Biostar Pharmaceuticals, Inc. Reports Fiscal 2009 Financial Results
XIANYANG, China, April 1 /PRNewswire-Asia-FirstCall/ -- Biostar Pharmaceuticals, Inc. (OTC Bulletin Board: BSPM) ("Biostar" or "the Company"), the Xianyang-based manufacturer of a leading over-the-counter Hepatitis B medicine, Xin Aoxing Oleanolic Acid Capsule ("Xin Aoxing"), and other pharmaceutical products, today announced its 2009 year-end financial results.
FINANCIAL HIGHLIGHTS -- FY 2009 revenues increased 57.2% to $53.3 million, from $33.9 million for FY 2008 -- FY 2009 gross profit increased 96.0% to $39.0 million, compared to $19.9 million for FY2008; and gross margin increased 1,470 basis points to 73.2% -- FY 2009 cash flow from operations increased 171.0% to $5.7 million -- At December 31, 2009, cash and equivalents of $8.6 million, working capital of $24.1 million and current asset to current debt ratio ("current ratio") of 5.0 to 1.0 -- FY2009 net income increased 56.7% to $10.5 million, or diluted EPS of $0.32, from $6.7 million for FY2008, or diluted EPS of $0.22 SUMMARY FINANCIALS Fiscal 2009 Results FY 2009 FY 2008 CHANGE Net Sales $53.3 million $33.9 million +57.2% Gross Profit $39.0 million $19.9 million +96.0% GAAP Net Income $10.5 million $6.7 million +56.7% GAAP EPS (Fully Diluted) $0.32 $0.22 +45.5%
Biostar's 2009 revenues increased 57.2% to $53.3 million from $33.9 million reported for the prior year period as a direct result of newly established sales offices in Tianjin municipality, Fujian province and Xinjiang province, as well as expanded sales efforts through rural networks. Demand for Biostar's leading Hepatitis B medicine, Xin Aoxing Capsules ("Xin Aoxing") and the balance of the Company's product portfolio peaked in the second half of the year. Xin Aoxing contributed approximately $36.7 million or 68.9% to total revenues for the fiscal 2009, representing 95.8% year-over-year growth. The significant increase was primarily due to market expansion of Xin Aoxing in 2009 and the Company's strategy to target rural communities and networks in China.
Cost of goods sold for fiscal 2009 was approximately $14.3 million, yielding a gross profit of $39.0 million and gross margins of 73.2%, compared to $19.9 million in gross profit and a gross margin of 58.5% for fiscal 2008. The 1,470 basis point improvement in gross margins was primarily attributable to the decrease in the raw material prices of Xin Aoxing and Danshen Granule and the Company's strategy to use its direct sales force to sell to dealers and end-users primarily in rural communities.
Operating expenses for 2009 were $23.9 million, up 97.7% compared to the same period in 2008. Selling, general and administration expenses for the period increased to approximately $22.9 million from $12.1 million, primarily due to enhanced marketing efforts including increased sales payrolls and direct marketing expenses. In addition, we incurred non-cash equity compensation charge of $1.0 million in 2009, which was not present in 2008.
Operating income for 2009 totaled approximately $15.1 million, a 94.6% increase from 2008 operating income of $7.8 million. Operating margins were 28.3% and 22.9% for 2009 and 2008, respectively. Excluding the non-cash equity compensation charge of $1.0 million recorded during 2009, adjusted operating income for fiscal 2009 is $16.1 million with operation margins of 30.2%.
2009 net income was approximately $10.5 million, a 56.7% increase from $6.7 million recorded for 2008. Adjusted net income for 2009, excluding the equity compensation charge, was $11.5 million, or $0.36 per diluted common share based on 24.3 million diluted common shares for 2009.
The income tax provision was $4.3 million and $1.0 million for fiscal 2009 and 2008 with an effective tax rate of 28.8% and 13.4%, respectively. The increase was due to the expiration of a 50% income tax reduction on December 31, 2008, raising Biostar's statutory income tax rate in China to 25%.
"We are very pleased to report our fiscal 2009 results which included strong revenue growth. Our marketing strategy for our flagship Xin Aoxing Capsule was successful and was complemented by the expansion of our rural network, which enabled us to achieve record sales and earnings for the year," commented Ronghua Wang, Chairman and Chief Executive Officer of Biostar. "Our Xin Aoxing Capsule, the only OTC Hepatitis drug available in China, is sold directly through our own sales forces in 17 provinces as of March 31, 2010. In addition, we expect to expand our rural network coverage from 6,000 sales outlets as of March 31, 2010, to over 10,000 by the end of 2010, with projected full-year revenue contribution of approximately $17.2 million. We have established a solid foundation which optimizes revenue opportunities for both our flagship and new products in major metropolitan and rural areas, and leverages support from both the government's health care reform under the New Rural Cooperative Medical System, and the consumers' desire to improve their quality of life."
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $8.6 million at December 31, 2009, compared to $0.8 million at December 31, 2008. Accounts receivable balance was approximately $19.8 million at December 31, 2009 versus approximately $11.7 million at December 31, 2008. Days sales outstanding (DSO) were at 135 days. Net intangible assets were $11.1 million at December 31, 2009, compared to $7.4 million at December 31, 2008, which included $2.9 million for land use right in connection with Company's raw material processing plant. The Company had a current ratio of 5.0 to 1.0, and stockholders' equity of $40.9 million, with total assets of $47.0 million versus total liabilities of $6.1 million at December 31, 2009.
For fiscal 2009, the Company generated $5.7 million in cash from operations as compared to $2.1 million in cash from operations in 2008.
"In addition to expanding distribution and sales of Xin Aoxing, we will start marketing our Ganwang Capsule and several nutrient products approved last year. We expect to receive approval for Zushima Analgesic Aerosol Spray from Chinese Military Drug Administration, which will generate incremental revenues and net income. We remain focused on the initiatives which will contribute to our long-term growth and increased profitability, thus enhancing shareholder value," concluded Mr. Wang.
-- Launched Xin Aoxing Capsule in Tianjin in November 2009 and in Beijing and Shanghai in January 2010. Beijing, Shanghai, and Tianjin are three of the largest markets in China with a total population estimated at 50 million, and Biostar will leverage both distributors and direct sales in these three markets. Management anticipates approximately $11 million in incremental revenues during 2010 from these three new markets with average gross margins of approximately 72%.
-- Entered into an agreement on March 18, 2010 to acquire 100% of Xi'an Meipude Bio-Technology Co., Ltd., a Xi'an-based medical equipment and nutrients manufacturer ("Meipude") for $1.1 million, and officially took control over the operations and the assets of Meipude on March 29, 2010. Meipude manufactures and distributes topical hernia treatment belts with seven traditional Chinese medicine bags for application to body points associated with hernias. Meipude also manufactures a liquid product for treatment of gynecological inflammation in young and middle-aged women. Meipude has been manufacturing and selling its products in Xi'an and an adjacent province since 2004. Biostar expects revenue contribution from the acquisition to add approximately $3.0 million in 2010.
Management is raising its 2010 guidance and now expects to report revenues of $80.0 to $82.0 million with net income of $18 million to $20 million. This represents between 50.1% to 53.8% revenue growth and between 71.4% to 90.5% net income growth year over year. The improved outlook is based on new market development of Biostar's flagship Xin Aoxing Capsule, including the launch in four new markets including Jiangxi, Jiangsu, Hebei and Guangxi provinces planned for early April 2010. Management anticipates approximately $9.3 million in incremental revenues during 2010 from these new markets, and for Xin Aoxing to comprise approximately 66% to 70% of total 2010 revenues. In addition, the addition of Meipude will open up a medical equipment distribution opportunity for Biostar and is expected to contribute approximately $3 million in incremental revenue during 2010. Net income guidance excludes non-cash expenses associated with stock-based compensation and/or future interest expense. The Company's guidance does not include any contribution from future acquisitions previously announced by the Company or otherwise. Management will continue to evaluate its business outlook as necessary and communicate any changes on a quarterly basis or when appropriate.
The Company will host a conference call to discuss the 2009 year end financial results on Thursday, April 1, 2010 at 10:00 a.m. ET. Interested participants should call +1-877-941-2068 within the United States, or US +1- 480-629-9712 if calling internationally. The conference ID is 4276443. It is advisable to dial in approximately 5-10 minutes prior to 10:00 a.m. ET. A playback will be available through April 8, 2010. To listen, please call 1- 800-406-7325 within the United States or 1-303-590-3030 when calling internationally. Utilize the pass code 4276443 for the replay. This call is being webcast by ViaVid Broadcasting and can be accessed at ViaVid's website at http://www.viavid.net or at the following link: http://viavid.net/dce.aspx?sid=000072BD . To access the web cast, you will need to have the Windows Media Player on your desktop. For the free download of 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 in China, develops, manufactures and markets pharmaceutical products for a variety of diseases and conditions. The Company's most popular product is its Xin Ao Xing Oleanolic Acid Capsule, an over-the-counter ("OTC") medicine for chronic hepatitis B, a disease affecting approximately 10% of the Chinese population. In addition to its hepatitis product, Biostar currently manufactures two broad-based OTC products and two prescription-based pharmaceuticals. The Company has adopted international standards, holds one patent and is in the process of applying for two patents.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measure for the non-cash charge related to stock-based compensation. The Company believes that such non-GAAP financial measure is useful to investors because they exclude non- cash charges that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because such measure provides a consistent method of comparison to historical periods. Moreover, management believes such non-GAAP measure reflects the essential operating activities of Biostar. Accordingly, management excludes the non-cash stock-based compensation charge when making operational decisions. The Company believes that providing the non-GAAP measure that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measure provides a consistent basis for investors to understand the Company's financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, management compensates for these limitations by providing the relevant disclosure of the items excluded.
The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure. Year ended December 31, 2009 2008 GAAP Net Income $10.5 million $6.7 million GAAP EPS (fully diluted) $0.32 $0.22 Exclusion Stock-based Compensation Charge $1.0 million $0 Non-GAAP Net Income $11.5 million $6.7 million Non-GAAP EPS (fully diluted) $0.36 $0.22 Shares used in computing fully diluted EPS 24.3 million 23.3 million
Certain statements in this release concerning our future growth prospects are 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. Securities Exchange Act of 1934, as amended, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our S-1 dated June 27, 2008, our 10-K for the year ended December 31, 2009, and other recent filings. These filings are available at www.sec.gov. We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.
Financial Tables Follow BIOSTAR PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS December 31, December 31, 2009 2008 ASSETS Current Assets Cash and cash equivalents $8,577,704 $758,316 Accounts receivable 19,803,434 11,700,841 Inventories 340,078 315,745 Prepaid expenses and other receivables 1,500,327 8,753 Total Current Assets 30,221,543 12,783,655 Deposits 1,316,328 2,917,919 Property and equipment, net 4,340,917 5,930,467 Intangible assets, net 11,131,681 7,365,765 Total Assets $47,010,469 $28,997,806 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $3,559,281 $ 2,228,296 Customer and other deposits -- 2,556,097 Value-added tax payable 1,050,051 527,103 Income tax payable 1,481,266 413,205 Total Current Liabilities 6,090,598 5,724,701 Commitment and contingencies Stockholders' Equity Series B, convertible preferred stock, $0.001 par value, 5,000,000 shares authorized, 3,060,000 shares and Nil issued and outstanding at December 31, 2009 and 2008 3,060 -- Common stock, $0.001 par value, 100,000,000 shares authorized, 23,374,799 and 23,240,899 shares issued and outstanding at December 31, 2009 and 2008 23,375 23,241 Additional paid-in capital 19,801,366 10,430,168 Statutory reserve 2,860,685 1,585,383 Retained earnings 17,548,676 10,996,655 Accumulated other comprehensive income 682,709 237,658 Total Stockholders' Equity 40,919,871 23,273,105 Total Liabilities and Stockholders' Equity $47,010,469 $28,997,806 BIOSTAR PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2009 2008 Sales, net $53,318,744 $33,910,922 Cost of sales 14,314,776 14,059,343 Gross profit 39,003,968 19,851,579 Operating expenses: Selling, general and administrative expenses 22,873,250 12,089,937 Stock-based compensation 1,029,875 -- Total operating expenses 23,903,125 12,089,937 Income from operations 15,100,843 7,761,642 Other Income (Expense) Interest income 2,899 2,917 Interest expense -- (40,615) Loss on disposal of building (357,789) -- Foreign exchange loss 2,809 -- Total other Income (Expense) (352,081) (37,698) Income before income taxes 14,748,762 7,723,944 Provision for income taxes 4,250,922 1,033,402 Net income $10,497,840 $6,690,542 Deemed dividend from beneficial conversion feature of preferred stock (2,670,517) (1,462,240) Net income applicable to common stockholders $7,827,323 $5,228,302 Net income per common stock Basic $0.34 $0.23 Diluted $0.32 $0.22 Weighted average number of common stocks outstanding Basic 23,255,391 22,369,434 Diluted 24,338,471 23,257,470 BIOSTAR PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES Net income $10,497,840 $6,690,542 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 607,649 645,846 Loss on disposal of building 357,789 -- Stock-based compensation 1,029,875 -- Changes in operating assets and liabilities: Accounts receivable (8,069,157) (7,187,746) Inventories (23,535) (92,443) Prepaid expenses and other receivables (1,490,765) 10,528 Accounts payable and accrued expenses 1,175,997 1,593,165 Other deposits -- 17,236 VAT tax payable 521,357 205,829 Income tax payable 1,066,459 210,249 Net cash provided by operating activities 5,673,509 2,093,206 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (16,561) (51,770) Construction in progress (1,169,440) -- Acquisition of land use right (1,169,440) (276,531) Deposit paid for acquisition of land use right -- (2,872,635) Proceeds from disposal of property and equipment 143,256 -- Deposit paid for acquisition of business (1,315,620) -- Net cash used in investing activities (3,527,805) (3,200,936) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of short-term bank loan -- (545,801) Proceeds from issuance of preferred stock 5,674,000 -- Net cash provided by (used in) financing activities 5,674,000 (545,801) Effect of exchange rate changes on cash and cash equivalents (316) 125,428 Net increase (decrease) in cash and cash equivalents 7,819,388 (1,528,103) Cash and cash equivalents, beginning balance 758,316 2,286,419 Cash and cash equivalents, ending balance $8,577,704 $758,316 SUPPLEMENTAL DISCLOSURES: Interest payments $-- $40,615 Income tax payments $3,184,462 $823,153 SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Conversion of preferred stock to common stock $-- $725,000 Prior year deposit received for disposed building $2,561,074 $-- Prior year deposit paid for acquisition of land use right $2,923,600 $-- For further information, contact: Company: Ms. Elaine Zhao, CFO Phone: +1-626-456-2789 Email: firstname.lastname@example.org Mr. Mike Lan Phone: +1-949-335-6918 Email: email@example.com Investors: John Mattio HC International, Inc. Phone: +1-203-616-5144 Email: firstname.lastname@example.org Web: http:// www.hcinternational.net
SOURCE Biostar Pharmaceuticals, Inc.