Genesis Pharmaceuticals Reports Results for its Fourth Quarter and Fiscal Year 2008

Wednesday, October 1, 2008 General News
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LAIYANG, China, Sept. 30 GenesisPharmaceuticals Enterprises, Inc. (OTC Bulletin Board: GNPH) ("Genesis" or the"Company"), a U.S. pharmaceutical company with its principal operations in thePeople's Republic of China, today announced its financial results for itsfourth quarter and fiscal year ended June 30, 2008. A 10-K Form was filed forthe year with the U.S. Securities Exchange Commission that is availablethrough the Company's website and from the SEC.

Fourth Quarter FY 2008 Highlights

-- Revenue was $28.3 million, up 39.0% from the corresponding quarter in2007

-- Gross profit was $23.5 million, up 57.7% from the corresponding quarterin 2007, and gross margin was 83.2%, compared to 73.3% in the correspondingquarter in 2007

-- Operating income was $10.1 million, up 42.2% from the correspondingquarter in 2007

-- Net income was $9.6 million, compared to $14.6 million in thecorresponding quarter in 2007

-- Gross profit was $77.0 million, up 40.0% from the year ended June 30,2007, and gross margin was 77.4%, compared to 72.2% in the year ended June 30,2007

-- Operating income was $32.2 million, up 75.9% from the year ended June30, 2007

-- Net income was $22.5 million, up 1.8% from the year ended June 30,2007, with earnings of $1.84 per diluted share

-- Completed private placements for a total of $35 million of convertiblenotes and 2,275,000 warrants

-- Began manufacturing and distributing Baobaole chewable tablets, aTraditional Chinese Medicine

"Genesis had a strong fourth quarter and spent this past year establishingits financial performance, putting a growth strategy into place, and expandingits marketing and sales efforts. Our product line was strengthened by theintroduction of Baobaole chewable tablets, a new over the counter drug whichis sold directly to pharmacies and has a high profit margin," said Mr. WuboCao, Chairman and CEO of Genesis Pharmaceuticals Enterprises, Inc. "We plan tobuild on the solid performance that we were able to achieve in fiscal year2008."

Fourth Quarter of Fiscal Year 2008 Results

Total revenue in the fourth quarter ended June 30, 2008 was $28.3 million,up 39.0% from $20.4 million in the prior year's corresponding period. Thisincrease in revenue was due to sales of the Company's new Baobaole chewabletablets (which were not available for sale in the prior year's correspondingperiod), along with sustained sales of the Company's most popular products,Clarithromycin sustained-release tablets and Itopride Hydrochloride Granules.

Gross profit in the fourth quarter ended June 30, 2008 was $23.5 million,an increase of 57.7% from $14.9 million in the prior year's correspondingperiod. Gross margin was 83.2%, compared to 73.3% in the prior year'scorresponding period. This increase in gross profit was due to rapidly growingsales of Baobaole chewable tablets.

Selling, general and administrative expenses in the fourth quarter endedJune 30, 2008 were $12.3 million, up 73.9% from $7.1 million in the prioryear's corresponding period. Higher expenses in 2008 were principally becauseof higher commission expenses paid to sales personnel, higher advertising,marketing and promotion spending and salaries, wages and related benefitsexpenses, and expenses related to being a public company.

Operating income in the fourth quarter ended June 30, 2008 was $10.1million, with an operating margin of 35.8%, a 42.2% increase from $7.1 millionin the prior year's corresponding period.

Net income for the quarter ended June 30, 2008 was $9.6 million, comparedto $14.6 million in the prior year's period. Net income decreased because non-operating income declined to $1.4 million in the quarter ended June 30, 2008from $6.6 million in the prior year's corresponding period. Part of thisdecrease was due to a decrease in a tax exemption that declined to $5.3million in the fourth quarter of fiscal year 2008 from $9.9 million in theprior year's corresponding quarter. Also, a non-cash debt amortization expenseof approximately $2.5 million took place in the fourth quarter of 2008, forwhich there was no similar expense the prior year's corresponding quarter.

Full Fiscal Year Operating Highlights

Total revenue for fiscal year 2008 was $99.5 million, up 30.6% from $76.2million in the twelve month period ended June 30, 2007. Gross profit was $77.0million, up 40.0% from $55.0 million in the twelve month period ended June 30,2007. Gross margin was 77.4%, up from 72.2% in the twelve month period endedJune 30, 2007. Operating income totaled $32.2 million, a 75.9% increase from$18.3 million in the twelve month period ended June 30, 2007. The Company'soperating margin was 32.4%, up from 24.0% in the prior year's period. Netincome for fiscal year 2008 was $22.5 million, with net margin of 22.6%, a1.8% increase from $22.1 million, with net margin of 28.9% in the twelve monthperiod ended June 30, 2007. Net margin decreased primarily because of higherselling, general and administrative expenses as a percentage of sales and nolonger having a significant tax exemption received in 2007. After givingeffect to a one for forty reverse split, net income was $2.45 per basic shareand $1.84 per fully diluted share in fiscal year 2008, compared to $2.94 perbasic and fully diluted share in the twelve month period ended June 30, 2007.

Adjusting for a recent one for forty reverse split for its shares, therewere 10,327,844 outstanding shares of common stock as of June 30, 2008. Ofthose shares, 560,000 shares are not considered issued and outstanding forearnings per share calculations as of at June 30, 2008 because the issuance ofthose shares is contingent on the occurrence of certain future events.

Financial Condition

As of June 30, 2008, the Company had $48.2 million in cash and anadditional $7.8 million in restricted cash. Working capital was $73.2 million,up from $16.0 million as of June 30, 2007. This increase was primarily due toan increase in cash, investments and accounts receivable as well as decreasesin short term bank loans and dividends payable. Current liabilities were $16.4million and long-term debt consisted of $2.5 million in convertible debt.Shareholder's equity was $95.5 million. Future contractual obligations infiscal 2009 include $8.6 million in bank indebtedness and $4.4 million inresearch and development contractual agreements. The Company generated $17.1million in cash flow from operating activities in fiscal 2008. The Companyinvested $8.9 million in intangible assets consisting mostly of land userights and the rights to develop, manufacture and distribute new drugs.

Recent Events

In June 2008, the Board of Directors appointed a new independent boardmember. The Board of Directors also established an independent Audit Committeeand a Compensation Committee.

In July 2008, the Company received approval from the Chinese State Foodand Drug Administration ("SFDA") to start producing and distributing RadixIsatidis Dispersible Tablets, an herbal-based traditional Chinese medicineused for viral influenza. Sales in China will begin in October.

Business Outlook and Guidance

"We are pleased to report that we recently added a new over the counterdrug, Radix Isatidis Dispersible Tablets, to our product line. We beganselling significant amounts of Radix Isatidis Dispersible Tablets immediatelyafter we received our final approvals from the SFDA. We have three other drugswaiting for approval from the SFDA which we hope will be approved in fiscalyear 2009 and will find similar market success. We expect sales of our currentpopular products to continue growing because of increased branding and greatermarketing efforts," said Mr. Cao. "Throughout this last year we took a numberof steps to improve our corporate governance. This included adding anindependent member to our Board, adopting a code of business conduct andethics, and establishing an audit committee and a compensation committee.These steps are a part of preparing the Company for its applying to have itsshares listed on a senior securities exchange."

"Because of our strong financial performance throughout fiscal 2008 andour expectations of expanding our product line and increasing sales throughoutthe upcoming year, as guidance, we expect revenue for fiscal 2009 to be from$122 to $130 million, and operating income to be from $40 to $43 million.These guidance numbers are subject to change, and are based on our ability togrow our business in the future in the same way as we have in the past,"concluded Mr. Cao.

Conference Call

Genesis Pharmaceuticals Enterprises, Inc. management will host aconference call at 9:00 a.m. Eastern on Wednesday, October 1, 2008 to discussfinancial results for the fiscal year ended June 30, 2008. The conference callwill include Mr. Wubo Cao, Chairman and Ms. Elsa Sung, CFO. To participate inthis live conference call, please dial the following number five to tenminutes prior to the scheduled conference call time: (888) 419-5570.International callers should call (617) 896-9871. The Conference Passcode is375 022 62. If you are unable to participate in the call at that time, replayof the conference call will be available from Wednesday, October 1 at 11:00a.m. Eastern until Wednesday, October 15. To access the replay, call (888)286-8010. International callers should call (617) 801-6888. The ConferencePasscode is 31221366.

About Genesis Pharmaceuticals Enterprises, Inc.

Genesis Pharmaceuticals Enterprises, Inc. is a U.S. public company engagedin the research, development, production, marketing and sales ofpharmaceutical products in the People's Republic of China. Its operations arelocated in Northeast China in an Economic Development Zone in Laiyang City,Shandong province. Genesis is a pharmaceutical company in China producingwestern and Chinese herbal-based medical drugs in tablet, capsule, and granuleform.

Safe Harbor Statement

Certain statements in this press release that are not historical facts are"forward-looking statements" within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such statements are not guarantees of futureperformance and are subject to risks and uncertainties that could cause theCompany's actual results and financial position to differ materially fromthose included within the forward-looking statements. Forward-lookingstatements involve risks and uncertainties, including those relating to theCompany's ability to introduce, manufacture and distribute new drugs. Actualresults may differ materially from predicted results, and reported resultsshould not be considered as an indication of future performance. The potentialrisks and uncertainties include, among others, the Company's ability to obtainraw materials needed in manufacturing, the continuing employment of keyemployees, the failure risks inherent in testing any new drug, the possibilitythat regulatory approvals may be delayed or become unavailable, patent orlicensing concerns that may include litigation, direct competition from othermanufacturers and product obsolescence. More information about the potentialfactors that could affect the Company's business and financial results isincluded in the Company's filings, available via the United States Securitiesand Exchange Commission.Fiscal Year 2008 Highlights: -- Revenue was $99.5 million, up 30.6% from the year ended June 30, 2007

SOURCE Genesis Pharmaceuticals Enterprises, Inc.

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