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Biostar Pharmaceuticals, Inc. Announces Record Third Quarter 2009 Financial Results

Thursday, November 12, 2009 General News
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XIANYANG, China, Nov. 12 BiostarPharmaceuticals, Inc. (OTC Bulletin Board: BSPM) ("Biostar" or "the Company"),a Xianyang-based developer, manufacturer and supplier of pharmaceuticalproducts and medical nutrients addressing a variety of diseases and conditions,today announced financial results the third quarter ended September 30, 2009.
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Third Quarter 2009 Financial Results

Revenue for the third quarter of 2009 increased 106.3% to approximately$15.6 million compared to $7.5 million for the third quarter of 2008. Theincrease in revenue was primarily due to Biostar's flagship product, XinAoxing Oleanolic Acid Capsule ("Xin Aoxing") which accounted for 76.9% of theCompany's revenues during the quarter. For the third quarter of 2009, thesales of Xin Aoxing increased 200.6% to $12.0 million with a gross margin of84.1%, compared to $4.0 million in the third quarter of 2008. The increasewas driven by Xin Aoxing penetrating a new province through local wholesalersin the third quarter of 2009 in addition to initiating sales in two provincesin the second quarter of 2009. Biostar's focus on growing its ruraldistribution network also contributed to revenue growth in the third quarter.Up to September 2009, Biostar more than doubled its rural network retaillocations to 3,500 outlets from 1,300 reported in the second quarter of 2009.Another Biostar's state approved drug, Tianqin Dysmenorrhea Capsule,contributed $1.1 million in revenue in the third quarter, an increase of 17.3%compared to $0.9 million in the third quarter of 2008.
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Cost of goods sold for the three months ended September 30, 2009 wasapproximately $3.6 million or 23.0% of revenues as compared to $3.8 million or49.8% of revenues for the three months ended September 30, 2008, Gross profitsfor the quarter were $12.0 million with gross margins of 77.0%, compared to$3.8 million in gross profit and gross margins of 50.2% during the thirdquarter of 2008. The decrease in cost of goods sold was a result of lower rawmaterial prices from the Sichuan province as production fully resumed afterthe 2008 earthquake. Gross profits surged by 216.3% for the three monthsended September 30, 2009.

Operating expenses for the three months ended September 30, 2009 wereapproximately $7.9 million, an increase of 151.3% compared to the same periodin 2008. The increase was primarily due to increase in promotional andadvertising expenditures of $2.4 million in support of the Biostar's productand brand awareness marketing strategy. Biostar also expensed $0.5 million onresearch and development in the quarter as part of new product developmentstrategy.

Operating income for the third quarter of 2009 totaled approximately $4.1million, a 524.9% increase from the $0.7 million reported for the thirdquarter of 2008. Operating margins were 26.4% and 8.7% for the third quarterof 2009 and 2008, respectively.

Net income was approximately $3.1 million in the third quarter of 2009, a459.1% increase compared to $0.6 million for the third quarter of 2008. Thecompany maintains an effective tax rate of 24.0% at September 30, 2009.Diluted earnings per share were $0.13 for the third quarter of 2009 comparedto $0.02 for the third quarter of 2008, based upon 23.7 million and 23.2million shares.

"We are very pleased to report another quarter of strong revenue growthand improved profitability. The success of our marketing strategy, strongsales of our Hepatitis B product, the Xin Aoxing Capsule, and expansion ofrural supply network enabled us to achieve record breaking sales and earningsfor the quarter," commented Ronghua Wang, Chairman and Chief Executive Officerof Biostar. "The Chinese government's stimulus plan includes $126 billion inhealth care reform and support of the New Rural Cooperative Medical System,which is providing the means to improve health care services for all Chinesecitizens. This provides a solid foundation for sustained growth of theChinese pharmaceutical industry and will benefit our company. We areconfident that our strong product portfolio, proven sales team, experiencedand committed management team will enable us to continue to execute our growthplan and capitalize on these long-term, secular growth opportunities."

Nine Month Results

For the nine months ended September 30, 2009, revenues increasedapproximately 52.5% to $36.2 million compared to $23.8 million in the sameperiod of 2008. Gross profits were $26.5 million for the first nine months of2009, representing an increase of 98.5% from the first nine months of 2008.Gross margins increased 30% to 73.1% for the first nine months of 2009compared to 56.2% for the same period in 2008.

Income from operations increased 147.9% year over year to $11.9 millionfor the first nine months of 2009. Operating margins were 32.8% and 20.2% forthe first nine month of 2009 and 2008, respectively.

Net income was $8.8 million for the nine months ended September 30, 2009,an increase of 112.9% from the same period in 2008. Diluted earnings pershare were $0.37 for the first nine months of 2009 compared to $0.18 for thefirst nine months of 2008, based up on 23.7 million and 23.2 million sharesrespectively.

Balance Sheet and Cash Flow

Cash and cash equivalents totaled $2.4 million on September 30, 2009compared to $0.8 million on December 31, 2008. Accounts receivable balancewas approximately $17.9 million on September 30, 2009 versus approximately$11.7 million on December 31, 2008. Days sales outstanding (DSO) were at 104days. The Company had a current ratio of 5.9 to 1 and stockholders' equity of$32.5 million, with total assets of $37.1 million versus total liabilities of$4.5 million on September 30, 2009.

For the first nine months of 2009, the Company generated $2.9 million incash from operations versus reported $0.5 million used in operations for thesame period in 2008.

Business Developments

On November 6, 2009, Biostar announced the closing of a private placementfinancing of approximately $3.6 million with certain accredited investors.The "Make Good" target associated with this financing is measured by incomefrom operations of $15.9 million for 2009, and $21.1 million for 2010. TheCompany will use the net proceeds for the completion of the Company's new rawmaterials processing facility.

On November 3, the Company announced it has expanded its rural supplynetwork to 3,512 sales outlets in rural areas of 6 provinces. The Companywill continue working toward its goal of covering 5,000 sales outlets by theend of 2009 and 10,000 sales outlets by 2011. The Company expects the ruralsupply network to contribute more than $10.0 million in annual revenues in2010 with average annual revenue generated from each sales outlet of $2,000.00.

On October 7, Biostar announced the Chinese Military Drug Administrationgranted clearance to begin clinical trials on Biostar's new drug, ZushimaAnalgesic Aerosol Spray. The Company anticipates formal product approval bythe Chinese Military Drug Administration in the second quarter of 2010. Theproduct is expected to contribute at least $2.0 million to revenues in 2010.

On October 2, 2009 Biostar Pharmaceuticals reported it received a patentfrom China's State Intellectual Property Bureau for its Aoxing Ganbao, whichis a complementary medicine for its flagship Xin Aoxing Capsule in treatingHepatitis B. Aoxing Ganbao is a TCM product applied topically and effectiveto nourish the liver and reduce inflammation without side effects. The patentwill prevent its competitors from producing similar products for 20 years.

"We are making progress on all aspects of our business including the ruralsupply network, raw material processing facility, and new products. We willcontinue to expand Xin Aoxing Capsule product's market and we expect furtherpenetration of the new markets we just entered. We will remain focused onthese initiatives which will contribute to our long-term growth profitability.We are committed to creating value for our shareholders and will continue toimplement and execute a growth plan which will enable us to accomplish thisgoal," concluded Mr. Wang.

Conference Call

The Company will host a conference call to discuss the 2009 third quarterfinancial results on Thursday, November 12, 2009 at 9:30 a.m. ET. Interestedparticipants should call +1-888-549-7704 within the United States, or US+1-480-629-9857 if calling internationally. The conference ID is 4182017. Itis advisable to dial in approximately 5-10 minutes prior to 9:30 a.m. ET.This call is being web cast by ViaVid Broadcasting and can be accessed atViaVid's website at http://www.viavid.net or at the following link:http://viavid.net/dce.aspx?sid=00006CE5 . 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, Biostarmanufactures two broad-based OTC products, two prescription-basedpharmaceuticals and thirteen nutrients. The Company has adopted internationalstandards and is in the process of applying for two patents.

Safe Harbor

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.SUMMARY FINANCIALS Third Quarter 2009 Results Q3 2009 Q3 2008 CHANGE Net Sales $15.6 million $7.5 million +106.3% Gross Profit $12.0 million $3.8 million +216.3% Net Income $3.1 million $0.6 million +459.2% EPS (Fully Diluted) $0.13 $0.02 +550.0% Nine Month 2009 Results First 9M 2009 First 9M 2008 CHANGE Net Sales $36.2 million $23.8 million +52.5% Gross Profit $26.5 million $13.3 million +98.5% Net Income $8.8 million $4.1 million +112.9% EPS (Fully Diluted) $0.37 $0.18 +105.6%

SOURCE Biostar Pharmaceuticals, Inc.
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