Biostar Pharmaceuticals, Inc. Reports Fiscal 2009 Financial Results

Thursday, April 1, 2010 General News
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Company Increases 2010 Revenue Guidance to $80 million-$82 million and Net Income to $18 million-$20 million

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.

    -- 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


    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.

Recent Events

-- 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.

2010 Guidance

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.

Conference Call

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 or at the following link: . 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: .

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

    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

Safe Harbor

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 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
    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

    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.

                                                      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.

                                                    Year Ended
                                                    December 31,
                                              2009                 2008

    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
        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

      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)

      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

      Interest payments                          $--              $40,615
      Income tax payments                 $3,184,462             $823,153

      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:


     Ms. Elaine Zhao, CFO
     Phone: +1-626-456-2789

     Mr. Mike Lan
     Phone: +1-949-335-6918


     John Mattio
     HC International, Inc.
     Phone: +1-203-616-5144
     Web:   http://

SOURCE Biostar Pharmaceuticals, Inc.

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