BJGP Bmp Sunstone Corp. (MM)

PLYMOUTH MEETING, Pa., Nov. 9, 2010 /PRNewswire-Asia-FirstCall/ -- BMP Sunstone Corporation (NASDAQ: BJGP) ("BMP Sunstone" or the "Company") today announced financial results for the third quarter ended September 30, 2010.

• Revenue increased 33.4% to $44.9 million from $33.6 million in the prior year period.
• Gross profit rose to $16.3 million from $15.7 million in the third quarter of 2009. Gross margin was 36.3%, compared to 46.6% in the prior year period.
• Operating income was $69,000, compared to $1.0 million in the prior year period.
• Adjusted EBITDA was $961,000 compared to $2.6 million in the third quarter of 2009.
• Adjusted EBITDA in the first nine months of 2010 was $9.9 million compared to $9.0 million in the first nine months of 2009.
• Non-GAAP net income in the first nine months of 2010 was $5.1 million, compared to $4.6 million in the prior year period.

Third Quarter 2010 Financial Results

Revenue in the third quarter of 2010 increased 33.4% to $44.9 million from $33.6 million in the third quarter of 2009.  Revenue from manufacturing was $19.7 million, up 15.2% from the prior year period, reflecting continued demand for the Company's leading products and continued benefits from the sales force reorganization completed earlier in the year. Revenue from licensed products increased 10.0% year over year to $2.3 million, primarily due to expansion of hospital coverage.  Revenue from distribution was $22.9 million, up 58.2% on a year over year basis, driven by a strategic initiative to increase Wanwei's product sales.

David Gao, Chief Executive Officer of BMP Sunstone, stated, "We are pleased with our performance in the third quarter. We actively increased our activity at our distribution business in an effort to meet potential revenue requirements by the Beijing local government, in order to be qualified for hospital bidding. In addition, given the seasonality of the cold and flu season which is a principal driver of Sunstone sales, we increased our investment in advertising and marketing. Going into the last quarter of 2010, we are seeing healthy demand for our leading Sunstone products and we believe our revenue mix contributions will normalize within the next several months."

Gross profit in the third quarter of 2010 increased to $16.3 million from $15.7 million in the third quarter of 2009. Gross margin was 36.3%, compared to 46.6% in the prior year period. The decrease in gross margin reflects the strong revenue contribution from distribution, which carries lower gross margins than our manufacturing business, as the Company deliberately grew the Wanwei business. This effort also resulted in lower gross margins in the distribution business on a sequential basis.

The Company's operating income was $69,000 in the third quarter of 2010, compared to $1.0 million in the third quarter of 2009. Operating expenses in the third quarter of 2010 included a dividend transfer tax payment of $0.8 million related to Sunstone. The Company also increased its advertising and marketing expenditure by $1.0 million from the prior year period as the Company positioned itself for a seasonally strong fourth quarter at Sunstone. Operating expenses also include approximately $1.0 million of purchase accounting adjustments related to prior acquisitions, as well as approximately $466,000 of stock compensation expense, which reflects fewer options granted to senior management and board members on a year over year basis. Excluding purchase accounting adjustments and stock compensation, non-GAAP operating income was $1.5 million, compared to $2.5 million in the prior year period.

Adjusted EBITDA was $961,000 in the third quarter of 2010, compared to $2.6 million in the third quarter of 2009. On a nine months basis, as discussed below, adjusted EBITDA increased to $9.9 million in 2010 from $9.0 million in the first nine months of 2009.

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Non-GAAP net income was $299,000, or $0.01 per diluted share, compared to $1.3 million, or $0.03 per diluted share, in the third quarter of 2009. On a GAAP basis, the Company reported a net loss of $1.3 million, or $0.03 per diluted share, compared to a net loss of $208,000, or $0.01 per diluted share, in the third quarter of 2009. The earnings per share calculation is based on 51.3 million diluted shares outstanding, compared to 50.8 million diluted shares outstanding in the prior year period.

Non-GAAP net income and earnings per share exclude stock based compensation expense, amortization related to acquisitions, amortization of debt discount and issuance cost, loss on early extinguishment of debt and gain on the embedded derivative value on convertible notes. Adjusted EBITDA is a non-GAAP measure which provides earnings before interest, taxes, depreciation and amortization and excludes loss on early extinguishment of debt and gain on the embedded derivative value on convertible notes. Please refer to the financial tables provided in this news release for a reconciliation of GAAP results to non-GAAP results for the three month periods ended September 30, 2010 and 2009.

Balance Sheet

Including notes receivable of $17.8 million, total cash and cash equivalents were $35.7 million as of September 30, 2010.  Notes receivables from customers for the settlement of trade receivable balances are guaranteed by established banks in China and have maturities of six months or less. The Company paid down roughly $4.8 million of bank debt during the quarter.

Financial Results for the Nine Months Ended September 30, 2010

For the nine months ended September 30, 2010, revenue increased 18.4% to $124.7 million from $105.4 million in the first nine months of 2009. During this same time period, gross profit increased 10.3% to $55.9 million from $50.7 million. Income from operations increased 24.1% to $5.4 million, compared to $4.4 million in the first nine months of 2009. Adjusted EBITDA increased to $9.9 million in the first nine months of 2010, up from $9.0 million in the prior year period. Non-GAAP net income increased to $5.1 million, or $0.10 per diluted share from $4.6 million, or $0.10 per diluted share, in the prior year period. On a GAAP basis, net loss was $30,000, or ($0.00) per share, compared to a net loss of $3.9 million, or ($0.10) per share, in the first nine months of 2009. The EPS calculation is based on 51.1 million diluted shares outstanding, compared to 48.2 million diluted shares outstanding in the prior year period.

Full Year 2010 Financial Guidance

The Company continues to expect revenue to reach between $160 million and $170 million in fiscal 2010.  Additionally, during fiscal 2010, the Company continues to expect adjusted EBITDA to reach between $16 million and $17 million and non-GAAP net income to reach between $9 million and $10 million.

Recent Events

On October 28, 2010 BMP Sunstone and sanofi-aventis (EURONEXT: SAN and NYSE: SNY) announced that they have entered into a definitive agreement under which sanofi-aventis is to acquire all outstanding shares of BMP Sunstone for cash consideration of USD 10 per share, or a total of approximately USD 520.6 million on a fully diluted basis. The acquisition is to be structured as a merger of BMP Sunstone and a wholly-owned subsidiary of sanofi-aventis. Under the terms of the merger agreement, completion of the transaction is subject to approval at the BMP Sunstone stockholder meeting, as well as the receipt of certain regulatory approvals in China and other customary conditions. Stockholders controlling 23% of BMP Sunstone's shares on a fully diluted basis have committed to vote in favour of the transaction.

Additionally, during the third quarter of 2010, BMP Sunstone signed an equity transfer agreement with Sunstone Shengda (Zhangjiakou) Pharmaceutical Co., Ltd. ("Sunstone Shengda") to increase its ownership position to 75% from 50% previously held.  The all-cash transaction was funded entirely from Sunstone's existing cash flow. The Company believes that ownership of Sunstone Shengda, a leading manufacturer of pediatric pharmaceuticals in China, complements its efforts to strengthen its pharmaceutical production capacity, optimally allocate resources, and reinforce the Company's competitive position.

Conference Call

The Company will hold a conference call at 5:00 pm ET on November 9, 2010 to discuss its results.  Listeners may access the call by dialing 1-866-788-0538 or 1-857-350-1676 for international callers, access code: 82782645. A webcast will be available through the Company's website at www.bmpsunstone.com. A replay of the call will be accessible through November 16, 2010 by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 15522468.

About BMP Sunstone Corporation

BMP Sunstone Corporation is a specialty pharmaceutical company that is building a proprietary portfolio of branded pharmaceutical and healthcare products in China. Through Sunstone the Company manufactures leading pediatric and women's health products, including two of China's most recognized brands, "Hao Wawa" and "Confort," sold in pharmacies throughout the country.  The Company also markets a portfolio of products under exclusive multi-year licenses into China, primarily focused on women's health and pediatrics, as well as provides pharmaceutical distribution services through subsidiaries in Beijing and Shanghai.  BMP Sunstone's main office is in Beijing, with a U.S. office in Plymouth Meeting, PA. For more information, please visit www.bmpsunstone.com.

Safe Harbor Statement

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning, the Company's expected financial performance in fiscal 2010 and the Company's expectations for its business units in fiscal year 2010. These statements are subject to uncertainties and risks including, but not limited to, the impact from the Company's recent organizational changes, changes in the Company's sales, marketing and distribution plans, changes in the Company's operating performance, general financial, economic, and political conditions affecting the biotechnology and pharmaceutical industries and the Chinese pharmaceutical market, the ability to timely manufacture and distribute the Company's products and other risks contained in reports filed by the Company with the Securities and Exchange Commission. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

SOURCE BMP Sunstone Corporation