American Oriental Bioengineering, Inc. Reports First Quarter 2011 Financial Results

NEW YORK, May 9, 2011 /PRNewswire-Asia-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE: AOB), (the "Company" or "AOB"), a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and overthe-counter ("OTC") products, today announced financial results for the first quarter ended March 31, 2011.

First Quarter 2011 Financial Performance

In the first quarter of 2011, revenue decreased to $52.0 million from $53.7 million in the same period of 2010.

• The Company generated revenue of $48.7 million from its manufacturing business in the first quarter of 2011 compared with $50.5 million in the prior year period. Revenue from pharmaceutical products decreased 4.7% to $39.0 million from $40.9 million in the prior year period. Nutraceutical products generated revenue of approximately $9.8 million in the first quarter of 2011, an increase of 1.2% from $9.7 million in the prior year period. The revenue performance reflects the combined results of the Company's continuous marketing efforts, new product launches, and expanding coverage in rural areas. This was offset by the impact from the Company's strategic shift of revenue mix toward higher-margin products to minimize the impact from the increased costs of certain raw materials.
• The Company generated $3.3 million from its distribution business, Nuo Hua, in the first quarter of 2011, compared to $3.2 million in the prior year period.

Gross profit in the first quarter of 2011 was $25.1 million compared to $28.2 million in the first quarter of 2010. Gross margin was 48.2% compared to 52.5% in the prior year period. The margin pressure was mainly caused by a higher proportion of generic product sales in the rural market, the increased costs of certain raw materials, as well as the new levied urban construction and maintenance tax and educational surcharge.

Operating income in the first quarter of 2011 decreased to $5.5 million compared with $6.4 million in the prior year period. Total operating expenses decreased 10.7% to $19.5 million from $21.9 million in the prior year period. Selling, general and administrative expenses were $11.2 million, or 21.6% of total revenue, compared to $10.7 million, or 20.0% of total revenue, in the prior year period. Advertising expense decreased to $3.8 million in the first quarter of 2011 compared to $6.7 million in the prior year period, reflecting reduced advertising efforts on OTC drugs to correspond to the Company's selective product sales strategy. Research and development expenses were $2.7 million compared to $2.8 million in the prior year period. Management continued to implement stringent cost control measures which offset the increased labor costs.

Net income attributable to controlling interest for the first quarter of 2011 was $0.9 million, or $0.01 per diluted share, compared to $3.1 million, or $0.04 per diluted share, in the prior year period.

Balance Sheet

As of March 31, 2011, the Company had $111.4 million in cash and cash equivalents, and generated approximately $21.6 million of operating cash flow during the first quarter of 2011. Working capital was $162.9 million as of March 31, 2011, compared to $162.2 million as of December 31, 2010.

Mr. Tony Liu, Chairman and Chief Executive Officer of AOB, commented, "We are pleased with our financial performance despite the increasingly challenging economic and regulatory environment in China and worldwide. Our first quarter results reflect our continuing efforts on profitability focus and cost control. We dynamically adjusted our product mix to minimize the negative impact from the increased costs of certain raw materials and the government's price reduction on certain drugs. In addition, we believe our continued investments in CAPEX and R&D will give us a competitive advantage in for the long term, especially under the stricter regulatory environment."

Conference Call

The Company will hold a conference call at 8:00 am ET on Tuesday, May 10, 2011, to discuss its results. Listeners may access the call by dialing 1-877-299-4454 or 1-617-597-5447 for international callers, access code: 91826695. A webcast will also be available through AOB's website at www.bioaobo.com. A replay of the call will be available through May 17, 2011. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 86841058.

About American Oriental Bioengineering, Inc.

American Oriental Bioengineering, Inc. is a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter products.

Safe Harbor Statement

Statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. The economic, competitive, governmental, technological and other factors identified in the Company's filings with the Securities and Exchange Commission may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.