Biostar Pharmaceuticals, Inc. Announces 2011 Fourth Quarter And Year-end Financial Results

XIANYANG, China, March 27, 2012 /PRNewswire-Asia-FirstCall/ -- Biostar Pharmaceuticals, Inc. (NASDAQ GM: BSPM) ("Biostar" or "the Company"), a PRC-based manufacturer and marketer of pharmaceutical and health supplement products in China for a variety of diseases and conditions, today announced its financial results for the fourth quarter and year ended December 31, 2011.

Fourth Quarter 2011 vs. 2010

• Net sales decreased 8.1% to $25,985,024 from $28,277,390;
• Gross margin was 68.3% as compared to 76.1%;
• Income from operations decreased to $2,542,230, compared to $8,122,473; and,
• Net income decreased to $833,630, or $0.03 per diluted share, compared to $6,105,736, or $0.22 per diluted share.

Full Year 2011 vs. 2010

• Net sales increased 14.6% to $91,965,505 from $80,214,873;
• Gross margin was 70.0% as compared to 75.0%;
• Income from operations decreased to $18,159,054, compared to $23,610,274; and,
• Net income decreased to $12,173,513, or $0.44 per diluted share, compared to $17,381,560 or $0.63 per diluted share.

Ronghua Wang, Biostar's Chief Executive Officer and Chairman commented, "Net sales for the 2011 fourth quarter declined by approximately $2.3 million from the same period of 2010, mainly due to lower net sales of our flagship product, Xin Aoxing Capsule. To combat increased competition facing our Xin Aoxing Capsule, in mid-2011 we started a 'Buy 3 Get 1 Free' promotion, and as a result, sales volume increased, but net sales decreased by approximately $2.7 million from the 2010 fourth quarter. Since the start of this promotion, gross margin for Xin Aoxing Capsule has declined, but continues to remain above 80%."

Mr. Wang continued, "For all the other products, although sales volume increased, selling prices were depressed due to the Chinese government's price control policy through its drug-tendering model called 'lowest-price-win' Anhui EDL (essential drug list). This accounted for much of the decline in gross margin. Notwithstanding the lower selling prices, however, for 2011 as a whole, net sales increased by approximately $11.8 million or 14.6%. This was a direct result of our ongoing efforts to gain market share in our current locations, as well as, to expand our operations into new provinces.

"Of note, Xin Aoxing Capsule continues to be our main growth catalyst, as net sales for 2011 increased by 13.2% to $60.5 million and represented 65.8% of net sales compared to $53.4 million or 66.6% of 2010 net sales. Additionally, product sales from the newly acquired Shaanxi Weinan which we acquired in October 2011, contributed approximately $836,000 in total net sales for the 2011 fourth quarter and the year. Net sales from rural markets were approximately $4.8 million and $16.3 million for the 2011 fourth quarter and year, respectively. We continue to focus much of our marketing efforts in rural areas where there is less competition and more patients in need of our pharmaceutical and health products."

Mr. Wang noted, "Another persistent reason for the decline in gross margin for the 2011 fourth quarter and the year has been the significant increase of raw materials costs, especially those used in Taohuasan Pediatrics Medicine and Tianqi Dysmenorrhea Capsule. To control costs and enhance quality of our raw materials, we have planted 13 herbs at our 82 acre plantation in Qinling Mountains, two of which, salvia miltiorrhiza and honeysuckle, have been harvested and are being used to produce Danshen Granule and a health product. Other herbs should be ready for harvest in 2012. We plan to either trade these herbs for other raw materials or sell them."

Mr. Wang added, "2011 operating expenses as a percentage on net sales increased to 50.3% as compared to 45.5% in 2010, due to (i) higher advertising expenditures, (ii) $1.5 million higher general and administrative expenses mainly related to stock-based compensation and the acquisition of Shaanxi Weinan in late 2011, and (iii) a $2.3 million increase in research and development expenses for acquiring a proprietary technology used to manufacture a medicine to fight a cardiovascular and cerebrovascular disease, recorded in the fourth quarter of 2011. Additionally, in the fourth quarter, we recorded a non-cash $1.8 million impairment loss on land use rights for the construction of a raw materials processing plant in Zouan Town and another piece of land adjacent to our headquarters in Xianyang which was reclaimed by the local government. As a result, net income for 2011 fourth quarter and the year declined to approximately $0.8 million ($0.03 per diluted share) and approximately $12.2 million ($0.44 per diluted share), respectively, compared to approximately $6.1 million and approximately $17.4 million in the corresponding periods of 2010."

Biostar's CFO, Zack Pan noted, "Our balance sheet remains strong. Total current assets at December 31, 2011 were $60.5 million vs. total current liabilities of $6.7 million for a 9.1:1 current ratio. We continue to fund our business from our free cash flow. As of December 31, 2011, we had cash and cash equivalents of approximately $17 million compared to approximately $13.2 million one year earlier. Net cash provided by operating activities through December 31, 2011 was approximately $8.8 million; net cash used in investing activities in 2011 was approximately $6.3 million. We believe our existing cash and cash equivalents are sufficient to fund our current operations."

Mr. Wang added, "We continue to execute our strategy to grow our Company organically and through acquisitions. In 2011, we expanded our geographic coverage by adding three new provinces into our network, for a total of 25 provinces, and have increased our rural presence in the province of Shaanxi to approximately 13,000 sales outlets. To further increase our market share, we have expanded our sales force to over 400 people and increased our advertising spending. Additionally, we continue to invest in the development of several innovative products. Our team of 30 scientists and researchers continues to develop new products and we currently have eight OTC products and prescription drugs in our pipeline. "

Mr. Wang noted, "With the 2011 acquisition of Shaanxi Weinan, we increased our portfolio of drug approvals and permits by an additional 86 drugs and one health product. Currently, we are manufacturing eleven products at Shaanxi Weinan's facilities, and we expect to generate over $5 million in net sales in 2012 from the sale of these products."

Mr. Wang concluded, "We believe that Biostar is well positioned to take advantage of opportunities in China's pharmaceutical market, ranked the third largest in the world in 2011, over $50 billion in size and with growth projected at more than 20% in the next five years. Our large portfolio of drug approvals and permits, state-of-the-art research laboratories, high-tech production facilities, large distribution network and geographic coverage, are the foundations for our continued growth. To address the significant unmet needs of its population, China's $124 billion healthcare reform plan, launched in 2009, has made accessibility and affordability two major government guidelines. Our business plan works well with those goals. Additionally, we participate in the New Rural Medical Care Cooperative Program launched by the Chinese government in 2008, and benefit from greater numbers of people seeking medicines offered in hospitals and healthcare centers. We expect to announce 2012 revenue guidance when we issue our results for the first quarter of 2012."

Conference Call

Biostar's Chairman and CEO, Ronghua Wang and CFO, Zack Pan will host a conference call today, Tuesday, March 27th at 10:00 am E.T. to discuss these results as well as recent corporate developments.

Live conference call details

Interested parties may participate in the call by dialing (480) 629-9808. Please call in 10 minutes before the conference is scheduled to begin and ask for the Biostar call or use pass code 4527039. After opening remarks, there will be a question and answer period. Questions may be asked during the live call, or alternatively, you may e-mail questions in advance to lcati@equityny.com.

Webcast

The conference call will also be broadcast live over the Internet. To listen to the webcast, please go to http://viavid.net/dce.aspx?sid=0000954F or visit Biostar's website http://www.biostarpharmaceuticals.com and then to the Event Calendar page where the conference call is posted. Please go to the website at least 15 minutes early to register, and download and install any necessary audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days. We suggest listeners use Microsoft Internet Explorer as their web browser.

Replay

A reply will be available until 11:59 pm E.T.April 3, 2012. To listen, please call (858) 384-5517 and use pass code 4527039.

About Biostar Pharmaceuticals, Inc.

Biostar Pharmaceuticals, Inc., through its wholly owned subsidiary and controlled affiliate in China, develops, manufactures and markets pharmaceutical and health supplement products for a variety of diseases and conditions. The Company's most popular product is its Xin Aoxing Oleanolic Acid Capsule, an over-the-counter ("OTC") medicine for chronic hepatitis B, a disease affecting approximately 10% of the Chinese population. For more information please visit: http://www.biostarpharmaceuticals.com