Simcere Pharmaceutical Group's
) second quarter 2013 earnings of 2 cents per American Depositary
Share (ADS) were significantly short of the Zacks Consensus
Estimate of 12 cents per ADS. In the year-ago quarter, Simcere
earned 8 cents per ADS.
We note that each ADS represents two ordinary shares of
Revenues at Simcere came in at $78.7 million in the second
quarter of 2013, well short of the Zacks Consensus Estimate of
$90 million and down 3.0% year over year.
The decline was attributed to government policies imposing
pricing restrictions on antibiotics as well as stiff market
Quarter In Detail
All growth rates mentioned below are in terms of local
Sales of Bicun (anti-stroke) decreased 18.5% year over year
primarily due to pricing restrictions by the government along
with issues relating to the tendering process.
Sales of oncology drugs Sinofuan and Endu were up 9.8% and
32.3% year over year respectively. Lowvo (oncology) was up 15%
from the year-ago quarter.
However, sales of Jiebaishu (oncology) declined 3.0%. Simcere
expects sales of its oncology drugs to improve in the second half
of 2013 due to adjustment in the drug reimbursement list.
Sales of gastroenterology drug Biqi grew 1.4% year over
Sales of anti-infection drugs continue to be hit by government
restrictions on the use of antibiotics leading to a 15.3%, 41.2%
and 30.7% decline in sales of Anxin, Anqi, and Zailin,
respectively. To counter the decline, Simcere will delegate more
resources to key markets and hospitals and promote sales.
Gross margin dipped to 83.1% during the second quarter of 2013
from 84.5% in the year-ago quarter.
The decline in gross margin was due to a reduction in sales of
drugs with higher gross margins.
Simcere's research and development (R&D) expenses
decreased 16.5% primarily due to the completion of development of
the company's influenza vaccine and subsequent transition to
commercial manufacturing. Sales, marketing and distribution
expenses decreased 0.8%. General and administrative expenses
increased 27.1% from the year-ago quarter.
During the second quarter, Simcere entered into collaboration
Bristol-Myers Squibb Company
) for the development and commercialization of the subcutaneous
(SC) formulation of Bristol-Myers Squibb's rheumatoid arthritis
Simcere's second-quarter results were disappointing. We
believe that Simcere will face challenging market conditions in
the remainder of 2013 due to pricing pressure from the
government. Nevertheless, improvements in cost structure should
boost the overall performance.
We note that in Jun 2013, Simcere announced the sale of its
99.99% stake in Jilin Boda Pharmaceutical Co., Ltd. for RMB 400
million to Zhuhai Rongding Equity Investment Partnership.
We remind investors that Simcere received a buyout proposal
from Mr. Jinsheng Ren, New Good Management Limited, Assure Ahead
Investments Limited and its subsidiaries in Mar 2013.
In response, Simcere's board has formed a special committee of
independent directors, headed by Mr Alan Au, to consider the
Simcere Pharma currently carries a Zacks Rank #2 (Buy). Others
stocks which look attractive include
Biogen Idec Inc.
), each with a Zacks Rank #1 (Strong Buy).
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