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American Oriental Bioengineering Reports Second Quarter 2008 Financial Results

Tuesday, August 12, 2008 General News J E 4
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NEW YORK, Aug. 11 American OrientalBioengineering, Inc. (NYSE: AOB), a pharmaceutical company dedicated toimproving health through the development, manufacture and commercialization ofa broad range of prescription and over the counter (''OTC'') products in China,today announced financial results for the quarter ended June 30, 2008.

Revenue in the second quarter of 2008 increased 74.0% year over year to$59.0 million from $33.9 million, reflecting a continued increase in demandfor the Company's OTC and prescription pharmaceutical products. Revenue frompharmaceutical products increased 91.5% to $49.8 million from $26.0 million inthe second quarter of 2007. Revenue from OTC pharmaceutical productsincreased 102.9% to $29.4 million from $14.5 million in the prior year'ssecond quarter, reflecting continued recognition of the Company's new productssupported by effective marketing campaigns. Sales generated by CCXA and Boke,which were not subsidiaries in the second quarter of 2007, were majorcontributors to the increase in OTC sales and generated a combined $13.4million of revenue during the second quarter of 2008. Strong sales of theJinji series and Jinji Yimucao products also contributed to the increase inOTC revenue during the second quarter of 2008. Prescription pharmaceuticalproducts generated $20.4 million in revenue during the second quarter of 2008,a 77.2% year over year increase, driven by sales of Shuanghuanglian InjectionPowder and Cease Enuresis Soft Gel. We believe that our continous marketingefforts, increased brand recognition and effective pricing strategy, as wellas expanding rural market coverage drove prescription pharmaceutical revenueperformance during the second quarter of 2008. Nutraceutical product revenueincreased approximately 17% to $9.2 million in the second quarter of 2008 from$7.9 million in the prior year's period, and decreased as a percentage oftotal revenue to approximately 15.6% versus 23.3% in the comparable period.The increase in Nutraceutical revenue was mainly attributed to the increase insales of peptide tablets and peptide powder. The Company continues to focuson selling and marketing higher growth pharmaceutical products.

Gross profit in the second quarter of 2008 increased 69.1% to $40.1million from $23.7 million in the second quarter of 2007. Gross margin wasapproximately 67.9%, compared to 69.9% in the prior year's period, reflectinga shift in product mix.

For the second quarter of 2008, operating expenses increased 75.5% to$21.4 million from $12.2 million in the comparable period of 2007. Theincrease in operating expenses was primarily due to increases of $3.8 millionin sales and marketing expenses, $2.7 million in general and administrativeexpenses as well as additional depreciation and amortization costs due to theBoke and CCXA acquisitions. Income from operating in the second quarter of2008 increased 62.4% to $18.7 million from $11.5 million in the second quarterof 2007, while operating margin was 31.7%, compared to 33.9% in the secondquarter of the prior year.

Net income for the second quarter of 2008 increased 43.4% to $13.9 million,or $0.18 per diluted share, compared to $9.7 million, or $0.15 per dilutedshare, in the prior year's period. Net income for the second quarter of 2008includes the impact of $0.6 million in loss from unconsolidated entities,related to the Company's minority ownership in China Aoxing. Diluted sharecount in the second quarter of 2008 was 78.2 million, compared to 66.6 millionin the second quarter of 2007.

Mr. Tony Liu, Chairman and Chief Executive Officer of American OrientalBioengineering, commented ''We are very pleased with our financial performancein the second quarter of 2008. All of our product categories exhibited strongsales and we believe that our performance is the result of promotingeffective marketing and branding of our products and t
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