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UNAUDITED THIRD QUARTER FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 SEPTEMBER 2018
In 3Q2018, the Group recorded net loss attributable to equity holders of RMB0.3 million and on revenue was RMB51.5 million.
Group revenue increased 157% from RMB20.1 million in 3Q2017 to RMB51.5 million in 3Q2018 caused to higher sales of Antibiotics, Cardiovasular drugs and Cerebovascular drugs and other specialized drugs.
Antibiotics sales increased 18% to RMB6.8 million in 3Q2018 due to increase sales of Azithromycin Asportate for Injection and Sulbactam Sodium for Injection which partially offset with the decrease of sales of Cefoxitin Sodium for Injection and Cefepime hydrochloride for Injection. Antibiotics accounted for 13% of Group revenue in 3Q2018 as the second largest revenue contributor to the Group.
Cardiovascular drugs and cerebrovascular drugs sales increased 53% to RMB1.7 million due to higher sales of Vinpocetine for Injection. Cardiovascular drugs and cerebrovascular drugs represented 3% of Group revenue in 3Q2018.
Other specialized drug increased 225% to RMB43.0 million in 3Q2018 mainly caused by higher sales of Potassium Sodium Dehydroandrographolide Succinate for Injection and new products of Acetylcysteine Solution for Inhanlation which commenced sales in 2Q2018. Other specialized drugs were still the largest revenue contributor, accounting for 84% of Group revenue in 3Q2018.
Gross profit increased 331% to RMB37.5 million in 3Q2018 mainly due to higher sales revenues.
Other operating income decreased from RMB1.2 million in 3Q2017 to RMB0.6 million in 3Q2018 mainly caused by the government subsidy for FY2017 of RMB0.7 million received in 3Q2017 and the same subsidy for FY2018 received and recorded earlier in 2Q2018.
Selling and distribution expenses increased 22.4 times to RMB31.0 million in 3Q2018 mainly due to the selling and marketing expenses to those distributors that taken active roles to assist the Group to facilitate the sales to hospitals and increase of staff costs.
Administrative expenses increased 77% from RMB3.6 million in 3Q2017 to RMB6.4 million in 3Q2018 caused by increase of staff costs, product assessment costs and product testing and registration costs.
Other expenses decrease 28% to RMB1.2 million in 3Q2018 mainly due to no exchange loss during 3Q2018.
Finance income increased from RMB0.02 million to RMB0.1 million due to higher interest income received from fair value through OCI assets.
Finance expenses changed from RMB5,000.00 expenses in 3Q2017 to RMB2.1 million income in 3Q2018 mainly due to the exchange gain from foreign currencies during the quarter.
As a result, the Group recorded net loss attributable to equity holders of RMB0.3 million in 3Q2018 compared with RMB2.6 million net profit in 3Q2017.
(30 September 2018 vs. 31 December 2017)
Non-current assets increased from RMB79.3 million to RMB87.9 million. Property, plant and equipment decreased from RMB42.5 million to RMB40.2 million mainly due to depreciation charges. Intangibles assets increased from RMB5.8 million to RMB7.3 million caused by increase of product development in progress costs of RMB1.5 million. Refundable deposits increased to RMB23.3 million due to new prepayments of RMB14.5 million paid to R&D vendors and a refunded deposit of RMB4.5 million also received from R&D vendor during the reported period.
Current assets increased from RMB112.2 million to RMB175.2 million. Inventories level raised from RMB27.4 million to RMB65.8 million mainly due to increase in inventory level of Acetylcysteine Solution for Inhanlation which are new products commenced sales in 2Q2018 and Potassium Sodium Dehydroandrographolide. Trade & bills receivables increased from RMB9.0 million to RMB13.6 million due to increase in sales revenue. Other receivables, prepayments and deposits increase from RMB5.5 million to RMB19.6 million mainly due to increase prepayment to factory equipments' vendors and raw material suppliers of RMB3.0 million and RMB11.1 million respectively. Fair value through OCI assets increased to RMB7.0 million. Cash and bank balances decreased slightly from RMB69.0 million to RMB67.9 in 3Q2018.
Current liabilities increased from RMB56.8 million to RMB118.8 million. Trade payables increased from RMB12.5 million to RMB33.2 million resulted from increase of raw material purchased for the period. Other payables increased from RMB44.3 million to RMB85.6 million was mainly caused by the amount due to distributors for selling and marketing costs under the "Two-invoice" system.
Cash Flow Statement
The Group's net cash inflow from operating activities in 3Q2018 was RMB8.9 million. This was mainly due to increase of the trade payables and other payables level in 3Q2018.
Net cash generated from investing activities in 3Q2018 amounted to RMB0.4 million. This was mainly caused by a refund of deposit from R&D vendor and the proceeds from disposal of product development in progress which offset partially by new prepayment for product development in progress and the additional purchase of fair value through OCI assets during 3Q2018.
Net cash used in financing activities in 3Q2018 was RMB0.1 million that was used for purchase treasury shares of the Company.
Finally, the net increase in cash and cash equivalent in 3Q2018 was RMB9.2 million
The China pharmaceutical industry will continue encounter challenges. The introduction of a series of important healthcare reform and policies, including the "Two-invoice" system, the hierarchical diagnosis and treatment system, zero mark-up on medicines across hospitals and the representative registration system, has presented new pressures on the operation of the pharmaceutical industry.
The cost pressure and changing policies will continue to increase and differentiation of enterprises within the pharmaceutical industry will be more evident. Under such conditions, the Group aims to seize opportunities amid challenges to strengthen our R&D, expand sales and consolidate our sales channels, and thereby generate a more stable and sustainable return on investment for shareholders.