American Oriental Bioengineering, Inc. Reports Fourth Quarter and Full Year 2010 Financial Results

NEW YORK, March 14, 2011 /PRNewswire-Asia-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE: AOB), (the “Company” or “AOBO”), a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter (“OTC”) products, today announced financial results for the fourth quarter and fiscal year ended December 31, 2010.

Fourth Quarter 2010 Financial Performance

In the fourth quarter of 2010, revenue decreased to $83.4 million from $100.0 million in the same period of 2009, primarily caused by decreased sales from pharmaceutical products, partially offset by increased sales from distribution business.

• The Company generated $79.4 million from its manufacturing business, in the fourth quarter of 2010, compared with $96.4 million in the prior year period. Revenue from pharmaceutical products decreased 19.7% to $68.3 million from $85.0 million in the prior year period. Nutraceutical products generated revenue of approximately $11.1 million in the fourth quarter of 2010, down 2.8% from $11.4 million in the prior year period. The revenue performance reflects the Company’s strategic shift of revenue mix toward higher-margin products to minimize the impact from the increased cost of certain raw materials and the continuing government price cut on certain products.

• The Company generated $3.9 million from its distribution business, Nuo Hua, in the fourth quarter of 2010, an increase of 10.2% from $3.6 million in the prior year period, primarily due to Nuo Hua‘s expanding market coverage.

Gross profit in the fourth quarter of 2010 was $42.4 million compared to $52.6 million in the fourth quarter of 2009. Gross margin was 50.9%, compared to 52.6% in the prior year period. The Company continued its efforts to manage the margin pressure, which was mainly caused as a result of the combined impact of the increased cost of certain raw materials, the government’s pricing control on EDL drugs, and increased labor costs.

Operating income in the fourth quarter of 2010 decreased to $5.9 million compared with $14.9 million in the prior year period. Selling, general and administrative expenses were $18.1 million, or 21.7% of total revenue, compared to $21.2 million, or 21.2% of total revenue in the prior year period. This is primarily driven by management’s continuing efforts at cost control. Advertising expense increased to $12.0 million in the fourth quarter of 2010, compared to $9.5 million in the prior year period, driven by increased efforts to increase brand awareness and market recognition. Research and development expenses were $4.6 million, or 5.5% of total revenue, compared with $5.4 million, or 5.4% of total revenue, in the prior year period. The company emphasizes the importance of science and technology and continues investment in R&D spending related to create new products, and improve existing product portfolio.

Net income attributable to controlling interest for the fourth quarter of 2010 was $2.8 million, or $0.04 per diluted share, compared to $11.7 million, or $0.14 per diluted share, in the prior year period.

2010 Financial Performance

Revenue for the fiscal year 2010 increased 3.3% to $305.9 million from $296.2 million in 2009, primarily resulted from continuing customer demand and increased sales coverage. Prescription pharmaceutical products generated revenue of $129.2 million, up 11.6% from $115.8 million in the year 2009, and OTC pharmaceutical products generated revenue of $120.9 million, down 5.8% from $128.4 million in 2009. Revenue from nutraceutical products increased 4.8% to $41.0 million from $39.1 million in the year before. Revenue from Nuo Hua‘s distribution business was $14.8 million compared to $12.9 million in 2009, primarily resulted from expanded sales coverage and distribution network especially in the rural areas. During the same time period, gross profit decreased by 5.4% to $157.8 million from $166.8 million in the year 2009.

Operating income in the year 2010 was $30.4 million compared to $58.8 million in the year 2009. Net income attributable to controlling interest for the year 2010 was $16.3 million, or $0.22 per diluted share, compared to $41.4 million, or $0.53 per diluted share, in the prior year period.

Balance Sheet

As of December 31, 2010, the Company had $94.6 million in cash and cash equivalents, and generated approximately $8.0 million of operating cash flow during the year of 2010. Working capital was $162.2 million in 2010, reflecting an increase of 23.9% compared to $130.9 million in 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, “We are pleased with our fiscal year 2010 financial results in which we demonstrated steady growth despite the increasingly challenging economic environment worldwide and China‘s rapidly changing regulatory environment. Our growth in 2010 was consistent with our expectations and reflects our continued efforts on profitability focus and cost control. We dynamically adjust our product mix to minimize the negative impact from the increased cost of certain raw materials, as well as the government’s price cut on certain drugs. In addition, our long-term investments in science and technology have achieved initial results, which were demonstrated by the strong sales from the new products supported by our R&D efforts. Overall, we remain enthusiastic about the tremendous opportunities in China‘s healthcare sector, and we are looking forward to more progress in the fiscal year ahead.”

Conference Call

The Company will hold a conference call at 8:00 am ET on Tuesday, March 15, 2011, to discuss its results. Listeners may access the call by dialing 1-800-901-5231 or 1-617-786-2961 for international callers, access code: 57286885. A webcast will also be available through AOB’s website at www.bioaobo.com. A replay of the call will be available through March 22, 2011. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 91403928.

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, including the Form 10-K for the year ended December 31, 2010, 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.