30th Sep 2014 14:44
LONDON (Alliance News) - Traditional Chinese medicine supplier Taihua PLC Tuesday said it swung to a loss in the first half of the year, as revenue was hit by lower sales of its two main products and government scrutiny of the Chinese medicine distribution market in the wake of the GlaxoSmithKline PLC bribery allegations.
Taihua reported a pretax loss of CNY423,000 for the six months to June 30, compared with a profit of CNY336,000 a year earlier, as revenue fell to CNY4.3 million, from CNY5.4 million.
Sales of Paclitaxel were 3,600 grammes at an average price of CNY371 a gram, generating revenue of CNY1.3 million, down from CNY1.9 million a year earlier. The company warned that sales of the product cannot be profitable given the price decline without sales of associated by-products. It said two by-products, 10-DAB and 7-Xylosyltaxol, have had successful extraction trials from the company's raw material and suitable customers have been identified and have taken the by-products for testing.
Paclitaxel is extracted from Yew tree bark and is used to treat some cancers.
Homoharringtonine sales, meanwhile, fell to CNY676,000, from CNY703,000. Volumes have fallen considerably in the past two years, but Taihua intends to carry on supplying it, hoping that volumes may recover.
Homoharringtonine is an alkaloid extracted from the branches and leaves of the Cephalotaxus tree. This drug has been prescribed for acute myeloid leukaemia and other cancers in China.
It said it had been unable to extend distribution of Chinese traditional medicine Bian Tong Pian in the half due to the impact of the Glaxo bribery allegations in China.
"The problems surrounding GlaxoSmithKline in China and associated investigations into the distribution of pharmaceuticals by the Chinese government has left distributors reluctant to take on new products. For the time being, given the government focus on this industry, they prefer to adopt a very conservative approach and only distribute their existing products," it said.
The company sells its Forsythia seed harvest in the second half of the year, but warned that growing conditions this year have not been optimal. The dried seeds and seed cases are used in traditional Chinese remedies for flu and cold symptoms.
"The region suffered a drought during the Spring. We do not yet have sufficient visibility to determine what, if any, effect this has had on the 2014 harvest. We have engaged the services of a specialist in the cultivation of Forsythia to assess the likely harvest in 2014 and advise what we can do to improve the harvest in subsequent years," it said.
It hold all costs associated with cultivating the Forsythia in the first half of the year in inventory, releasing them when sales are made in the second half of the year. It therefore has no impact on its first-half results. It said trade debtors generated from Forsythia sales were CNY46.0 million as of June 30, and it since received about CNY14.6 million in cash in respect of these debtors.
It said its cash position improved by CNY1.8 million over the first half to CNY36.4 million, despite the poor first-half trading conditions.
Taihua shares were down 9.1% at 2.50 pence Thursday.
By Steve McGrath; [email protected]; @stevemcgrath1
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