XIANYANG, China, May 17 BiostarPharmaceuticals, Inc. (Nasdaq: BSPM) ("Biostar" or "the Company"), a Xianyang-based manufacturer of a leading over-the-counter Hepatitis B medicine, XinAoxing Oleanolic Acid Capsules ("Xin Aoxing"), and a variety of pharmaceuticalproducts, today announced financial results of the first quarter ended March31, 2010.
First Quarter 2010 Financial Results
Revenue for the first quarter of 2010 increased 66.0% to approximately$12.4 million compared to $7.4 million for the first quarter of 2009. Theincrease was primarily due to Biostar's flagship product, Xin Aoxing OleanolicAcid Capsule ("Xin Aoxing"), which saw increased sales by 138.2% to $9.2million with a gross margin of 85.1%, compared to $3.9 million in the firstquarter of 2009. Sales of Xin Aoxing represented 74.4% of total revenues andbenefited from the expansion into the Beijing and Shanghai markets during thefirst quarter of 2010, in addition to the implementation of a retail-directselling strategy to select high-volume pharmacies who accept direct shipmentsfrom the Company's Xianyang-based production facility. Another notablecontributor from Biostar's portfolio was its Taohuasan Pediatrics Medicine,which contributed $1.0 million in revenue in the first quarter of 2010, anincrease of 13.1% compared to $0.9 million in the first quarter of 2009. TheCompany continued its expansion into rural communities in China with productsnow being sold at the Company's rural supply network of approximately 6,000locations out of a target market which includes an estimated 10,000 totallocations.
Cost of goods sold for the three months ended March 31, 2010 wasapproximately $2.8 million or 23.0% of revenues, as compared to $2.7 millionor 35.7% of revenues for the three months ended March 31, 2009. Gross profitsfor the first quarter of 2010 were $9.5 million with gross margins of 77.0%,compared to $4.8 million in gross profit and gross margins of 64.3% for thefirst quarter of 2009. The increase in gross margins was due to the increasedsales volumes of Xin Aoxing and Taohuasan as wells as lower raw material costsfor Xin Aoxing experienced in the first quarter of 2010. Gross profitsincreased by 98.9% for the three months ended March 31, 2010 as compared tothe same period in 2009.
Operating expenses for the three months ended March 31, 2010 wereapproximately $6.4 million, an increase of 157.7% compared to the same periodin 2009. Selling and distribution cost increased 197% to $5.6 million in thefirst quarter of 2010, compared to $1.9 million in the same period in 2009.The increase in selling cost is primarily due to $2.2 million in incrementaladvertising and promotional efforts which included billboards, newsprints andin-store advertising designed to drive sales in existing and new markets andto promote brand awareness of Xin Aoxing. These increased sales activitiesdrove higher commissions and travel expenses, which increased $1.1 million and$0.3 million, respectively. In addition, the Company incurred non-cash equitycompensation charge of $0.2 million in the first quarter of 2010, which wasnot present for the same period in 2009.
Operating income for the first quarter of 2010 totaled approximately $3.1million, a 35.7% increase from $2.3 million reported for the first quarter of2009. Operating margins were 25.3% and 31.0% for the first quarter of 2010 and2009, respectively. The decrease was mainly attributed to the increase of SG&Ain the first quarter of 2010. Excluding the non-cash equity compensationcharge of $0.2 million recorded during the first quarter of 2010, adjustedoperating income for the first quarter is $3.3 million with operation marginsof 26.6%.
Net income was approximately $2.3 million for the first quarter of 2010, a23.7% increase compared to $1.8 million for the first quarter of 2009. Dilutedearnings per share were $0.08 for the first quarter of 2010 compared to $0.08for the first quarter of 2009, based upon 27.3 million and 23.5 milliondiluted common shares outstanding, respectively. Adjusted Non-GAAP net incomefor the first quarter was $2.4 million, or $0.09 per diluted common sharebased on 27.3 million diluted common shares outstanding for the first quarterof 2010. The Company's effective tax rate was at 27.6% for the first quarterof 2010.
"We are pleased to report another quarter of strong revenue growth, asBiostar gains further brand recognition and awareness for our Xin AoxingCapsules. With momentum in several key markets, we are confident that thisflagship product is becoming known as one of the major medical treatments forHepatitis B in China," commented Ronghua Wang, Chairman and Chief ExecutiveOfficer of Biostar. "We are optimistic that with our continued expansion intonew markets, supported by comprehensive marketing and distribution strategies,including direct sales, we are in position to leverage our product portfoliofor optimal growth." Wang concluded.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $8.6 million on March 31, 2010, comparedto $8.6 million on December 31, 2009. Accounts receivable balance wasapproximately $20.8 million on March 31, 2010, versus approximately $19.8million on December 31, 2009. Days sales outstanding (DSO) were at 149 days.The Company had a current ratio of 5.7 to 1 and stockholders' equity of $43.4million, with total assets of $48.9 million versus total liabilities of $5.6million on March 31, 2010.
For the first three months of 2010, the Company generated $0.6 million incash from operations versus $0.06 million used in operations reported for thesame period in 2009.
As of March 31, 2010, Biostar has expended its rural supply network toapproximately 6,000 sales outlets.
On April 27, Biostar addressed and resolved a concern that its mainproduct, Xin Aoxing, was to be suspended from selling by the local State Foodand Drug Administration (SFDA) due to non-compliance with approved advertisinguse.
On April 23, 2010, Biostar was approved by NASDAQ to list its common stockon the NASDAQ Global Market and commenced trading under the ticker symbol BSPM.
On April 12, 2010, Biostar completed Chinese Military Drug Administrationclinical trials for Zushima Analgesic Aerosol Spray ("Zushima"). Zushima is atraditional Chinese herbal product used to relieve pain through a topicalapplication of the medicine to affected areas or closed wounds. Zushima spraycan also be used in the treatment of certain rheumatic conditions. The productwas classified as "Specially Needed Drug" by the Chinese Military DrugAdministration and will also be available to the public.
On March 29, 2010, Biostar officially took control over the assets ofXi'an Mei pude Bio-Technology Co., Ltd., a Xi'an-based medical equipment andnutrients manufacturer ("Meipude"). Biostar is working on a productionmarketing program and anticipates starting sales using the acquired assets inMay 2010.
The Company will host a conference call to discuss the 2010 first quarterfinancial results on Monday, May 17, 2010 at 9:30 a.m. ET. Interestedparticipants should call +1-877-941-4775 within the United States, or US +1-480-629-9763 if calling internationally. The conference ID is 4302147. It isadvisable to dial in approximately 5-10 minutes prior to 9:30 a.m. ET. Thiscall is being web cast by ViaVid Broadcasting and can be accessed at ViaVid'swebsite at http://www.viavid.net or at the following link:http://viavid.net/dce.aspx?sid=00007582 . To access the web cast, you willneed to have the Windows Media Player on your desktop. For the free downloadof the Media Player please visit:http://www.microsoft.com/windows/windowsmedia/en/download/default.asp .
About Biostar Pharmaceuticals, Inc.
Biostar Pharmaceuticals, Inc., through its wholly-owned subsidiary inChina, develops, manufactures and markets pharmaceutical and medical nutrientproducts for a variety of diseases and conditions. The Company's most popularproduct is its Xin Ao Xing Oleanolic Acid Capsule, an over-the-counter ("OTC")medicine for chronic hepatitis B, a disease affecting approximately 10% of theChinese population. In addition to its hepatitis product, Biostar manufacturestwo broad-based OTC products, two prescription-based pharmaceuticals andthirteen nutrients. The Company has adopted international standards and is inthe process of applying for two patents.
Certain statements in this release concerning our future growth prospectsare forward-looking statements, within the meaning of Section 27A of the U.S.Securities Act of 1933, as amended, and Section 21E of the U.S. SecuritiesExchange Act of 1934, as amended, which involve a number of risks anduncertainties that could cause actual results to differ materially from thosein such forward-looking statements. The risks and uncertainties relating tothese statements include, but are not limited to, risks and uncertaintiesregarding the success of our investments, risks and uncertainties regardingfluctuations in earnings, our ability to sustain our previous levels ofprofitability including on account of our ability to manage growth, intensecompetition, wage increases in China, our ability to attract and retain highlyskilled professionals, time and cost overruns on fixed-price, fixed-time framecontracts, client concentration, our ability to successfully complete andintegrate potential acquisitions, withdrawal of governmental fiscal incentives,political instability and regional conflicts and legal restrictions on raisingcapital or acquiring companies outside China. Additional risks that couldaffect our future operating results are more fully described in our UnitedStates Securities and Exchange Commission filings including our S-1 dated June27, 2008, our Quarterly Report on Form 10-Q for the quarter ended September 30,2009, our 10-K for the year ended December 31, 2008, and other recent filings.These filings are available at http://www.sec.gov . We may, from time to time,make additional written and oral forward-looking statements, includingstatements contained in our filings with the Securities and ExchangeCommission and our reports to shareholders. We do not undertake to update anyforward-looking statements that may be made from time to time by or on ourbehalf.
About Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements, whichstatements are prepared and presented in accordance with GAAP, we use thefollowing non-GAAP financial measures: non-GAAP adjusted net income, and non-GAAP adjusted EPS. The presentation of this financial information is notintended to be considered in isolation or as a substitute for, or superior to,the financial information prepared and presented in accordance with GAAP. TheCompany uses these non-GAAP financial measures for financial and operationaldecision making and as a means to evaluate period-to-period comparisons.Management believes that these non-GAAP financial measures provide meaningfulsupplemental information regarding the Company's performance and liquidity byexcluding certain expenses and expenditures that may not be indicative of"recurring core business operating results", meaning operating performanceexcluding non-cash amortization charges for intangibles. China Marine believesthat both management and investors benefit from referring to these non-GAAPfinancial measures in assessing performance and when planning, forecasting andanalyzing future periods. These non-GAAP financial measures also facilitatemanagement's internal comparisons to historical performance and liquidity aswell as comparisons to competitors' operating results. The Company believesthese non-GAAP financial measures are useful to investors both because (1)they allow for greater transparency with respect to key metrics used bymanagement in its financial and operational decision making and (2) they areused by our institutional investors and the analyst community to help themanalyze the health of the business.-- Q1 2010 revenue increased 66.0% to $12.4 million -- Q1 gross margins were 77.0%, a 1,270-basis point improvement -- Q1 2010 Non-GAAP adjusted net income increased 32.1% to $2.4 million with adjusted EPS of $0.09 -- Biostar reiterates guidance for 2010: Revenue expected to be between $80.0 to $82.0 million and net income between $18.0 to $20.0 million SUMMARY FINANCIALS First Quarter 2010 Results (unaudited) Q1 2010 Q1 2009 CHANGE Net Sales $12.4 million $7.4 million +66.0% Gross Profit $9.5 million $4.8 million +98.9% GAAP Net Income $2.3 million $1.8 million +23.7% Adjusted Non-GAAP Net Income* $2.4 million $1.8 million +32.1% GAAP EPS (Diluted) $0.08 $0.08 +0% Adjusted Non-GAAP EPS (Diluted)* $0.09 $0.08 +12.5% * Excluding non-cash stock-based compensation charge of $0.2 million for Q1 2010. For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below.
SOURCE Biostar Pharmaceuticals, Inc.