Executive Summary

Q4 2016 revenue was approximately $5.26M, up sharply versus Q3 ($3.13M) and Q2 ($3.54M), with Q4 gross margin improving to ~33% versus 11% in Q3 and 14% in Q2; FY 2016 revenue declined 23.5% to $15.6M and net loss narrowed to $(9.18)M (EPS $(0.21)) .
The quarter benefited from lower inventory obsolescence and improved mix, while FY results were pressured by missed provincial tenders (2014 impact), CFDA distributor rectification in mid-2016, and a $4.0M impairment of intangible assets .
Management indicated the PRC “National High-Tech Enterprise” status would not be renewed, increasing the tax rate to 25% in 2017 from 15% (no formal revenue/EPS guidance) .
No Wall Street consensus estimates were available via S&P Global for Q4 2016, limiting beat/miss assessment; the company held a call on Mar 31, 2017 but no transcript was available in our document set (S&P Global consensus unavailable).

What Went Well and What Went Wrong

Sequential rebound: Q4 revenue rose to ~$5.26M from $3.13M in Q3 and $3.54M in Q2; Q4 gross margin improved to ~33% vs 11% in Q3 and 14% in Q2, aided by lower obsolescence and mix .
Operating discipline: 2016 operating loss improved to $(8.16)M from $(14.30)M in 2015; bad debt expense declined to $1.09M from $10.15M in 2015 .
Management confidence and sales push: “To increase our sales remains our top priority… actively participating in the recent opening of the new provincial drug tender… demand for pharmaceutical products is huge and steady in China” (Ms. Zhilin Li, CEO) .

Structural headwinds: FY revenue fell 23.5% due to missed provincial biddings (2014) and CFDA distributor rectification, which delayed promotion and purchases in Q2–Q3 2016 .
Asset impairments: $4.0M impairment recognized on five formulas unlikely to generate cash flow under updated policies (generic consistency evaluations), pressuring FY results .
Tax rate reset and liquidity pressure: High-Tech status not renewed—tax rate rising to 25% in 2017; year-end cash fell to $2.7M from $6.2M, current ratio moderated to 1.7x (working capital $7.1M vs $12.2M prior) .

Metric	Q4 2015	Q2 2016	Q3 2016	Q4 2016
Revenue ($USD Millions)	$4.503	$3.542	$3.126	$5.262 (derived from FY−9M)
Gross Profit ($USD Millions)	$0.139	$0.482	$0.350	$1.746 (derived from FY−9M)
Gross Margin %	3.1% (derived)	13.6%	11.2%	33.2% (derived)
Operating Income (Loss) ($USD Millions)	$(6.022)	$(2.222)	$(1.548)	$(3.065) (derived)
Net Income (Loss) ($USD Millions)	$(6.248)	$(2.454)	$(1.750)	$(3.426) (derived)
Diluted EPS ($USD)	$(0.14) (derived)	$(0.06)	$(0.04)	$(0.08) (derived)

Notes: Q4 figures derived from FY 2016 financial statements minus 9M 2016 totals; Q4 2015 derived from FY 2015 minus 9M 2015 .

Metric	FY 2015	FY 2016
Revenue ($USD Millions)	$20.352	$15.571
Gross Profit ($USD Millions)	$1.465	$3.219
Gross Margin %	7.2%	20.7%
Operating Income (Loss) ($USD Millions)	$(14.300)	$(8.155)
Net Income (Loss) ($USD Millions)	$(15.406)	$(9.183)
Diluted EPS ($USD)	$(0.35)	$(0.21)

Product Category	Q2 2016 ($M)	Q3 2016 ($M)
Anti-Viro/Infection & Respiratory	$2.45	$1.78
CNS Cerebral & Cardio Vascular	$0.60	$0.57
Digestive Diseases	$0.17	$0.22
Other (incl. Vitamin B6)	$0.32	$0.56

KPI	Q2 2016	Q3 2016	FY 2016
Cash & Equivalents ($M)	$6.285	$3.650	$2.666
Trade A/R (net, $M)	$4.348	$4.015	$4.000
Inventory (net, $M)	$8.938	$8.569	$7.311
Current Ratio (x)	—	—	1.7x
Working Capital ($M)	—	—	$7.1

Estimates comparison: Not available; S&P Global consensus unavailable for CPHI in the period (no beat/miss assessment possible).

Metric	Period	Previous Guidance	Current Guidance	Change
Statutory Tax Rate	FY 2017+	15% (High-Tech status)	25% (no renewal)	Increased
Revenue / EPS / Margin	FY 2017	None provided	None provided	Maintained (no guidance)

Topic	Previous Mentions (Q2 2016)	Previous Mentions (Q3 2016)	Current Period (Q4 2016)	Trend
CFDA distributor rectification	Distributors focused on inspections; delayed promotion and purchases; sales pressure	Continued negative impact on sales in Q3	Cited as a 2016 sales drag	Headwind persisted through FY
Missed provincial tenders (2014)	Missed biddings due to late GMP certificates; market share loss	Ongoing impact into 2016	Still cited as sales drag	Lingering share loss
Generic drug “consistency evaluations”	New PRC requirements prolong approvals	Status unchanged; delays	Pipeline development suspended in 2016; several formulas impaired	Regulatory burden increased
Product mix and margins	Q2 gross margin 13.6%	Q3 gross margin 11.2%	FY gross margin 20.7%; Q4 derived ~33%	Sequential improvement in Q4
Tax policy / High-Tech status	Evaluating renewal	Decided not to renew in 2017	Tax rate to 25% in 2017	Adverse tax shift
A/R and credit practices	Tightened credit; aging remains long; allowance methodology detailed	Continued focus; allowance $29.4M	A/R decreased YoY; bad debt expense down to $1.09M	Improving collections/allowances

“Nevertheless, to increase our sales remains our top priority. Management will continue to vigorously promote sales by actively participating in the recent opening of the new provincial drug tender and participation in drug promotion activities like exhibitions.” — Zhilin Li, Chairman & CEO .
“We continue to believe that demand for pharmaceutical products is huge and steady in China… [Reforms] will have major impact on the future development of our industry… We will continue to actively adapt to state policy guidance and further evaluate market conditions… to optimize our development strategy.” — Zhilin Li .
“Our income tax rate was 15%… However… the Company has decided not to renew this status. As a result, our tax rate for 2017 and the foreseeable future will be 25%.” .

The company scheduled a conference call on March 31, 2017 (8:30am ET), but no Q4 2016 transcript was available in our document set; therefore, specific Q&A themes and guidance clarifications cannot be summarized .

S&P Global (Capital IQ) Wall Street consensus estimates for Q4 2016 and FY 2016 were unavailable for CPHI at the time of retrieval; as a result, we cannot assess beats/misses versus consensus (S&P Global consensus unavailable).

Q4 2016 showed meaningful sequential recovery in revenue and margin, suggesting stabilization after mid-year CFDA-driven distributor disruptions; monitor sustainability of ~33% gross margin into 2017 .
FY 2016 reductions in bad debt and operating loss reflect improving financial discipline, but asset impairments and pipeline delays underscore regulatory risk to long-term growth .
Tax rate reset to 25% from 15% will mechanically pressure net income in 2017; absence of formal financial guidance warrants conservative modeling .
Sales recovery depends on re-engagement in provincial tenders and distributor normalization; management is prioritizing sales efforts, which could be a catalyst if tender wins materialize .
Liquidity tightened (cash $2.7M; current ratio 1.7x), with debt service ongoing; watch working capital and refinancing progress to gauge near-term resilience .
With no accessible Street coverage, the stock may trade on company-specific headlines (tender outcomes, regulatory/pipeline updates) rather than consensus beats/misses (S&P Global consensus unavailable).

All figures and statements above are sourced from company filings and press releases as cited.