China Pharma Holdings, Inc.
Q1 2017 Earnings Call Transcript

Published: 17 May 2017

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only-mode. We will be taking questions at the later stage of the call [Operator Instructions]. Now, I would like to hand the conference over to your speaker for the day, Ms. Diana Huang. Over to you ma'am, please go ahead.

[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 Holding's first quarter 2017 earnings conference call. I'm Diana Huang, the Company's Investor Relations manager. Speaking on the call today are China Pharma’s President and CEO and Interim CFO, Ms. Zhilin Li; and Corporate Vice President, Mr. Sam Hsing. In addition, I will provide translation during the Q&A session of the call. I would like to remind our 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 response 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 market and customer acceptance and demands for our products, our ability to market our product, the impact of competitive product and pricing, the ability to develop and launch new product on its harmony basis, the regulatory environment including government regulation in the PRC, our ability to obtain the requisite regulatory approvals to commercialize our products, fluctuations in operating results including spending for R&D and sales and marketing activities, and other risks detailed from time-to-time in our filings with the SEC. In addition, any projections as to the Company's future performance represent management's estimates as of today, May 12, 2017. China Pharma assumes no obligation to update those projections in the future as market conditions change. Now, it is my pleasure to turn the call over to China Pharma’s CEO and Interim CFO, Ms. Li to make her opening remarks in Chinese, which will be then translated by Sam. Afterwards, Sam will continue translating Ms. Li’s detailed discussion of the Company's fiscal year 2016 financial results.

[Zhilin Li:]

Thank you, Diana, and good morning everyone. I would like to thank each of you for joining us today and for your continued support of China Pharma. We experienced a slight revenue decrease in the first quarter of 2017 compared to the same period last year, which was mainly due to a more significant impact from an earlier Spring Festival holiday in 2017. However, we believed that our overall financial performance has improved, taking into consideration the increased gross profit margin and decreased net loss. Nevertheless, increasing sales remains our top priority. Management will continue to vigorously promote sales by actively participating in the recent opening of the new provincial drug tender offer and further exploring basic medical market. We continue to believe that demand for pharmaceutical products is huge and steady in China. The ongoing generic drug consistency evaluations and reform of China’s drug production registration and review policies will have a major impact on the future development of our industry and may change its business patterns. We will continue to actively adapt to state policy guidance and further evaluate market conditions for our current existing products, pipeline products, and competition in the market in order to optimize our development strategy. I will now read the rest of the Ms. Li’s prepared remarks in English. Now, I would like to review our first quarter 2017 financial results and balance sheet information. Revenue decreased by 9.8% to 3.3 million for the three months ended March 31, 2017, as compared to 3.6 million for the three months ended March 31, 2016. This decrease was primarily due to the impact from China Spring Festival on purchase and logistic activities. Gross profit for the three months ended March 31, 2017 was 0.7 million, compared to 0.6 million in the same period last year. Our gross profit margin in the three months ended March 31, 2017 was 21.9% compared to 17.6% in the same period last year. This increase was primarily due to the increase in gross profit margins of our major products in this period. Our selling expenses for the three months ended March 31, 2017 were 0.7 million, a decrease of 0.3 million, compared to 1 million for the three months ended March 31, 2016. Selling expenses accounted for 21.8% of the total revenue in the three months ended March 31, 2017 compared to 26.6% in the same period last year. Because of adjustments in our sales practices resulting from healthcare reform policies, despite the overall decrease in sales, we made repair additional personnel and expenses to support our sales and the collection of accounts receivable. Our general and administrative expenses for the three months ended March 31, 2017 were $0.4 million which represented an increase of $0.1 million compared to $0.3 million in the same period last year. General and administrative accounted for 12.7% and 8.7% of our total revenues in the three months ended March 31, 2017 and 2016, respectively. This increase was primarily due to several major payments for listing maintenance happened in the three months ended March 31, 2017. Our bad debt expenses for the three months ended March 31, 2017 was $0.4 million, which represented a decrease of $0.2 million compared to $0.6 million in the same period last year. The decline in our bad debt expenses was mainly the result of the decline in our revenues in recent years, which also led to the corresponding decline in the net amount of accounts receivable aging over one year according to our current accounting policy, we are required to recognize a 70% bad debt allowance. Net loss for the first quarter 2017 was $1.0 million, or negative $0.02 per basic and diluted share, compared to net loss of $1.6 million, or $0.04 per basic and diluted share for the same period of 2016. The decrease in net loss was mainly a result of the increase in gross profit margin and decrease in bad debt expenses. Turning to the balance sheet, as of March 31, 2017, the Company had cash and cash equivalents of $2.5 million compared to $2.7 million as of December 31, 2016. Working capital decreased to $6.9 million as of March 31, 2017 from $7.1 million as of December 31, 2016. Our accounts receivable balance decreased to $3.7 million as of March 31, 2017 from $4 million as of December 31, 2016. Overall, we will continue to focusing on our business developments and promote our sales and beliefs that this will supports the fair evaluation of our shareholders in interest in the future. With that, we will now open the call to questions. Operator?

[Diana Huang:]

On behalf of the entire China Pharma team, we would like to thank you for your interest in the Company and participation on this call. For any of you traveling to China, we always welcome and encourage any visitors from our shareholders, potential investors and analysts. This concludes China Pharma’s first quarter 2017 earnings call.

[Operator:]

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participation. You may all disconnect lines now. Thank you.