Lee's Pharm Announces 2019 Third Quarterly Results
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For the period under review, the Group's revenue reached HK$913,868,000, increased by 5.4% over the same period last year. Sales of licensed-in products accounted for 56.6% (nine months ended 30 September 2018: 53.6%) of the Group's revenue while sales of proprietary products contributed 43.4% (nine months ended 30 September 2018: 46.4%) of the Group's revenue. The Group's gross profit increased by 4.9% to HK$600,911,000 during the first nine months of 2019. The Group's gross profit margin for the nine months ended 30 September 2019 dropped to 65.8% from 66.1%, represented a decrease of 0.3 percentage point compared with same period last year.
Taking into account the depreciation of Renminbi of 3.8% during the quarter under review, the Group's reported revenue for the third quarter of this year was HK$306,334,000 (three months ended 30 September 2018: HK$299,202,000), which represented a quarter-on-quarter growth of 2.4%. Sales of Ferplex, Zanidip and Yallaferon for the third quarter of this year registered increase of 17.8%, 19.1% and 29.7%, respectively. Other newer products such as Rasilez, GaslonN and Mictonorm have also started making contribution to the growth during the third quarter of this year. But the overall growth was dragged down by the underperformance of Carnitene, Livaracine and Slounase sales.
Dr. Benjamin Li, Executive Director and Chief Executive Officer of the Group said, "During the third quarter of 2019, Renminbi plunged beyond 7 per US dollar has become a new normal as the escalating trade battle between China and the United States of America seems to be no end in sight, coupled with the persistent inflationary pressure in the operating environment in China have created challenging operating environments during the period under review. The revenue growth of the Group during the third quarter of this year was stagnant as the sale performance of individual products was mixed. Together with the escalating administrative costs as a reflection of the expanded business scale in Nansha site, the profitability of the Group during the quarter under review was affected as a result."
The Group's commitment to R&D has also brought the number one ranking in the "Most Innovative Small and Medium-sized Pharmaceutical Enterprises Award on the Asia Pacific Region 2019" by Clarivate Analytics, a digital health intelligence solution provider during the quarter under review. Administrative expenses has also increased due to the expanded business scale in Nansha site. Combined with the full impairment of the R&D costs amounted to HK$108,564,000 by China Oncology Focus Limited ("COFL"), a 65% owned subsidiary of the Group, in relations to the Pexa-Vec global Phase III clinical trial for advanced liver cancer (the "PHOCUS Study") previously capitalised has been made during the second quarter of this year, net profit attributable to the owners of the Company for the first nine months of 2019 was HK$80,344,000, decreased by 59.3% as compared to the same period last year.
With respect to New Drug Application, the Group's applications for Import Drug License ("IDL"), namely Trazodone, Prulifloxacin, INOMax and Zingo, are under review by the Centre for Drug Evaluation (the "CDE").
To date, The Group's applications for Abbreviated New Drug Application ("ANDA"), namely Sodium Phenylbutyrate Tablet, Sodium Phenylbutyrate Granule, Treprostinil, Fondaparinux, Nadroparin Calcium, Azilsartan and Bimatoprost, were also in good progress. Among these ANDA submissions, Sodium Phenylbutyrate Granule and Sodium Phenylbutyrate Tablet are under review by the CDE. For Treprostinil, the Group is actively communicating with the CDE for its acceptance for priority review. The bioequivalence studies of Fondaparinux have been completed and is pending for ANDA approval. And Nadroparin Calcium, Azilsartan and Bimatoprost are currently pending for the review by the CDE. In addition, the Group is also actively introducing and developing other products such as Apremilast, Leuprorelin, and Natulan which aim at optimising its product mix in the medium term.
During the period under review and to date, COPFL has successfully completed a Phase II trial of Cyclosporine A ("CsA") Ophthalmic Gel for the treatment of dry eye syndrome (the "DES") in China (clinicaltrials.gov registration No.: NCT03676335), with the topline data show that the experimental drug has similar or a trend towards better efficacy than that of the marketed CsA Ophthalmic Emulsion. COPFL plans to meet with the CDE to discuss and agree upon a Phase III protocol of the CsA Ophthalmic Gel trial. The pivotal study is expected to initiate patient recruitment in early 2020. With over 30 approved studies currently in progress, the Group is confident to establish a solid foundation for growth in the foreseeable future.
Dr. Li concluded, "Notwithstanding that the Group will continue to face different challenges towards the end of this year such as stagnant sales growth for certain products, downward pressure on profit margins and probable Renminbi depreciation, it is expected that more concrete progress could be reflected in the medium term given the Group's strong business fundamentals, and the Group remains cautiously optimistic in respect of its prospects. Regarding the measure taken to improve the revenue growth, the Group has actively reforming and enhancing its sales distribution to improve efficiency and boost sales. Moreover, the Group has a total of 14 IDL and ANDA pending for approval by the NMPA in the foreseeable future which may become new fuel for revenue growth in the medium to long term. At the corporate level, the Group believes that having greater clarity in pharma business from biotech entrepreneurship by means of the proper employment of capital market platform could bring about additional value to the Group. As always, the operation and management team will continue to make its unremitting efforts to attain additional uplift on the performance in the upcoming period and beyond."
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