SHPHY Sihuan Pharmaceutical Holdings Group Ltd (PK)

HONG KONG, March 11, 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 its annual results for the year ended 31 December 2013 ("2013" or the "Year").

Financial Highlights

In 2013, the Company not only achieved a sharp sales rebound for its two key products, Kelinao and Oudimei, but also recorded rapid growth of its fast-growing promising products such as Yuanzhijiu, Yeduojia, and Danshen Chuangxionqin. With the increase of sales growth of our CCV drugs, the Company's revenue surged 55.6% to RMB4,732.7 million. Overall gross profit increased by 61.6% from RMB2,289.4 million in 2012 to RMB3,699.7 million in 2013 due to an increase in the sales of products with higher gross profit margins, while profit attributable to owners of the Company jumped 44.1% to RMB1,303 million. A final dividend of RMB2.1 cents per share (2012: RMB5.8 cents) was recommended by the Board together with a bonus issue of 1 bonus ordinary share at par value of HK$0.01 each for every 1 existing ordinary share in return for shareholders' support and are subject to the approval of the shareholders at the annual general meeting of the Company to be held on 30 May 2014.   

Dr. Che Fengsheng, Chairman and CEO of the Company, said, "Backed by our industry-leading capabilities in integration and sales and marketing, we not only completed integrating of the acquired companies, but also grew bigger and stronger in the increasingly fierce pharmaceutical market. In 2013, we reaped the fruits of our labor and achieved rapid financial growth and outstanding operational results. This reflected the success of our previous expansion, which brought us a more diversified product portfolio, further balanced revenue stream and strengthened market leadership. On top of that, we achieved breakthroughs in our research and development for new drugs, ensuring that our strong growth momentum will be sustained by an enhanced product pipeline in the long run. As a result, we become the fourth largest pharmaceutical company in the Chinese hospital market and kept our lead in China's cardio-cerebral vascular ("CCV") prescription drug market."

Sharp Rebounds of Key CCV Products and Rapid Growth of Fast-growing Promising Products Boosted Strong Growth in Sales

CCV Products

Thanks to a young and diversified product portfolio, sales of CCV products grew 60.7% to RMB4,505.0 million, which accounted for 95.2% of the Company's total revenue, continuing to be the Company's largest revenue contributor. The significant growth was mainly attributable to the exciting rebound in sales for its two key products, Kelinao and Oudimei, and the rapid growth of its promising products. The Company stepped up its support to Kelinao's distributors for academic promotion and deepened its penetration into low-end markets, sales of Kelinao increased by 71.7% year-on-year to RMB1,115.3 million. As for Oudimei, the successful integration of its distribution network boosted its sales and marketing efficiency. As a result, sales of Oudimei jumped 93.1% to RMB 1,343.9 million during the Year. Promising products such as Yeoduojia, Danshen Chuanxiongqin, Guhong, Yimaining and Yuanzhijiu maintained strong growth in sales, which were up significantly by 225.7%, 83.9%, 59.8%, 54.9% and 19.7% respectively.

Non-CCV Products

The Company's non-CCV products maintained stable growth in sales volume. The Company launched its first non-CCV exclusive first-to-market generic drug Roxatidine, which has expanded its market by tender wins in two provinces and supplementary tender submissions in another province. In addition, it entered drug reimbursement list ("DRL") of one province. The product is expected to generate significantly more revenue with more extensive marketing and after winning tenders and entering provincial DRL in more provinces.

Clear Sales and Tendering Strategies Achieved Promising Results

During the Year, the Company stepped up its academic promotion work and boosted incentives to distributors for Kelinao and Oudimei, to motivate distributors to promote the Company's products. In the meantime, the Company devised clear tendering strategies for its products, i.e. horizontal expansion to increase market coverage of its products by provincial tender wins and supplementary tender submissions, as well as vertical expansion into low-end markets with provincial Essential Drug List ("EDL") tender wins and provincial New Rural Cooperative Medical Scheme List ("NRCMSL").

Positive Results from New Products Development

The Company has intensified efforts on innovative drug projects and achieved promising results by leveraging its effective resources integration. To date, the Company has submitted investigational new drug ("IND") applications for seven Category 1.1 innovative drugs and has obtained Approval for Clinical Trial for five Category 1 innovative drugs from the China State Food and Drug Administration ("CFDA"). Among them, Category 1.1 innovative drug Benapenem and Imigliptin Dihydrochloride have been awarded as The National Major Innovative Drug Projects.

As for generic drugs, after securing production licenses for the exclusive first-to-market generic drug Roxatidine and Category 3.1 new drug Nalmefene Hydrochloride Injection at the end of 2012 and start of 2013 respectively, the products have successfully passed on-site inspections and were officially launched. In total, the Company has 17 Category 3.1 first-to-market generic drug projects under development. By the end of 2013, production license applications of 22 generic drugs were filed in total and these products are expected to be launched progressively in the coming years.

Production and Quality Management

The Company completed the construction of its main production and R&D base in Tongzhou, Beijing and the upgrade of all its other production bases. In compliance with the new Good Manufacturing Practice standard, these constructions projects cover a total of over 300,000 square meters which mark the largest constructions in the Company's history. The Company's Active Pharmaceutical Ingredients production base, Langfang Gaobo Jingband, received certification from the Food and Drug Administration of United States during the Year.

Future Prospects

Looking forward, the development of China's pharmaceutical industry will continue to be driven by market potential released from expanded national medical insurance coverage, accelerated urbanization and ageing population, enabling it to maintain fast growth in 2014. The management believes that companies such as Sihuan Pharmaceutical will reap benefits from the government's policies for encouraging innovation and industry consolidation, being an innovative company with strong integrated capabilities, in R&D, production and sales and marketing, with its focus on exclusive and patented drugs. 

Looking ahead, the Company plans to continue to tap potential of its strong existing product resources, with all six key and potential blockbusters being exclusive products, coupled with over ten products with exclusive formulations or dosages. In addition, many of its products have been included in the national or provincial EDL or were recently added to NRCMSL of many provinces to further market penetration. This is a prestigious product mix which helps the Company to differentiate itself amidst fierce market competition, and is expected to sustain business growth in the coming years. Also, the Company will continue to reinforce its nationwide distribution network and optimize its unique sales and marketing system. Moreover, the Company will continue to enriching its product resources through R&D, acquisitions and product collaboration. The Company's long-term growth momentum will be supported by a variety of patented drugs and first-to-market generic drugs under development. These products are expected to launch from 2015.

Dr. Che concluded, "I have full confidence in Sihuan Pharmaceutical's future development, as we have established an effective operating system and a solid business foundation. I firmly believe that we are poised to seize opportunities arising from the industry consolidation and will be able to achieve stable and sustainable growth. We are making strides towards achieving our goal of becoming the most competitive Chinese pharmaceutical company and developing a global reputation for excellence." 

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, Yeduojia and Guhong are widely used in the treatment of various cardio-cerebral vascular diseases.

SOURCE Sihuan Pharmaceutical Holdings Group Ltd.