China Biologic Products Holdings Inc (NASDAQ: CBPO) stock fell over 5.2% on 6th August, 2018(as of 4:30 PM GMT-4; Source: Google finance), after an impact of regulatory changes coupled with rising competition in China’s healthcare market. Due to stricter drug purchase expenses, the group faced double-digit decline in the direct sales channel revenue. Rising competition of distribution market has led to a 10% cut in year over year price across major products, and increase in expenses. The income from operations fell 15.3% while operating margin also lost to 29.8%. Non-gaap adjusted income from operations fell 3.7% with decline in 21% in operations income. There is even much shrink in net income attributable to the company of about 14.1% in RMB terms and 7.7%in USD terms as compared to the same in quarter of 2017. Non-GAAP adjusted earnings per share decreased to $1.17 from $1.35.
With those even the sales volume of IVIG products fell by 9% on the back of prescription volumes pressure at hospitals. The sales percentage also got down by 23.4% reflecting the decline in sales volume and sales price.
The Company group also downgraded the outlook for the year leading to a further decline in the stock. They are forecasting a non-GAAP adjusted income from operations to rise 0-2% but non-GAAP adjusted net income to fall 2-4%. The first half year forecast was lowered in account of worse results for the quarter mainly due to persisting regulatory headwinds leading to downward pressure on sales growth. The boost in payables and liabilities led to more market activities and promoting its products with two invoice policy.
On the other hand, for the second quarter of 2018, the total sales got increased by 25.5% driven by favourable exchange rates. Gross profit rose over 39.7% to $82.7 million from $59.2 million while the margins increased about 2.4%. The revenue from human albumin surged 9.6% and the sales volume rose by 15.6 % boosted by sales volumes in the distributors and the pharmacy channels. The revenue from placenta polypeptide products rose about 71.6% which reached 14.1 % of total sales supported by high unit selling prices. General and administrative expenses surged by $6.3 million which mainly included rise in share-based compensation expenses by $2.7 million and $1.0 million increase of taibang’s depreciation expense and property tax. The research and development expenses in the second quarter reached $1.9 million.