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China Medical Technologies 6-K 2009

Documents found in this filing:

  1. 6-K
  2. Graphic
  3. Graphic
Form 6-K
Table of Contents

 

 

FORM 6-K

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

 

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the month of March 2009

Commission File Number: 000-51440

 

 

CHINA MEDICAL TECHNOLOGIES, INC.

(Translation of registrant’s name into English)

 

 

No. 24 Yong Chang North Road

Beijing Economic-Technological Development Area

Beijing 100176

People’s Republic of China

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F      X                Form 40-F              

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):             

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):             

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes                          No      X    

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

82-     N/A    

 

 

 


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CHINA MEDICAL TECHNOLOGIES, INC.

Form 6-K

TABLE OF CONTENTS

 

     Page

Signature

   3

Exhibit 99.1 – Press Release

   4

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CHINA MEDICAL TECHNOLOGIES, INC
By:  

/s/ Takyung (Sam) Tsang

Name:   Takyung (Sam) Tsang
Title:   Chief Financial Officer

Date: March 2, 2009

 

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Exhibit 99.1

LOGO

China Medical Technologies Reports Third Fiscal Quarter Financial Results

Beijing, China, March 2, 2009 - China Medical Technologies, Inc. (the “Company”) (Nasdaq: CMED), a leading China-based medical device company that develops, manufactures and markets advanced in-vitro diagnostic products, today announced its unaudited financial results for the third fiscal quarter ended December 31, 2008 (“3Q FY2008”). The Company’s 2008 fiscal year ends on March 31, 2009 (“FY2008”).

3Q FY2008 Highlights

 

 

Revenues from continuing operation increased by 50.7% year-over-year to RMB225.3 million (US$33.0 million).

 

 

Loss from continuing operation was RMB171.5 million (US$25.1 million) including a one-time charge of RMB244.9 million (US$35.9 million) for acquired in-process research and development (“IPR&D”).

 

 

Net income increased by 10.5% year-over-year to RMB108.1 million (US$15.8 million).

 

 

Non-GAAP adjusted income from continuing operation, as defined below, increased by 94.5% year-over-year to RMB119.4 million (US$17.5 million).

 

 

Diluted loss from continuing operation per ADS* was RMB6.54 (US$0.96).

 

 

Non-GAAP adjusted diluted earnings from continuing operation per ADS*, as defined below, increased by 95.3% year-over-year to RMB4.55 (US$0.67).

 

* One American Depositary Share (“ADS”) = 10 ordinary shares

See “Non-GAAP Measure Disclosures” below, where the impact of certain items on reported results is discussed.

“We made a major strategic acquisition to purchase SPR technology and sold our HIFU business to become a pure advanced IVD company based in China,” commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. “Our revenue sources have changed to come only from recurring sales of our ECLIA reagent kits and FISH probes. We expect to launch our SPR-based fully automated analysis system to our existing Tier-1 hospital customers through our direct sales force in April 2009 and expect our SPR-based HPV-DNA biosensor chips used with the closed analysis system to become a new source of recurring revenues for us in the near future. We are also pleased to receive further SFDA approval for our Prenatal and Cervical Cancer FISH probes in addition to the first FISH probe approval from SFDA in China for our Breast Cancer HER-2 FISH probe as well as the high-tech certification from Beijing government authorities. We are confident in our growth prospects despite the current weak economic environment in China because the diagnostic needs are least affected by economic downturn and the PRC government has committed to make substantial additional investment in the healthcare sector to increase medical insurance coverage including 50% more subsidy to each participant of government medical insurance plans.”

Mr. Xiaodong Wu continued, “We expect to penetrate more than 400 Tier-1 hospitals in China through our direct sales force managed by our wholly-owned subsidiary, Beijing Jin Pu Jia Medical Technologies Co., Ltd. by the end of March 2009. We have been actively promoting FISH technology to different clinical departments in each hospital to drive the FISH test volume. Our promotion efforts also drew attention of China Central TV which featured our FISH technology in its series of news program. Since the launch of our

 

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FISH probes, we have successfully established relationships with almost all the top 5 Tier-1 hospitals in each province of China. For example, Beijing 301 General PLA Hospital, The Affiliated Ruijin Hospital of Shanghai Communication University, The Affiliated Hospital of Guangdong Zhongshan University, The Affiliated Oncology Hospital of Heilongjiang Medical University, The Affiliated Hospital of China Medical University in Shenyang, Tianjing General Hospital, The 1st Affiliated Hospital of Shanxi Medical University, The Affiliated Hospital of Shandong Qilu University, Jiangsu Provincial People’s Hospital, Henan Provincial People’s Hospital, The Affiliated Union Hospital of Wuhan Tongji University, Hunan Xiangya Hospital, Sichuan Huaxi Hospital, The 1st Affiliated Hospital of Gansu Medical University and The Affiliated Hospital of The 3rd PLA Medical University in Chongqing, etc. We expect to leverage our hospital resources to introduce our SPR analysis system and HPV chip. We also expect to use the same direct sales force and coverage to introduce other advanced diagnostic products available to us in the future. When we continue to grow our direct sales coverage, our revenue from direct sales to Tier-1 hospitals will exceed our revenue from distributors in the near future. Therefore, our direct sales coverage, being one of our most important assets, will serve as long term contributor to our sustainable future growth.”

“3Q is a complicated quarter to analyze our performance,” commented Mr. Sam Tsang, Chief Financial Officer of the Company. “We have taken into account the preliminary purchase price allocation of the SPR acquisition, the gain from the sale of the HIFU business and the reclassification of financial numbers relating to HIFU business to discontinued operation in this quarter. It is the first time we present our results from continuing operation and report a loss due to the one-time charge for acquired IPR&D in accordance with U.S. GAAP. This was acquired as part of the purchase consideration for our SPR acquisition. Although we charged the fair value of the acquired IPR&D to the income statement in this quarter, the related research and development projects are still ongoing after our acquisition and may create new advanced diagnostic products for us if completed in the future. Besides, due to the sale of the HIFU business, the revenue and the direct costs and expenses of the HIFU business as well as the gain from the sale of the HIFU business were reclassified to income from discontinued operation. For the ease of comparing our performance to previous quarters and prior fiscal year, we provide in the latter part of this release the condensed income statements and the non-GAAP reconciliations for these quarters and prior fiscal year which were prepared on the same basis comparable to 3Q FY2008.”

3Q FY2008 Financial Results

The Company reported revenues of RMB225.3 million (US$33.0 million) for 3Q FY2008, representing a 50.7% increase from the corresponding period of FY2007.

The Company’s revenues from continuing operation are currently generated from two product lines, ECLIA diagnostic system and FISH diagnostic system.

ECLIA system sales for 3Q FY2008 were RMB131.8 million (US$19.3 million), representing a 36.3% increase from the corresponding period of FY2007. The strong year-over-year growth in the ECLIA system sales was primarily due to the increasing utilization of the Company’s ECLIA analyzers by hospitals as well as the expanded installed base of the analyzers which resulted in increased sales of ECLIA reagents kits.

FISH system sales for 3Q FY2008 were RMB93.5 million (US$13.7 million), representing a 77.0% increase from the corresponding period of FY2007. The strong year-over-year growth in the FISH system sales was primarily due to a significant increase in sales of FISH probes to hospitals as a result of increase in new hospital customers and increased usage of the Company’s FISH probes by existing hospital customers.

Gross margin increased to 75.2% for 3Q FY2008 from 56.9% for the corresponding period of FY2007. The increase in gross margin was primarily due to the change in revenue mix where almost all revenues were from recurring sales of higher margin ECLIA reagent kits and FISH probes in 3Q FY2008.

 

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Research and development expenses were RMB8.3 million (US$1.2 million) for 3Q FY2008, representing a 49.3% year-over-year increase. The increase was primarily due to the development of new ECLIA reagent kits and FISH probes.

Acquired IPR&D charge was RMB244.9 million (US$35.9 million) and was related to the one-time charge in connection with the acquisition of SPR technology in December 2008.

Sales and marketing expenses were RMB14.6 million (US$2.1 million) for 3Q FY2008, representing a significant year-over-year increase. The increase was primarily due to the expansion of the direct sales force for FISH system sales, increased product promotional activities as well as the cost of the ECLIA analyzers provided free of charge to customers.

General and administrative expenses were RMB38.1 million (US$5.6 million) for 3Q FY2008, representing a 70.1% year-over-year increase. The increase was primarily due to the increased headcount associated with the expansion of the Company’s operations, an increase in stock compensation expense arising from a restricted stock grant in June 2008 and an additional amortization of acquired intangible assets in connection with the acquisition of SPR technology in December 2008.

Interest income was RMB12.4 million (US$1.8 million) for 3Q FY2008, representing a 74.4% increase from the corresponding period of FY2007. The increase was primarily due to interest earned on the net proceeds from the issuance of US$276.0 million convertible notes in August 2008.

Interest expense of convertible notes was RMB27.9 million (US$4.1 million) for 3Q FY2008, representing a significant year-over-year increase. The increase was primarily due to the issuance of US$276.0 million convertible notes in August 2008. The Company’s outstanding convertible notes of US$150.0 million and US$276.0 million bear interest at 3.5% and 4.0% per annum, respectively and will mature in November 2011 and August 2013, respectively.

Interest expense of amortization of convertible notes issuance costs was RMB4.7 million (US$0.7 million) for 3Q FY2008, representing a significant year-over-year increase. The increase was primarily due to the cost of the issuance of US$276.0 million convertible notes in August 2008.

Other interest expense was RMB1.2 million (US$0.2 million) for 3Q FY2008 and was primarily due to the present value discounting of other payable of US$10.0 million for the final payment of the FISH acquisition due in March 2009.

Income tax expense was RMB13.9 million (US$2.0 million) for 3Q FY2008.

The Company’s certain PRC subsidiaries have received approval for hi-tech enterprise status from Beijing government authorities. With this status, the subsidiaries are entitled to a preferential income tax rate of 15% which is lower than the statutory income tax rate of 25%. The status is valid for three years starting from January 2008 and will be renewed after evaluation by relevant government authorities every three years.

Loss from continuing operation was RMB171.5 million (US$25.1 million) for 3Q FY2008, including a one-time charge of RMB244.9 million (US$35.9 million) for acquired IPR&D for the acquisition of SPR technology in December 2008.

Income from discontinued operation was RMB279.6 million (US$41.0 million), representing a significant year-over-year increase, primarily due to a one-time gain of RMB243.3 million (US$35.7 million) from the sale of the HIFU business completed by the end of December 2008.

Net income was RMB108.1 million (US$15.8 million) for 3Q FY2008, representing a 10.5% increase from the corresponding period of FY2007.

 

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Adjusted income from continuing operation excluding stock compensation expense, amortization of acquired intangible assets and acquired IPR&D charge (non-GAAP) was RMB119.4 million (US$17.5 million) for 3Q FY2008, representing a 94.5% increase from the corresponding period of FY2007.

Stock compensation expense for 3Q FY2008 was RMB14.5 million (US$2.1 million), which was allocated to research and development expenses (RMB2.2 million) and general and administrative expenses (RMB12.3 million).

Amortization of acquired intangible assets for 3Q FY2008 was RMB31.6 million (US$4.6 million), which was allocated to cost of revenues (RMB22.5 million) and general and administrative expenses (RMB9.1 million).

Acquired IPR&D charge for 3Q FY2008 was RMB244.9 million (US$35.9 million).

As of December 31, 2008, the Company’s cash balance was RMB1,943.6 million (US$284.9 million). Net cash provided by operating activities for 3Q FY2008 was RMB121.0 million (US$17.7 million).

As of December 31, 2008, the Company’s accounts receivable was RMB284.3 million (US$41.7 million), representing a decrease of 12.7% from the balance as of September 30, 2008, primarily due to the sale of the HIFU business.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.8225 to US$1.00, the noon buying rate in New York City for cable transfers of RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York, as of Wednesday, December 31, 2008.

Outlook for FY2008

The targeted revenues from continuing operation for FY2008 are expected to be between RMB825.0 million (US$120.9 million) and RMB838.0 million (US$122.8 million), representing a year-over-year increase of 50.7%-53.1%.

The targeted adjusted income from continuing operation excluding stock compensation expense, amortization of acquired intangible assets and acquired IPR&D charge (non-GAAP) for FY2008 are expected to be between RMB410.0 million (US$60.1 million) and RMB420.0 million (US$61.6 million), representing a year-over-year increase of 76.8%-81.1%.

The targeted adjusted diluted earnings from continuing operation per ADS excluding stock compensation expense, amortization of acquired intangible assets and acquired IPR&D charge (non-GAAP) for FY2008 is expected to be between RMB14.84 (US$2.18) and RMB15.13 (US$2.22) assuming a diluted weighted average number of ADS of approximately 34.2 million and excluding interest for convertible notes (RMB83.2 million) and amortization of convertible notes issuance costs (RMB14.3 million), representing a year-over-year increase of 68.6%-71.9%.

The above targets are based on the Company’s current views on the operating and marketing conditions which are subject to change.

The Company will provide the outlook for FY2009 when it announces its unaudited financial results for 4Q FY2008 in June 2009.

Non-GAAP Measure Disclosures

To supplement its consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), the Company uses non-GAAP measures of adjusted income from continuing operation and adjusted earnings from continuing operation per ADS, which are adjusted from results based on GAAP to exclude the impact of stock compensation expense, amortization of acquired intangible assets and acquired IPR&D charge. Non-GAAP financial measures are used by the

 

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Company in their financial and operating decision-making because management believes they reflect the Company’s ongoing business in a manner that allows meaningful period-to-period comparison. The Company’s management believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company’s current operating performance and future prospects in the same manner as management does, if they so choose. The Company’s management also believes the non-GAAP financial measures are useful for itself and investors because it makes more meaningful comparisons of the Company’s current results of operations to those of prior periods.

The presentation of this additional financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure, please see the financial statements included with this press release.

Conference Call

The Company’s management team will host a conference call at 8:00 a.m. Eastern Time on March 2, 2009 (or 9:00 p.m. Beijing/Hong Kong time on the same date) to discuss the results following this earnings announcement.

The dial-in details for the live conference call are as follows:

 

 

U.S. toll free number 1-800-901-5247

 

 

International dial-in number 1-617-786-4501

Passcode CMEDCALL

A live webcast of the conference call will be available on http://ir.chinameditech.com.

A replay of this webcast will be available for one month on this website.

A telephone replay of the call will be available after the conclusion of the conference call through 10:00 a.m. Eastern Time on March 3, 2009.

The dial-in details for the replay are as follows:

 

 

U.S. toll free number 1-888-286-8010

 

 

International dial-in number 1-617-801-6888

Passcode 84251245

About China Medical Technologies, Inc.

China Medical Technologies is a leading China-based medical device company that develops, manufactures and markets advanced in-vitro diagnostic products using Enhanced Chemiluminescence (ECLIA) technology, Fluorescent in situ Hybridization (FISH) technology and Surface Plasmon Resonance (SPR) technology to detect and monitor various diseases and disorders. For more information, please visit www.chinameditech.com.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the quotations from management in this press release, the Company’s strategic operational plans, as well as outlook for FY2008, contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company’s filings with the U.S. Securities and

 

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Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Contacts

Sam Tsang and Winnie Yam

Tel: 86-10-6530-8833

Email: IR@chinameditech.com

 

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China Medical Technologies, Inc.

Unaudited Condensed Consolidated Balance Sheets

 

     As of  
     March 31,
2008
    September 30,
2008
    December 31, 2008  
     RMB     RMB     RMB     US$  
     (in thousands except for per ADS information)  

Assets

        

Current assets

        

Cash and cash equivalents

   682,679     2,702,722     1,943,588     284,879  

Trade accounts receivable, net

   289,751     325,596     284,262     41,665  

Inventories

   27,834     37,555     28,029     4,108  

Prepayments and other receivables

   27,845     32,720     27,908     4,091  

Due from a related party

   —       —       204,675     30,000  
                        

Total current assets

   1,028,109     3,098,593     2,488,462     364,743  

Property, plant and equipment, net

   164,499     157,182     161,801     23,716  

Land use rights

   7,430     7,334     7,287     1,068  

Goodwill

   8,654     8,654     8,654     1,268  

Intangible assets, net

   1,541,793     1,460,312     3,532,442     517,764  

Prepayments and other receivables

   154,264     149,378     —       —    

Convertible notes issuance costs

   27,055     77,399     73,131     10,719  
                        

Total assets

   2,931,804     4,958,852     6,271,777     919,278  
                        

Liabilities

        

Current liabilities

        

Trade accounts payable

   48,040     63,597     21,160     3,101  

Accrued liabilities and other payables

   238,580     268,748     1,466,097     214,892  

Income taxes

   69,499     81,579     82,908     12,152  
                        

Total current liabilities

   356,119     413,924     1,570,165     230,145  

Convertible notes

   1,051,800     2,892,497     2,906,385     426,000  

Deferred income taxes

   1,124     2,364     21,657     3,174  
                        

Total liabilities

   1,409,043     3,308,785     4,498,207     659,319  
                        

Shareholders’ equity

        

Ordinary shares US$0.1 par value: 500,000,000 authorized; 274,066,661 issued and outstanding as of March 31, 2008 and 321,066,661 issued and outstanding as of September 30, 2008 and December 31, 2008

   225,473     257,738     257,738     37,778  

Additional paid-in capital

   526,264     515,773     530,259     77,722  

Accumulated other comprehensive loss

   (48,046 )   (53,701 )   (52,766 )   (7,734 )

Retained earnings

   819,070     930,257     1,038,339     152,193  
                        

Total shareholders’ equity

   1,522,761     1,650,067     1,773,570     259,959  
                        

Total liabilities and shareholders’ equity

   2,931,804     4,958,852     6,271,777     919,278  
                        

Note:

The Company has performed preliminary purchase price allocation after completion of SPR acquisition in December 2008. The Company will finalize the purchase price allocation as soon as practicable.

 

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China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income

 

     For the Three Months Ended  
     December 31,
2007
    September 30,
2008
    December 31,
2008
    December 31,
2008
 
     RMB     RMB     RMB     US$  
     (in thousands except for per ADS information)  

Revenues (1)

   149,494     193,967     225,296     33,022  

Cost of revenues

   (64,368 )   (52,043 )   (55,818 )   (8,181 )
                        

Gross profit

   85,126     141,924     169,478     24,841  

Operating expenses:

        

Research and development

   (5,561 )   (6,338 )   (8,304 )   (1,217 )

Acquired in-process research and development

   —       —       (244,872 )   (35,892 )

Sales and marketing

   (6,129 )   (16,515 )   (14,565 )   (2,135 )

General and administrative

   (22,413 )   (26,859 )   (38,115 )   (5,586 )
                        

Total operating expenses

   (34,103 )   (49,712 )   (305,856 )   (44,830 )
                        

Operating income (loss)

   51,023     92,212     (136,378 )   (19,989 )

Interest income

   7,137     10,301     12,448     1,825  

Interest expense—convertible notes

   (9,755 )   (18,410 )   (27,856 )   (4,083 )

Interest expense—amortization of convertible notes issuance costs

   (1,978 )   (3,235 )   (4,652 )   (682 )

Interest expense—other

   (1,181 )   (1,145 )   (1,165 )   (171 )
                        

Income (loss) before tax

   45,246     79,723     (157,603 )   (23,100 )

Income tax expense

   (10,789 )   (14,423 )   (13,915 )   (2,040 )
                        

Income (loss) from continuing operation

   34,457     65,300     (171,518 )   (25,140 )

Income from discontinued operation (2)

   63,344     52,432     279,600     40,982  
                        

Net income

   97,801     117,732     108,082     15,842  
                        

Earnings (loss) from continuing operation per ADS

        

- basic

   1.31     2.49     (6.54 )   (0.96 )
                        

- diluted (3)

   1.31     2.43     (6.54 )   (0.96 )
                        

Earnings from discontinued operation per ADS

        

- basic

   2.41     2.00     10.65     1.56  
                        

- diluted (3)

   2.40     2.02     10.65     1.56  
                        

Weighted average number of ADS

        

- basic

   26,238,264     26,242,974     26,242,974     26,242,974  
                        

- diluted (3)

   26,370,834     31,278,897     26,242,974     26,242,974  
                        

 

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Notes:

 

(1)

 

Revenues

   RMB ’000    RMB ’000    RMB ’000    US$ ’000
 

- ECLIA

     96,663      122,160      131,782      19,316
 

- FISH

     52,831      71,807      93,514      13,706
                             
       149,494      193,967      225,296      33,022
                             

(2)

 

Income from discontinued operation

   RMB ’000    RMB ’000    RMB ’000    US$ ’000
 

- Revenue from HIFU business

     115,639      96,517      85,364      12,512
                             
 

- Income from HIFU business

     63,344      52,432      36,271      5,316
                             
 

- Gain on disposal of HIFU business

     —        —        243,329      35,666
                             

(3)

  In computing diluted earnings from continuing operation per ADS for the three months ended September 30, 2008, interest expense and amortization in connection with convertible notes were added back to income from continuing operation before dividing income from continuing operation by the diluted number of ADS, which included shares that may be issued from the conversion of convertible notes. Interest expense and amortization in connection with convertible notes were not added back in computing diluted earnings from continuing operation per ADS for the three months ended December 31, 2007 and 2008 because they were anti-dilutive.

 

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China Medical Technologies, Inc.

Reconciliations of Non-GAAP Adjusted Income from Continuing Operation to GAAP Adjusted

Income from Continuing Operation

 

     For the Three Months Ended  
     December 31,
2007
   September 30,
2008
   December 31,
2008
    December 31,
2008
 
     RMB    RMB    RMB     US$  
     (in thousands except for per ADS information)  

GAAP income (loss) from continuing operation

   34,457    65,300    (171,518 )   (25,140 )

Adjustments:

          

Stock compensation expense

   5,074    14,080    14,486     2,123  

Amortization of acquired intangible assets

   21,876    22,447    31,586     4,630  

Acquired in-process research and development

   —      —      244,872     35,892  
                      

Non-GAAP adjusted income from continuing operation

   61,407    101,827    119,426     17,505  
                      

GAAP earnings (loss) from continuing operation per ADS

          

- basic

   1.31    2.49    (6.54 )   (0.96 )
                      

- diluted

   1.31    2.43    (6.54 )   (0.96 )
                      

Non-GAAP adjusted earnings from continuing operation per ADS

          

- basic

   2.34    3.88    4.55     0.67  
                      

- diluted (1)

   2.33    3.60    4.55     0.67  
                      

Weighted average number of ADS

          

- basic

   26,238,264    26,242,974    26,242,974     26,242,974  
                      

- diluted

   26,370,834    31,278,897    26,242,974     26,242,974  
                      

 

Note:

 

(1) In computing diluted non-GAAP adjusted earnings from continuing operation per ADS for the three months ended September 30, 2008, interest expense and amortization in connection with convertible notes were added back to non-GAAP adjusted income from continuing operation, before dividing the non-GAAP adjusted income from continuing operation by the diluted number of ADS, which included shares that may be issued from the conversion of convertible notes. Interest expense and amortization in connection with convertible notes were not added back in computing diluted non-GAAP adjusted earnings from continuing operation per ADS for the three months ended December 31, 2007 and 2008 because they were anti-dilutive.

 

13


Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income

 

     For the Nine Months Ended  
     December 31,
2007
    December 31,
2008
    December 31,
2008
 
     RMB     RMB     US$  
     (in thousands except for per ADS information)  

Revenues (1)

   366,373     581,315     85,205  

Cost of revenues

   (170,551 )   (159,131 )   (23,324 )
                  

Gross profit

   195,822     422,184     61,881  

Operating expenses:

      

Research and development

   (13,969 )   (20,780 )   (3,046 )

Acquired in-process research and development

   —       (244,872 )   (35,892 )

Sales and marketing

   (15,128 )   (42,365 )   (6,210 )

General and administrative

   (55,417 )   (89,754 )   (13,155 )
                  

Total operating expenses

   (84,514 )   (397,771 )   (58,303 )
                  

Operating income

   111,308     24,413     3,578  

Other income

   100     —       —    

Interest income

   23,616     26,746     3,920  

Interest expense—convertible notes

   (29,753 )   (55,398 )   (8,120 )

Interest expense—amortization of convertible notes issuance costs

   (6,032 )   (9,738 )   (1,427 )

Interest expense—other

   (3,930 )   (3,455 )   (506 )
                  

Income (loss) before tax

   95,309     (17,432 )   (2,555 )

Income tax expense

   (22,736 )   (40,899 )   (5,995 )
                  

Income (loss) from continuing operation

   72,573     (58,331 )   (8,550 )

Income from discontinued operation (2)

   147,436     364,409     53,413  
                  

Net income

   220,009     306,078     44,863  
                  

Earnings (loss) from continuing operation per ADS

      

- basic

   2.77     (2.22 )   (0.33 )
                  

- diluted (3)

   2.76     (2.22 )   (0.33 )
                  

Earnings from discontinued operation per ADS

      

- basic

   5.62     13.89     2.04  
                  

- diluted (3)

   5.60     13.89     2.04  
                  

Weighted average number of ADS

      

- basic

   26,214,926     26,242,974     26,242,974  
                  

- diluted (3)

   26,326,211     26,242,974     26,242,974  
                  

 

14


Table of Contents

 

Notes:

 

(1)

 

Revenues

   RMB ’000    RMB ’000    US$ ’000
 

- ECLIA

     268,299      365,660      53,596
 

- FISH

     98,074      215,655      31,609
                      
       366,373      581,315      85,205
                      

(2)

 

Income from discontinued operation

   RMB ’000    RMB ’000    US$ ’000
 

- Revenue from HIFU business

     265,146      246,588      36,143
                      
 

- Income from HIFU business

     147,436      121,080      17,747
                      
 

- Gain on disposal of HIFU business

     —        243,329      35,666
                      

(3)    

  In computing diluted earnings (loss) from continuing operation per ADS for the nine months ended December 31, 2007 and 2008, interest expense and amortization in connection with convertible notes were not added back to income (loss) from continuing operation before dividing income (loss) from continuing operation by the diluted number of ADS because the convertible notes were anti-dilutive.

 

15


Table of Contents

China Medical Technologies, Inc.

Reconciliations of Non-GAAP Adjusted Income from Continuing Operation to GAAP Adjusted Income from Continuing Operation

 

     For the Nine Months Ended  
     December 31,
2007
   December 31,
2008
    December 31,
2008
 
     RMB    RMB     US$  
     (in thousands except for per ADS information)  

GAAP income (loss) from continuing operation

   72,573    (58,331 )   (8,550 )

Adjustments:

       

Stock compensation expense

   11,991    36,260     5,315  

Amortization of acquired intangible assets

   66,533    76,765     11,252  

Acquired in-process research and development

   —      244,872     35,892  
                 

Non-GAAP adjusted income from continuing operation

   151,097    299,566     43,909  
                 

GAAP earnings (loss) from continuing operation per ADS

       

- basic

   2.77    (2.22 )   (0.33 )
                 

- diluted

   2.76    (2.22 )   (0.33 )
                 

Non-GAAP adjusted earnings from continuing operation per ADS

       

- basic

   5.76    11.42     1.67  
                 

- diluted (1)

   5.74    11.42     1.67  
                 

Weighted average number of ADS

       

- basic

   26,214,926    26,242,974     26,242,974  
                 

- diluted

   26,326,211    26,242,974     26,242,974  
                 

 

Note:

 

(1) In computing diluted non-GAAP adjusted earnings from continuing operation per ADS for nine months ended December 31, 2007 and 2008, interest expense and amortization in connection with convertible notes were not added back to non-GAAP adjusted income from continuing operation before dividing the non-GAAP adjusted earnings from continuing operation by the diluted number of ADS because the convertible notes were anti-dilutive.

 

16


Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income

 

     For the Three Months Ended     For the
Year Ended
 
     June 30,
2007
    September 30,
2007
    March 31,
2008
    June 30,
2008
    March 31,
2008
 
     RMB     RMB     RMB     RMB     RMB  
     (in thousands except for per ADS information)  

Revenues (1)

   93,493     123,386     181,048     162,052     547,421  

Cost of revenues

   (47,819 )   (58,364 )   (74,886 )   (51,270 )   (245,437 )
                              

Gross profit

   45,674     65,022     106,162     110,782     301,984  

Operating expenses:

          

Research and development

   (4,915 )   (3,493 )   (6,262 )   (6,138 )   (20,231 )

Acquired in-process research and development

   —       —       (672 )   —       (672 )

Sales and marketing

   (4,246 )   (4,753 )   (6,884 )   (11,285 )   (22,012 )

General and administrative

   (13,123 )   (19,881 )   (15,522 )   (24,780 )   (70,939 )
                              

Total operating expenses

   (22,284 )   (28,127 )   (29,340 )   (42,203 )   (113,854 )
                              

Operating income

   23,390     36,895     76,822     68,579     188,130  

Other income

   100     —       —       —       100  

Interest income

   8,694     7,785     5,034     3,997     28,650  

Interest expense—convertible notes

   (10,078 )   (9,920 )   (9,396 )   (9,132 )   (39,149 )

Interest expense—amortization of convertible notes issuance cost

   (2,043 )   (2,011 )   (1,905 )   (1,851 )   (7,937 )

Interest expense—other

   (1,569 )   (1,180 )   (1,299 )   (1,145 )   (5,229 )
                              

Income before income tax

   18,494     31,569     69,256     60,448     164,565  

Income tax expense

   (4,801 )   (7,146 )   (17,457 )   (12,561 )   (40,193 )
                              

Income from continuing operation

   13,693     24,423     51,799     47,887     124,372  

Income from discontinued operation (2)

   31,130     52,962     53,414     32,377     200,850  
                              

Net income

   44,823     77,385     105,213     80,264     325,222  
                              

Earnings from continuing operation per ADS

          

- basic

   0.52     0.93     1.97     1.82     4.74  
                              

- diluted (3)

   0.52     0.93     1.96     1.81     4.72  
                              

Earnings from discontinued operation per ADS

          

- basic

   1.19     2.02     2.04     1.23     7.66  
                              

- diluted (3)

   1.18     2.01     2.02     1.22     7.62  
                              

Weighted average number of ADS

          

- basic

   26,196,308     26,210,004     26,242,974     26,242,974     26,221,900  
                              

- diluted (3)

   26,317,214     26,290,383     26,407,370     26,461,885     26,346,462  
                              

 

17


Table of Contents

 

Notes:

 

(1)

 

Revenues

   RMB ’000    RMB ’000    RMB ’000    RMB ’000    RMB ’000
 

- ECLIA

     79,051      92,585      112,221      111,718      380,520
 

- FISH

     14,442      30,801      68,827      50,334      166,901
                                    
       93,493      123,386      181,048      162,052      547,421
                                    

(2)

 

Income from discontinued operation

   RMB ’000    RMB ’000    RMB ’000    RMB ’000    RMB ’000
 

- Revenue from HIFU business

     57,997      91,510      103,171      64,707      368,317
                                    
 

- Income from HIFU business

     31,130      52,962      53,414      32,377      200,850
                                    
 

- Gain on disposal of HIFU business

     —        —        —        —        —  
                                    

(3)

  In computing diluted earnings from continuing operation per ADS, interest expense and amortization in connection with convertible notes were not added back to income from continuing operation before dividing income from continuing operation by the diluted number of ADS, because the convertible notes were anti-dilutive.

 

18


Table of Contents

China Medical Technologies, Inc.

Reconciliations of Non-GAAP Adjusted Income from Continuing Operation to GAAP Adjusted Income from Continuing Operation

 

     For the Three Months Ended    For the
Year Ended
     June 30,
2007
   September 30,
2007
   March 31,
2008
   June 30,
2008
   March 31,
2008
     RMB    RMB    RMB    RMB    RMB
     (in thousands except for per ADS information)

GAAP income from continuing operation

   13,693    24,423    51,799    47,887    124,372

Adjustments:

              

Stock compensation expense

   1,379    5,538    4,669    7,694    16,660

Amortization of acquired intangible assets

   22,475    22,182    23,700    22,732    90,233

Acquired in-process research and development

   —      —      672    —      672
                        

Non-GAAP adjusted income from continuing operation

   37,547    52,143    80,840    78,313    231,937
                        

GAAP earnings from continuing operation per ADS

              

- basic

   0.52    0.93    1.97    1.82    4.74
                        

- diluted

   0.52    0.93    1.96    1.81    4.72
                        

Non-GAAP adjusted earnings from continuing operation per ADS

              

- basic

   1.43    1.99    3.08    2.98    8.85
                        

- diluted (1)

   1.43    1.98    3.06    2.96    8.80
                        

Weighted average number of ADS

              

- basic

   26,196,308    26,210,004    26,242,974    26,242,974    26,221,900
                        

- diluted

   26,317,214    26,290,383    26,407,370    26,461,885    26,346,462
                        

 

Note:

 

(1) In computing diluted non-GAAP adjusted earnings from continuing operation per ADS, interest expense and amortization in connection with convertible notes were not added back to non-GAAP adjusted income from continuing operation before dividing the non-GAAP adjusted income from continuing operation by the diluted number of ADS, because the convertible notes were anti-dilutive.

 

19

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