China Pharma Holdings, Inc.
Q2 2019 Earnings Call Transcript

Published: 15 Aug 2019

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the China Pharma Holdings’ Q2 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.I would now like to hand the conference over to Ms. Diana Huang. Please go ahead, ma’am.

[Diana Huang:]

Thank you, operator. Good morning, ladies and gentlemen, and good evening to those of you joining us from China. Welcome to China Pharma Holdings’ second quarter 2019 earnings conference call. I’m Diana Huang, the Company’s Investor Relations Manager. Speaking on the call today are China Pharma’s President and Chief Executive Officer and Interim CFO, Ms. Zhilin Li; and Corporate Vice President, Mr. Sam Hsing. In addition, I will provide translation during the Q&A section of the call.I would like to remind all listeners that on this call management’s prepared remarks contain forward-looking statements which are subject to risks and uncertainties. And management may make additional forward-looking statements in referring to your questions. Therefore, the Company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.Actual results may differ from those discussed today due to such risks as

[Zhilin Li:]

[Foreign Language]

[Sam Hsing:]

Thank you, Diana, and good morning, everyone. I thank each of you for joining us today and for your continued support of China Pharma. We’ve experienced negative impacts on our sales from the strict implementation of the government policy of controlling the proportion of the spending on drugs to the patients’ total expenditures in hospitals. Management endeavors to vigorously promote sales through active participation in recent provincial market openings to solicit new drug tender offers and allow China Pharma to expand its presence in these markets.In addition, we are experiencing sustained pressure from the more stringent requirements of the drug registration standards, consistency evaluations and challenging environment in our industry in this period. We will continue actively adapting to the state policy guidance and further evaluating market conditions for our current existing products, pipeline products, and competition in the market, in order to optimize our development strategy. Simultaneously, we will also actively implement the launch of our nutrition products.I will now read the rest of Ms. Li’s prepared remarks in English. Now I would like to review our second quarter of 2019 financial results and balance sheet information. Revenue decreased by 19% to $2.6 million for the three months ended June 30, 2019, as compared to $3.2 million for the three months ended June 30, 2018. This decrease was mainly due to the market reaction caused by the strict implementation of the policy on controlling the percentage of the spending on medicines to patients’ total expenditure in hospitals.Gross profit for the three months ended June 30, 2019 was $0.2 million, as compared to $0.6 million during the same period in 2018. Our gross profit margin in the three months ended June 30, 2019 was 6.4% as compared to 18.3% during the same period in 2018. The decrease in our gross profit margin was mainly due to the decrease in revenue and the increased ratio of the fixed cost to revenue.Our selling expenses for the three months ended June 30, 2019 and 2018 were $0.5 million and $0.7 million respectively. Selling expenses accounted for 19.7% of the total revenue in the three months ended June 30, 2019, as compared to 22.6% during the same period in 2018. Because of adjustments in our sales practices, and the reform of the healthcare policies, we reduced the number of our personnel and expenses to efficiently support our sales and the collection of accounts receivables.Our general and administrative expenses for the three months ended June 30, 2019 were $0.3 million, as compared to $0.4 million for the same period in 2018. General and administrative expenses accounted for 13.0% and 11.1% of our total revenues in the three months ended June 30, 2019 and 2018, respectively.Our research and development expenses for the three months ended June 30, 2019 were $0.07 million, as compared to $0.02 million in the same period in 2018. Research and development expenses accounted for 2.6% and 0.7% of our total revenues in the three months ended June 30, 2019 and 2018, respectively. The increase in research and development expenses in this period was mainly due to the spending on the consistency evaluation of our current existing products.Our bad debt expenses for the three months ended June 30, 2019 were – $10,092, as compared to – $350,847 for the same period in 2018.Net loss for the three months ended June 30, 2019 was $0.8 million, or $0.02 per basic and diluted common share, as compared to a net loss of $1.0 million for the same period a year ago, or $0.02 per basic and diluted common share. The decrease in net loss was mainly the result of controls on expenditures outweighed the impact of decrease in revenue.Six months results, revenue decreased by 19.0% to $5.5 million for the six months ended June 30, 2019, as compared to $6.8 million for the six months ended June 30, 2018. This decrease was mainly due to the implementation of government policies on controlling the percentage of medicine spending on total hospital expenditure in recent quarters.Gross profit for the six months ended June 30, 2019 was $0.8 million, compared to $1.6 million in the same period in 2018. Our gross profit margin in the six months ended June 30, 2019 was 14.9% compared to 24.1% in the same period in 2018. The decrease in our gross profit margin was mainly due to the decrease in sales in the first half of 2019. Although cost decreased in this period as well, the stable nature of fixed cost deteriorates the gross margin when the decrease in revenue outweighed that of cost.Net loss for the six months ended both June 30, 2019 and 2018 was $1.3 million, or $0.03 per basic and diluted common share. This reflected the offset of decreased revenue to decreased expenditure in the six months ended June 30, 2019.Turning to the balance sheet, as of June 30, 2019, the Company had cash and cash equivalents of $1.7 million compared to $1.2 million as of the December 31, 2018. As of June 30, 2019, our net accounts receivable was $0.7 million compared to $0.9 million as of December 31, 2018. For the six months ended June 30, 2019, cash flow from operating activities was $0.9 million as compared to $0.1 million for the same period in 2018.Overall, we will continue focusing on our business development and promote our sales and believe that this will support the fair valuation of our shareholders' interest in the future. With that we will now open the call up to questions. Operator?

[Sam Hsing:]

On behalf of the entire China Pharma team, we would like to thank you for your interest in the Company and the participation on this call. For any of you traveling through China, we always welcome and encourage any visitors from our shareholders, potential investors and analysts.This concludes China Pharma's second quarter 2019 earnings call.

[Operator:]

Thank you, sir. Ladies and gentlemen, that concludes our conference for today. Thank you all for your participation. You may disconnect now.