American Oriental Bioengineering, Inc. Reports Third Quarter 2010 Financial Results

NEW YORK, Nov. 9, 2010 /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 third quarter ended September 30, 2010.

Third Quarter 2010 Financial Performance

In the third quarter of 2010, revenue continued its double-digit growth, increasing 16.1% year over year to $91.5 million from $78.8 million. The overall increase in sales was supported by the Company’s continuous marketing efforts, new product offerings, as well as further expansion in the rural market.

• Revenue from pharmaceutical products increased 16.9% to $77.2 million from $66.0 million in the third quarter of 2009. Revenue from prescription pharmaceutical products increased 25.1% to $37.3 million from $29.8 million in the prior year period, primarily due to the double digit increase in sales from the Jinji capsule, SHL powder, YYQH capsule and the expansion of CCXA generic pharmaceutical products in the rural market. OTC pharmaceutical products generated $39.8 million in revenue during the third quarter of 2010, representing a 10.1% increase from $36.2 million in the same period of last year, which was driven by the increased sales volume of CCXA and GLP’s generic drugs, and the expansion of HQPL distribution channel.
• Nutraceutical products generated revenue of approximately $10.3 million in the third quarter of 2010, up 11.4% from $9.2 million in the same period of last year, reflecting increased sales of the Company’s soybean product series.
• The Company generated $4.1 million from its distribution business, Nuo Hua, in the third quarter of 2010, an increase of 14.4%, primarily due to Nuo Hua‘s expanding market coverage.

Gross profit in the third quarter of 2010 increased 7.1% to $47.3 million from $44.1 million in the third quarter of 2009. Gross margin was 51.7%, compared to 56.0% in the prior year period. The Company continued its efforts to control margin pressure, which occurred 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 third quarter of 2010 was $9.0 million, compared to $15.0 million in the prior year period. Selling and marketing expenses were $13.9 million, or 15.2% of total revenue, compared to $12.2 million, or 15.5% of total revenue, in the prior year period. Advertising expense increased 21.9% to $11.0 million in the third quarter of 2010 from $9.0 million in the prior year period. General and administrative expenses increased 22.0% to $7.0 million from $5.7 million in the prior year period. Research and development expenses increased to $4.7 million from $0.9 million in the prior year period, reflecting the Company’s continued efforts in innovation and product life cycle management.

Net income attributable to controlling interest for the third quarter of 2010 was $5.3 million, or $0.07 per diluted share, compared to $10.0 million, or $0.13 per diluted share, in the prior year period.

Nine Months Ended September 30, 2010 Financial Performance

Revenue for the nine months ended September 30, 2010 increased 13.5% to $222.6 million from $196.1 million in the first nine months of 2009. During the nine months ended September 30, 2010, gross profit was $115.4 million, compared to $114.2 million in the first nine months of 2009. Operating income in the first nine months of 2010 was $24.4 million, compared to $43.9 million in the first nine months of 2009. Net income attributable to controlling interest for the first nine months of 2010 was $13.6 million, compared to $29.7 million in the same period of prior year. In the first nine months of 2010, net income per diluted share was approximately $0.18, compared to $0.39 in the same period of prior year.

Balance Sheet

As of September 30, 2010, the Company had $92.5 million in cash and cash equivalents, compared to $91.1 million as of December 31, 2009. The Company generated approximately $7.3 million of operating cash flow during the first nine months of 2010. Working capital was $154.0 million as of September 30, 2010, compared to $130.9 million as of December 31, 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering Inc., commented, “We are very glad to report double digit revenue growth despite continuing macro challenges. We are also pleased to report that our Jinji Capsule was awarded status as “the most recognized brand in Women’s Healthcare Products in China” for 2010 by China Pharmaceutical Enterprise Co-operation and Development organization, China Pharmaceutical Research Center of Retailing, and 21 century pharmacy news and retail outlets media. We will continue our efforts in brand building and further our market penetration in rural areas. In addition, we will continue our efforts in innovation and product life cycle management.”

Conference Call

The Company will hold a conference call at 8:00 am ET on Wednesday, November 10, 2010, to discuss its results. Listeners may access the call by dialing 1-866-783-2143 or 1-857-350-1602 for international callers, access code: 50172096. A webcast will also be available through AOB’s website at www.bioaobo.com. A replay of the call will be available through November 17, 2010. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 74852306.

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.