China Pharma Holdings, Inc. (NYSEMKT:CPHI) Q1 2018 Results Earnings Conference Call May 15, 2018 8:30 AM ET

Executives

Diana Huang – IR

Zhilin Li – President, CEO and Interim CFO

Sam Hsing – Corporate VP

Analysts

Operator

Ladies and gentlemen, thank you for standing by and welcome to China Pharma Holdings’ Inc., First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions].

I must advice you that this conference is being recorded today, Tuesday 15 May, 2018. I would now like to hand the conference over to your first speaker today, Ms. Diana Huang. Thank you, please go ahead.

Diana Huang

Thank you, operator. Good morning ladies and gentlemen, and good evening to those of you joining us from China. Welcome to China Pharma Holdings’ first quarter 2018 earnings conference call. I’m Diana Huang, the company’s Investor Relations Manager.

Speaking on the call today are China Pharma’s President and CEO and Interim CFO, Ms. Zhilin Li; and Corporate Vice President, Mr. Sam Hsing. In addition, I will provide translation during the Q&A session of the call.

I would like to remind our listeners that on this call, management’s prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today due to such risks as market and customer acceptance and demands for our products, our ability to market our product, the impact of competitive product and pricing, the ability to develop and launch new product on a timely basis, the regulatory environment including government regulation in the PRC, our ability to obtain the requisite regulatory approvals to commercialize our products, fluctuations in operating results including spending for R&D and sales and marketing activities, and other risks detailed from time-to-time in our filings with the SEC.

In addition, any projections as to the company’s future performance represent management’s estimates as of today, May 15, 2018. China Pharma assumes no obligation to update those projections in the future as market conditions change.

Now, it is my pleasure to turn the call over to China Pharma’s CEO and Interim CFO, Ms. Li to make her opening remarks in Chinese, which will be then translated by Sam. Afterwards, Sam will continue translating Ms. Li’s detailed discussion of the company’s first quarter 2018 financial results.

Zhilin Li

[Foreign Language].

Thank you Diana and good morning everyone. I would like to thank each of you for tuning with us and for your continued support of China Pharma; actively and steadily increasing sales remains our top priority in recent quarters. It was encouraging to see increase in revenue in this quarter. Management will continue to rigorously promote sales through active participation in recent provincial market openings to receive new drug tender offers and ensure further penetration in to the market.

The ongoing generic drug consistency evaluations and reform of the China’s drug production registration and the review policies will continue to have a significant impact on the current performance and the future development of Chinese pharmaceutical manufacturers including us, and may gradually change business patterns of the industry.

We will continue to actively adapt to state policy guidance, and further evaluate market conditions for our current existing product pipeline and the competition in the market in order to optimize our development strategy.

I will now read the rest of Ms. Li’s prepared remarks in English. Now I would like to review our first quarter 2018 financial results and the balance sheet information. Revenue increased by 10.1% to 3.6 million for the three months ended March 31, 2018, as compared to 3.3 million for the three months ended March 31, 2017. This increase was mainly due to the change in exchanges rates between the USD and the RMB.

Revenue for the three months ended March 31, 2018 was RMB 23 million, which is an increase up to 2%, compared to RMB 22.6 million for the same period in 2017. Gross profit for the three months ended March 31, 2018 was 1.1 million compared to 0.7 million in the same period in 2017. Our gross profit margin in the three months ended March 31, 2018 was 29.1% compared to 21.9% in the same period in 2017.

The increase in our gross profit margin was mainly due to the increase in general selling price of our product packages in the first quarter of 2018. Our selling expenses for the three months ended March 31, 2018 and 2017 were both 0.7 million. Selling expenses accounted for 18.8% of the total revenue in the three months ended March 31, 2018 compared to 21.8% in the same period in 2017.

Because of the adjustment in our sales practices resulting from the healthcare reform policies, we reserve a basic amount of personnel and expenses to support our sales and the collection of the accounts receivable.

Our general and administrative expenses for the three months ended March 31, 2018 were 0.5 million, which represented an increase of the 0.1 million compared to 0.4 million in the same period in 2017. General and administrative expenses accounted for 13.6% and 12.7% of our total revenue in the three months ended March 31, 2018 and 2017 respectively.

Net loss for the three months ended March 31, 2018 was 0.3 million compared to the net loss of 1 million in the same period a year ago. The decrease in the net loss was mainly the result of the increase in gross profit margin.

Turning to the balance sheet, as of March 31, 2018, the company had cash and cash equivalents of 2.5 million compared to 2 million as of December 31, 2017. Working capital increased to 3.9 million as of March 31, 2018 from 3.1 million as of December 31, 2017, and the current ratio was 1.4 and 1.3 times at March 31, 2018 and December 31, 2017 respectively.

For the three months ending March 31, 2018, cash flow from the operating activity was 0.5 million, as compared to 0.01 million for the same period in 2017. Overall, we will continue focusing on our business development and promote our sales and believe that this will support the fair evaluation of our shareholders interest in the future.

With that we will now open the call up for questions. Operator?

Question-and-Answer Session

Operator

Zhilin Li

On behalf of the China Pharma team, we would like to thank you for your interest in the company, and the participation on this call. For any of you who are travelling to China, we always welcome and encourage any visitors, from our shareholders, potential investors, and analysts. This concludes China Pharma’s first quarter 2018 earnings call.

Diana Huang

Thank you, operator.

Operator

Ladies and gentlemen this does conclude our conference for today. Thank you for participating, you may now all disconnect,

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