NEW YORK, Nov. 16 /PRNewswire-Asia-FirstCall/ -- American Oriental Bioengineering, Inc. , (“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 third quarter ended September 30, 2009.
Third Quarter 2009 Financial Performance
Revenue in the third quarter of 2009 increased 11.7% to $78.8 million from $70.6 million in the third quarter of 2008, reflecting continued demand for the Company’s core pharmaceutical and nutraceutical products. Revenue from pharmaceutical products increased 6.3% to $66.0 million from $62.1 million in the third quarter of 2008. Revenue from prescription pharmaceutical products increased 22.7% to $29.8 million during the third quarter of 2009, reflecting a year over year increase in sales from prescription formulated Jinji capsule, Boke and CCXA products, which offset declines in sales of Shuanghuanglian Injection Powder (“SHL”). The overall increase in sales was also supported by continuous marketing efforts, an increase in new product offerings, as well as expansion of coverage to previously unaddressed rural markets. OTC pharmaceutical products generated $36.2 million in revenue during the third quarter of 2009, in comparison to $37.8 million in the prior year’s period, primarily reflecting lower sales performance of Jinji Yimucao, a drug included in China’s Essential Drug list, as distributors reduced orders in anticipation of pricing uncertainty related to healthcare reform. Nutraceutical products generated revenue of approximately $9.2 million in the third quarter of 2009, up 8.7% from $8.5 million in the prior year period, reflecting increased sales of new beverage products launched in the beginning of 2009. The Company generated $3.6 million from its distribution business in the third quarter of 2009.
Gross profit in the third quarter of 2009 was $44.1 million compared to $47.2 million in the third quarter of 2008. Gross margin was 56.0%, compared to 66.8% in the prior year period, reflecting continued revenue mix shift to CCXA’s generic product sales, increasing raw material prices and lower margin distribution business from Nuo Hua.
Operating income in the third quarter of 2009 was $15.0 million compared to $21.6 million in the third quarter of 2008. Selling and marketing expenses increased 23.2% to $12.2 million from $9.9 million in the prior year period. The increase primarily reflects increased marketing and promotional initiatives related to enhancing prescription product sales. Advertising expense was $9.0 million in the third quarter of 2009, compared to $9.9 million in the prior year period, reflecting a greater focus on promotional activities and direct sales efforts. General and administrative expenses increased 37.7% to $6.5 million from $4.7 million in the prior year period, primarily driven by expenses related to improving production efficiency and testing equipment and technology upgrades as a result of more stringent GMP manufacturing standards.
Net income attributable to controlling interest for the third quarter of 2009 was $10.0 million, compared to $16.3 million in the prior year period. Excluding $0.9 million of interest expense on convertible securities and $0.2 million of amortized financing costs related to the Company’s outstanding convertible notes, the Company’s net income attributable to controlling interest was $11.2 million, or $0.13 per diluted share. In the third quarter of 2008, net income per diluted share was approximately $0.21.
Nine Months Ended September 30, 2009 Financial Performance
Revenue for the nine months ended September 30, 2009 increased 16.5% to $196.1 million from $168.4 million in the first nine months of 2008. During the same time period, gross profit increased slightly by 0.5% to $114.2 million from $113.6 million in the first nine months of 2008. Operating income in the first nine months of 2009 was $43.9 million compared to $51.9 million in the first nine months of 2008. Net income attributable to controlling interest for the first nine months of 2009 was $29.7 million, compared to $39.2 million in the prior year period. Excluding $3.8 million of interest expense on convertible securities and $0.7 million of amortized financing costs related to the Company’s outstanding convertible notes, the Company’s net income attributable to controlling interest was $34.2 million, or $0.39 per diluted share. In the first nine months of 2008, net income per diluted share was approximately $0.50.
Balance Sheet
As of September 30, 2009, the Company had $115.9 million in cash and generated approximately $44.3 million of operating cash flow during the first nine months of 2009.
Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, “Despite the tough business environment we are currently experiencing, we are pleased with our third quarter performance as we continued to enhance our diversified product portfolio and pursue further vertical integration. We are witnessing uncertainty around product pricing related to healthcare reform, and this has caused select disruption in purchasing patterns. Nonetheless, we continue to actively monitor the regulatory landscape and we will adapt our business strategy accordingly. For example, the potential inclusion of our Jinji products in the upcoming national insurance catalog, along with our marketing capabilities, extensive distribution platform, diversified product offering and ongoing rural expansion, should help us navigate the challenging sales environment related to healthcare reform. We continue to drive revenue growth and consistently generate cash despite the uncertain regulatory environment, and we appreciate the hard work and contributions by our entire team.”
Restatement of Certain Historical Results
During the review of its third quarter 2009 operating results, the Company identified historical accounting errors in: (i) the calculation of stock based compensation, (ii) the recognition of deferred tax liabilities of certain acquired assets and (iii) the provision of deferred tax liabilities on undistributed earnings of foreign subsidiaries. The accounting errors have resulted in the misstatement of certain balance sheet and income statement items and the cumulative net earnings since 2006. The errors did not result from any fraud or intentional misconduct and the Company undertook a review to determine the total amount of the errors and the accounting periods in which the errors occurred. As a result, the Company chose to restate its previously reported financial statements.
The Company has restated its consolidated balance sheets and the related consolidated statements of income, statements of shareholders’ equity and statements of cash flows as of and for the years ended December 31, 2008, 2007 and 2006 as reported in its amended annual report on Form 10K/A for the fiscal year ended December 31, 2008. The restated financial information for each of the three interim quarterly periods for 2008 and 2007 were also included in the amended annual report on Form 10-K/A for the fiscal year ended December 31, 2008.
The effects of the restatement on selected income statement line items for the years ended December 31, 2008 and 2007 are as follows:
The cumulative effects of the restatement on selected balance sheet line items as of December 31, 2008 and 2007 are as follows:
Conference Call
The Company will hold a conference call at 8:00 am ET on Tuesday, November 17, 2009 to discuss third quarter 2009 results. Listeners may access the call by dialing 1-866-770-7051 or 1-617-213-8064 for international callers, access code: 89648638. A webcast will also be available through AOB’s website at http://www.bioaobo.com .
A replay of the call will be available through November 24, 2009. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 58148119.
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.
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, 2008, 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.
CONTACT: Integrated Corporate Relations, Inc., Ashley M. Ammon, +1-646-
277-1227
Web site: http://www.bioaobo.com/
