China Sky One Medical (Nasdaq: CSKI), a pharmaceutical company producing over-the-counter drugs in the People's Republic of China ("PRC") announced ‘record financial results’ for the first quarter of 2010.
Total revenues in the 3 month period ended March 31, 2010 rose 16.4% to $28.9 million year over year, with gross profits climbing 15% to $21.6 million and operating income climbing 11.8% to just over $10 million. The strong headline numbers were largely thanks to strong sales from the company's ‘ointment and other’ product categories, which represented around 56% of total group revenues. Sales of ointments grew strongly, up 53.6% to $7.8 million – one product, Compound Camphor Cream, represented 10.5% of total revenues in the first quarter. Sales of ‘Other Products’ grew 82% in the current year quarter to $8.4 million – lead by solid demand for Naphazoline Hydrochloride eye drops, Napadil tablet and Tinea liniment.
The robust growth in ointments and other products was partially softened by a 9.9% decline in patch products to $8.2 million, which was blamed on tighter regulations related to promoting weight loss products on TV.
GAAP net income increased 73.8% to $12.6 million, or 74 cents per diluted share – though the figure was massaged by a non-cash gain in the fair value of a derivative warrant liability. Excluding the non-cash gain, net income climbed 5.8% to $7.7 million, or 45 cents per share.
"Our first quarter double-digit revenue growth was partly driven by strength in the sales of our ointment products, including Compound Camphor Cream, which grew nearly 54% year-over-year and has become our best selling product," said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc. "While Slim Patch sales were adversely affected by new government restrictions limiting the promotion of weight loss products on TV and sales of our diagnostic kits were lower due to limited internal promotional support in the first quarter, we remain confident in our outlook to accelerate revenue growth in the coming quarters, driven by increased sales, marketing and distribution of our rich portfolio of over 90 products and new product launches."
Operating expenses increased 18% year-over-year to $11.5 million in the first quarter of 2010, mainly due to a $1.4 million increase in R&D expenses.
As of March 31, 2010, China Sky One had $65.4 million in cash and equivalents.
Looking ahead, the Nasdaq listed group said it was now revising revenue guidance for the full year to $160-$164 million and net income guidance to $40-$41 million.
“The first quarter is typically the slowest period, partly due to a temporary slowdown in customer orders during the Chinese New Year holiday. China Sky One's management expects revenue growth to accelerate in future quarters, driven by further optimization of the Company's distribution channels and enhancement of product promotional efforts, and is confident in achieving the 2010 financial guidance,” the company added.