Dragon Pharmaceutical Inc. Announces 2002 Fourth Quarter and Full Year Results
Dragon Pharmaceutical Inc. (TSX: DDD; OTC BB: DRUG) today announced results for the three-month and twelve-month periods ending December 31, 2002.
- Generated revenues of $7.36 million, representing significant growth from $3.07 million in 2001.
- Enhancement of gross margin in 2002 to 86.7% from 81% in 2001.
- Reported a first ever operating profit of $118,968 in 2002 compared to an operating loss of $4.02 million in 2001 for the Company’s principal Erythropoietin Alfa (“EPO” business.
- Net loss in 2002 was $5.25 million or $0.26 per share, compared to $3.98 million or $0.21 per share in 2001, reflecting the increase in research and development efforts in pipeline products, particularly Insulin and G-CSF and Company’s decision to write down the repayment of the Hepatitis B Vaccine project to a nominal value of $100 from $3.29 million.
- Announced continued realignment and strengthening of the Management team and organization with the appointment of Dr. Alexander Wick as the new President and subsequent to year-end, Mr. James Harris III as the Vice President of Sales and Marketing.
- Obtained a Toronto Stock Exchange (“TSX”) listing under the symbol ‘DDD’
- Added three new Licensees to fourteen Licensees internationally covering 136 countries worldwide.
- Submitted an application for marketing approval of EPO in surgical patients and new dosage of 6000IU for the new indication to the Chinese State Drug Administration (“SDA”)
- Delivered a landmark order for supplying bulk EPO to a major pharmaceutical company for research purposes.
Fourth Quarter of 2002
During the quarter, the Company posted revenues of $1.19 million, a 16% increase from the same period in 2001. We continued to record improvement in gross margin for the quarter in 2002, which was at 87.1%, up from 83.6% recorded for the same period in 2001. Net loss from the quarter was $4.11 million, or $0.20 per share, compared to the net loss of $1.17 million, or $0.07 per share in the fourth quarter in 2001. (See Write off of Hepatitis B Vaccine Project below)
Full Year of 2002
Revenues in 2002 were $7.36 million, representing a very significant increase from the $3.07 million revenues of 2001. Sales in China and outside of China were $3,002,898 and $4,359,350, respectively for 2002 compared to $2,630,182 and $443,703, respectively for 2001. The sales outside of China during 2002 primarily increased due to a breakthrough order worth $3.7 million to a major pharmaceutical company for new drug research and development.
Gross Margin for full year 2002 was 86.7% presenting 570 basis points improvement from 2001, which is mainly due to the efficiency gained from the continued upgrade and improvement invested in the existing cGMP (current Good Manufacturing Practices) production facility in Nanjing, China.
The Company recorded an operating profit of $118,968 in 2002 compared to the operating loss of $4.02 million in 2001 for the Company’s principal business in EPO, reflecting the significant $3.7 million order to the major pharmaceutical company. Net loss of 2002 was $5.25 million or $0.26 per share compared to $3.98 million or $0.21 per share in 2001. The main reasons for the large loss recorded were the Company’s research and development expenses in Insulin and G-CSF and the decision to write-down $3.29 million owed by Dr. Liu, the Chairman of the Company, for the repayment of the Hepatitis B Vaccine project. Pursuant to an agreement dated June 5, 2001, Dr. Liu exercised his right to repurchase the Hepatitis B Vaccine project for the original purchase price of $4.0 million. Dr. Liu paid $0.5 million, with the balance of $3.5 million (which was written down to the book value of $3.29 million), due in September 2003. Although Dr. Liu has reaffirmed his intention to pay the amount owing plus accrued interest, when due, the Company chose to conservatively write down the amount owing due to the significant amount involved and the lack of security.
“I am delighted to announce the remarkable growth of revenue, continued enhancement of gross profit margin and more importantly, the first ever operating profit recorded for our EPO business. Based on the solid foundation we built up over the last four years, we continued to demonstrate strong execution of business opportunities that enhances the growth in revenue and improvement of margin and profitability throughout 2002.” said, Dr. Wick, President of Dragon Pharmaceutical Inc. “In 2003, we will continue to capture existing and future opportunities to achieve our stated goal of turning profitable for the year.”
Following the appointment of Dr. Alexander Wick as the President of Dragon in October, 2002, we announced the appointment of Mr. James Harris III, a 22-year veteran in the biotech and pharmaceuticals industry, as the Vice President of Sales and Marketing in early 2003. “We will continue to strengthen the management team and organization and are determined to realign the Company resources to meet our corporate objectives in 2003.” said, Dr. Wick.
As previously announced, during the second quarter of 2002, Dragon received approval and began trading on the Toronto Stock Exchange, under the symbol “DDD” Listing on a senior stock exchange not only raises our corporate profile in the investment community but also support our efforts to increase the institutional following of our Company.
Sales and Marketing Review
In 2002, Dragon’s EPO was approved and marketed for use in the treatment of anemia related to chronic renal failure in China, India, Egypt and Peru. Subsequent to the year end, we received approval and began our first shipment of order to Brazil. We also added three international Licensees during 2002, which brings the total number of Licensees to fourteen, covering 136 countries worldwide.
During the year, we have submitted an application to the Chinese State Drug Administration for the use of EPO in surgical patients as well as approval for a new dosage of 6000IU, which will be used for this new indication. Furthermore, clinical trials are on-going for cancer radio and chemotherapy patients in China. These data will be submitted to the SDA for approval in 2003 together with the new 10000 IU dosage. “In addition to obtaining additional international market approvals in several key markets in 2003, we anticipate to receive a new drug license in China for the new indication as well as the new dosage shortly.” said Dr. Wick.
Year 2002 marked a remarkable breakthrough for Dragon when the Company successfully entered the bulk EPO market for drug research and development purposes other than in the field of anemia with a $3.7 million order from a well established pharmaceutical company. During 2003, Dragon will continue to actively pursue the market opportunities in the highly prospective bulk EPO and EPO derivatives market.
“2003 is going to be an important milestone year in Dragon’s corporate history. Based on the new business strategies as well as the continued competitive advantages that we enjoy in China, we are confident that the Company will achieve profitability this year.” said Dr. Wick. “In addition to profitable EPO sales, one of the other long term potentials for Dragon relies with the successful outcome of our research partners’ ability to develop new applications for our EPO and to demonstrate the therapeutic validity of these new indications.”
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