China Sky One Medical Inc., a Chinese over-the-counter drug maker, said Friday several major distributors have stopped doing business with the company, and it cut its 2010 profit and sales expectations.
The company said several major private distributors chose to end their relationships with the company because they learned that China Sky One is required to disclose information about their business in filings with the Securities and Exchange Commission. According to China Sky One, the distributors said the disclosures led to greater scrutiny of their businesses by Chinese government regulators.
China Sky One Medical said it can replace the relationships with distributors over time, but it will have lower profit and revenue in 2010 because of the termination of the agreements. It will also have greater selling and marketing costs in the second half of 2010 as it develops new relationships with distributors.
The Harbin, China, company now expects annual net income of $26 million to $31 million, down from a prior estimate of $40 million to $41 million. China Sky One cut its revenue forecast to a range of $128 million to $136 million. It previously expected $160 million to $164 million.
Analysts were expecting $152.5 million in revenue, according to Thomson Reuters.
The company also said Stanley Hao resigned as its chief financial officer on Sept. 1 for health reasons. Hao will remain on the board of directors.
Shares of China Sky One Medical plunged $2.54, or 26.2 percent, to $7.15 in aftermarket trading. The shares rose 10 cents to $9.69 during the day.