China Yongxin Pharmaceuticals Inc. Announces 2008 Fourth Quarter and Full Year Financial Results

China Yongxin Pharmaceuticals, Inc. ("China Yongxin Pharmaceuticals" or "the Company") , a leading manufacturer, distributor and retailer of pharmaceuticals in Northeastern China, today announced Annual 2008 financial results ended December 31, 2008.

Fourth Quarter Ending December 31, 2008 Financial Results

Yongxin announced record revenue for its fourth quarter of $14.1 million, representing a 28.6% increase from $11 million recorded in the fourth quarter of fiscal 2007. Growth was driven by increased sales from both its wholesale distribution and retail business segment.

Gross profit in the fourth quarter 2008 was $3.5 million, a 122.8% increase from $1.6 million in the fourth quarter of 2007. Gross margins were 24.6% in the fourth quarter of 2008, compared to 14.2% in the fourth quarter of 2007.

Operating expenses were approximately $2 million, representing a 112.6% increase from approximately $1 million in the fourth quarter of 2007, and were directly related to increased marketing and selling expenses. Income from operations was $1.4 million, an increase of 138.8% from $0.6 million in the same period of 2007. Operating margins were 10.1% compared to 5.4%.

Net income for the quarter was $0.9 million, down from net income of $1.3 million in the same period a year ago. Income taxes were approximately $346,053 and 0 representing an effective tax rate of 25% and 0% for the fiscal fourth quarter of 2008 and 2007 respectively.

Diluted earnings per share were $0.03 for the fourth quarter of 2008, compared to diluted earnings per share of $0.06 in the fourth quarter of 2007, utilizing 31.2 million shares and 21 million shares respectively. The variance in net income and earnings per share was related to recapitalization on reverse merger.

Fiscal Year Ending December 31, 2008 Financial Results

For the fiscal year ended December 31, 2008, Yongxin announced record revenue of $59.1 million, a 23.5% increase versus $47.9 million reported for 2007. Revenues from the pharmaceutical wholesale business segment increased approximately 25.8% from $38.3 million in 2007 to $48.3 million in 2008, while revenues for retail chain drugstores increased approximately 15.1% to $10.9 million in 2008. Increased demand for its portfolio of pharmaceutical products by a broader customer base and higher sales volume overall, and the addition of 14 new drugstores were the principal drivers of growth year over year. Yongxin Drugstore, Jingyongxin Drugstore and Caoantang Drugstore, three new subsidiaries added in mid-2007, grew rapidly in 2008, which brought in additional revenues and contributed to overall revenue growth.

Cost of goods sold was approximately $47.2 million, yielding a gross profit of $11.9 million and gross margins of 20.1%, compared to $8.0 million in gross profit and a gross margin of 16.7% for fiscal year of 2007. Thus, gross profits grew by 48.8% and gross profit margin improved 340 basis points on a year-over-year basis. The improved margins were primarily attributable to the company's ability to receive larger volume discounts for purchases to service a greater revenue base, in addition to a product mix which included higher profit margin cosmetics and health and organic products. During 2008, the Company added 486 new products for distribution, 343 of these were granted exclusive distribution rights in Jilin province.

Operating expenses, which include selling, general and administration expenses for fiscal year 2008, were $6.1 million, up 57.7% compared to the same period in 2007. Selling expenses for the period increased to approximately $3.6 million from $2.6 million in 2007, which is a result of increased marketing efforts. General and administrative expenses increased to $2.6 million in 2008 from $1.3 million in 2007. The increase was mainly due to the increased expenses related to the public market.

Operating income totaled approximately $5.8 million, a 40.5% increase from the $4.1 million reported for fiscal year 2007. Operating margins were 9.8% and 8.6% for the fiscal year 2008 and 2007, respectively.

For fiscal 2008, net income was approximately $4.1 million, an increase of 13.7% from $3.6 million recorded for fiscal 2007. The provision for income taxes was $1.0 million and $17,888, yielding an effective tax rate of 16% and 0.4% for 2008 and 2007 respectively and thus impacted the year-over-year net income comparison.

Fully diluted earnings per share for 2008 and 2007 were $0.13 and $0.16 respectively, based on 31.2 million and 22.4 million shares for 2008 and 2007, respectively. This increase in outstanding shares was related to recapitalization on reverse merger. The share count does not include 5 million shares of preferred stock owned by the management, which is convertible to up to 30 million shares of common stock.

"We are very pleased with our strong financial performance in 2008 despite the global recession as growth emanated from increased sales through our pharmaceutical wholesale business to a larger base of customers complemented by higher margin products in addition to contributions from our retail chain drugstores where we launched 14 new locations during 2008," commented Mr. Yongxin Liu, Chairman and Chief Executive Officer of China Yongxin. "Our multi-pronged growth strategy is proving to be successful as evidenced by this growth in revenue and net income for 2008."

"Revenues generated from prescription drugs represented approximately 25% of total drugstore sales with gross margins of approximately 23.5%. We successfully launched our Electronic Diagnosis System in the 42 chain drugstores located in Changchun, Jilin Province and where we have experienced an approximate 25% increase in prescription drug sales in these stores. We plan to introduce this service to the balance of our retail drugstores, which we expect to drive market share gains and incremental revenue growth during 2009 and beyond. The Chinese government recently released its new plan to spend $124 billion on healthcare reform during the next three years, which will provide accessible and affordable healthcare to the country's 1.3 billion citizens. We believe this healthcare plan will significantly increase the overall market size and our strategic location and strong reputation in Northeastern China will enable us to capitalize on this opportunity, while creating further value for our shareholders," concluded Mr. Liu.

Balance Sheet and Cash Flow

The Company had a current ratio of 1.8 to 1 and $0.6 million in cash and cash equivalents on December 31, 2008. Stockholders' equity was $13.6 million, with working capital of $10.2 million and total assets of $31.5 million and total liabilities of $18 million. Days Sales Outstanding for fiscal 2008 were 37 days, a considerable decrease compared to the 50 days reported during 2007. For the fiscal year of 2008, the Company generated $5.9 million in cash from operations versus net cash used in operations of $1.8 million for the same period in 2007. The increase in cash flow was primarily attributable to an increase in net income and decrease in accounts receivable, advances to suppliers and inventory, while partially offset by a decrease in accounts payable.

About China Yongxin Pharmaceuticals, Inc.

China Yongxin Pharmaceuticals, Inc. was founded in 1993 as the Changchun Yongxin Dirui Medical Co., Ltd. (Yongxin), a wholesale drug distributor. Its products include Chinese traditional medicines, pharmaceutical preparations, natural health products, health food, cosmetics, and medical equipment. It began retail operations in 2004, and in 2005, it gained franchise rights from one of the world's largest drug chains for China's Jilin Province. By the end of 2007, the Company had become one of the fastest growing pharmaceutical companies in China through its retail chain of 93 drug outlets as well as wholesale distribution and manufacturing operations in Northeastern China. For more information about China Yongxin Pharmaceuticals, please visit http://www.yongxinchina.com .

Forward Looking Statements

This news release contains certain "forward-looking statements." Forward-looking statements are based on current expectations and assumptions and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and many of which are beyond the Company's control. The forward-looking statements are also identified through the use of words "believe," enable," "may," "will," "could," "intends," "estimate," "anticipate," "plan," "predict" "probable," "potential," "possible," "should," "continue," and other words of similar meaning. Actual results could differ materially from these forward-looking statements as a result of a number of risk factors detailed in the Company's periodic reports filed with the SEC. Given these risks and uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements and no assurances can be given that such statements will be achieved. China Yongxin Pharmaceutical Inc. does not assume any duty to publicly update or revise the material contained herein.

CONTACT: Company: Mr. Sam Liu, COO of China Yongxin Pharmaceuticals, Inc.,
+1-626-581-9098, info@yongxinchina.com; or Investors: Mr. Matthew Hayden of
HC International, +1-561-245-5155, matt.hayden@hcinternational.net

Web site: http://www.yongxinchina.com/