China Sky One Medical, a leading fully integrated pharmaceutical company producing over-the-counter drugs in the China, announced that its second quarter revenue has increased by nearly 27percent year-over-year, driven by strong product sales across a number of product categories, partially offset by lower revenue from Slim Patch and Diagnostic Kit Sales.
“A noteworthy contributor to our growth this quarter continues to be strength in the sales of our ointment products, including Compound Camphor Cream, which grew 85 percent year-over-year, and remains our best selling product," said Mr Yan-Qing Liu, Chairman and CEO of China Sky One Medical. "In 2010, we have increased our cooperation with several larger scale distributors, who provide us with a powerful channel to expand our addressable market. We continue to make a significant investment in research and development, with a focus on innovative proprietary drugs and diagnostic kits that we expect will drive future sales growth."
In the second quarter of 2010, China Sky One's total revenues increased 26.7 percent to $40.8 mn from $32.2 mn in the same quarter last year. Top-line growth was primarily attributable to strong sales from the Ointment and Others product categories, which together represented 57.9 percent of total revenue. Sales of ointments increased 51.7percent year-over-year to $11.6 mn, primarily due to the rapid growth of the Company's Compound Camphor Cream and Kecuo Yintong Ointment. With the successful marketing of Compound Camphor Cream under the well established Yu Fu brand, the product has replaced Slim Patch to become China Sky One's best selling product, accounting for 15.0 percent of total revenues in the second quarter of 2010 up from 10.5 percent of sales during the first quarter of 2010. Sales of the acne prevention product, Kecuo Yintong Ointment, also increased significantly, reflecting the successful efforts of a new distributor since the third quarter of 2009.
Sales of Other Products grew 98.5percent in the current year quarter to $12.0 mn. Higher sales in this category were mainly driven by strong market demand for Naphazoline Hydrochloride eye drops, Napadil tablet and Tinea liniment.
Sales of patch products declined 2.3 percent year-over-year to $9.7 mn in the second quarter of 2010 due to a 31.1 percent decrease in Slim Patch sales to $4.8 mn, as compared to $6.9 mn in the comparable period of 2009. Excluding the Slim Patch, sales of other patch products, including Pain Relief Patch, Asthma Patch and Hypertension Patch, rose 63.6 percent to $4.9 mn in the second quarter of 2010, as compared to $3.0 mn in the year ago quarter.
Sales of spray products were up 5.5 percent from the prior year at $5.1 mn. Diagnostic kit sales fell year-over-year to $2.3 mn from $3.7 mn. The company has implemented training of its sales professionals to enhance cooperation with its distributors to increase marketing support for this category and is confident that new diagnostic kits under development have very significant market potential.
Gross profit rose 20.9 percent to $29.5 mn in the second quarter of 2010. Gross margin in the quarter was 72.5 percent, as compared to 75.9 percent in the 2009 quarter. Regional flooding and droughts in the second quarter of 2010 led to higher pricing of herbal raw materials used by the Company to produce traditional Chinese medicine (TCM) products.
Operating expenses increased 28.3 percent year-over-year to $15.8 mn in the second quarter of 2010. The increase was principally due to $2.2 mn higher R&D expenses, a $0.7 mn increase in general and administrative and a $0.4 mn increase in depreciation and amortization expenses associated with two proprietary technologies acquired in the fourth quarter of 2009. Second quarter 2010 operating income was $13.7 mn, representing an operating margin of 33.6 percent, as compared to $12.1 mn and 37.5 percent in the same period a year ago.