XIANYANG, China, Aug. 17 /PRNewswire-Asia-FirstCall/ -- Biostar Pharmaceuticals, Inc. (Nasdaq:BSPM - News) ("Biostar" or "the Company"), a Xianyang-based manufacturer of a leading over-the-counter Hepatitis B medicine, Xin Aoxing Oleanolic Acid Capsules ("Xin Aoxing Capsules"), and a variety of pharmaceutical products, today announced financial results of the second quarter ended June 30, 2010.
Second Quarter 2010 Financial Results
Revenue for the second quarter of 2010 increased 46.4% to approximately $19.4 million compared to $13.2 million for the second quarter of 2009. Sales of Xin Aoxing Capsules, Biostar's flagship product, increased by 41.7% to $12.7 million with a gross margin of 85.0%, compared to $8.9 million in the second quarter of 2009. During the second quarter of 2010, sales of Xin Aoxing represented 65.4% of total revenues and benefited from $1.7 million in sales from the Beijing, Tianjing and Shanghai markets which were launched in the first quarter of 2010, in addition to $1.6 million from four new provincial markets including Jiangsu, Jiangxi, Chongqing and Hebei province. Another notable contributor from Biostar's portfolio was its Gan Wang Compound Paracetamol Capsules ("Gan Wang"), which grew 42.0% to $1.4 million in sales for the second quarter of 2010 and benefited from an unusually cold weather during the second quarter in Shaanxi province. In addition, sales of the Company's health supplement products were $1.8 million in the second quarter of 2010. The Company continued its expansion into rural communities in China with products now being sold at 7,000 locations. $4.0 million in revenues were generated through this sales channel during the second quarter, up 58.8% from the year ago period.
"We are pleased to report another quarter of strong revenue growth, which benefited from the 42% growth in sales of our flagship product. We are seeing dividends from the resources allocated to expand brand recognition and awareness for our Xin Aoxing Capsules as a preferred medical treatment for Hepatitis B in China," commented Ronghua Wang, Chairman and Chief Executive Officer of Biostar. "The addition of new rural network locations and our nutritional supplement product line is anticipated to generate incremental revenues for the balance of 2010. Collectively, our growth plan gives us confidence in meeting our 2010 guidance."
Cost of goods sold for the three months ended June 30, 2010 was approximately $5.0 million or 25.8% of revenue, as compared to $3.5 million or 26.5% of revenue for the three months ended June 30, 2009. Gross profit for the second quarter of 2010 were $14.4 million with gross margins of 74.2%, compared to $9.7 million in gross profit and gross margins of 73.5% for the second quarter of 2009. The increase in gross profit was due to the increased sales volumes of higher margin products, including Xin Aoxing Capsules, Gan Wang and new health supplement products in the second quarter of 2010.
Operating expenses for the three months ended June 30, 2010 were approximately $6.9 million, an increase of 60.6% compared to the same period in 2009. Selling and distribution cost increased 62.4% to $6.1 million in the second quarter of 2010, which was primarily due to $2.5 million in incremental advertising and promotional efforts which included billboards, newsprints and in-store advertising designed to drive sales in existing and new markets and to promote brand awareness and drive sales of Xin Aoxing Capsules. In addition, the Company incurred a non-cash equity compensation charge of $0.2 million in the second quarter of 2010, which was not present in the year ago period.
Operating income for the second quarter of 2010 totaled approximately $7.5 million, a 37.9% increase from $5.5 million reported for the second quarter of 2009. Operating margins were 38.8% and 41.3% for the second quarter of 2010 and 2009, respectively. Excluding non-cash equity compensation charge of $0.2 million, adjusted operating income for the second quarter of 2010 was $7.8 million with operation margins of 40.1%. (Please see "About Non-GAAP Financial Measures" below.)
Net income was approximately $5.6 million for the second quarter of 2010, a 44.7% increase from the second quarter of 2009. Diluted earnings per share were $0.20 for the second quarter of 2010 compared to $0.16 for the second quarter of 2009, based upon 27.8 million and 23.7 million diluted common stocks outstanding, respectively. Adjusted Non-GAAP net income for the second quarter was $5.8 million, or $0.21 per diluted common share based on 27.8 million diluted common stocks outstanding for the second quarter of 2010. (Please see "About Non-GAAP Financial Measures" below.)
Six Month Results
For the six months ended June 30, 2010, revenue increased approximately 53.5% to $31.8 million compared to the same period in 2009. Gross profit was approximately $23.9 million for the first six months of 2010, representing an increase of 64.6% from the first six months of 2009. Gross margins improved 510 basis points to 75.3% for the first six months of 2010 compared to the year ago period.
Income from operations was $10.7 million for the first six months of 2010, representing an increase of 37.2% over the first six months of 2009. Operating margins were 33.6% for the first six months of 2010, compared to 37.6% for the first six months of 2009. Excluding the non-cash equity compensation charge of $0.4 million recorded during the first six months of 2010, adjusted operating income for the first six months is $11.1 million with operating margins of 34.8%. (Please see "About Non-GAAP Financial Measures" below.)
Net income was $7.8 million for the six months ended June 30, 2010, an increase of approximately 38.0% from the same period in 2009. Fully diluted earnings per share were $0.28 compared to $0.24 for the first six months of 2010 and 2009 respectively, based up on 27.8 million and 23.7 million shares. Adjusted Non-GAAP net income for the first six months of 2010 was $8.2 million, or $0.30 per diluted common share. (Please see "About Non-GAAP Financial Measures" below.)
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $9.7 million on June 30, 2010, compared to $8.6 million on December 31, 2009. Accounts receivable balance was approximately $25.3 million on June 30, 2010, versus approximately $19.8 million on December 31, 2009. Days sales outstanding (DSO) for the first six months of 2010 were at 145 days, compared to 134 days for the same period in 2009. The increase was primarily due to expansion of its Xin Aoxing Capsules to four new provincial markets and newly launched health supplement products in the second quarter. The Company had a current ratio of 5.7 to 1 and stockholders' equity of $49.5 million, with total assets of $56.4 million versus total liabilities of $6.8 million on June 30, 2010.
For the first six months of 2010, the Company generated $1.6 million in cash from operations versus $1.2 million for the same period in 2009.
Business Developments
On March 29, 2010, Biostar officially took control over the assets of Xi'an Meipude Bio-Technology Co., Ltd., a Xi'an-based medical equipment manufacturer ("Meipude"). The Company commenced sales of hernia belts produced from Meipude's assets in the second quarter of 2010 and plans to expand through the Company's current sales network.
As of June 30, 2010, Biostar has expanded its rural supply network to approximately 7,000 sales outlets, which is a 430.3% increase from June 30, 2009. This sales channel has contributed $4.8 million in revenues for the first six months of 2010, a 66.1% increase from the same year ago period.
On July 1, 2010, the Company appointed Mr. Deyin "Bill" Chen as Chief Financial officer.
On July 28, 2010, all shareholders of the Company's PRC operating subsidiary, Aoxing Pharmaceuticals, officially registered with the local office of State Administration of Industry and Commerce for the Share Pledge Agreement with its offshore holding company, Shaanxi Biostar. With the Agreement, transfer or sale of any equity interest in the Company's PRC operating subsidiary owned by its shareholders will not be approved by the Chinese government as these shares have already been pledged to the offshore holding company.
"The Share Pledge Agreement eliminates one of the risks associated with investing in our shares, specifically, that the Agreement prevents shareholders of local operating subsidiary from transferring the equity interest from local operating entity and protects public shareholders' interest," continued Mr. Wang.
"We are making progress on all aspects of our business. We expect to receive the final approval to produce Zushima Analgesic Spray in October. With $30 million in anticipated capacity, we expect to generate $3 million in revenue for fiscal 2011 and to grow at least 50% for the coming years. We will remain focused on expanding our sales footprint, branding our leading products, while introducing higher margin products, which we believe will collectively drive further growth and increased profitability," concluded Mr. Wang.
Conference Call
The Company will host a conference call to discuss the 2010 second quarter financial results on Tuesday, August 17, 2010 at 9:30 a.m. ET. Interested participants should call +1-877-941-4778 within the United States, or US +1-480-629-9763 if calling internationally. The conference ID is 4345891. It is advisable to dial in approximately 5-10 minutes prior to 9:30 a.m. ET. This call is being web cast by ViaVid Broadcasting and can be accessed at ViaVid's website at http://www.viavid.net or at the following link: http://viavid.net/dce.aspx?sid=00007973 . To access the web cast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp .
About Biostar Pharmaceuticals, Inc.
Biostar Pharmaceuticals, Inc., through its wholly-owned subsidiary and controlled affiliate in China, develops, manufactures and markets pharmaceutical and health supplement products for a variety of diseases and conditions. The Company's most popular product is its Xin Ao Xing Oleanolic Acid Capsule, an over-the-counter ("OTC") medicine for chronic hepatitis B, a disease affecting approximately 10% of the Chinese population. In addition to its hepatitis product, Biostar currently manufactures two broad-based OTC products, two prescription-based pharmaceuticals, one medical device and five health supplements.
Safe Harbor
Certain statements in this release concerning our future growth prospects are forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Form S-1 dated June 27, 2008, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, our 10-K for the year ended December 31, 2009, and other recent filings. These filings are available at http://www.sec.gov . We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.
About Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP adjusted net income and non-GAAP adjusted EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance and liquidity by excluding certain expenses and expenditures that may not be indicative of "recurring core business operating results", meaning operating performance excluding non-cash stock-based compensation charge. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to competitors' operating results. The Company believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of the business.
