BEIJING, Feb. 18, 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 third fiscal quarter ended December 31, 2010 ("3Q FY2010") today.

3Q FY2010 Highlights

Nine Months FY2010 Highlights

Outlook for 4Q FY2010

• Target revenues are expected to be approximately RMB234.0 million (US$35.5 million), representing a year-over-year increase of 33.2%.
• Target non-GAAP net income is expected to be approximately RMB71.0 million (US$10.8 million), representing a year-over-year increase of 37.9%. The Company has taken into account the impact of incremental cash interest arising from the issuance of 2016 Convertible Notes in December 2010 to refinance its 2011 Convertible Notes.
• Target non-GAAP diluted earnings per ADS* is expected to be approximately RMB2.69 (US$0.41), representing a year-over-year increase of 35.9%.

Outlook for FY2010

• Target revenues are expected to be approximately RMB846.0 million (US$128.2 million), representing a year-over-year increase of 17.0%.
• Target non-GAAP net income is expected to be approximately RMB269.1 million (US$40.8 million), representing a year-over-year increase of 43.7%.
• Target non-GAAP diluted earnings per ADS* is expected to be approximately RMB10.24 (US$1.55), representing a year-over-year increase of 43.6%.

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 results of our 3Q FY2010," commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. "The business of HPV-DNA chips started to contribute increasing revenue to our molecular diagnostic division. We expect our molecular diagnostic revenues to keep driving the growth of the Company."

3Q FY2010 Unaudited Financial Results

The Company reported revenues of RMB223.9 million (US$33.9 million) for 3Q FY2010, representing a 30.0% 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 3Q FY2010 were RMB135.1 million (US$20.5 million), representing a 40.5% 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 RMB9.2 million (US$1.4 million) to hospitals during 3Q FY2010.

Immunodiagnostic system sales for 3Q FY2010 were RMB88.9 million (US$13.5 million), representing a 16.7% 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 58.1% for 3Q FY2010 which decreased year-over-year from 63.4% 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. Non-GAAP gross margin was 79.9% for 3Q FY2010 which increased year-over-year from 76.4% 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 RMB12.3 million (US$1.9 million) for 3Q FY2010, representing a 15.0% year-over-year increase. Non-GAAP research and development expenses were RMB11.2 million (US$1.7 million) for 3Q FY2010, representing a 22.2% year-over-year increase. The year-over-year increase was primarily due to product research and development for FISH probes and SPR chips.

Sales and marketing expenses were RMB24.4 million (US$3.7 million) for 3Q FY2010, representing a 28.2% year-over-year increase. Non-GAAP sales and marketing expenses were RMB24.2 million (US$3.7 million) for 3Q FY2010, representing a 27.2% 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 RMB21.0 million (US$3.2 million) for 3Q FY2010, representing an 18.8% year-over-year decrease. Non-GAAP general and administrative expenses were RMB13.7 million (US$2.1 million) for 3Q FY2010, representing a 20.6% year-over-year decrease. The year-over-year decrease was primarily due to decrease in professional fees and traveling expenses for 3Q FY2010.

Interest expense on convertible notes was RMB32.8 million (US$5.0 million) for 3Q FY2010. Non-GAAP interest expense on convertible notes was RMB26.7 million (US$4.0 million) for 3Q FY2010. As of December 31, 2010, the Company's outstanding convertible notes of US$29.1 million, US$248 million and US$150 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 on amortization of convertible notes issuance costs was RMB3.9 million (US$0.6 million) for 3Q FY2010.

Interest expense on amortization of share lending costs was RMB2.4 million (US$0.4 million) for 3Q FY2010.

Other income, net for 3Q FY2010 was RMB22.4 million (US$3.4 million), primarily due to a gain on repurchase of 2011 Convertible Notes. Non-GAAP other expense, net was RMB3.7 million (US$0.6 million) for 3Q FY2010.

Income tax expense was RMB25.2 million (US$3.8 million) for 3Q FY2010. The significant income tax expense was primarily because 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 during 3Q FY2010.

Net income was RMB35.8 million (US$5.4 million) for 3Q FY2010, which improved significantly from the net loss of RMB24.7 million for the corresponding period of FY2009. Non-GAAP net income was RMB75.6 million (US$11.5 million) for 3Q FY2010, representing a 65.8% 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 RMB148.9 million (US$22.6 million) for 3Q FY2010, representing an 81.8% increase from the corresponding period of FY2009. The significant year-over-year increase in EBITDA was primarily due to the increase in both molecular diagnostic system sales and immunodiagnostic system sales as well as a gain on repurchase of 2011 Convertible Notes.

Adjusted EBITDA was RMB131.5 million (US$19.9 million) for 3Q FY2010, representing a 42.8% increase from the corresponding period of FY2009. The reason for the increase is also due to increased sales in 3Q FY2010.

Stock compensation expense for 3Q FY2010 was RMB8.8 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 RMB7.3 million to general and administrative expenses.

Amortization of acquired intangible assets for 3Q FY2010 was RMB48.7 million (US$7.4 million) which was all allocated to cost of revenues.

As of December 31, 2010, the Company's cash and cash equivalents were RMB1,119.4 million (US$169.6 million). Net cash generated from operating activities for 3Q FY2010 was RMB49.7 million (US$7.5 million). Net cash generated from investing activities for 3Q FY2010 was RMB77.9 million (US$11.8 million). Net cash generated from financing activities for 3Q FY2010 was RMB190.5 million (US$28.9 million).

As of December 31, 2010, the Company's net accounts receivable was RMB397.7 million (US$60.3 million), representing an increase of 19.4% from the balance at September 30, 2010. The increase in net accounts receivable was primarily due to the increase in molecular diagnostic system sales to hospital customers.

Issuance of 2016 Convertible Notes

In December 2010, the Company issued US$150 million 6.25% convertible senior notes due December 2016 ("2016 Convertible Notes"). The Company used a large portion of the net proceeds from the 2016 Convertible Notes to repurchase US$105.9 million aggregate principal amount of its outstanding convertible notes due November 2011 ("2011 Convertible Notes") and recorded a gain of approximately US$4.8 million and a reduction of additional paid-in capital of approximately US$8.6 million. The remaining balance of 2011 Convertible Notes was US$29.1 million in principal amount on December 31, 2010. The Company will continue to look for opportunities to repurchase the remaining 2011 Convertible Notes before maturity in November 2011. Approximately 900,000 ADSs were returned to the Company as treasury stock following the repurchase of 2011 Convertible Notes under the prepaid forward arrangement in connection with the issuance of 2011 Convertible Notes. Upon the issuance of 2016 Convertible Notes, the Company expensed off the costs of approximately US$0.8 million in connection with the suspended high yield note offering in December 2010.

Nine Months FY2010 Unaudited Financial Results

Revenues were RMB612.0 million (US$92.7 million) for the nine months ended December 31, 2010, representing an 11.8% increase from the corresponding period of FY2009. The year-over-year increase in revenues was primarily due to the increase in molecular diagnostic system sales.

Gross margin was 59.8% for the nine months ended December 31, 2010 which decreased year-over-year from 67.9% 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. Non-GAAP gross margin was 79.6% for the nine months ended December 31, 2010 which decreased year-over-year from 80.2% for the corresponding period of FY2009. The year-over-year decrease in non-GAAP gross margin was primarily due to the impact of the price reduction for ECLIA reagent kits.

Research and development expenses were RMB33.9 million (US$5.1 million) for the nine months ended December 31, 2010, representing a 6.0% year-over-year increase. Non-GAAP research and development expenses were RMB30.1 million (US$4.6 million) for the nine months ended December 31, 2010, representing an 11.4% year-over-year increase. The year-over-year increase was primarily due to product research and development for FISH probes and SPR chips.

Sales and marketing expenses were RMB64.2 million (US$9.7 million) for the nine months ended December 31, 2010, representing a 35.5% year-over-year increase. Non-GAAP sales and marketing expenses were RMB63.7 million (US$9.6 million) for the nine months ended December 31, 2010, representing a 34.5% 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 RMB71.2 million (US$10.8 million) for the nine months ended December 31, 2010, representing a 39.6% year-over-year decrease. Non-GAAP general and administrative expenses were RMB47.0 million (US$7.1 million) for the nine months ended December 31, 2010, representing a 49.5% year-over-year decrease. The year-over-year decrease was primarily because the Company incurred costs for the independent internal investigation during the nine-month period ended December 31, 2009 which did not recur in 2010 and lower allowance for doubtful accounts.

Net income was RMB66.5 million (US$10.1 million) for the nine months ended December 31, 2010, which improved significantly from the net loss of RMB74.4 million for the corresponding period of FY2009. Non-GAAP net income was RMB198.1 million (US$30.0 million) for the nine months ended December 31, 2010, representing a 45.8% increase from the corresponding period of FY2009.

EBITDA was RMB397.9 million (US$60.3 million) for the nine months ended December 31, 2010, representing a 54.1% increase from the corresponding period of FY2009.

Adjusted EBITDA was RMB353.0 million (US$53.5 million) for 3Q FY2010, representing a 22.6% increase from the corresponding period of FY2009.

Stock compensation expense for the nine months ended December 31, 2010 was RMB28.6 million (US$4.3 million), of which RMB0.3 million was allocated to cost of revenues, RMB3.7 million to research and development expenses, RMB0.5 million to sales and marketing expenses and RMB24.1 million to general and administrative expenses.

Amortization of acquired intangible assets for the nine months ended December 31, 2010 was RMB147.8 million (US$22.4 million), of which RMB120.5 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 RMB6.6000 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, December 30, 2010. 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 December 30, 2010 or at any other dates.

Update on Receivable from Chengxuan

As of December 31, 2010, the remaining amount of receivable due December 31, 2010 from Chengxuan, one of the Company's major shareholders and owned by Mr. Xiaodong Wu, was reduced from US$30 million to US$18 million. This receivable relates to the sale of the Company's HIFU business to Chengxuan. Chengxuan made two payments to the Company in the amount of US$8 million and US$4 million during 3Q FY2010. Subsequently, Chengxuan made another payment of US$3 million to the Company in January 2011. Chengxuan indicated to the Company that payments will be made to the Company to pay off the remaining balance together with interest thereon 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 nine months ended December 31, 2009 and 2010, respectively. The Company also presented non-GAAP information, which included EBITDA and adjusted EBITDA, for the three months and nine months ended December 31, 2009 and 2010, respectively. The non-GAAP measures are defined below:

• Non-GAAP gross profit represents gross profit reported in accordance with GAAP, adjusted for 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, adjusted for the effects of stock compensation expense.

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

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

• Non-GAAP operating income represents operating income reported in accordance with GAAP, adjusted for 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, adjusted for the effects of non-cash interest expense of convertible notes.

• Non-GAAP other income (expense), net represents other income and expense, net reported in accordance with GAAP, adjusted for 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, adjusted for the effects of stock compensation expense, amortization of acquired intangible assets, non-cash interest expense of convertible notes, non-cash 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.

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

• Adjusted EBITDA represents EBITDA adjusted for 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 February 18, 2011 (or 9:00 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:

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 February 19, 2011.

The dial-in details for the replay are as follows:

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 4Q FY2010 and full year FY2010, 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.

Notes:

Notes:

SOURCE China Medical Technologies, Inc.

Source: PR Newswire (February 18, 2011 - 7:00 AM EST)

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    1Q FY2010 Highlights
    -- Revenues decreased by 10.9% year-over-year to RMB186.2 million (US$27.5
       million) but increased by 5.9% sequentially.
    -- Net income was RMB33.7 million (US$5.0 million).
    -- Non-GAAP net income, as defined below, decreased by 21.4% year-over-
       year to RMB57.0 million (US$8.4 million) but increased by 10.8%
       sequentially.
    -- EBITDA, as defined below, was RMB142.0 million (US$20.9 million).
    -- Adjusted EBITDA, as defined below, was RMB105.2 million (US$15.5
       million).
    -- Diluted earnings per ADS* was RMB1.29 (US$0.19).
    -- Non-GAAP diluted earnings per ADS*, as defined below, decreased by
       20.4% year-over-year to RMB2.18 (US$0.32) but increased by 10.1%
       sequentially.
    -- Net cash generated from operations was RMB69.8 million (US$10.3
       million).
    -- Approximately RMB101.7 million (US$15.0 million) 3.5% convertible notes
       and RMB113.6 million (US$16.8 million) 4% convertible notes were
       purchased and cancelled by the Company. Approximately 285,000 ADSs*
       were returned to the Company under the share lending agreement in
       connection with the issuance of 4% convertible notes in August 2008.

    Outlook for 2Q FY2010
    -- Target revenues are expected to be not less than RMB200.0 million
       (US$29.5 million), representing a year-over-year increase of not less
       than 20.4% and a quarter-over-quarter increase of not less than 7.4%.
    -- Target non-GAAP net income is expected to be not less than RMB65.0
       million (US$9.6 million), representing a year-over-year increase of not
       less than 267.9% and a quarter-over-quarter increase of not less than
       14.0%.
    -- Target non-GAAP diluted earnings per ADS* is expected to be not less
       than RMB2.49 (US$0.37), representing a year-over-year increase of not
       less than 271.6% and a quarter-over-quarter increase of not less than
       14.2%.

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 third consecutive sequential growth in our quarterly revenues. Following the recent receipt of SFDA approval for our SPR-based HPV-DNA chip and positive feedback from the trial use of our chip by our hospital customers, we believe that we will achieve accelerated sequential growth in the upcoming quarters," commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company.

1Q FY2010 Unaudited Financial Results

The Company reported revenues of RMB186.2 million (US$27.5 million) for 1Q FY2010, representing a 10.9% decrease from the corresponding period of FY2009 but a 5.9% increase from 4Q 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.

Molecular diagnostic system sales for 1Q FY2010 were RMB108.1 million (US$15.9 million), representing a 9.8% increase from the corresponding period of FY2009 and a 7.1% increase from 4Q FY2009. The year-over-year and sequential increase was primarily due to the increase in usage of the Company's FISH probes by existing and new hospital customers served by the Company's direct sales personnel.

Immunodiagnostic system sales for 1Q FY2010 were RMB78.1 million (US$11.5 million), representing a 29.3% decrease from the corresponding period of FY2009 and a 4.3% increase from 4Q FY2009. The year-over-year decrease was primarily due to the price reduction for ECLIA reagent kits since September 2009.

Gross margin was 67.0% for 1Q FY2010 which decreased year-over-year from 73.5% for the corresponding period of FY2009 but improved sequentially from 64.9% for 4Q FY2009. The year-over-year decrease in gross margin was primarily due to the impact of the price reduction for ECLIA reagent kits. The sequential increase in gross margin was primarily due to the price reduction for major raw materials used in the production of ECLIA reagent kits and more contribution from the sales of FISH probes which generate higher gross margin.

Research and development expenses were RMB10.6 million (US$1.6 million) for 1Q FY2010, representing a 9.2% year-over-year decrease but a 2.7% sequential increase. The year-over-year decrease was primarily due to lower stock compensation expenses.

Sales and marketing expenses were RMB18.3 million (US$2.7 million) for 1Q FY2010, representing a 68.0% year-over-year increase and a 9.4% sequential increase. The year-over-year and sequential increase was primarily due to the increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB25.1 million (US$3.7 million) for 1Q FY2010, representing a 46.4% year-over-year decrease and a 6.0% sequential decrease. The year-over-year decrease was primarily due to no costs of independent internal investigation for 1Q FY2010.

Amortization of SPR intangible assets was RMB27.3 million (US$4.0 million) for 1Q FY2010. Due to the commencement of sales of HPV-DNA chips, the amortization of SPR intangible assets will be classified from operating expenses to cost of revenues starting from 2Q FY2010.

Interest expense on convertible notes was RMB32.5 million (US$4.8 million) for 1Q FY2010. As of June 30, 2010, the Company's outstanding convertible notes of US$135 million and US$248 million bear interest at 3.5% and 4% per annum, respectively, and will mature in November 2011 and August 2013, respectively.

Interest expense on amortization of convertible notes issuance costs was RMB4.0 million (US$0.6 million) for 1Q FY2010.

Due to the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or the financing effective on April 1, 2010, the Company recorded additional non-cash interest expense on amortization of share lending costs of RMB2.5 million (US$0.4 million) for the 4% convertible notes in 1Q FY2010. The Company also made adjustments related to these convertible notes for the corresponding periods of FY2009 by increasing non-cash interest expense on amortization of share lending costs by RMB2.6 million and RMB2.8 million for 4Q FY2009 and 1Q FY2009 respectively, to adopt this guidance retrospectively. There is no share lending arrangement for 3.5% convertible notes.

Other income was RMB43.3 million (US$6.4 million) for 1Q FY2010. The significant year-over-year and sequential increase was primarily due to the gain from the purchase of the Company's convertible notes on the open market.

Income tax expense was RMB18.7 million (US$2.8 million) for 1Q FY2010. The significant income tax expense was primarily because 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 is required to accrue for withholding income tax on distributable earnings generated in China during 1Q FY2010.

Net income was RMB33.7 million (US$5.0 million) for 1Q FY2010, representing a significant increase from the corresponding period of FY2009 and 4Q FY2009.

Non-GAAP net income was RMB57.0 million (US$8.4 million) for 1Q FY2010, representing a 21.4% decrease from the corresponding period of FY2009 but a 10.8% increase from 4Q FY2009.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") was RMB142.0 million (US$20.9 million) for 1Q FY2010, representing a 26.6% increase from the corresponding period of FY2009 and a 25.7% increase from 4Q FY2009.

Adjusted EBITDA which excludes stock compensation expense and gain on purchase of convertible notes was RMB105.2 million (US15.5 million) for 1Q FY2010, representing a 15.4% decrease from the corresponding period of FY2009 but a 5.6% increase from 4Q FY2009.

Stock compensation expense for 1Q FY2010 was RMB10.6 million (US$1.6 million), of which RMB0.1 million was allocated to cost of revenues, RMB1.4 million to research and development expenses, RMB0.1 million to sales and marketing expenses and RMB9.0 million to general and administrative expenses.

Amortization of acquired intangible assets for 1Q FY2010 was RMB49.7 million (US$7.3 million), of which RMB22.4 million was allocated to cost of revenues and RMB27.3 million to operating expenses. Due to the commencement of sales of HPV-DNA chips, amortization of acquired intangible assets will all be allocated to cost of revenues starting from 2Q FY2010.

As of June 30, 2010, the Company's cash and cash equivalents was RMB742.3 million (US$109.5 million). Net cash generated from operating activities for 1Q FY2010 was RMB69.8 million (US$10.3 million).

As of June 30, 2010, the Company's net accounts receivable was RMB311.3 million (US$45.9 million), representing an increase of 2.6% from the balance at March 31, 2010.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.7815 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 Wednesday, June 30, 2010. 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 June 30, 2010 or at any other dates.

Non-GAAP Measure Disclosures

The Company provides gross profit, operating income, net income, earnings per ADS, EBITDA and adjusted EBITDA on a Non-GAAP basis to enable investors to better assess the Company's operating performance. The Non-GAAP measures described by the Company are reconciled to the corresponding GAAP measures in the exhibit below titled "Reconciliations of GAAP measures to Non-GAAP measures".

The Company reported for 1Q FY2010 and provided guidance for 2Q FY2010 net income and diluted earnings per ADS on a Non-GAAP basis. Each of the terms used by the Company is defined as follows:

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

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

    -- Non-GAAP net income represents net income reported in accordance with
       GAAP, adjusted for the effects of stock compensation expense,
       amortization of acquired intangible assets, non-cash interest expense
       of convertible notes, non-cash interest expense for amortization of
       share lending costs and gain on purchase of convertible notes.

    -- 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.

    -- EBITDA represents net income reported in accordance with GAAP, adjusted
       for the effects of interest income, interest expenses, income tax
       expense, depreciation as well as amortization of acquired intangible
       assets.

    -- Adjusted EBITDA represents EBITDA adjusted for the effects of stock
       compensation expense and gain on purchase of convertible notes.

Non-GAAP financial measures are used by the Company in their 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 August 16, 2010 (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 1-866-543-6407
    -- International Dial-in Number 1-617-213-8898
    Passcode: CMEDCALL

A live webcast of the conference call will be available on http://ir.chinameditech.... .

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 August 17, 2010.

    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: 57983372

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 force and ECLIA reagent kits to small and mid-size hospitals through distributors. For more information, please visit http://www.chinameditech... .

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 "will," "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 2Q FY2010, 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.

    For more information, please contact:

     Sam Tsang and Winnie Yam
     Tel:   +852-2511-9808
     Email: IR@chinameditech.com



    China Medical Technologies, Inc.
    Unaudited Condensed Consolidated Balance Sheets
                                                         As of
                                                 March 31,      June 30,
                                                   2010           2010
                                                    RMB       RMB      US$
                                               As adjusted(1)
                                                       (in thousands)
    Assets
    Current assets
    Cash and cash equivalents                     815,453   742,340  109,465
    Trade accounts receivable, net                303,368   311,282   45,902
    Inventories                                    24,889    20,177    2,975
    Prepayments and other receivables              21,508    12,048    1,777
    Due from a related party                      204,774   203,445   30,000
        Total current assets                    1,369,992 1,289,292  190,119


    Property, plant and equipment, net            155,825   151,621   22,358
    Land use rights                                 7,049     7,001    1,032
    Goodwill                                        8,654     8,654    1,276
    Intangible assets, net                      3,285,190 3,216,535  474,311
    Convertible notes issuance costs               46,681    39,166    5,775
    Share lending costs(1)                         35,678    30,744    4,534
        Total assets                            4,909,069 4,743,013  699,405

    Liabilities
    Current liabilities
    Trade accounts payable                         20,126    24,136    3,559
    Accrued liabilities and other payables        183,498   186,036   27,433
    Income taxes payable                           57,529    56,518    8,334
        Total current liabilities                 261,153   266,690   39,326

    Convertible notes
                                                2,777,086 2,556,014  376,910
    Deferred income taxes                          67,134    72,518   10,694
        Total liabilities                       3,105,373 2,895,222  426,930

    Shareholders' equity
    Ordinary shares US$0.1 par value:
    500,000,000 authorized; 322,680,001 issued
     and outstanding as of March
     31, 2010 and June 30, 2010                   258,840   258,840   38,169
    Additional paid-in capital(1)                 808,221   820,778  121,032
    Treasury stock                                (45,143)  (47,108)  (6,947)
    Accumulated other comprehensive loss(1)       (70,556)  (70,731) (10,430)
    Retained earnings(1)                          852,334   886,012  130,651
        Total shareholders' equity              1,803,696 1,847,791  272,475

        Total liabilities and shareholders'
         equity                                 4,909,069 4,743,013  699,405

    Note:

    (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 balance sheet as of March 31, 2010
        retrospectively in accordance with GAAP.



    China Medical Technologies, Inc.
    Unaudited Condensed Consolidated Statements of Income

                                          For the Three Months Ended
                                    June 30,    March 31,
                                      2009        2010         June 30, 2010
                                       RMB         RMB        RMB        US$
                                As adjusted(4) As adjusted(4)

                                  (in thousands except for per ADS information)

    Revenues, net(1)                 208,957     175,728    186,170     27,453
    Cost of revenues(2)              (55,413)    (61,624)   (61,354)    (9,047)
    Gross profit                     153,544     114,104    124,816     18,406
    Operating expenses
      Research and development(2)    (11,703)    (10,352)   (10,632)    (1,568)
      Sales and marketing(2)         (10,870)    (16,695)   (18,266)    (2,694)
      General and administrative(2)  (46,954)    (26,743)   (25,149)    (3,708)
      Amortization of SPR
       intangible assets             (27,352)    (27,343)   (27,329)    (4,030)
        Total operating expenses     (96,879)    (81,133)   (81,376)   (12,000)
    Operating income                  56,665      32,971     43,440      6,406
      Interest income                  2,773       4,155      4,597        678
      Interest expense - convertible
       notes                         (35,432)    (34,831)   (32,505)    (4,793)
      Interest expense -
       amortization of convertible
       notes issuance costs           (4,380)     (4,263)    (4,012)      (592)
      Interest expense -
       amortization of share lending
       costs(4)                       (2,756)     (2,644)    (2,475)      (365)
      Other income, net                  240      24,638     43,295      6,384
    Income before income tax          17,110      20,026     52,340      7,718
    Income tax expense               (16,919)    (15,206)   (18,662)    (2,752)
    Net income                           191       4,820     33,678      4,966
    Earnings per ADS
    - basic                             0.01        0.19       1.30       0.19
    - diluted(3)                        0.01        0.19       1.29       0.19
    Weighted average number of ADS
    - basic                       26,324,842  25,993,349 26,005,975 26,005,975
    - diluted(3)                  26,438,076  26,050,599 26,128,403 26,128,403

    Notes:

    (1)  Revenues, net               RMB'000     RMB'000    RMB'000    US$'000
    - Molecular diagnostic systems    98,466     100,897    108,092     15,940
    - Immunodiagnostic systems       110,491      74,831     78,078     11,513
                                     208,957     175,728    186,170     27,453

    (2)  Stock compensation          RMB'000     RMB'000    RMB'000    US$'000
     expense
    - Cost of revenues                    --          --         52          8
    - Research and development         2,047       1,440      1,418        209
    - Sales and marketing                 --          --         91         13
    - General and administrative      10,110       9,252      9,031      1,332
                                      12,157      10,692     10,592      1,562

    (3) Interest expense and amortization in connection with convertible notes
        were not added back in computing diluted earnings per ADS because they
        were anti-dilutive.

    (4) 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 June 30,
        2009 and March 31, 2010 retrospectively in accordance with GAAP.



    China Medical Technologies, Inc.
    Reconciliations of GAAP measures to Non-GAAP measures

                                      For the Three Months Ended
                              June 30,     March 31,
                                2009         2010          June 30, 2010
                                 RMB          RMB         RMB          US$
                            As adjusted(2)As adjusted(2)

                               (in thousands except for per ADS information)

    Gross profit               153,544      114,104     124,816       18,406
    Adjustments:
      Stock compensation
       expense                      --           --          52            8
      Amortization of
        acquired
        intangible assets       22,455       22,423      22,414        3,305
    Non-GAAP gross profit      175,999      136,527     147,282       21,719
    Gross margin                 73.5%        64.9%       67.0%        67.0%
    Non-GAAP gross margin        84.2%        77.7%       79.1%        79.1%

    Operating income            56,665       32,971      43,440        6,406
    Adjustments:
      Stock compensation
       expense                  12,157       10,692      10,592        1,562
      Amortization of
       acquired
       intangible assets        49,807       49,766      49,743        7,335
    Non-GAAP operating
     income                    118,629       93,429     103,775       15,303
    Operating margin             27.1%        18.8%       23.3%        23.3%
    Non-GAAP operating
     margin                      56.8%        53.2%       55.7%        55.7%

    Net income                     191        4,820      33,678        4,966
    Adjustments:
      Stock compensation
       expense                  12,157       10,692      10,592        1,562
      Amortization of
       acquired
       intangible assets        49,807       49,766      49,743        7,335
      Non-cash interest
       expense of
       convertible notes         7,620        7,618       7,916        1,167
      Non-cash interest
       expense -
       amortization of share
       lending costs(2)          2,756        2,644       2,475          365
      Gain on purchase of
       convertible notes            --      (24,064)    (47,393)      (6,989)
    Non-GAAP net income         72,531       51,476      57,011        8,406
    GAAP net margin               0.1%         2.7%       18.1%        18.1%
    Non-GAAP net margin          34.7%        29.3%       30.6%        30.6%

    Net income                     191        4,820      33,678        4,966
    Adjustments:
      Interest income           (2,773)      (4,155)     (4,597)        (678)
      Interest expense -
       convertible notes        35,432       34,831      32,505        4,793
      Interest expense -
       amortization
       of convertible notes
       issuance costs            4,380        4,263       4,012          592
      Interest expense -
       amortization
       of share lending
       costs(2)                  2,756        2,644       2,475          365
      Income tax expense        16,919       15,206      18,662        2,752
      Depreciation               5,450        5,588       5,475          807
      Amortization of
       acquired
       intangible assets        49,807       49,766      49,743        7,335
    EBITDA                     112,162      112,963     141,953       20,932
    EBITDA margin                53.7%        64.3%       76.2%        76.2%

    EBITDA                     112,162      112,963     141,953       20,932
    Adjustments:
      Stock compensation
       expense                  12,157       10,692      10,592        1,562
      Gain on purchase of
       convertible notes            --      (24,064)    (47,393)      (6,989)
    Adjusted EBITDA            124,319       99,591     105,152       15,505
    Adjusted EBITDA
     margin                      59.5%        56.7%       56.5%        56.5%

    Earnings per ADS
    - basic                       0.01         0.19        1.30         0.19
    - diluted                     0.01         0.19        1.29         0.19

    Non-GAAP earnings per
     ADS
    - basic                       2.76         1.98        2.19         0.32
    - diluted(1)                  2.74         1.98        2.18         0.32

    Weighted average
     number of ADS
    - basic                 26,324,842   25,993,349  26,005,975   26,005,975
    - diluted(1)            26,438,076   26,050,599  26,128,403   26,128,403

    Notes:

    (1) Interest expense and amortization in connection with convertible notes
        were not added back in computing non-GAAP diluted earnings per ADS
        because they were anti-dilutive.

    (2) 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 June 30,
        2009 and March 31, 2010 retrospectively in accordance with GAAP.