HARBIN, China, April 2, 2008 /Xinhua-PRNewswire-FirstCall/ -- China Sky One Medical, Inc. (“China Sky One” or “the Company”), a manufacturer, marketer and distributor of pharmaceutical, medicinal and diagnostic products in China, today announced record financial results for the fourth quarter and fiscal year ended December 31, 2007.
“This was a very successful year for China Sky One, both in terms of financial performance and the execution of our business strategy. We achieved significant growth in revenues, due in large part to our strategy of hiring direct territory managers and sales agents to assure that our products and their benefits are reaching our customers. We also introduced a new line of bio-chemical products and expanded into the high margin overseas markets,” said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc. “We have a strong pipeline of new products, and plan to begin clinical testing of eight new kit products in 2008. We are also excited about our research and development efforts in the areas of stem cell research and our cancer treatment drug Endothelin-1. We hope to complete clinical trials of Enothelin-1 in 2013 and plan to open a cord stem cell and tissue bank at our newly established facility outside Harbin in late 2008 or 2009.”
Fourth Quarter 2007 Results
China Sky One’s total revenues in the fourth quarter were $12.7 million, an increase of 223% on year-over-year basis. This was primarily the result of strong performance associated with the Company’s continued efforts to develop its sales distribution channels. Product sales increased 237.5% year-over- year to $9.3 million, or 73.5% of total revenues. Contract sales increased 188.2% year-over-year to $3.4 million and accounted for 26.5% of revenues in the fourth quarter of 2007.
Gross profit in the fourth quarter of 2007 was $9.9 million, an increase of 201% on year-over-year basis. Gross margin was 77.7% of total revenues, down from 83.2% of total revenues in the fourth quarter of 2006. The decline in gross margin was due to high production efficiency of core products according to the market demand, which resulted in a temporary, unusually high gross margin in the fourth quarter of 2006.
Operating expenses in the fourth quarter of 2007 were $4.9 million, up 30% from $3.8 million in the fourth quarter of 2006. This increase was much less than the increase in sales, although it was primarily the result of higher selling, general and administrative expenses associated with the Company’s sales growth. Research and development expenses were $1.4 million in the fourth quarter, compared with $37,327 in the fourth quarter of 2006. Operating expenses were 38.8% of total revenues in the fourth quarter of 2007, improved from 96.7% in the fourth quarter of 2006 due to efficiencies as the Company grows in scale.
Operating income was $4.9 million, compared with a loss of $532,262 in the fourth quarter of 2006. Operating margin was 38.9%, compared to negative 13.5% in the fourth quarter of 2006.
Provision for income taxes was $0.9 million in the fourth quarter of 2007, compared to $0.3 million in the same quarter of the previous year.
Net income for the fourth quarter of 2007 was $4.1 million, or $0.31 per diluted share, compared to loss of $1.0 million, or ($0.08) per diluted share, in the fourth quarter of 2006.
Full Year 2007 Results
For the full year 2007, total revenues were $49.3 million, up 148% from $19.8 million in 2006. Product sales increased 171% year-over-year to $36.3 million, or 74% of total revenues, and contract sales increased 104% year-over-year to $13.0 million, or 26% of total revenues, in 2007. Gross profit for the full year 2007 was $38.4 million, an increase of 159% from $14.8 million in 2006. Gross profit margin increased from 74.5% in 2006 to 77.8% in 2007. Operating income was $18.6 million, up 863% from $1.9 million in 2006. Operating margin was 37.7%, up from 9.7% in 2006. Net income for 2007 was $15.3 million or $1.15 per diluted share, compared to $0.6 million, or $0.05 per diluted share, in 2006.
Financial Condition
As of December 31, 2007, China Sky One had $9.2 million in cash and equivalents, approximately $15.4 million in working capital, and no debt. Stockholders’ equity at December 31, 2007 was $32.2 million, a 125% increase over the $14.3 million recorded at December 31, 2006. The Company generated $11.6 million in net cash flow from operating activities in 2007, up from $5.2 million in 2006.
In February 2008, the Company completed a private placement of its common stock and warrants generating $25.0 million in gross proceeds.
Recent Events
In February 2008, China Sky signed an agreement to acquire Heilongjiang Tianlong Pharmaceutical, Inc. (“Tianlong”), an external-use drug manufacturing specialty pharmaceutical company, through which the Company will obtain $8.3 million in assets, which include $0.5 million in inventory, land use rights, GMP-certified manufacturing facilities, state-of-the-art production equipment, a research and development center, a portfolio of 69 approved drugs (in 98 forms) and a pipeline of 38 new drugs, all of which have been submitted to the SFDA for approval. The acquisition is subject to a due diligence review of Tianlong, as well as approval by the appropriate regulatory authorities in the PRC. In 2007, Tianlong generated revenue of $5.2 million with a net profit margin of 13%. China Sky One Medical expects Tianlong to be accretive to earnings, generating revenues of approximately $7.5 million and net profit of approximately 30% in 2008.
In March 2008, the Company appointed four new independent directors to its board: Song Chun Fang, Jiang Qi Feng, Zhao Jie and Qian Xu Feng. As a result, the number of directors has increased from three to seven and the majority of the Company’s directors are now independent. The Company also formed finance, executive, compensation and corporate governance and nominating committees.
In March 2008, the Company filed an application to list its shares on the American Stock Exchange.
2008 Outlook
“In 2008, we expect to see continued growth in sales and anticipate a growing contribution from sales of our proprietary products. We plan to utilize the capital raised in our private placement to fund our exciting new R&D initiatives and to make strategic acquisitions. We anticipate completing complete our acquisition of Tianlong, which will not only be accretive to earnings, but will expand our product lines and improve our production and R&D capabilities. Additionally, we plan to use our sales and marketing expertise and the benefits of scale to improve profitability,” said Mr. Liu.
Conference Call
The Company will conduct a conference call at 11:00 a.m. Eastern Time on Thursday, April 3, 2008 to discuss the fourth quarter and fiscal year 2007 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-552-2116. International callers should dial 706-634-2457. The Conference ID for this call is 42056418. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Thursday, April 3, 2008 at 12:30 p.m. Eastern Time. To access the replay, dial 800-642-1687, international callers dial 706-645-9291, conference ID 42056418.
About China Sky One Medical, Inc.
China Sky One Medical, Inc., a Nevada corporation, is engaged in the manufacturing, marketing and distribution of pharmaceutical, medicinal and diagnostic products. Through its wholly-owned subsidiaries, Harbin Tian Di Ren Medical Science and Technology Company (“TDR”) and Harbin First Bio-Engineering Company Limited (“First”), the Company manufactures and distributes over-the-counter pharmaceutical products as its primary revenue source. For more information, visit http://www.skyonemedical.com .
Safe Harbor Statement
Certain of the statements made in the press release constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward- looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,” or “anticipate” or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. The Company cannot provide any assurance that its application to list on the American Stock Exchange will be approved or that the liquidity and marketability of its shares will improve. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the inability of the company to meet the listing standards, risks associated with the effect of changing economic conditions in The People’s Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
tdrhan@163.comcrocker.coulson@ccgir.com
CONTACT: China Sky One Medical, Inc., Ms. Xiaoyan Han, CFO,
+86-133-5999-3681, or tdrhan@163.com; CCG Elite Investor Relations Inc.,
Mr. Crocker Coulson, President, +1-646-213-1915 (New York), or
crocker.coulson@ccgir.com, for CSKI
Web site: http://www.skyonemedical.com/
