Simcere Pharmaceutical Group
) reported a third quarter 2013 loss of 2 cents per American
Depositary Share (ADS) which compared unfavorably to the Zacks
Consensus Estimate of an earnings per share of 6 cents per ADS.
In the year-ago quarter, Simcere earned 7 cents per ADS. We note
that each ADS represents two ordinary shares of Simcere.
Revenues at Simcere came in at $68.8 million in the third
quarter of 2013, down 16.5% year over year. The decline was
attributed to government policies imposing pricing restrictions
on antibiotics along with issues relating to the tendering
process of Bicun.
Quarter In Detail
All growth rates mentioned below are in terms of local
Sales of Bicun (anti-stroke) decreased 28.2% year over year,
primarily due to pricing restrictions by the government and
Sales of oncology drug Sinofuan was down 14.3% year over year
while Endu was up 7.6%.
Sales of Jiebaishu (oncology) increased 11.2%. Sales of
gastroenterology drug Biqi grew 38.7% year over year.
Sales of anti-infection drugs continue to be affected by
government restrictions on the use of antibiotics leading to a
20.8% and 72.2% decline in sales of Anxin and Zailin,
Gross margin dipped to 76.0% during the third quarter of 2013
from 84.2% in the year-ago quarter due to the inventory
write-down for the influenza vaccine reporting unit and a drop in
sales of products with higher gross margins.
Simcere's research and development (R&D) expenses
decreased 26.5% primarily due to a decline in travelling and
conference expenses and promotional expenses. Sales, marketing
and distribution expenses decreased 31.1%. General and
administrative expenses increased 13.6% from the year-ago
During the quarter, the company completed the sale of its
equity interest in Boda and in Kanda to focus on its core
businesses. 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
We remind investors that Simcere accepted a buyout proposal
from a conglomerate led by founder Mr. Jinsheng Ren, New Good
Management Limited, Assure Ahead Investments Limited and its
Ren founded Simcere in Mar 1995. The conglomerate currently
has approximately 77.6% stake in Simcere. As per the buyout
offer, shareholders of Simcere will receive $4.83 per share or
$9.66 per American depositary share (ADS), up from the original
offer price of $4.78 per share or $9.56 per ADS.
We note that Simcere's decision to go private comes in the
wake of tough business conditions that it has been facing in the
last few months due to price cuts from the government and market
Simcere Pharma currently carries a Zacks Rank #3 (Hold).
However, others stocks which look attractive include
). All three carry a Zacks Rank #1 (Strong Buy).
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