JERSEY CITY, N.J., Nov. 15, 2011 /PRNewswire/ -- Aoxing Pharmaceutical (NYSE Amex: AXN) ("Aoxing Pharma"), a specialty pharmaceutical company focusing on research, development, manufacturing and distribution of narcotic, pain-management, and addiction treatment pharmaceuticals, today announced its financial and operational results for the three month period ended September 30, 2011.
Revenues for the three months ended September 30, 2011 were $1,530,068, representing a 12.1% decrease over the revenues of $1,740,673 realized during the same period in 2010. The decrease is mostly attributed to reduced promotional efforts on certain non-proprietary products that have become non-profitable. Most of them are those included in the PRC government's Essential Drug List. The significant increase in the price of raw materials since January 2011 combined with the pricing pressure from the bidding process made those products unprofitable.
Cost of sales was $662,550 for the three months ended September 30, 2011, 20% less than the $827,295 in costs incurred during the same period in 2010. The main factor for the decrease in cost of sales was a lower volume of product sales. Improved gross margin also reduced cost of sales.
Gross profit was $867,518 during the three months ended September 30, 2011, 5% lower than the same period a year earlier, reflecting the combined effect of lower sales and higher gross margin. Gross margin was 56.7% during the three months ended September 30, 2011, a 4.2% improvement from the gross margin of 52.5% for the same period a year earlier. The improvement in gross margin was due to a modest price increase for Zhongtongan as well as manufacturing efficiency enhancements. The price of raw materials during the three months ended September 30, 2011 was higher than the same period a year ago, but flat sequentially quarter to quarter.
Research and development expenses were $106,399 during the three months ended September 30, 2011, representing a 24.5% increase from $85,448 incurred during the same period in 2010. R&D expenses could fluctuate significantly from one period to another, reflecting the progress and timing of various development projects.
General and administrative expenses were $746,243 in the three months ended September 30, 2011, 17.9% lower than $909,057 in the same period a year earlier. The main reason for the decrease was Company's effort to reduce cost.
Selling expenses in the amount of $363,293 incurred during the three months ended September 30, 2011 were 29% lower than $511,821 spent on selling during the same period in 2010. The decrease was mainly due to reduced marketing efforts for non-profitable products.
Loss from operations for the quarter ended September 30, 2011 decreased 33.4% to $495,957, from $744,992 incurred during the same period in 2010. The significant decrease in the loss was primarily due to lower general, administrative, and selling expenses.
Net interest expense was $418,431 for the three months ended September 30, 2011, increasing 11.6% from net interest expense of $374,781 for the same period in 2010. The increase in interest expense was due to higher interest rates upon renewal of loans, as a result of nationwide credit tightening in China, and currency exchange rate change.
During the quarter ended September 30, 2011, the Company recognized a loss of $41,936 from the joint venture with Johnson Matthey Plc. The JV did not have any product sales yet and was not in operation during the same period in 2010.
Recent Highlights and Updates
- On November 3, 2011, the Company announced that it had received a special funding of 2 million RMB (approximately $315,000) from the Industry and Information Technology Department and the Finance Department of Hebei Province in China. The grant was for manufacturing facility improvements in the form of interest payment assistance on the Company's existing bank loans.
Zhenjiang Yue, Aoxing's Chairman and CEO, commented, "I am pleased with improvement in gross margin, as we have continued our strategy to decrease promotions on unprofitable products, despite continued challenges in the market place. We are making progress with our exciting pipeline of narcotic, pain management, and addiction treatment pharmaceuticals. We look forward to continued success in the years ahead."
About Aoxing Pharmaceutical Company, Inc.
Aoxing Pharmaceutical Company, Inc is a US incorporated specialty pharmaceutical company with its operations in China, specializing in research, development, manufacturing and distribution of a variety of narcotics and pain-management products. Headquartered in Shijiazhuang City, outside Beijing, Aoxing has the largest and most advanced manufacturing facility in China for highly regulated narcotic medicines. Its facility is one of the few GMP facilities licensed for the manufacture of narcotic medicines by the China State Food and Drug Administration (SFDA). It has a joint venture collaboration with Johnson Matthey Plc to produce and market narcotics and neurological drugs in China. It also has strategic alliance partnerships with QRxPharma, and Phoenix PharmaLabs, Inc. For more information, please visit: www.aoxingpharma.com.