Tianyin Pharmaceutical Co., Inc. Announces Record Second Quarter 2010 Financial Results
Second Quarter Ending December 31, 2009 Financial Results
Revenue for the second quarter of fiscal 2010 was approximately $14.9million, an increase of 47.9% compared to $10.1 million for the second quarterof fiscal 2009. The increase was attributable to higher sales of both existingand new products, channel expansion efforts that increased market penetration,and increased utilization of the Company's expanded production facility.Revenues from the top three selling products, Ginkgo Mihuan Oral Liquid, ArpuShuangxin Oral Liquid and Azithromycin Dispersible Tablets, were $7.6 millionand represented approximately 51% of total revenues collectively for thequarter.
Cost of goods sold for the three months ended December 31, 2009 wasapproximately $7.2 million or 48.1% of revenue as compared to $4.9 million or49.0% of revenue for the three months ended December 31, 2008, yielding agross profit of $7.8 million and gross margins of 51.9%, compared to $5.2million in gross profit and gross margins of 51.0% during the second quarterof fiscal 2009. Gross margins improved as a result of an increase in highermargin products in the sales mix along with greater efficiencies in ourproduction and manufacturing processes.
Operating expenses for the three months ended December 31, 2009 wereapproximately $4.6 million, up 72.0% compared to the same period in 2008.Selling, general and administration expenses for the period increased toapproximately $4.4 million from $2.6 million in the second quarter of fiscal2009 as a result of the implementation of Tianyin's sales and marketingstrategy, including increased sales payrolls and direct marketing expenses, inaddition to non-cash stock compensation expense of $0.9 million. Research anddevelopment expenses for the three months ended December 31, 2009 increased134.4% to $0.2 million compared to the second quarter of fiscal 2009.
Operating income for the second quarter of fiscal 2010 totaledapproximately $3.2 million, a 27.2% increase from the $2.5 million reportedfor the second quarter of fiscal 2009. Operating margins were 21.1% and 24.5%for the second quarter of fiscal 2010 and fiscal 2009, respectively as theCompany continued to spend aggressively on sales and marketing initiatives togenerate incremental and future product sales.
GAAP net income was approximately $2.6 million in the second quarter offiscal 2010, a 24.8% increase, compared to $2.1 million for the second quarterof fiscal 2009. The company had an effective tax rate of 18.2% and 16.6%, forthe second quarter of fiscal 2010 and 2009, respectively. Diluted earnings pershare were $0.08 compared to $0.13 for the second quarter of fiscal 2010 andfiscal 2009 respectively, based upon 30.4 million and 15.7 million shares.Adjusted net income, which adds back the non-cash equity compensation chargeof $0.9 million, was $3.4 million, representing 62.0% year-over year growthwith earnings of $0.11 per diluted share. The divergence in the share countrelates to the preferred shares which have been and are convertible intocommon, in addition to common shares issued in October 2009 private placement,and warrants both exercised and outstanding.
"Our strong performance in the second quarter and first half of fiscalyear 2010 was driven by continued execution of our growth strategy, includingthe expansion of our sales force and distribution channels, increased salesand marketing activities to support market share gains for our expandingportfolio of products, in addition to rapid utilization of our newly addedmanufacturing capacity," stated Dr. Guoqing Jiang, Tianyin's Chief ExecutiveOfficer. "To facilitate our future growth strategy and to diversify ourproduct offering, we formalized a joint venture named Sichuan JiangchuanPharmaceutical Co., Ltd. to produce macrolide antibiotics, which addresses alarge and rapidly growing market in China. We have secured the property andcommenced construction for our new production facility and expect this to be akey contributor to growth during fiscal 2011. In addition, we received SFDAapproval for four new generic products, which complement our portfolio andaddress established billion dollar plus markets that cover multipleindications. We currently have 40 drug candidates under SFDA review andbelieve the Chinese stimulus plan, favorable health care policies, increasedconsumer disposable income, and favorable demographic trends will continuedriving overall growth in demand for the pharmaceutical market."
Six Months Ending December 31, 2009 Financial Results
For the six months ended December 31, 2009, revenues increased 44.1% to$28.3 million from $19.7 million reported for the prior year period. GinkgoMihuan, one of Tianyin's flagship products, contributed approximately $9.2million or 33% of total revenues for the first six months of fiscal 2010,representing 102% year-over-year growth. Revenues generated from the ArpuShuangxin Oral Liquid were $2.9 million, or 16% of total revenues, a 2%increase from fiscal 2009. Tianyin's top 5 selling products generated revenueof $14.7 million and represented 53% of total revenue.
Cost of goods sold for the first six months of fiscal year 2010 wasapproximately $13.5 million, yielding a gross profit of $14.8 million andgross margins of 52.3%, compared to $10.0 million in gross profit and a grossmargin of 51.0% for the same period in fiscal year 2009.
Operating expenses for the first six months of fiscal year 2010 were $8.9million, compared to $5.4 million in the same period in fiscal 2009. Selling,general and administration expenses for the period increased to approximately$8.5 million from $5.2 million, which included the previously disclosednon-cash equity compensation expense.
Operating income totaled approximately $5.9 million, a 27.1% increase fromthe $4.6 million reported for the first half of fiscal 2009. Operating marginswere 20.8% and 23.6% for the first half of fiscal year 2010 and 2009,respectively, and were impacted by a non recurring $0.9 million equitycompensation expense for consulting.
For the six months ended December 31, 2009, net income was approximately$4.8 million, a 23.6% increase from $3.8 million recorded for the same periodin fiscal 2009. Diluted earnings per share were $0.17, compared to $0.16 inthe same period 2009, based on 28.5 million and 24.7 million shares for 2010and 2009, respectively. Adjusted net income, which adds back the non-cashequity compensation charge of $0.9 million, was $5.5 million, representing44.7% year-over year growth with earnings of $0.20 per diluted share.
The provision for income taxes was $1.1 million and $0.8 million for thefirst half of fiscal 2010 and 2009 with an effective tax rate of 18.5% and16.6%, respectively.
Balance Sheet and Cash Flow
Cash and cash equivalents and restricted cash totaled $19.9 million onDecember 31, 2009 compared to $12.4 million on June 30, 2009, which was theresult of cash flow from operations, a $4.5 million net equity raise completedin October, 2009, and proceeds from exercised warrants. Net cash used ininvesting activities for the six months ended December 31, 2009 was $4.3million for the acquisition of intangible drug, and property and equipment.The Company had a current ratio of 6.8 to 1 and total stockholders' equity of$54.0 million, with total assets of $58.8 million versus total liabilities of$4.8 million on December 31, 2009. For the first six months of fiscal 2010,the Company generated $4.9 million in cash from operations versus $3.9 millionfor the same period in fiscal 2009.
Fiscal 2010 and 2011 Guidance
On October 29, 2009 management increased fiscal 2010 guidance for the yearwhich ends June 30, 2010 and expects to report revenues of more than $63.6million and net income of at least $11.3 million, representing 48.3% and 43.0%year-over-year growth respectively.
On December 3, 2009 management announced financial guidance for fiscalyear ending June 30 2011. The Company forecasted revenues of $113.3 millionfor fiscal 2011, representing a 78.1% increase over projected fiscal year 2010revenues of $63.6 million, with net income of $19.6 million, representing73.5% over projected net income of $11.3 million for fiscal 2010.
The Company will host a conference call to discuss the 2010 second quarterfinancial results on Monday, February 8, 2010 at 4:30 p.m. ET. Interestedparticipants should call +1-877-941-8418 within the United States, or US+1-480-629-9809 if calling internationally. The conference ID is 4207607. Itis advisable to dial in approximately 5-10 minutes prior to 4:30 p.m. EDT. Ifyou are unable to participate in the call at the scheduled time, a playbackwill be available through February 22, 2010. To listen to the playback, pleasecall +1-800-406-7325 from within the United States, or US +1-303-590-3030internationally. Please use passcode 4207607 for the replay.
This call is being web cast by ViaVid Broadcasting and can be accessed atViaVid's website at the following link http://viavid.net/dce.aspx?sid=00007061To access the web cast, you will need to have the Windows Media Player on yourdesktop. For the free download of the Media Player please visit:http://www.microsoft.com/windows/windowsmedia/en/download/default.asp
About Tianyin Pharmaceuticals
Tianyin is a manufacturer and supplier of modernized Traditional ChineseMedicine ("TCM") in China. It was established in 1994 and acquired by thecurrent management team in August 2003. It has a comprehensive productportfolio of 39 products, 22 of which are listed in the highly selectiveNational Medicine Catalog of the National Medical Insurance program. Tianyinowns and operates two GMP manufacturing facilities and an R&D platformsupported by leading Chinese academic institutions. The Company has a pipelineof 17 pharmaceutical products pending approval. Tianyin has an extensivenationwide distribution network throughout China with a sales force of 720salespeople. Tianyin is headquartered in Chengdu, Sichuan Province with twomanufacturing facilities and a total of 1,365 employees. For more informationabout Tianyin, please visit http://www.tianyinpharma.com .
Safe Harbor Statement
The Statements which are not historical facts contained in this pressrelease are forward-looking statements that involve certain risks anduncertainties including but not limited to risks associated with theuncertainty of future financial results, additional financing requirements,development of new products, government approval processes, the impact ofcompetitive products or pricing, technological changes, the effect of economicconditions and other uncertainties detailed in the Company's filings with theSecurities and Exchange Commission.
This press release utilizes Non GAAP financial measures, such as adjustednet income and earnings per share. Management believes that adjustmentsreflecting certain non cash charges are more representative of the Company'soperating results. Investors should not rely on such measures in makingdecisions
Non-GAAP Financial Measures and Reconciliations
As used herein, "GAAP" refers to generally accepted accounting principalsin the United States. We use various numerical measures in conference calls,investor meetings and other forums, which are or may be considered "Non-GAAPfinancial measures" under the SEC's Regulation G. We have provided below foryour reference supplemental financial disclosure for these measures, includingthe most directly comparable GAAP measure and an associated reconciliation.
Note: To supplement our consolidated financial statements presented inaccordance with GAAP, Tianyin Pharmaceutical Corp. uses non-GAAP measures,such as Adjusted Net Income and Adjusted Diluted Earnings per share, whichexclude certain non cash expenses. This non-GAAP adjustment is provided toenhance the user's overall understanding of our historical and currentfinancial performance and our prospects for the future. We believe the non-GAAP results provide useful information to both management and investors byexcluding certain expenses we believe are not indicative of our core operatingresults.-- Q2 2010 Revenue Increased 47.9% to $14.9 Million, Net Income Increased 24.8% to $2.6 Million with adjusted EPS of $0.11 on a diluted basis -- Cash and Equivalents of $19.9 Million on December 31, 2009 -- First-half 2010 Cash Flow from Operations Increased 24.5% to $4.9 million -- Tianyin secured SFDA approvals for four new products during the second quarter addressing multiple indications, bringing total number of products in the portfolio to 48 Q2 FY2010 Results Q2 FY2010 Q2 FY2009 CHANGE (%) Net Sales $14.9 million $10.1 million +48% Gross Profit $7.8 million $5.2 million +50% GAAP Net Income $2.6 million $2.1 million +25% Adjusted Net Income* $3.4 million $2.1 million +62% GAAP EPS (Diluted) $0.08 $0.13 -38% Adjusted EPS (Diluted) $0.11 $0.13 -15% Weighted Shares Outstanding 30.4 million 15.7 million +94% Six Months FY2010 Results Six Months Six Months CHANGE FY2010 FY2009 (%) Net Sales $28.3 million $19.7 million +44% Gross Profit $14.8 million $10.0 million +48% GAAP Net Income $4.8 million $3.8 million +24% Adjusted Net Income $5.5 million $3.8 million +48% GAAP EPS (Diluted) $0.17 $0.16 +6% Adjusted EPS (Diluted) $0.19 $0.16 +19% Weighted Shares Outstanding 28.5 million 24.7 million +15%
SOURCE Tianyin Pharmaceutical Co., Inc.
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