Transcript CCG - China Pharma Holdings

Investor Presentation
China Pharma Holdings, Inc. (CPHI)
Investor Presentation
January 2007
Safe Harbor Statement
China Pharma
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995: Any statements set forth in this presentation
that are not historical facts are forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements,
which may include, but are not limited to, such factors as
unanticipated changes in product demand, increased competition,
failure to obtain or maintain intellectual property protection,
downturns in the Chinese economy, uncompetitive levels of
research and development, failure to obtain regulatory approvals,
and other information detailed from time to time in the China
Pharma Holdings, Inc.’s filings and future filings with the United
States Securities and Exchange Commission.
The forward-looking statements contained in this presentation are
made only of this date, and China Pharma Holdings, Inc. is under
no obligation to revise or update these forward-looking statements.
Slide 2
Investment Highlights
China Pharma
 Profitable company with a low cost/high margin
business model
 Rapid top line growth and increasing profitability
 Positioned within the largest segments of the Chinese
pharmaceutical market
 Robust portfolio and pipeline of approximately 30
drugs that address large patient populations
 State-of-art modern manufacturing facilities with
multiple production lines and capacity to meet future
growth
 Industry dynamics support growth strategy
Slide 3
Equity Snapshot
China Pharma
Exchange/Symbol
OTC BB: CPHI
Price (1/17/2007)
$2.28
Shares Outstanding
34.7 M
Market Capitalization
$79.17 M
Revenues (TTM)
$18.2 M
Net Income ( 9 mos. 2006)
$5.2 M
Slide 4
Corporate Overview
China Pharma
 China Pharma is a leading generic drug maker with a
growing brand product business
• Specialty pharmaceutical company that develops,
manufactures, and markets pharmaceutical products for
hospitals and the over the counter (OTC) market in China
 Corporate headquarters: Haikou City, China
 Professional Staff
• 150 employees
• 550 marketing and sales agent network in 16 sales offices
 Scalable GMP certified manufacturing facilities in
Haikou City, China, with eight production lines with extra
capacity
 China Pharma is a holding company for Helpson Biopharmaceutical Co., Ltd. (Helpson), a specialty biopharmaceutical company
Slide 5
The Strong Economy is Fueling Double
Digit Growth of the Pharma Market
China Pharma
 Growth factors
• Overall growth/strength of Chinese economy
• Increase in disposable household income
• Desire for improved healthcare
• Aging population
• Increasing diagnosis and treatment rates
• Greater government spending on healthcare
 8th largest pharmaceutical market in the world
• The pharmaceutical market grew 20.4% in 2005 to $11.7B
• Forecasted to be the 5th largest market by 2010 and largest
market by 2050
 Projected CAGR of 16% to 19% for 2005-2010
Source: IMS, Pharmexec.com
Slide 6
China Pharma
Chinese Generic Companies Dominate
the Industry
 About 80% of drugs sold in China are generics
 China’s Drug Administration Law
• Drugs that have never been manufactured in
China are new drugs
 Imported medicines are prohibited or restricted
from China’s social medical insurance
 Domestic company market share: 65%
 Foreign company market share: 35%
Source: VOI Consulting, Inc., 2005 PharmaHandbook, Citigroup SmithBarney
Slide 7
Growing Western Medicines Segment
Dominates the Market
China Pharma
 Western medicines and biologics segment makes
up 74% of China’s drug market, or US$ 11B* and is
growing at double digit rates
 Traditional Chinese medicines make up 26% of
China’s drug market
Western
Medicines
• China Pharma’s
generic drug
strategy focuses on
Western medicines
• This sector achieved
20% annualized
growth between 1996
and 2002
26%
Traditional
Chinese
Medicines
74%
* 2004, ex-manufacturer level
Source: VOI Consulting, Inc., 2005 PharmaHandbook, Citigroup SmithBarney, JPMorgan
Slide 8
Highly Fragmented Pharma Market
Provides Opportunity for Growth
China Pharma
 There are over 5,000 companies in the Chinese
pharmaceutical market
 The top ten companies contribute only 15% of total
industry sales
• CPHI is positioned to gain
market share:
• Robust portfolio and
pipeline of new drugs
• Wide distribution network
• Modern GMP-certified
production facilities
• Expertise and experience
with the SFDA and approval
process
15%
85%
Top 10 Companies Cumulative % of Total Industry Sales
Cumulative % of Total Industry Sales of Remainder of Companies
Source: JPMorgan
Slide 9
Low Cost/High Margin Generic Drug
Business Model
China Pharma
Off-patent global
drugs with $1+
billion cumulative
sales
• Select off-patent global drugs
• Each drug has cumulative global sales of $1+
billion
• Reformulate these drugs
Reformulation &
Chinese Patent
Protection
• Obtain authorization from China’s State Food and
Drug Administration (SFDA)
• Obtain Chinese patent protection
• Chinese patent protection applies for 3 years
5 Year Barrier to
Entry
• 2-year ramp up period for a competitor to pursue a
drug that China Pharma is already marketing
• China Pharma is GMP certified – new competitors
must go through the GMP certification process
Slide 10
Patient Marketing Focus Forms a
Competitive Advantage
China Pharma
China Pharma customizes the
delivery system
and
marketing
for products
based on the
target
patient group
Target patient
group
 Maintaining various
patient focused delivery
systems enhances China
Pharma’s competitive
position in the market
 Types of delivery include:
•
•
•
•
•
Tablets
Capsules
Injectables
Granules
Oral fluids (suspension)
• Freeze dried
(Lyopholized injectables)
Slide 11
Strong Pipeline with Therapeutic Focus
China Pharma
Three major therapeutic areas:
 Cardiovascular and
Cerebrovascular diseases
 Infectious diseases
 Central nervous system (CNS)
diseases
Treats the
1st and 3rd leading causes
of death in China
Source: New England Journal of Medicine, Volume 353:1124-1134, September 15, 2005,
Number 11, ”Major Causes of Death Among Men and Women in China”
Slide 12
Diverse Product Portfolio
China Pharma
Treatment
Products
CNS and Neurology
Neurotrophicpeptide
Gastrodin
Ozagrel
Buflomedil
Infectious Diseases
Cefaclor
Clarithromycin
Andrographolide
Roxithromycin
pHGF
Nutritional Supplement
rhaFGF
Vitamin B6
Flu and Cold
Pusen OK – 1st to market OTC product comparable
to Aleve
Full list available from China Pharma
Slide 13
Newly Launched Drugs Treat High
Incidence Conditions
China Pharma
Pusen OK
Treatment: Flu (OTC) Launched: Q4 2005
Gastrodin
Treatment: Headaches and other CNS symptoms
Launched: Q1 2006
Hepatocyte
Growthpromoting
Factor
(pHGF)
Treatment: Promotes repair and growth in
liver cells and is indicated for the adjunct
treatment of hepatitis at various stages
Launched: Q1 2006
Ozagrel
Treatment: acute strokes Launched: Q3 2006
At 10%, China has one of the highest carrier rates of
hepatitis B in the world Source: WHO
Slide 14
China Pharma
Recently Approved Drugs Maintain
Focus on Leading Causes of Death
Propylgallate
Treatment: prophylaxis and
treatment for coronary heart
disease, cerebral embolism and
thrombophlebitis after surgery
Alginic Sodium
Diester
Treatment: ischemic
cardiovascular and
cerebrovascular diseases, and
high lipid levels in the blood
Granisetron
hydrochloride
Treatment: prevention of nausea
and vomiting associated with
radiation treatment and
chemotherapy in cancer patients.
Cardiovascular &
Cerebrovascular
Medicine
Slide 15
Research and Development is Supported by
Leading Institutions
China Pharma
China Pharma
(CPHI)
Joint
R&D
Chinese Academy of
Sciences
China University of
Pharmaceuticals
Academy of Military Medical
Science
Chongqing Pharmaceutical
Research Institute
China Sichuan University
China Pharma retains ownership rights to all resulting
intellectual property
Slide 16
Scalable Modern Production Facilities
with Multiple Production Lines
China Pharma
 Scalable GMP certified
manufacturing facilities with
multiple product lines in Haikou
City, China
 China Pharma has invested
$6.25M in expansion, upgrades,
and GMP certification
 Eight modern production lines
with capacity to meet future
demand
 Plans to invest $3M to expand
manufacturing capacity in 2007
for a production line dedicated
to antibiotics
Slide 17
Expansive Distribution Network Reaches
Main Market Channels
China Pharma
 China Pharma sells directly to hospitals and drug
stores via a dedicated sales and marketing team:
• 16 sales offices and approximately 550 agents
• Products are currently sold throughout China
15%
Drugstores as %
total sales
Hospitals as %
total sales
85%
Source: VOI Consulting, Inc., 2005 PharmaHandbook, Citigroup SmithBarney
Slide 18
New Rural Cooperative Medical Care System (CMS)
Enhances China Pharma’s Market Positioning
China Pharma
 China’s public health insurance regime provides
reimbursement for up to 100% of drug prices
 The Chinese government recently expanded health
insurance coverage to include rural populations in its
New Rural Cooperative Medical-care System (CMS),
thus opening up a potential new multi-billion dollar
drug market
 All of China Pharma’s prescription drugs are on the
national reimbursement list, and the Company will
benefit most from the New Rural CMS
Slide 19
Strategy for Growth
China Pharma
 Focus on billion dollar generic drug market
 Increase development of high margin
biotechnology and brand-name drugs
 Robust and diverse R&D pipeline
 Increased manufacturing capacity and
specialization
 Expanded marketing and promotion
 New product lines and related R&D including:
• Chemical drugs
• Biologics
• Traditional Chinese medicines
Slide 20
Experienced Management Team
China Pharma
Ms. Zhilin Li
President and
CEO
Founder of Helpson (wholly owned subsidiary of China Pharma)
Chairman and CEO of Helpson since 1993
Formerly the president of Haikou Bio-engineering Institute, and the vice
president of the Sichuan Institute of Biology
Graduated from Sichuan University in biology
Mr. Xinhua Wu
CFO
CFO since October 2005
CFO of Helpson since 1999
CFO and assistant to the CEO at Hainan Guobang Enterprises Inc. from
1992 to 1999
Graduated from the University of Wales with an MBA
Ms Yao Huang
CSO
Started at Helpson in 1994
Certified senior engineer and registered pharmacist
Graduated from Chengdu Chinese Medicine and Pharmaceutics
University
Over 20 years professional experience in pharmaceutical manufacturing
Ms. Jian Yang
Secretary of
Board





Secretary since October 2005
Founder and director of Helpson
Former researcher at the Sichuan Institute of Biology
Vice president of Haikou Biomedicine Engineering Co., Ltd. in 1991
Slide 21
Graduated from the University of Wales with an MBA
Strong Top Line Growth
China Pharma
$14.10
$13.72
YE05
9 Mos 2006
$7.74
$3.76
YE03
$ million
YE04
Unaudited financial data provided by China Pharma. The information provided is not intended to reflect U.S. GAAP and is provided
for informational purposes only. On June 16, 2005, Onny acquired Hainan Helpson Medical & Biotechnology Co., Ltd. (“Helpson”),
which is the main operating unit of China Pharma. The financial statements reflected in SEC filings include accounts and operations
of Helpson from the date of its acquisition on June 16, 2005. For additional information please refer to the notes accompanying the
financial statement in the 10K SEC filings.
Slide 22
Increasing Gross Profits
China Pharma
$6.51
$6.57
YE05
9 Mos 2006
$3.12
$1.91
YE03
YE04
$ million
Unaudited financial data provided by China Pharma. The information provided is not intended to reflect U.S. GAAP and is provided
for informational purposes only. On June 16, 2005, Onny acquired Hainan Helpson Medical & Biotechnology Co., Ltd. (“Helpson”),
which is the main operating unit of China Pharma. The financial statements reflected in SEC filings include accounts and operations
of Helpson from the date of its acquisition on June 16, 2005. For additional information please refer to the notes accompanying the
financial statement in the 10K SEC filings.
Slide 23
Growing Net Income
China Pharma
$5.78
$5.16
$2.34
$1.01
YE03
YE04
YE05
9 Mos 2006
$ million
Unaudited financial data provided by China Pharma. The information provided is not intended to reflect U.S. GAAP and is provided
for informational purposes only. On June 16, 2005, Onny acquired Hainan Helpson Medical & Biotechnology Co., Ltd. (“Helpson”),
which is the main operating unit of China Pharma. The financial statements reflected in SEC filings include accounts and operations
of Helpson from the date of its acquisition on June 16, 2005. For additional information please refer to the notes accompanying the
financial statement in the 10K SEC filings.
Slide 24
Attractive Gross and Net Margins
China Pharma
Gross Margin
50.7%
40.4%
YE03
YE04
46.2%
47.9%
YE05
9 Mos 2006
Profit Margin
28.2%
30.2%
YE03
YE04
41.1%
37.6%
YE05
9 Mos 2006
Unaudited financial data provided by China Pharma. The information is not intended to reflect U.S. GAAP and is provided for informational
purposes only. On June 16, 2005, Onny acquired Hainan Helpson Medical & Biotechnology Co., Ltd. (“Helpson”), which is the main operating unit
of China Pharma. The financial statements reflected in SEC filings included accounts and operations of Helpson from the date of its acquisition on
June 16, 2005. For additional information please refer to the notes accompanying the financial statement in the 10k SEC filings.
Slide 25
Income Statement
China Pharma
In $millions
Q3
2006
% of
sales
Q3
2005
% of
sales
9 Mos
2006
% of
sales
Revenues
5.0
100%
2.6
100%
13.7
100%
COGS
2.5
50%
1.6
62%
7.2
52%
Gross Profit
2.5
50%
1.0
38%
6.6
48%
Operating Exps.
.4
8%
0.3
11%
0.6
5%
Operating Income
2.1
41%
0.7
27%
5.9
43%
Net Income
1.7
34%
0.5
20%
5.1
37%
Slide 26
Solid Balance Sheet with No Debt
China Pharma
In $millions
Q3 2006
FY 2005
Current Assets
Working Capital
22.5
14.2
14.5
8.7
Current Liabilities
Long-term Liabilities
Shareholders’ Equity
8.4
0.03
17.1
5.8
0.03
11.7
Slide 27
Investment Highlights
China Pharma
 Profitable company with a low cost/high margin
business model
 Rapid top line growth and increasing profitability
 Positioned within the largest segments of the Chinese
pharmaceutical market
 Robust portfolio and pipeline of approximately 30
drugs that address large patient populations
 State-of-art modern manufacturing facilities with
multiple production lines and capacity to meet future
growth
 Industry dynamics support growth strategy
Slide 28