China Medical Technologies Reports Fourth Fiscal Quarter and Full Fiscal Year Financial Results

BEIJING, June 1, 2011 /PRNewswire-Asia-FirstCall/ -- China Medical Technologies, Inc. (the "Company") (Nasdaq: CMED), a leading China-based advanced in-vitro diagnostic ("IVD") company, announced its unaudited financial results for the fourth fiscal quarter ("4Q FY2010") and the full fiscal year ended March 31, 2011 ("FY2010") today.

4Q FY2010 Highlights
	For the Three Months Ended
	March 31, 2010		March 31, 2011		March 31, 2011
	RMB		RMB		US$		% change
	(in thousands except for per ADS information)
Net revenues	175,728		230,414		35,187		31.1%
Net income	4,820		16,095		2,458		233.9%
Diluted earnings per ADS*	0.19		0.61		0.09		221.1%
Non-GAAP net income	51,476		75,002		11,454		45.7%
Non-GAAP diluted earnings per ADS*	1.98		2.84		0.43		43.4%
Adjusted EBITDA	99,591		140,244		21,417		40.8%
FY2010 Highlights
	For the Year Ended
	March 31, 2010		March 31, 2011		March 31, 2011
	RMB		RMB		US$		% change
	(in thousands except for per ADS information)
Net revenues	723,071		842,366		128,639		16.5%
Net income (loss)	(69,582)		82,619		12,617		-
Diluted earnings (loss) per ADS*	(2.65)		3.14		0.48		-
Non-GAAP net income	187,295		273,056		41,699		45.8%
Non-GAAP diluted earnings per ADS*	7.13		10.39		1.59		45.7%
Adjusted EBITDA	387,580		493,254		75,326		27.3%

Outlook for first fiscal quarter ending June 30, 2011

• Target net revenues are expected to range from RMB232.0 million (US$35.4 million) to RMB234.0 million (US$35.7 million), representing a year-over-year increase of 24.6% - 25.7%.
• Target non-GAAP net income is expected to range from RMB73.0 million (US$11.1 million) to RMB74.0 million (US$11.3 million), representing a year-over-year increase of 28.0% - 29.8%.
• Target non-GAAP diluted earnings per ADS* is expected to range from RMB2.75 (US$0.42) to RMB2.79 (US$0.43), representing a year-over-year increase of 26.1% - 28.0%.

Outlook for full fiscal year ending March 31, 2012

• Target net revenues are expected to range from RMB970.0 million (US$148.1 million) to RMB995.0 million (US$151.9 million), representing a year-over-year increase of 15.2% - 18.1%.
• Target non-GAAP net income is expected to range from RMB310.0 million (US$47.3 million) to RMB318.0 million (US$48.6 million), representing a year-over-year increase of 13.5% - 16.5%. The slightly lower growth rate in non-GAAP net income is primarily due to the full year impact of additional interest expense arising from new convertible notes issued in December 2010.
• Target non-GAAP diluted earnings per ADS* is expected to range from RMB11.70 (US$1.79) to RMB12.00 (US$1.83), representing a year-over-year increase of 12.6% - 15.5%.

The above targets are based on the Company's current views on the operating and market conditions, which are subject to change.

*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 are pleased with the quarterly results, in particular, the continued growth of our molecular diagnostic business during the seasonally weak quarter. We expect our FISH business and HPV-DNA chip business to drive our growth in the following quarters," commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. "We will continue to expand our product offering in FISH probes and PCR assays as well as develop a new SPR analyzer through investment in research and development. We will leverage our established sales networks to introduce our new products to our hospital customers. In addition, we are working on several initiatives to support our sustainable growth including discussion with a leading independent laboratory testing service group in China for a potential collaboration to promote the use of molecular diagnostic tests to the group's hospital customers."

Mr. Sam Tsang, Chief Financial Officer of the Company commented, "We issued new convertible notes in December 2010 to extend our debt maturity profile. We have been focusing to improve our leverage profile and have reduced our net debt to adjusted EBITDA ratio from 5.1 times to 3.3 times. However, we believe that we are still maintaining relatively high leverage, and the continued improvement in our leverage to the level of 2 times or below is our priority. We have been very cautious in making capital expenditures and did not consider new acquisition and will continue to do so. Meanwhile, we will maintain our investment in product research and development which will support our future growth. We will also continue to invest in our direct sales network to attract and retain Tier 1 hospitals which are major consumers in China's healthcare industry."

4Q FY2010 Unaudited Financial Results

The Company reported net revenues of RMB230.4 million (US$35.2 million) for 4Q FY2010, representing a 31.1% increase from the corresponding period of FY2009.

The Company's revenues are currently generated from two segments, molecular diagnostic systems and immunodiagnostic systems. The molecular diagnostic system segment includes FISH products and SPR products while the immunodiagnostic system segment consists of ECLIA products. The customers of the molecular diagnostic system segment, that is, Tier 1 hospitals in China, are being served by the Company's direct sales personnel.

Molecular diagnostic system sales for 4Q FY2010 were RMB146.6 million (US$22.4 million), representing a 45.3% increase from the corresponding period of FY2009. The year-over-year increase was primarily due to the increase in usage of the Company's FISH probes by existing and new hospital customers as well as the sales of SPR-based HPV-DNA chips of RMB11.9 million (US$1.8 million) to hospitals during 4Q FY2010.

Immunodiagnostic system sales for 4Q FY2010 were RMB83.8 million (US$12.8 million), representing a 12.0% increase from the corresponding period of FY2009. The year-over-year increase was primarily due to the increase in sales of the Company's ECLIA reagent kits to existing and new distributors.

Gross margin was 61.4% for 4Q FY2010 which decreased year-over-year from 64.9% for the corresponding period of FY2009. The year-over-year decrease was primarily due to the classification of amortization of SPR intangible assets from operating expenses to cost of revenues after the commencement of sales of HPV-DNA chips in 2Q FY2010 which offset the positive impact on more contribution from the sales of FISH probes which generate higher gross margin. Non-GAAP gross margin was 82.4% for 4Q FY2010 which increased year-over-year from 77.7% for the corresponding period of FY2009. The year-over-year increase in non-GAAP gross margin was primarily due to more contribution from the sales of FISH probes which generate higher gross margin.

Research and development expenses were RMB12.6 million (US$1.9 million) for 4Q FY2010, representing a 21.8% year-over-year increase. Non-GAAP research and development expenses were RMB11.4 million (US$1.7 million) for 4Q FY2010, representing a 28.0% year-over-year increase. The year-over-year increase was primarily due to product research and development for SPR analyzers and PCR assays.

Sales and marketing expenses were RMB24.0 million (US$3.7 million) for 4Q FY2010, representing a 43.9% year-over-year increase. Non-GAAP sales and marketing expenses were RMB23.8 million (US$3.6 million) for 4Q FY2010, representing a 42.7% year-over-year increase. The year-over-year increase was primarily due to an increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB25.4 million (US$3.9 million) for 4Q FY2010, representing a 5.1% year-over-year decrease. Non-GAAP general and administrative expenses were RMB18.4 million (US$2.8 million) for 4Q FY2010, representing a 5.0% year-over-year increase.

Interest expense on convertible notes was RMB34.6 million (US$5.3 million) for 4Q FY2010. Non-GAAP interest expense on convertible notes was RMB33.2 million (US$5.1 million) for 4Q FY2010. As of March 31, 2011, the Company's outstanding convertible notes of US$22.7 million, US$248.0 million and US$150.0 million bear interest at 3.5%, 4% and 6.25% per annum, respectively, and will mature in November 2011, August 2013 and December 2016, respectively.

Interest expense related to amortization of convertible notes issuance costs was RMB4.2 million (US$0.6 million) for 4Q FY2010.

Interest expense related to amortization of share lending costs was RMB2.4 million (US$0.4 million) for 4Q FY2010.

Income tax expense was RMB28.1 million (US$4.3 million) for 4Q FY2010. The high effective tax rate was due to certain expenses of the Company such as stock compensation expense, amortization of acquired intangible assets and interest expense of convertible notes were not deductible for income tax purpose. In addition, the Company was required to accrue for withholding income tax on distributable earnings generated in China.

Net income was RMB16.1 million (US$2.5 million) for 4Q FY2010, which improved significantly from RMB4.8 million for the corresponding period of FY2009. Non-GAAP net income was RMB75.0 million (US$11.5 million) for 4Q FY2010, representing a 45.7% increase from the corresponding period of FY2009. The significant year-over-year increase was primarily due to the increase in both molecular diagnostic system sales and immunodiagnostic system sales.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") was RMB133.3 million (US$20.4 million) for 4Q FY2010, representing an 18.0% increase from the corresponding period of FY2009. The year-over-year increase in EBITDA was primarily due to the increase in both molecular diagnostic system sales and immunodiagnostic system sales.

Adjusted EBITDA was RMB140.2 million (US$21.4 million) for 4Q FY2010, representing a 40.8% increase from the corresponding period of FY2009. The reason for the increase is also due to increased sales in 4Q FY2010.

Stock compensation expense for 4Q FY2010 was RMB8.5 million (US$1.3 million), of which RMB0.1 million was allocated to cost of revenues, RMB1.2 million to research and development expenses, RMB0.2 million to sales and marketing expenses and RMB7.0 million to general and administrative expenses.

Amortization of acquired intangible assets for 4Q FY2010 was RMB48.2 million (US$7.4 million) which was all allocated to cost of revenues.

As of March 31, 2011, the Company's cash and cash equivalents were RMB1,123.8 million (US$171.6 million). Net cash generated from operating activities for 4Q FY2010 was RMB37.3 million (US$5.7 million). Net cash generated from investing activities for 4Q FY2010 was RMB18.8 million (US$2.9 million). Net cash used in financing activities for 4Q FY2010 was RMB48.9 million (US$7.5 million).

As of March 31, 2011, the Company's net accounts receivable was RMB481.1 million (US$73.5 million), representing an increase of 21.0% from the balance at December 31, 2010. The increase in net accounts receivable was primarily due to the increase in molecular diagnostic system sales to hospital customers.

FY2010 Unaudited Financial Results

Net revenues were RMB842.4 million (US$128.6 million) for FY2010, representing a 16.5% year-over-year increase. The year-over-year increase in revenues was primarily due to the increase in molecular diagnostic system sales.

Gross margin was 60.3% for FY2010 which decreased year-over-year from 67.1% for FY2009. The year-over-year decrease was primarily due to the classification of amortization of SPR intangible assets from operating expenses to cost of revenues after the commencement of sales of HPV-DNA chips in 2Q FY2010 which offset the positive impact on more contribution from the sales of FISH probes which generate higher gross margin. Non-GAAP gross margin was 80.3% for FY2010 which increased year-over-year from 79.6% for FY2009. The year-over-year increase in non-GAAP gross margin was primarily due to more contribution from the sales of FISH probes which generate higher gross margin.

Research and development expenses were RMB46.5 million (US$7.1 million) for FY2010, representing a 9.9% year-over-year increase. Non-GAAP research and development expenses were RMB41.5 million (US$6.3 million) for FY2010, representing a 15.5% year-over-year increase. The year-over-year increase was primarily due to product research and development for FISH probes, SPR analyzers and PCR assays.

Sales and marketing expenses were RMB88.2 million (US$13.5 million) for FY2010, representing a 37.7% year-over-year increase. Non-GAAP sales and marketing expenses were RMB87.5 million (US$13.4 million) for FY2010, representing a 36.6% year-over-year increase. The year-over-year increase was primarily due to an increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB96.6 million (US$14.7 million) for FY2010, representing a 33.3% year-over-year decrease. Non-GAAP general and administrative expenses were RMB65.4 million (US$10.0 million) for FY2010, representing a 40.8% year-over-year decrease. The year-over-year decrease was primarily because the Company incurred costs for the independent internal investigation in FY2009 which did not recur in FY2010.

Net income was RMB82.6 million (US$12.6 million) for FY2010, which improved significantly from net loss of RMB69.6 million for FY2009. Non-GAAP net income was RMB273.1 million (US$41.7 million) for FY2010, representing a 45.8% year-over-year increase from FY2009.

EBITDA was RMB531.2 million (US$81.1 million) for FY2010, representing a 43.1% year-over-year increase from FY2009.

Adjusted EBITDA was RMB493.3 million (US$75.3 million) for FY2010, representing a 27.3% year-over-year increase from FY2009.

Stock compensation expense for FY2010 was RMB37.2 million (US$5.7 million), of which RMB0.4 million was allocated to cost of revenues, RMB4.9 million to research and development expenses, RMB0.7 million to sales and marketing expenses and RMB31.2 million to general and administrative expenses.

Amortization of acquired intangible assets for FY2010 was RMB196.0 million (US$29.9 million), of which RMB168.7 million was allocated to cost of revenues and RMB27.3 million to operating expenses.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.5483 to US$1.00, the noon buying rate in New York City for cable transfers of RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board, as of Thursday, March 31, 2011. No representation is made that the RMB amounts could have been or could be converted into U.S. dollars at that rate or at any other rate on March 31, 2011 or at any other dates.

Product Development Plan

The Company plans to focus on the following product development activities with respect to its molecular diagnostic products:

FISH

• to develop more applications in the areas of prenatal diagnosis, cancer detection and companion diagnostics for cancer targeted drugs through internal research and development.

SPR

• to develop a new automated analyzer for hospitals and independent laboratories to conduct HPV tests using our DNA chips through internal research and development.

PCR

• to develop more assays in the area of companion diagnostics for cancer targeted drugs through internal research and development.

Update on Receivable from Chengxuan

As of March 31, 2011, the remaining amount of the receivable from Chengxuan, a company which is one of the Company's major shareholders and is owned by Mr. Xiaodong Wu, was reduced from US$18 million to US$15 million. This receivable relates to the sale of the Company's HIFU business to Chengxuan. Subsequently, Chengxuan paid US$8 million to the Company and indicated that the remaining balance of US$7 million together with interest thereon will be paid in full before June 30, 2011.

Non-GAAP Measure Disclosures

The Company reported its operating results in accordance with U.S. generally accepted accounting principles ("GAAP") for the three months and the year ended March 31, 2010 and 2011, respectively. The Company also presented non-GAAP information, which included EBITDA and adjusted EBITDA, for the three months and the year ended March 31, 2010 and 2011, respectively. The non-GAAP measures are defined below:

• Non-GAAP gross profit represents gross profit reported in accordance with GAAP, excluding the effects of stock compensation expense and amortization of acquired intangible assets.

• Non-GAAP gross margin represents non-GAAP gross profit divided by net revenues.

• Non-GAAP research and development expenses represent research and development expenses reported in accordance with GAAP, excluding the effects of stock compensation expense.

• Non-GAAP sales and marketing expenses represent sales and marketing expenses reported in accordance with GAAP, excluding the effects of stock compensation expense.

• Non-GAAP general and administrative expenses represent general and administrative expenses reported in accordance with GAAP, excluding the effects of stock compensation expense.

• Non-GAAP operating income represents operating income reported in accordance with GAAP, excluding the effects of stock compensation expense and amortization of acquired intangible assets.

• Non-GAAP interest expense on convertible notes represents interest expense on convertible notes reported in accordance with GAAP, excluding the effects of non-cash interest expense of convertible notes.

• Non-GAAP interest expense on amortization of share lending costs represents the exclusion of interest expense on amortization of share lending costs reported in accordance with GAAP, as this item is non-cash.

• Non-GAAP other income (expense), net represents other income and expense, net reported in accordance with GAAP, excluding the effects of gain on repurchase of convertible notes as well as high yield note offering expenses.

• Non-GAAP net income represents net income reported in accordance with GAAP, excluding the effects of stock compensation expense, amortization of acquired intangible assets, non-cash interest expense of convertible notes, interest expense for amortization of share lending costs, gain on repurchase of convertible notes as well as high yield note offering expenses.

• Non-GAAP earnings per ADS represents non-GAAP net income divided by the weighted average number of ADSs used in computing basic and diluted earnings per ADS in accordance with GAAP.

• EBIT represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense and income tax expense.

• EBITDA represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense, income tax expense, depreciation and amortization.

• Adjusted EBITDA represents EBITDA excluding the effects of stock compensation expense, gain on repurchase of convertible notes as well as high yield note offering expenses.

Non-GAAP financial measures are used by the Company in its 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 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 measures, please see the financial information included with this earnings announcement.

Conference Call

The Company's senior management team will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on June 2, 2011 (or 8:00 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 1-800-215-2410
-    International Dial-in Number 1-617-597-5410
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. U.S. Eastern Time on June 3, 2011.  

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: 61583099

About China Medical Technologies, Inc.

China Medical Technologies, Inc. is a leading China-based advanced IVD company using molecular diagnostic technologies including Fluorescent in situ Hybridization (FISH) and Surface Plasmon Resonance (SPR) and an immunodiagnostic technology, Enhanced Chemiluminescence Immunoassay (ECLIA), to develop, manufacture and distribute diagnostic products used for the detection of various cancers, diseases and disorders as well as companion diagnostic tests for targeted cancer drugs. The Company generates all of its revenues in China through the sale of diagnostic consumables including FISH probes, SPR-based DNA chips and ECLIA reagent kits to hospitals which are recurring users of the consumables for their patients. The Company sells FISH probes and SPR chips to large hospitals through its direct sales personnel and ECLIA reagent kits to small and mid-size hospitals through distributors. For more information, please visit http://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 "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the quotations from management in this press release, as well as its outlook for the first fiscal quarter ending June 30, 2011 and full fiscal year ending March 31, 2012, 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 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: [phone]
Email: [e-mail]

China Medical Technologies, Inc. Unaudited Condensed Consolidated Balance Sheets
	As of
	December 31, 2010		March 31, 2011
	RMB		RMB		US$
	(in thousands)
Assets
Current assets
Cash and cash equivalents	1,119,384		1,123,818		171,620
Trade accounts receivable, net	397,739		481,096		73,469
Inventories	16,640		19,273		2,943
Prepayments and other receivables	10,521		18,952		2,894
Due from a related party	118,800		98,225		15,000
Total current assets	1,663,084		1,741,364		265,926
Property, plant and equipment, net	144,251		139,448		21,295
Land use rights	6,906		6,859		1,047
Goodwill	8,654		8,654		1,322
Intangible assets, net	3,042,474		2,973,358		454,066
Convertible notes issuance costs	60,163		55,817		8,524
Share lending costs	25,133		22,562		3,445
Total assets	4,950,665		4,948,062		755,625
Liabilities
Current liabilities
Trade accounts payable	44,477		44,502		6,796
Accrued liabilities and other payables	174,978		191,120		29,186
Convertible notes	186,763		146,081		22,308
Income taxes payable	63,859		77,954		11,904
Total current liabilities	470,077		459,657		70,194
Convertible notes	2,626,800		2,606,223		398,000
Deferred income taxes	84,936		91,596		13,988
Total liabilities	3,181,813		3,157,476		482,182
Shareholders' equity
Ordinary shares US$0.1 par value:
500,000,000 authorized; 322,680,001 issued and      outstanding as of December 31, 2010 and March 31,     2011	258,840		258,840		39,528
Additional paid-in capital	869,439		875,448		133,691
Treasury stock	(201,362)		(201,362)		(30,750)
Accumulated other comprehensive loss	(76,923)		(77,293)		(11,804)
Retained earnings	918,858		934,953		142,778
Total shareholders' equity	1,768,852		1,790,586		273,443
Total liabilities and shareholders' equity	4,950,665		4,948,062		755,625

China Medical Technologies, Inc. Unaudited Condensed Consolidated Statements of Income and Reconciliations of GAAP Measures to Non-GAAP Measures
	For the Three Months Ended						For the Three Months Ended
	March 31, 2010						March 31, 2011
	GAAP		Adjustments		Non-GAAP		GAAP		Adjustments		Non-GAAP
	RMB		RMB		RMB		RMB		RMB		RMB
	As adjusted  (9)
	(in thousands except for per ADS information)
Net revenues (1)	175,728		-		175,728		230,414		-		230,414
Cost of revenues (2)	(61,624)		22,423		(39,201)		(88,948)		48,295		(40,653)
Gross profit	114,104		22,423		136,527		141,466		48,295		189,761
Operating expenses
Research and
development (3)	(10,352)		1,440		(8,912)		(12,612)		1,208		(11,404)
Sales and marketing (3)	(16,695)		-		(16,695)		(24,017)		192		(23,825)
General and
administrative (3)	(26,743)		9,252		(17,491)		(25,381)		7,009		(18,372)
Amortization of
SPR intangible
assets (4)	(27,343)		27,343		-		-		-		-
Total operating expenses	(81,133)		38,035		(43,098)		(62,010)		8,409		(53,601)
Operating income	32,971		60,458		93,429		79,456		56,704		136,160
Interest income	4,155		-		4,155		5,779		-		5,779
Interest expense –
convertible notes (5)	(34,831)		7,618		(27,213)		(34,612)		1,387		(33,225)
Interest expense –      amortization of      convertible notes      issuance costs	(4,263)		-		(4,263)		(4,150)		-		(4,150)
Interest expense –
amortization of
share lending costs (6)	(2,644)		2,644		-		(2,386)		2,386		-
Other income (expense),
net (7)	24,638		(24,064)		574		144		(1,570)		(1,426)
Income before
income tax	20,026		46,656		66,682		44,231		58,907		103,138
Income tax expense	(15,206)		-		(15,206)		(28,136)		-		(28,136)
Net income	4,820		46,656		51,476		16,095		58,907		75,002
Earnings per ADS
- basic (8)	0.19		1.79		1.98		0.61		2.25		2.86
- diluted (8)	0.19		1.79		1.98		0.61		2.23		2.84
Weighted average
number of ADS
- basic (8)	25,993,349		-		25,993,349		26,184,308		-		26,184,308
- diluted (8)	26,050,599		-		26,050,599		26,448,663		-		26,448,663

China Medical Technologies, Inc. Unaudited Condensed Consolidated Statements of Income and Reconciliations of GAAP Measures to Non-GAAP Measures Convenience Translation for Reference Only
	For the Three Months Ended
	March 31, 2011
	GAAP		Adjustments		Non-GAAP
	US$		US$		US$
	(in thousands except for per ADS information)
Net revenues (1)	35,187		-		35,187
Cost of revenues (2)	(13,583)		7,375		(6,208)
Gross profit	21,604		7,375		28,979
Operating expenses
Research and development (3)	(1,926)		185		(1,741)
Sales and marketing (3)	(3,668)		30		(3,638)
General and administrative (3)	(3,876)		1,070		(2,806)
Amortization of SPR intangible assets (4)	-		-		-
Total operating expenses	(9,470)		1,285		(8,185)
Operating income	12,134		8,660		20,794
Interest income	883		-		883
Interest expense – convertible notes (5)	(5,286)		212		(5,074)
Interest expense – amortization of
convertible notes issuance costs	(634)		-		(634)
Interest expense – amortization of
share lending costs (6)	(364)		364		-
Other income (expense), net (7)	22		(240)		(218)
Income before income tax	6,755		8,996		15,751
Income tax expense	(4,297)		-		(4,297)
Net income	2,458		8,996		11,454
Earnings per ADS
- basic (8)	0.09		0.35		0.44
- diluted (8)	0.09		0.34		0.43
Weighted average number of ADS
- basic (8)	26,184,308		-		26,184,308
- diluted (8)	26,448,663		-		26,448,663
For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.5483 to US$1.00, the noon buying rate in New York City for cable transfers of RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board, as of Thursday, March 31, 2011. No representation is made that the RMB amounts could have been or could be converted into U.S. dollars at that rate or at any other rate on March 31, 2011 or at any other dates.

Notes:

	For the Three Months Ended
	March 31, 2010		March 31, 2011
(1)  Net revenues	RMB'000		RMB'000		US$'000
- Molecular diagnostic systems	100,897		146,635		22,393
- Immunodiagnostic systems	74,831		83,779		12,794
	175,728		230,414		35,187
Molecular diagnostic systems
- HPV-DNA chips	-		11,922		1,821

(2) Non-GAAP numbers exclude stock compensation expense and amortization of acquired intangible assets.

	For the Three Months Ended
	March 31, 2010		March 31, 2011
	RMB'000		RMB'000		US$'000
Stock compensation expense	-		110		17
Amortization of acquired intangible assets	22,423		48,185		7,358
	22,423		48,295		7,375

(3) Non-GAAP numbers exclude stock compensation expense.
(4) Non-GAAP numbers exclude amortization of acquired intangible assets.
(5) Non-GAAP numbers exclude non-cash interest expense of convertible notes.
(6) Non-GAAP numbers exclude interest expense for amortization of share lending costs.
(7) Non-GAAP numbers exclude gain on repurchase of convertible notes.

	For the Three Months Ended
	March 31, 2010		March 31, 2011
	RMB'000		RMB'000		US$'000
Gain on repurchase of convertible notes	24,064		1,570		240

(8) Interest expense and amortization in connection with convertible notes were not added back in computing GAAP diluted earnings per ADS because they were anti-dilutive. Non-GAAP earnings per ADS represents non-GAAP net income divided by the weighted average number of ADSs used in computing basic and diluted earnings per ADS in accordance with GAAP.
(9) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing, effective on April 1, 2010,  the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the three months ended March 31, 2010 retrospectively in accordance with GAAP.

China Medical Technologies, Inc. Unaudited Condensed Consolidated Statements of Income and Reconciliations of GAAP Measures to Non-GAAP Measures
	For the Year Ended						For the Year Ended
	March 31, 2010						March 31, 2011
	GAAP		Adjustments		Non-GAAP		GAAP		Adjustments		Non-GAAP
	RMB		RMB		RMB		RMB		RMB		RMB
	As adjusted (9)
	(in thousands except for per ADS information)
Net revenues (1)	723,071		-		723,071		842,366		-		842,366
Cost of revenues (2)	(237,550)		89,720		(147,830)		(334,682)		169,086		(165,596)
Gross profit	485,521		89,720		575,241		507,684		169,086		676,770
Operating expenses
Research and
development (3)	(42,293)		6,335		(35,958)		(46,469)		4,946		(41,523)
Sales and marketing (3)	(64,055)		-		(64,055)		(88,182)		672		(87,510)
General and
administrative (3)	(144,671)		34,102		(110,569)		(96,567)		31,151		(65,416)
Amortization of
SPR intangible
assets (4)	(109,395)		109,395		-		(27,329)		27,329		-
Total operating expenses	(360,414)		149,832		(210,582)		(258,547)		64,098		(194,449)
Operating income	125,107		239,552		364,659		249,137		233,184		482,321
Interest income	13,456		-		13,456		20,882		-		20,882
Interest expense –
convertible notes (5)	(141,123)		30,477		(110,646)		(131,918)		22,628		(109,290)
Interest expense –      amortization of      convertible notes      issuance costs	(17,402)		-		(17,402)		(16,009)		-		(16,009)
Interest expense –
amortization of
share lending costs (6)	(10,912)		10,912		-		(9,731)		9,731		-
Other income (expense),
net (7)	24,848		(24,064)		784		64,086		(75,106)		(11,020)
Income (loss) before
income tax	(6,026)		256,877		250,851		176,447		190,437		366,884
Income tax expense	(63,556)		-		(63,556)		(93,828)		-		(93,828)
Net income (loss)	(69,582)		256,877		187,295		82,619		190,437		273,056
Earnings (loss) per ADS
- basic (8)	(2.65)		9.78		7.13		3.16		7.30		10.46
- diluted (8)	(2.65)		9.78		7.13		3.14		7.25		10.39
Weighted average
number of ADS
- basic (8)	26,254,639		-		26,254,639		26,114,768		-		26,114,768
- diluted (8)	26,254,639		-		26,254,639		26,280,000		-		26,280,000

China Medical Technologies, Inc. Unaudited Condensed Consolidated Statements of Income and Reconciliations of GAAP Measures to Non-GAAP Measures Convenience Translation for Reference only
	For the Year Ended
	March 31, 2011
	GAAP		Adjustments		Non-GAAP
	US$		US$		US$
	(in thousands except for per ADS information)
Net revenues (1)	128,639		-		128,639
Cost of revenues (2)	(51,110)		25,822		(25,288)
Gross profit	77,529		25,822		103,351
Operating expenses
Research and development (3)	(7,096)		755		(6,341)
Sales and marketing (3)	(13,466)		103		(13,363)
General and administrative (3)	(14,747)		4,757		(9,990)
Amortization of SPR intangible assets (4)	(4,173)		4,173		-
Total operating expenses	(39,482)		9,788		(29,694)
Operating income	38,047		35,610		73,657
Interest income	3,189		-		3,189
Interest expense – convertible notes (5)	(20,145)		3,455		(16,690)
Interest expense – amortization of
convertible notes issuance costs	(2,445)		-		(2,445)
Interest expense – amortization of
share lending costs (6)	(1,486)		1,486		-
Other income (expense), net (7)	9,786		(11,469)		(1,683)
Income before income tax	26,946		29,082		56,028
Income tax expense	(14,329)		-		(14,329)
Net income	12,617		29,082		41,699
Earnings per ADS
- basic (8)	0.48		1.12		1.60
- diluted (8)	0.48		1.11		1.59
Weighted average number of ADS
- basic (8)	26,114,768		-		26,114,768
- diluted (8)	26,280,000		-		26,280,000
For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.5483 to US$1.00, the noon buying rate in New York City for cable transfers of RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board, as of Thursday, March 31, 2011. No representation is made that the RMB amounts could have been or could be converted into U.S. dollars at that rate or at any other rate on March 31, 2011 or at any other dates.

Notes:

	For the Year Ended
	March 31, 2010		March 31, 2011
(1)  Net revenues	RMB'000		RMB'000		US$'000
- Molecular diagnostic systems	384,762		508,162		77,602
- Immunodiagnostic systems	338,309		334,204		51,037
	723,071		842,366		128,639
Molecular diagnostic systems
- HPV-DNA chips	-		24,928		3,807

(2) Non-GAAP numbers exclude stock compensation expense and amortization of acquired intangible assets.

	For the Year Ended
	March 31, 2010		March 31, 2011
	RMB'000		RMB'000		US$'000
Stock compensation expense	-		385		59
Amortization of acquired intangible assets	89,720		168,701		25,763
	89,720		169,086		25,822

(3) Non-GAAP numbers exclude stock compensation expense.
(4) Non-GAAP numbers exclude amortization of acquired intangible assets.
(5) Non-GAAP numbers exclude non-cash interest expense of convertible notes.
(6) Non-GAAP numbers exclude interest expense for amortization of share lending costs.
(7) Non-GAAP numbers exclude gain on repurchase of convertible notes as well as high yield note offering expenses.

	For the Year Ended
	March 31, 2010		March 31, 2011
	RMB'000		RMB'000		US$'000
Gain on repurchase of convertible notes	24,064		80,342		12,269
High yield note offering expenses	-		(5,236)		(800)
	24,064		75,106		11,469

(8) Interest expense and amortization in connection with convertible notes were not added back in computing GAAP diluted earnings per ADS because they were anti-dilutive. Non-GAAP earnings per ADS represents non-GAAP net income divided by the weighted average number of ADSs used in computing basic and diluted earnings per ADS in accordance with GAAP.
(9) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing, effective on April 1, 2010,  the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the year ended March 31, 2010 retrospectively in accordance with GAAP.

China Medical Technologies, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
	For the Three Months Ended
	March 31, 2010		March 31, 2011
	RMB		RMB		US$
	(in thousands)
Net cash provided by operating activities	59,758		37,339		5,702
Net cash provided by (used in) investing activities	(609)		18,789		2,869
Net cash used in financing activities	(73,596)		(48,921)		(7,471)
Effect of foreign currency exchange rate change on cash
and cash equivalents	13		(2,773)		(423)
Net increase (decrease) in cash and cash equivalents	(14,434)		4,434		677
Cash and cash equivalents:
At beginning of period	829,887		1,119,384		170,943
At end of period	815,453		1,123,818		171,620
	For the Year Ended
	March 31, 2010		March 31, 2011
	RMB		RMB		US$
	(in thousands)
Net cash provided by operating activities	279,877		224,176		34,234
Net cash provided by (used in) investing activities	(715,522)		94,169		14,381
Net cash used in financing activities	(205,061)		(3,000)		(458)
Effect of foreign currency exchange rate change on cash
and cash equivalents	(251)		(6,980)		(1,066)
Net increase (decrease) in cash and cash equivalents	(640,957)		308,365		47,091
Cash and cash equivalents:
At beginning of period	1,456,410		815,453		124,529
At end of period	815,453		1,123,818		171,620

China Medical Technologies, Inc. EBITDA and Adjusted EBITDA Measures
	For the Three Months Ended
	March 31, 2010		March 31, 2011
	RMB		RMB		US$
	As adjusted (1)
	(in thousands)
Net income	4,820		16,095		2,458
Adjustments:
Interest income	(4,155)		(5,779)		(883)
Interest expense – convertible notes	34,831		34,612		5,286
Interest expense – amortization of convertible        notes issuance costs	4,263		4,150		634
Interest expense – amortization of share        lending costs	2,644		2,386		364
Income tax expense	15,206		28,136		4,297
EBIT (2)	57,609		79,600		12,156
Adjustments:
Depreciation	5,588		5,510		842
Amortization	49,766		48,185		7,358
EBITDA (3)	112,963		133,295		20,356
EBITDA (3)	112,963		133,295		20,356
Adjustments:
Stock compensation expense	10,692		8,519		1,301
Gain on repurchase of convertible notes	(24,064)		(1,570)		(240)
Adjusted EBITDA (4)	99,591		140,244		21,417
	For the Year Ended
	March 31, 2010		March 31, 2011
	RMB		RMB		US$
	As adjusted (1)
	(in thousands)
Net income (loss)	(69,582)		82,619		12,617
Adjustments:
Interest income	(13,456)		(20,882)		(3,189)
Interest expense – convertible notes	141,123		131,918		20,145
Interest expense – amortization of convertible        notes issuance costs	17,402		16,009		2,445
Interest expense – amortization of share        lending costs	10,912		9,731		1,486
Income tax expense	63,556		93,828		14,329
EBIT (2)	149,955		313,223		47,833
Adjustments:
Depreciation	22,137		21,953		3,352
Amortization	199,115		196,030		29,936
EBITDA (3)	371,207		531,206		81,121
EBITDA (3)	371,207		531,206		81,121
Adjustments:
Stock compensation expense	40,437		37,154		5,674
Gain on repurchase of convertible notes	(24,064)		(80,342)		(12,269)
High yield note offering expenses	-		5,236		800
Adjusted EBITDA (4)	387,580		493,254		75,326

Notes:
(1) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing effective on April 1, 2010, the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the three months and the year ended March 31, 2010 retrospectively in accordance with GAAP.
(2) EBIT represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense and income tax expense.
(3) EBITDA represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense, income tax expense, depreciation and amortization.
(4) Adjusted EBITDA represents EBITDA excluding the effects of stock compensation expense, gain on repurchase of convertible notes as well as high yield note offering expenses.

SOURCE China Medical Technologies, Inc.

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