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Simcere Misses Estimates in 4Q

Zacks Equity Research

Simcere Pharmaceutical Group (SCR) reported fourth quarter 2012 earnings of 6 cents per American Depositary Share (ADS), a penny below the Zacks Consensus Estimate.

We note that each ADS represents two ordinary shares of Simcere Pharma.

Revenues at Simcere Pharma came in at $86.7 million in the fourth quarter of 2012, up 5.7% year over year. Revenues in the reported quarter were lower than the Zacks Consensus Estimate of $88 million.

Sales of branded generic drug, Zailin decreased 5% to $12.5 million. Yintaiqing also posted a decline of 14% from the fourth quarter of 2011. Both these drugs were adversely affected by intense competition.  

Sales of Anxin (anti-infection) were flat year over year as the hospital listing of this drug was impacted by the government’s restriction on use of antibiotics. Products like Edaravone injection increased 7.1% year over year.  Sales of cancer drug Endu increased 18.6% in local currency. Sales of Biqi recovered and posted year-over-year growth of 66.5%.

However, sales of oncology products were impacted by pricing pressure and reported a decline in the fourth quarter of 2012.  Cancer drug Sinofuan (declined 10.6% in terms of local currency) performed disappointingly during the fourth quarter.

Gross margin declined to 81.1% during the final quarter of 2012 from 82.3% in the prior-year quarter.  

Simcere Pharma’s research and development (R&D) expenses decreased 14.7% in local currency.  Sales, marketing and distribution expenses decreased 1.0% in local currency. General and administrative expenses at Simcere Pharma declined 13.8% in local currency.

For 2012, total revenue came in at $334.3 million, up 2.1% from 2011 and in line with the Zacks Consensus Estimate. Full year earnings of 17 cents per ADS were well below the Zacks Consensus Estimate of 27 cents.

Our Take

Simcere expects to face challenging market conditions in 2013, including pricing pressure from the government. Simcere has identified biologics and antibodies as key market opportunities. .

Simcere Pharma currently carries a Zacks Rank #3 (Hold). Right now, Mylan Inc (:MLY), Shire (SHPG) and Novo Nordisk (NVO) look better placed. All three carry a Zacks Rank #2 (Buy).

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