Simcere Pharmaceutical Group
's (
SCR
) second quarter 2012 earnings of 8 cents per American Depositary
Share (ADS), a couple of cents below the Zacks Consensus Estimate
and well below the year-ago earnings of 21 cents.
Lower-than-expected revenues led to the earnings miss in the
second quarter of 2012. We note that each ADS represents two
ordinary shares of Simcere Pharma.
Revenues at Simcere Pharma came in at $83.2 million in the
second quarter of 2012, down 1.4% year over year.
Lower-than-expected sales from products such as Endu, edaravone and
Sinofuan resulted in the year-over-year decline in revenues.
Revenues were also short of the Zacks Consensus Estimate of $86
million. In terms of local currency, revenues decreased 3.2% to RMB
528.7 million.
Sales of cancer drug Endu decreased 4.6% in local currency to
RMB 66.8 million. Sales of branded generic drugs, including Zailin,
climbed 40.8% in terms of local currencies to RMB 61.6 million.
Sales of edaravone injection products declined 18.4% to RMB177.8
million during the reported quarter. Cancer drug Sinofuan also
performed disappointingly during the quarter with sales decreasing
21.3% in terms of local currency to RMB 41.7 million.
Gross margin went down to 83.9% during the quarter, compared
with 84.9% reported in the prior-year quarter. Reduced sales of
high-margin offerings coupled with the reduction in price of some
drugs led to the decline in gross margin.
Simcere Pharma's R&D expenses increased 36.9% in local
currency to RMB 55.0 million. The increase was primarily
attributable to expenses related to Simcere Pharma's ongoing
R&D projects. The company expects to add new products to its
portfolio in the coming quarters.
Sales, marketing and distribution expenses increased 0.9% in
local currency to RMB 291.4 million. Simcere Pharma's increased
expenditure related to promotional activities of its branded
generic pharmaceutical products resulted in the year-over-year
increase.
General and administrative expenses at Simcere Pharma declined
25.3% in local currency to RMB 55.7 million.
Neutral on Simcere Pharma
We currently have a Neutral recommendation on Simcere Pharma.
The stock carries a Zacks #4 Rank (short-term Sell rating). Though
Simcere Pharma had a disappointing second quarter, we expect
investor focus to stay on new product launches in the upcoming
quarters.
Moreover, the Chinese company's associations with leading
players such as
Merck & Company, Inc.
(
MRK
) and
Bristol-Myers Squibb Company
(
BMY
) should stand in good stead.
BRISTOL-MYERS (BMY): Free Stock Analysis Report
MERCK & CO INC (MRK): Free Stock Analysis
Report
SIMCERE PHARMAC (SCR): Free Stock Analysis
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