Sihuan Pharmaceutical Announces 2014 Interim Results

HONG KONG, Aug. 27, 2014/PRNewswire/ -- Sihuan Pharmaceutical Holdings Group Ltd. (HKEx: 0460) ("Sihuan Pharmaceutical" or the "Company"), a leading pharmaceutical company with the largest cardio-cerebral vascular ("CCV") drug franchise in China's prescription drug market, today announced the unaudited consolidated results of the Company and its subsidiaries (collectively the "Group") for the six months ended 30 June 2014 (the "Period").

Financial Highlights

For the Six months ended 30 June
Key Income Statement Items		RMB Million		Change
		2014	2013
Profit Attributable to Owners of the Company		830.1	617.5	+34.4%
Revenue*		2,000,0	2,324,7	-14.0%
Gross Profit		1,596,0	1,847,1	-13.6%
Declared Interim Dividend per Share (RMB Cents)		1.3	4.3	N/A
*Due to the change in sales strategy, there was a downward adjustment in the ex-factory price of the Group's several key products. Meanwhile, there was a significant decrease in distribution costs in conjunction with this change, resulting in their profit contributions being largely the same as their profit contributions had the change in sales strategy not taken place.

Following a year of strong growth in 2013, the Group sustained sound growth momentum in the first half of 2014, thanks to its diversified product portfolio and timely adjustments to its marketing strategies, and entered another stage of steady development. Sales volume of the Group's key products recorded impressive growth compared with the same period last year. Through the expansion of the Group's market coverage and stepping up of academic promotion, it was able to accelerate sales growth for its promising products. Meanwhile, the Group increased its market penetration into the low-end market and achieved good results for its established products. The Group's profit attributable to owners of the Company increased by 34.4% year-on-year to RMB830.1 million. The Board declared an interim dividend of RMB1.3 cents per share.

Dr. Che Fengsheng, Chairman and CEO of the Company, said, "Despite lingering challenges in China's pharmaceutical market, our industry-leading sales and marketing capability spoke for itself by delivering above-market performance. Our clear development roadmap and commitment to innovation have laid a strong foundation for where we stand today. There is no doubt that the Group has demonstrated its capability to move in tandem with an ever-changing market, which attests to Sihuan Pharmaceutical's strong fundamentals built up over past years. We reinforced our leadership in the CCV prescription drug market with our market share rising to 10.8%. Sihuan Pharmaceutical has become the third-largest pharmaceutical enterprise in China's hospital market in terms of hospital purchases."

Significant Sales Volume Growth of Key CCV Products with Contribution Surge of Promising Products

CCV Products

Thanks to a young and diversified product portfolio, sales of CCV products accounted for 94.0% of the Company's total revenue, continuing to be the Company's largest revenue contributor. During the Period, the sales volume of the Group's promising products such as Oudimei, Yuanzhijiu, Yeduojia, Danshen Chuanxiongqin, Yimaining and Salivae Miltiorrhizae Liguspyragine Hydrochloride and Glucose Injection grew by over 30% as compared to the corresponding period last year. Among which, Yuanzhijiu, Danshen Chuanxiongqin and Salivae Miltiorrhizae Liguspyragine Hydrochloride and Glucose Injection recorded sales volume growth of over 50%. Meanwhile, the combined sales volume of established products Kelinao/Anjieli recorded an increase of about 20% year-on-year, while sales of Qingtong rose by 16.1% year-on-year.

Non-CCV Products

For the Period, the Group achieved strong performance with the sales of its non-CCV products. All of its major key products achieved sustainable growth. Sales of antiepileptic drug Ren'Ao rose 41.1% year-on-year, while sales of respiratory system drugs Zhuo'Ao and Bi'Ao increased by 32.6% and 6.5% year-on-year, respectively, and sales of Luoanming rose 15.5% year-on-year. Digestive drug Roxatidine achieved tender wins in 3 provinces and a supplementary tender submission in another province, in which sales activities have since started.

Widened Market Coverage of Promising Products and Furthered Penetration into Low-end markets for Established Products

For the Period, the Group enhanced the market coverage of promising products through provincial tender wins and supplementary tender submissions. As a result, market coverage of Oudimei and Yuanzhijiu has now expanded to more than 20 provinces, while that of Yeduojia, Yimaining and Guhong has reached over 15 provinces, and that of Danshen Chuanxiongqin expanded to 8 provinces; meanwhile, the Group's established products such as Kelinao, Qu'Ao, Chuanqing and Qingtong further developed the low-end markets through inclusion on provincial Essential Drug Lists ("EDL") and provincial New Rural Cooperative Medical Scheme Lists ("NRCMSL"). In addition, the Group conducted clinical studies on its two core products, Kelinao and Oudimei, to further enhance physicians' understanding of the products.

Positive Results from Product Development

The Company has intensified efforts on innovative drug projects. The Group's innovative drug R&D division filed an application for Approval for Clinical Trial of Janagliflozin, a Category 1.1 innovative anti-diabetic drug, to the Food and Drug Administration ("CFDA") and has received the official acceptance of the application. This is the Group's eighth self-developed Category 1.1 innovative drug, for which an application has been successfully filed with the CFDA. Meanwhile, Phase I of clinical trial of Imigliptin Dihydrochloride progressed as planned. Clinical trials of Anaprazole Sodium and Benapenem, two other Category 1.1 innovative drugs, also commenced during the Period. Currently, the Group is actively preparing to file an investigational new drug application for Pirotinib to the Food and <org>Drug Administration of the United States.

As for generic drugs, the Group filed several new production license applications during the Period. By the end of June 2014, production license applications for a total of 27 generic drugs were filed. Also, more than 20 new projects commenced development during the Period. In total, the Group has over seventy generic drug projects under development.

Production and Quality Management

The new production system has been running smoothly since the main production facilities received the new GMP certification. The production facility of the Group's Active Pharmacentical Ingredients ("APIs") business, Langfang Gaobo Jingband Pharmaceutical Co., Ltd. ("Langfang Gaobo Jingband"), received an Establishment Inspection Report from the U.S. FDA in the first half of this year. The Group's cooperation with Canada-based Apotex Inc. has further deepened and the Group's over RMB10 million contract with India's Dr. Reddy's Laboratories Ltd. involving the Posaconazole project was also signed. Moreover, the Group's collaboration with Italy-based company ZaCh System S.p.A. and Israel-owned company Taro Pharmaceutical Industries Ltd. also commenced as planned.

Future Prospects

Fueled by accelerated urbanization and the ageing of China's population, the rigid demand in the domestic pharmaceutical market will continue to grow. Also, the market potential brought by national medical insurance coverage is far from fully realized. On the other hand, the country has been curbing the excessive growth of medical expenditures, and the tightening of hospital medical budgets in first tier cities, lower provincial tendering prices, and the deepening reform of medical institutions will all exert pressure on pharmaceutical enterprises. Moreover, a rising industrial threshold, rising technical standards and stringent regulatory controls will speed up the polarization and consolidation of the pharmaceuticals industry, and quality resources will flow to leading enterprises. With further consolidation and integration in the industry, pharmaceutical companies with comprehensive operational advantages will have more opportunities for their development and for long-term success.

Looking ahead, the Company plans to continue to tap potential of its strong existing product resources. To support the rapid and sustainable growth in sales of its promising products, the Group will continue to enhance both horizontal expansion by seizing all opportunities for tender wins and supplementary tender submissions and vertical expansion in the more economically developed regions. For the products that are either at the earlier stages of market development or were recently launched to the market, the Group will step up its efforts in both academic promotion and market expansion. Sales of the Group's established products is set to achieve sustainable growth from further expansion in the low-end markets through inclusion on more provincial EDLs and provincial NRCMSLs. Meanwhile, the clinical usage of established products has been further expanded by entering various official medicine usage guidelines.

The Group will maintain strong sales and marketing capabilities by making prompt adjustments to its marketing strategies and continuing to optimize its marketing network according to changes in the market. To carry forward the Group's long-term growth momentum, the Group will continue to produce a steady stream of product resources through three major channels, namely its innovative and generic drug development platform, mergers and acquisitions and collaboration with international companies.

Dr. Che concluded, "Moving forward, Sihuan Pharmaceutical will continue to commit itself to product diversification through R&D, product collaboration and M&A, focusing on proprietary drugs in major therapeutic areas. We will fully realize the potential of our product resources through our flexible sales and marketing strategies and the expansion of our national network. We expect to launch a number of innovative proprietary drugs and blockbuster generic drugs after three years, which are complementary to the existing product portfolio, and will continue the cycle of high growth to bring Sihuan Pharmaceutical to new heights. I am fully confident in Sihuan Pharmaceutical's capability to achieve its 2014 full-year target and stride towards its future development. It is my firm belief that we are entering a phase of stable and sustainable growth. Upon the launch of our innovative drugs, Sihuan Pharmaceutical will be one step closer to becoming the most competitive, globally-recognized Chinese pharmaceutical company."

About Sihuan Pharmaceutical Holdings Group Ltd.

Founded in 2001, Sihuan Pharmaceutical Holdings Group Ltd. is a leading Chinese pharmaceutical corporation and the largest cardio-cerebral vascular drug franchise in China's prescription drug market by market share. The Company also became the fourth largest pharmaceutical company in terms of hospital purchase in China's hospital market by the end of 2013. The success of the Company can be attributed to its differentiated and proven sales and marketing model, extensive nationwide distribution network, young and diversified product portfolio, and strong R&D capabilities. The Company's current products encompass the top five medical therapeutic areas in China: cardio-cerebral vascular system, central nervous system, metabolism, oncology and anti-infectives. Its major products such as Kelinao, Oudimei, Yuanzhijiu, Chuanqing and Qu'Ao are widely used in the treatment of various cardio-cerebral vascular diseases.

SOURCE Sihuan Pharmaceutical Holdings Group Ltd.