China Medicine Corporation (CHME.OB), a developer and distributor of pharmaceuticals and nutritional supplements in China, reported strong second quarter financial results this morning. Revenues increased 40.8% year over year to $11.6 million, compared to $8.3 million in Q2 2007. Net income soared 118.8% to $2.5 million, or 16 cents per share, vs. $1.1 million, or 8 cents per share a year ago. No analysts currently cover the stock.
Sales increased across the entire breadth of the company’s pharmaceutical portfolio. “We are pleased to report strong revenue growth driven by an increase in sales of pharmaceutical products through exclusive nationwide and regional distribution rights, competitive pricing, timely delivery of products and excellent after-sales customer service” commented Mr. Senshan Yang, Chairman and CEO of China Medicine. “Based on our outstanding first half 2008 performance, we feel confident that we will meet our guidance of 25%-35% revenue growth and 30%-35% gross margins for fiscal 2008. In addition, based on our strong second quarter profitability, we expect to exceed our net income guidance of 20%-22% for 2008.”
China Medicine received a patent during the quarter for recombinant aflatoxin-detoxifizyme (rADTZ) in Australia that is valid through January 13, 2025. rADTZ can be used as an additive to remove aflatoxins, potential cancer-causing agents, from animal feed and other food products. The Company has applied for rADTZ patents in 13 other jurisdictions. “The entrance of rADTZ in the animal feed industry is relatively easy since we will only need approval from the Department of Agriculture in China, which is in contrast to entering the food industry, where the process might take years,” said Mr. Yang. “Therefore, our target market is China’s entire feed industry, which is approximately RMB 274.2 billion ($39.8 billion, 1 RMB = $0.145). In the next three years, we hope rADTZ will capture 20% of the animal feed market,” said Mr. Yang.
Shares of CHME, which closed at $2.00 yesterday, sell for less than the company’s tangible book value. With 15.2 million shares outstanding, CHME has a market cap of $30.4 million, while tangible net assets now exceed $35.7 million. Through the second quarter, CHME now has a trailing twelve-month P/E of 3.1. The company has zero long-term debt. The upcoming third quarter is seasonally the company’s strongest.
Let us hear your thoughts below: