China SXT Gets Regulatory Approval for DNA Testing Lab; Stock Up 7%

The maker of traditional medicines in China says the new facilities will significantly enhance its R&D and quality control capabilities.

Author: Anna Vodopyanova   

China SXT Pharmaceuticals Inc. (Nasdaq: SXTC) saw its stock soar 55% early Thursday before settling 7% higher on the day after it announced its DNA testing lab received approval from the Jiangsu province drug regulator.

Based in Taizhou, Jiangsu province, SXTC develops and sells traditional Chinese medicine (TCM) and health food supplements. Its new laboratory, completed in October, can now officially launch research and development and quality control of TCM raw materials and TCMP products using DNA testing technology, according to the company's statement.

In response to the news, shares in SXTC jumped to $1.38 per share in early trading, then leveled off to 95 cents a share by close.

Still, the stock in the maker of traditional medicine products has a long way up to get to its level a year ago. China SXT became publicly traded in early January 2019 in an offering of 2.5 million of its ordinary shares at $4 apiece. For a few months, shares in the company traded near the $6-mark. Since the lockup period expired in July, however, its stock has been on a slide that found it trading below $1 in November until now. 

Overall, SXTC raised $10.2 million in its January IPO and an additional $15 million in a private placement of its bonds in May 2019, according to its filings with the U.S. Securities and Exchange Commission.

For the year ended March 2019, SXTC reported revenue of $7 million, flat year-over-year. Net income, however, was up 25% coming in at $15 million.

Broken down into TCM product categories, SXTC generated revenue as set forth in the table below.

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(Table: China SXT's 20-F, Aug. 15, 2019)

In the statement today, SXTC's chief scientific officer and chief operating officer, Jingzhen Deng, said, "The approval of our DNA Exam Laboratory is an indication to our continuous effort in leading research and development of TCMPs and our pursuit of the higher quality of our products."

Deng also said, "We believe it is the first DNA Exam Laboratory set up by TCMP pharmaceutical company and approved by the regulatory administration. This will allows us to further strengthen our R&D capabilities and advance our Advanced TCMPs in TCM specialty pharmaceutical industry, which is expected to eventually help expanding our market share in our TCMP products."

SXTC said it expects its DNA testing technology would significantly enhance its R&D and quality control capabilites. 

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