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Lotus Pharmaceuticals, Inc. Message Board

  • guildcrantz guildcrantz May 16, 2011 11:48 AM Flag

    Guild's Analysis

    OK, here goes.....

    Obviously revenue is disappointing. The loss of Muxin resulted in a 20% hit to wholesale revenues as opposed to the 8% I was initially factoring. The reduction in price of 12 other medications in order to stay competitive also played a role. On the plus side three new drugs of which LTUS has exclusive distribution rights had a significant increase in sales. Also the retail business continues to grow steadily.

    Margins also took a hit due to the aforementioned price drops and the fact that the retail business, which now makes up a much higher percentage of revenue, in inherently a lower margin business.

    The construction delays are having a material impact on LTUS's top and bottom line. LTUS has now ceased the manufacture of 3 of it's five self branded drugs and the reduction in cash flow could be an issue as there is still 8 million dollars in construction costs remaining until completion.

    Dr. Liu's bonus, awarded (and partially expensed) in the 1st quarter as opposed to last years 4th qtr makes up the vast majority of the increase in operating expenses. The timing of this bonus is unfortunate, given the managerial oversight of the construction delays. Unfortunately another large chunk will be amortized next quarter as well. Should we take solace in knowing the the 1 million dollar bonus has taken a 65% haircut? I don't since I suffered the same haircut.

    To be fair this bonus was actually announced a month and a half ago on the last page of last quarters 10K. The expected loss in revenue was also reported. All in all I would say LTUS has been remarkably transparent and as such the stock price is down only slightly on extremely low volume.

    I would also say that these quarters results, although disappointing, should lend additional confidence that LTUS IS NOT A FRAUD. Yes, management has made mistakes, but the stock has been priced as a fraud. I would hope that in the coming quarters we will see moderate PE expansion to the 4 to 5 level. I do not see a significant share price drop from here.

    Best,

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Good analysis but I disagree with your last sentence. I don't see the price holding. This is basically dead money till next year. We are only going to get bad comparison quarters for the next 3.

      • 2 Replies to amendoza
      • I sure hope that you're right. Hopefully people will only focus on current earnings and not future earnings and continue to sell.

        Earnings for next year still appear to be $0.60+

        Maybe we will get to buy near 50 cents sometime this year.

      • I would agree with you if I thought the stock price was only a factor of comparable quarters. However, LTUS, along with many other Chinese RTO's are trading as if they are merely fraudulent shells.

        Even though earnings are down, there are still earnings and as the market realizes that these earnings are legitimate, LTUS should see some PE appreciation. A 3 PE would get us near $1.00 even at today's diminished earnings. I think with good news, a 4 or 5 PE is realistic.

        Best,

    • "Unfortunately another large chunk will be amortized next quarter as well."

      So how much?

      We need to know, it order to predict earnings for next quarter.

      • 1 Reply to mizesaw
      • According to the 10Q.

        "In January 2011, the Company issued 451,263 shares of its common stock to its chief executive office in connection with services rendered and to be rendered. The shares were valued at the fair value of $2.216 per share on the grant date. The total value of $1,000,000 was allocated to compensation expense of $500,000 and prepaid expense of $500,000 which will be amortized in the second quarter of 2011. "

        Best,

 
LTUS.PK
0.01320.0000(0.00%)Oct 30 2:12 PMEDT

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