Simcere Pharmaceutical Group Reports Unaudited Third Quarter 2009 Results

NANJING, China, Nov. 16 /PRNewswire-Asia/ -- Simcere Pharmaceutical Group
("Simcere" or the "Company") (NYSE: SCR), a leading pharmaceutical company
specializing in the development, manufacturing, and marketing of branded
generic and proprietary pharmaceuticals in China, today reported unaudited
financial results for the quarter ended September 30, 2009.
Highlights
-- Total revenue was RMB443.7 million (US$65.0 million) for the third
quarter of 2009, compared to RMB443.4 million for the same period in
2008.

-- Gross margin for the third quarter of 2009 was 82.2%, compared to 78.4%
for the same period in 2008.

-- Income from operations was RMB29.0 million (US$4.3 million) for the
third quarter of 2009, a decrease of 66.6% from RMB87.0 million for the
same period in 2008.

-- Net income attributable to Simcere was RMB16.4 million (US$2.4 million)
for the third quarter of 2009, a decrease of 82.0% from RMB91.2 million
for the same period in 2008.

Mr. Jinsheng Ren, Chairman and Chief Executive Officer of Simcere
Pharmaceutical Group, commented: "Our sales and gross profit margins remained
stable this quarter. However, lower sales in Endu, impacted by the
restructuring of the sales team, and an increase in sales and marketing
expenses for new to market drugs like Anxin and Sinofuan, caused a significant
decrease in operating income.
"Looking forward, we will maximize the commercial opportunities presented
by the upcoming changes in the national and local insurance catalogues, and
continue our strategy of marketing existing key products within Simcere's
strong product portfolio to drive mid-to-long term growth."
In October 2009, we increased our stake in Jiangsu Yanshen, a manufacturer
of the Influenza A (H1N1) vaccine and became its controlling shareholder. We
also acquired the manufacturing license of Rosuvastatin, an effective statin
to treat high cholesterol and related conditions.
2009 Third Quarter Financial Results
Total revenue for the third quarter of 2009 was RMB443.7 million (US$65.0
million), compared to RMB443.4 million for the same period in 2008. For the
first nine months of 2009, total revenue was RMB1,310.6 million (US$192.0
million), which represented an increase of 2.9% from RMB1,274.2 million for
the same period in 2008.
Revenue from Endu, the Company's patented anti-cancer biotech product,
amounted to RMB21.6 million (US$3.2 million) in the third quarter of 2009,
which was 4.9% of the Company's product revenue for the third quarter of 2009
and represented a decrease of 60.2% from RMB54.4 million for the same period
in 2008. For the first nine months of 2009, revenue from Endu totaled RMB90.2
million (US$13.2 million), which represented a decrease of 50.2% from RMB181.3
million for the same period in 2008.
Revenue from edaravone injection products under the brand names Bicun and
Yidasheng totaled RMB191.1 million (US$28.0 million) for the third quarter of
2009, which was 43.5% of the Company's product revenue for the third quarter
of 2009, and represented an increase of 20.4% from RMB158.8 million for the
same period in 2008. For the first nine months of 2009, revenue from Bicun and
Yidasheng totaled RMB533.7 million (US$78.2 million), which represented an
increase of 16.4% from RMB458.4 million for the same period in 2008.
Revenue from Sinofuan, a 5-FU sustained release implant for the treatment
of cancer, amounted to RMB36.0 million (US$5.3 million) for the third quarter
of 2009, which was 8.2% of the Company's product revenue for the third quarter
of 2009, and represented an increase of 114.6% from RMB16.8 million for the
same period in 2008.
Revenue from other first-to-market products including Jiebaishu, a
nedaplatin product, and Anxin, a biapenem injection for the treatment of
serious infections, amounted to RMB8.7 million (US$1.3 million) for the third
quarter of 2009, which was 2.0% of the Company's product revenue for the third
quarter of 2009. For the first nine months of 2009, revenue from other
first-to-market products totaled RMB27.6 million (US$4.0 million).
Revenue from other branded generic products amounted to RMB181.6 million
(US$26.5 million), which was 41.4% of the Company's product revenue for the
third quarter of 2009, and represented a decrease of 12.4% from RMB207.3
million for the same period in 2008. For the first nine months of 2009,
revenue from other branded generic products totaled RMB551.3 million (US$80.8
million), which represented a decrease of 7.5% from RMB596.2 million for the
same period in 2008.
Gross margin for the third quarter of 2009 was 82.2%, increased from 78.4%
for the same period in 2008. For the first nine months of 2009, gross margin
was 82.3%, increased from 81.0% for the same period in 2008.
Research and development expenses for the third quarter of 2009 totaled
RMB32.8million (US$4.8 million), which represented an increase of 55.3% from
RMB21.1 million for the same period in 2008. This increase was primarily due
to increased research and development headcount as the Company continued to
expand its research and development activities. As a percentage of total
revenue, research and development expenses were 7.4% for the third quarter of
2009, compared to 4.8% for the same period in 2008. For the first nine months
of 2009, research and development expenses totaled RMB82.9 million (US$12.1
million), compared to RMB52.1 million for the same period in 2008.
Sales, marketing and distribution expenses for the third quarter of 2009
were RMB247.2 million (US$36.2 million), which represented an increase of
27.0% from RMB194.7 million for the same period in 2008. As a percentage of
total revenue, sales, marketing and distribution expenses were 55.7% for the
third quarter of 2009, compared to 43.9% for the same period in 2008. This
increase was primarily due to higher expenses from Endu sales team
restructuring and increased expenses for new to market drugs such as Anxin and
Sinofuan. For the first nine months of 2009, sales, marketing and distribution
expenses were RMB702.5 million (US$102.9 million), which represented an
increase of 26.1% from RMB557.2 million for the same period in 2008.
General and administrative expenses were RMB55.6 million (US$8.1 million)
for the third quarter of 2009, which represented an increase of 24.6% from
RMB44.6 million for the same period in 2008. As a percentage of total revenue,
general and administrative expenses increased to 12.5% for the third quarter
of 2009 from 10.1% for the same period in 2008. For the first nine months of
2009, general and administrative expenses were RMB165.8 million (US$24.3
million), which represented an increase of 19.6% from RMB138.6 million for the
same period in 2008.
Share-based compensation expense, which was allocated to research and
development expenses, sales, marketing and distribution expenses, and general
and administrative expenses, based on the nature of the work that the employee
was assigned to perform, totaled RMB5.8 million (US$0.8 million) for the third
quarter of 2009. Share-based compensation expenses for the third quarter of
2008 were RMB6.5 million. For the first nine months of 2009, share-based
compensation expenses totaled RMB17.7 million (US$2.6 million), which
represented a decrease of 11.1% from RMB19.9 million for the same period in
2008.
Income from operations was RMB29.0 million (US$4.3 million) for the third
quarter of 2009, which represented a decrease of 66.6% from RMB87.0 million
for the same period in 2008. For the first nine months of 2009, operating
income was RMB128.0 million (US$18.8 million), which represented a decrease of
55.0% from RMB284.3 million for the same period in 2008.
Income tax expense for the third quarter of 2009 was RMB4.7 million
(US$0.7 million), compared to RMB1.5 million for the same period in 2008. The
increase in income tax expense for the third quarter of 2009 was primarily due
to the release of the valuation allowance utilized by the earnings of an
operating subsidiary in the same period of 2008. For the first nine months of
2009, income tax expense was RMB8.8 million (US$1.3 million) compared to
RMB36.3 million for the same period in 2008.
Net income attributable to Simcere was RMB16.4 million (US$2.4 million)
for the third quarter of 2009, compared to RMB91.2 million for the same period
in 2008. Net income margin was 3.7% for the third quarter of 2009, compared to
20.6% for the third quarter of 2008. For the first nine months of 2009, net
income was RMB101.8 million (US$14.9 million), which represented a decrease of
65.9% from RMB298.4 million for the same period in 2008. Net margin for the
first nine months of 2009 was 7.8% as compared to 23.4% for the same period in
2008.
Basic and diluted earnings per American Depository Share ("ADS") for the
third quarter of 2009 were RMB0.29(US$0.04) and RMB0.29(US$0.04)
respectively. Basic and diluted earnings per ADS for the first nine months of
2009 were RMB1.75(US$0.26) and RMB1.73(US$0.25) respectively. One ADS
represents two ordinary shares of the Company.
As of September 30, 2009, the Company had cash, cash equivalents and
restricted cash of RMB448.1 million (US$65.6 million), compared to RMB813.8
million as of December 31, 2008.
Financial Statements
The unaudited condensed consolidated statements of income and balance
sheets accompanying this press release have been prepared by management using
U.S. GAAP. These financial statements are not intended to fully comply with
U.S. GAAP because they do not present all of the financial statements and
disclosures required by U.S. GAAP.
Safe Harbor Statement
This press release contains forward-looking statements. These statements
constitute "forward-looking" statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, and as defined in the U.S.
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as "anticipate," "believe,"
"estimate," "expect," "forecast," "intend," "may," "plan," "project,"
"predict," "should" and "will" and similar expressions. In particular, the
quotations from management in this press release and the section under
"Financial Outlook" contain forward-looking statements. These forward looking
statements are based upon management's current views and expectations with
respect to future events and are not a guarantee of future performance.
Furthermore, these statements are, by their nature, subject to a number of
risks and uncertainties that could cause actual performance and results to
differ materially from those discussed in the forward-looking statements as a
result of a number of factors. Further information regarding these and other
risks is included in Simcere's filings with the U.S. Securities and Exchange
Commission at http://www.sec.gov . Simcere does not undertake any obligation
to update any forward-looking statement, except as required under applicable
law.
Conference Call
Simcere Pharmaceutical Group will host a conference call to discuss the
Company's results for the third quarter 2009 on Monday, November 16, 2009 at 8
a.m. Eastern Time (Monday, November 16, at 9 p.m.Beijing/Hong Kong time). The
management team will be on the call to discuss the results for third quarter
2009 and to answer questions.
To access the conference call, please dial:

United States toll-free dial-in number: +1 800 706 7741
International dial-in number: +1 617 614 3471
North China toll-free dial-in number: +86 10 800 152 1490
South China toll-free dial-in number: +86 10 800 130 0399
China toll free / Netcom: +86 10 800 852 1490
Hong Kong dial-in number: +852 3002 1672

Please ask to be connected to Simcere's Q3 2009 earnings call and provide
the following passcode: 32750293. Simcere will also broadcast a live audio
webcast of the conference call. The broadcast will be available by visiting
the "Investor Relations" section of the Company's web site at
http://www.simcere.com .
Following the earnings conference call, an archive of the call will be
available by dialing:
United States toll-free dial-in number: +1 888 286 8010
United States dial-in number: +1 617 801 6888

The passcode for replay participants is: 77133325. The telephone replay
also will be archived on the "Investor Relations" section of the Company's web
site for seven days following the earnings announcement.
About Simcere Pharmaceutical Group
Simcere Pharmaceutical Group (NYSE:SCR, Simcere) is a leading
pharmaceutical company specializing in the development, manufacturing, and
marketing of branded generic and proprietary pharmaceuticals in China. In
recent years, Simcere has been focusing its strategy on the development of
innovative pharmaceuticals and first-to-market generics, and has introduced an
innovative anti-cancer medication Endu, a first-to-market medication Sinofuan,
and first-to-market generics such as Bicun and Anxin. Simcere manufactures and
sells antibiotics, anti-cancer medication stroke management medication and
biopharmaceutical drugs such as vaccines. Simcere concentrates its research
and development efforts on the treatment of diseases with high incidence
and/or mortality rates and for which there is a clear demand for more
effective pharmacotherapy such as cancer, strokes, orthopaedics and infectious
diseases. For more information about Simcere Pharmaceutical Group, please
visit http://www.simcere.com .

SIMCERE PHARMACEUTICAL GROUP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT SHARE AND ADS DATA)

Three months ended September 30,
2008 2009 2009
RMB RMB USD

Product revenue 441,214 439,015 64,313
Other revenue 2,184 4,720 691
Total revenue 443,398 443,735 65,004
Cost of materials and
production (95,925) (79,045) (11,580)
Gross profit 347,473 364,690 53,424

Operating expenses:
Research and
development expenses (21,126) (32,808) (4,806)
Sales, marketing and
distribution expenses (194,731) (247,241) (36,219)

General and administrative
expenses (44,619) (55,592) (8,144)
Income from operations 86,997 29,049 4,255

Interest income 8,303 1,885 276
Interest expense (452) (4,005) (587)
Foreign currency exchange
gains 3,147 122 18
Other income -- -- --
Earnings before income taxes 97,995 27,051 3,962

Income tax expense (1,454) (4,662) (683)
Net Income 96,541 22,389 3,279

Less: Net income
attributable to
the noncontrolling
interest (5,384) (5,958) (873)
Net income attributable
to Simcere 91,157 16,431 2,406

Earnings per share
attributable to Simcere:
Basic 0.73 0.15 0.02
Diluted 0.72 0.14 0.02

Earnings per ADS
attributable to Simcere:
Basic 1.46 0.29 0.04
Diluted 1.44 0.29 0.04

Weighted average number
of common shares:
Basic 125,148,011 112,724,593 112,724,593
Diluted 126,261,753 114,929,639 114,929,639

Nine months ended September 30,
2008 2009 2009
RMB RMB USD

Product revenue 1,269,982 1,298,511 190,225
Other revenue 4,256 12,106 1,774
Total revenue 1,274,238 1,310,617 191,999
Cost of materials and
production (242,002) (231,478) (33,910)
Gross profit 1,032,236 1,079,139 158,089

Operating expenses:
Research and development
expenses (52,120) (82,852) (12,137)
Sales, marketing and
distribution expenses (557,188) (702,528) (102,916)
General and administrative
expenses (138,601) (165,779) (24,286)
Income from operations 284,327 127,980 18,750

Interest income 30,105 7,403 1,084
Interest expense (3,695) (8,680) (1,272)
Foreign currency exchange
gains 41,226 350 51
Other income 1,104 1,092 160
Earnings before income
taxes 353,067 128,145 18,773

Income tax expense (36,324) (8,831) (1,294)
Net Income 316,743 119,314 17,479

Less: Net income
attributable to
the noncontrolling
interest (18,303) (17,469) (2,559)
Net income attributable
to Simcere 298,440 101,845 14,920

Earnings per share
attributable to Simcere:
Basic 2.39 0.87 0.13
Diluted 2.37 0.87 0.13

Earnings per ADS
attributable to Simcere:
Basic 4.77 1.75 0.26
Diluted 4.73 1.73 0.25

Weighted average number
of common shares:
Basic 125,066,634 116,466,445 116,466,445
Diluted 126,175,766 117,663,824 117,663,824

SIMCERE PHARMACEUTICAL GROUP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS EXPRESSED IN THOUSANDS)

December 31, September 30, September
30,
2008 2009 2009
RMB RMB USD
Assets
Current assets
Cash, cash equivalents and
restricted cash 813,766 448,127 65,648
Accounts and bills
receivables, net 748,997 629,730 92,252
Inventories 95,948 100,963 14,790
Other current assets 49,048 60,552 8,870
Total current assets 1,707,759 1,239,372 181,560
Property, plant and equipment,
net 463,059 527,253 77,240
Land use rights 114,624 112,766 16,520
Goodwill and intangible
assets, net 453,455 432,290 63,328
Investments in and advances
to affiliated companies -- 351,187 51,448
Other assets 39,325 44,144 6,467
Total assets 2,778,222 2,707,012 396,563
Liabilities
Current liabilities
Short-term borrowings and
current installments of long-
term debt 6,000 11,000 1,611
Accounts payables 25,219 25,971 3,805
Bills payables -- 100,000 14,649
Other payables and accrued
liabilities 303,794 304,484 44,606
Total current liabilities 335,013 441,455 64,671
Long-term debt, excluding
current installments 62,000 57,000 8,350
Deferred tax liabilities 59,358 57,040 8,356
Other liabilities 20,529 21,303 3,121
Total liabilities 476,900 576,798 84,498

Equity
Simcere shareholders' equity
Ordinary shares at par 9,624 8,770 1,285
Additional paid-in capital 1,505,252 1,187,664 173,986
Accumulated other comprehensive
loss (82,130) (46,488) (6,810)
Retained earnings 820,279 922,124 135,086
Total Simcere shareholders'
equity 2,253,025 2,072,070 303,547
Noncontrolling interest 48,297 58,144 8,518
Total equity 2,301,322 2,130,214 312,065
Commitments and contingencies
Total liabilities and equity 2,778,222 2,707,012 396,563

Note: The conversions of Renminbi (RMB) into United States dollars (USD)
as at the reporting dates are based on the noon buying rate of USD1.00 =
RMB6.8262 on September 30, 2009 as set forth in the H. 10 statistical release
of the Federal Reserve Board. No representation is intended to imply that the
RMB amounts could have been, or could be, converted, realized or settled into
U.S. dollars at that rate on the reporting dates.
SOURCE Simcere Pharmaceutical Group

Investor and Media Contacts: ir@simcere.com; In Nanjing: Frank Zhao, Chief
Financial Officer of Simcere Pharmaceutical Group, +86-25-8556- 6666 x8818; In
Beijing: Ruirui Jiang of Brunswick Group, +86-10-6566-2256; In the United
States: Kate Tellier of Brunswick Group, +1-212-333-3810; In Hong Kong: Joseph
Lo Chi-Lun of Brunswick Group, +852-3512-5000