)1 compared to RMB82.4 million in the prior year period;
  • Baquting revenue was RMB76.1 million ($11.8 million) compared to RMB77.8 million in the prior year period;
  • Gross profit was RMB70.9 million ($11.0 million) compared to RMB73.2 million in the prior year period;
  • Gross margin was 89.2% compared to 88.8% in the prior year period;
  • Operating income was RMB21.0 million ($3.3 million); and
  • Net income was RMB14.2 ($2.2 million) or RMB0.72($0.11) per diluted ADS2.

Second Quarter 2011 Financial Performance

Revenue was RMB79.5 million ($12.3 million) compared to RMB82.4 million in the prior year period. Revenue from Baquting remained steady at RMB76.1 million ($11.8 million) compared to RMB77.8 million in the prior year period. Sequentially, Baquting revenue rose 15.6% from RMB65.8 million in the first quarter of 2011 as the sales team reorganization was completed. Revenue from other products was RMB3.4 million ($0.4 million) compared to RMB4.6 million in the prior year period.

Gross profit was RMB70.9 million ($11.0 million) compared to RMB73.2 million in the prior year period. Gross margin was 89.2% compared to 88.8% in the prior year period.

Operating income was RMB21.0 million ($3.3 million) in the second quarter of 2011 compared to RMB24.1 million in the prior year period. Operating margin for the second quarter of 2011 was 26.5%, compared to 29.2% in the prior year period and 27.8% in the first quarter of 2011. Operating expenses as a percentage of revenue is expected to remain within a similar range, growing in line with revenue, as the Company continues to invest in the sales and marketing efforts required to successfully bring to market its new products.

Research and development expenses remained within the Company's expected range at RMB3.3 million ($0.5 million) in the second quarter of 2011 compared to RMB2.8 million in the prior year period. These costs accounted for 4.1% of revenue this quarter, in line with the Company's full year research and development expense expectations.

Selling, marketing and distribution expenses were RMB36.6 million ($5.7 million) in the second quarter of 2011, compared to RMB34.6 million in the prior year period. Selling, marketing and distribution expenses as a percentage of revenue in the second quarter of 2011 was 46.1%, reflecting the Company's continued efforts to develop its sales team as well as bring to market new products.

General and administrative expenses decreased to RMB9.9 million ($1.5 million) in the second quarter of 2011 from RMB11.8 million in the prior year period, demonstrating the Company's cost control efforts.

Provision for income taxes was RMB4.8 million ($0.7 million) in the second quarter of 2011, representing an effective tax rate of 25.3%.

Net income was RMB14.2 million ($2.2 million) or RMB0.72($0.11) per diluted ADS in the second quarter of 2011 compared to RMB19.4 million or RMB0.98 per diluted ADS, in the prior year period.

For the quarter ended June 30, 2011, the Company had approximately 157.0 million weighted average diluted ordinary shares, or 19.6 million ADSs.

As of June 30, 2011, the Company had cash and cash equivalents of RMB208.0 million ($32.2 million), compared to RMB191.8 million as of December 31, 2010.

Six Months Ended June 30, 2011 Financial Performance

For the six months ended June 30, 2011, revenue decreased 5.3% to RMB144.0 million ($22.3 million) from RMB152.1 million for the six months ended June 30, 2010. During this same time period, gross profit decreased 6.2% to RMB127.1 million ($19.7 million) from RMB135.6 million and operating income decreased 14.1% to RMB39.0 million ($6.0 million) from RMB45.4 million.

Net income decreased 31.2% to RMB25.1 million ($3.9 million), or RMB1.27($0.20) per diluted ADS from RMB36.5 million, or RMB1.84 per diluted ADS, for the six months ended June 30, 2010. Weighted average number of diluted ordinary shares outstanding was approximately 158.1 million for the six months of 2011, or 19.8 million ADSs.

New Product Performance

The Company continues to make progress on the commercialization of the following pipeline products:

  • Kaitong: The Company continues to drive awareness and understanding of Kaitong through a nationwide marketing campaign. Thus far, the Company has won the bidding process for six provinces and two military zone areas, and expects additional provinces to hold bids during the remainder of 2011. The Company has seen nascent revenue contribution but continues to expect a gradual ramp up process.
  • In-licensed Products: The Company has made progress on the regulatory front for its in-licensed products, Dianatal® and other cardiovascular products, and continues to expect SFDA approval and revenue contribution in 2012.

Mr. Baizhong Xue commented, "As we have said before, Baquting is our main source of revenue. Our pipeline products have the potential to become significant revenue contributors. The commercialization process of these new products is dynamic and complicated. We have made considerable progress in the provincial bidding process and will diligently market these new products to hospitals and physicians to drive market recognition. For the full year of 2011, we are confident that Baquting will perform in line with the prior year and are cautiously optimistic regarding revenue contribution from new products."

1  This announcement contains translations of certain Renminbi amounts into US dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to US dollars as of and for the quarter ended June 30, 2011, were made at the noon buying rate of RMB6.4635 to USD1.00 on June 30, 2011 in the City of New York for cable transfers in Renminbi per US dollar as certified for customs purposes by the Federal Reserve Bank of New York. China Nuokang Bio-Pharmaceutical Inc. makes no representation that the Renminbi or US dollar amounts referred to in this press release could have been or could be converted into US dollars or Renminbi, at any particular rate or at all.
2 American Depositary Shares, which are traded on the NASDAQ, each represents eight ordinary shares of the Company.

Conference Call

The Company will hold a conference call at 8:00 am ET on Friday, August 26, 2011 to discuss second quarter 2011 results. Listeners may access the call by dialing:

United States toll free:1-866-405-2350
United States toll:1-718-354-1231
China toll free: 400-6988181
Hong Kong toll free: 800-965084
United Kingdom toll free:0800-0322281
Conference ID:91498737

A telephone replay will be available beginning two hours after the conclusion of the call and will be available through September 7, 2011. Listeners may access the replay by dialing:

United States toll free: 1-866-214-5335
International: 1-718-354-1232
Conference ID:91498737

A webcast will also be available through the Company's website www.nkbp.com.

About China Nuokang Bio-Pharmaceutical Inc.

China Nuokang Bio-Pharmaceutical Inc. (Nasdaq:NKBP) is a leading biopharmaceutical company in China focused on the research, development, manufacture, marketing and sales of hospital-based medical products. The Company provides a diversified portfolio of products across more than 3,000 hospitals in China. Nuokang's principal products include Baquting®, China's leading hemocoagulase product by market share, and Kaitong®, a lipid emulsion alprostadil product for the treatment of peripheral vascular diseases, cardiocerebral microcirculation disorders and post-surgery thrombosis. The Company's product pipeline includes product candidates under development in hematological, cardiovascular and cerebrovascular disease diagnosis, treatment and prevention. Please visit www.nkbp.com for more information.

Safe-Harbor Statement

This press release contains statements of a forward-looking nature. These statements, including the statements relating to the Company's new product development and financial outlook, are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. These forward-looking statements may include, but are not limited to, statements containing words such as "may," "could," "would," "plan," "anticipate," "believe," "estimate," "predict," "potential," "expects," "intends" and "future" or similar expressions. Among other things, the statements relating to the Company's expected progress on the product portfolio and future financial results may contain forward-looking statements. These forward-looking statements speak only as of the date of this press release and are subject to change at any time. These forward-looking statements are based upon management's current expectations and are subject to a number of risks, uncertainties and contingencies, many of which are beyond the Company's control that may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2011
Six Months 2010Six Months 20112Q 20102Q 2011
(RMB'000)(RMB'000)(US$'000)(RMB'000)(RMB'000)(US$'000)
Net revenue 152,144 144,006 22,280 82,405 79,487 12,298
Cost of revenue (16,585) (16,886) (2,613) (9,240) (8,621) (1,334)
Gross profit 135,559 127,120 19,667 73,165 70,866 10,964
Operating expenses
Research and development costs (5,899) (7,497) (1,160) (2,770) (3,274) (507)
Selling, marketing and distribution expenses (59,571) (57,787) (8,941) (34,555) (36,624) (5,666)
General and administrative expenses (24,707) (22,870) (3,538) (11,782) (9,924) (1,535)
Total operating expenses (90,177) (88,154) (13,639) (49,107) (49,822) (7,708)
Operating profit 45,382 38,966 6,029 24,058 21,044 3,256
Interest income 606 612 95 321 428 66
Interest expense (3,942) (2,139) (331) (2,024) (1,083) (168)
Exchange losses (1,216) (2,896) (448) (1,317) (1,535) (237)
Other income/(losses), net 2,046 (97) (15) 349 68 11
Income before income tax expense  42,876 34,446 5,329 21,387 18,922 2,928
Income tax expense (6,413) (9,403) (1,455) (1,994) (4,784) (740)
Net income 36,463 25,043 3,875 19,393 14,138 2,187
Net loss attributable to non-controlling interest 14 60 9 13 33 5
Net income attributable to shareholders 36,477 25,103 3,884 19,406 14,171 2,192
Net income per share
Basic  0.23 0.16 0.02 0.12 0.09 0.01
Diluted 0.23 0.16 0.02 0.12 0.09 0.01
Shares used in net income pershare computation
Basic 158,441,508 157,415,893 157,415,893 158,457,111 156,319,035 156,319,035
Diluted 158,973,110 158,096,893 158,096,893 158,629,958 157,000,035 157,000,035
Net income per ADS
Basic  1.84 1.28 0.20 0.98 0.73 0.11
Diluted 1.84 1.27 0.20 0.98 0.72 0.11
Shares used in net income per ADS computation
Basic19,805,18919,676,98719,676,987 19,807,139 19,539,879 19,539,879
Diluted19,871,63919,762,11219,762,112 19,828,745 19,625,004 19,625,004
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010 and JUNE 30, 2011
31-Dec30-Jun
20102011
(RMB'000)(RMB'000)(US$'000)
ASSETS
Current assets:
Cash and cash equivalents 191,822 208,024 32,184
Other investment - Current 29,868 19,415 3,004
Accounts receivable (net of allowance for doubtful accounts of RMB393,860 and RMB393,860(US$60,936) as of December 31, 2010 and June 30, 2011, respectively) 132,504 150,347 23,261
Bills receivable 86,587 46,912 7,258
Inventories 16,789 16,279 2,519
Prepayments and other receivables 20,116 30,682 4,747
Prepaid income tax 5,117 8,969 1,388
Deferred tax assets 1,518 831 129
Total current assets484,321 481,459 74,490
Non-current assets:
Property, plant and equipment, net155,786179,381 27,753
Land use rights, net35,80035,461 5,486
Intangible assets, net23,58722,401 3,466
Other Investments-Non current3,4143,414 528
Prepayment37,71338,108 5,896
Deferred tax assets4,2584,406 682
Total non-current assets260,558283,17143,811
TOTAL ASSETS744,879764,630118,301
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank loans47,00047,000 7,272
Accounts payable1,7642,132 330
Accrued expenses and other payables22,28119,928 3,083
Income tax payable2536,049 936
Unrecognized tax benefits809809 125
Total current liabilities72,10775,91811,746
Non-current liabilities:
Deferred tax liabilities2,0542,143 332
Deferred government grants21,62121,968 3,399
Long-term payable11,29911,670 1,806
Total non-current liabilities34,97435,7815,537
Commitments and contingencies --  --  -- 
Shareholders' equity:
Ordinary shares (par value US$0.0005 per share, 474,200,000 shares authorized and 158,490,942 share issued and outstanding as of December 31, 2010; 474,200,000 shares authorized and 158,550,942 share issued and outstanding as of June 30, 2011)597586 91
Additional paid-in capital460,981451,082 69,789
Retained earnings174,133199,236 30,825
Total shareholders' equity635,711650,904 100,705
Non-controlling interests2,0872,027 314
TOTAL EQUITY637,798652,931 101,018
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY744,879764,630 118,300
CONTACT: ICR, Inc.

         In the U.S.: Ashley De Simone: 1-646-277-1227

         In China: Wen Lei Zheng: 86-10-6583-7510
Source: China Nuokang Bio-Pharmaceutical Inc.