Tianyin Pharmaceutical Co., Inc., , a manufacturer and supplier of modernized traditional Chinese medicine (“TCM”) based in Chengdu, China, today announced fiscal results for its third quarter ended March 31, 2009.
Revenue for the third quarter of 2009 increased 7.4% to approximately $9.9 million compared to $9.2 million for the third quarter of 2008. The slowdown in year-over-year growth was due to capacity production constraints and longer lead times into the distribution channels as new drugs were commercialized.
Cost of goods sold for the three months ended March 31, 2009 was approximately $5.1 million or 51.1% of revenue as compared to $5.1 million or 55.4% of revenue for the three months ended March 31, 2008, yielding a gross profit of $4.9 million and gross margins of 48.9%, compared to $4.1 million in gross profit and a margins of 44.6% during the third quarter of fiscal 2008. Thus, gross profits grew by 17.8% on a year-over-year basis as a result of higher sales, while margins improved through the optimization of product portfolio and enhanced cost controls implemented during the manufacturing process.
Operating expenses for the three months ended March 31, 2009 were approximately $2.6 million, up 13.1% compared to the same period in 2008. Selling, general and administration expenses for the period increased to approximately $2.5 million from $2.2 million in the third quarter of 2008 as a result of the implementation of Tianyin’s sales and marketing strategy, including increased sales payrolls and direct marketing expenses. Research and development expenses were nearly flat at $0.1 million for the three months ended March 31, 2009 compared to the year ago period.
Operating income for the third quarter of 2009 totaled approximately $2.3 million, a 23.5% increase from the $1.9 million reported for the third quarter of 2008. Operating margins were 23.1% and 20.1% for the third quarter of fiscal 2009 and fiscal 2008, respectively and were the result of increased revenues and gross profit, along with the prudent management of operating expenses.
Net income was approximately $1.9 million in the third quarter of fiscal 2009, a 48.8% increase, compared to $1.3 million for the third quarter of 2008. The company had an effective tax rate of 16.7% and 20.9%, for the third quarter of fiscal 2009 and 2008, respectively. Diluted earnings per share were $0.10 compared to $0.05 for the third quarter of fiscal 2009 and fiscal 2008 respectively, based upon 16 million and 24.5 million shares. The divergence in the share account relates to accounting for the company’s preferred shares which are convertible into common.
Nine Month Results
For the nine months ended March 31, 2009, revenues increased approximately 22.4% to $29.6 million compared to the same period in 2008. Gross profit was $14.9 million for the first nine months of 2009, representing an increase of 46.3% from the first nine months of 2008. Gross margins were 50.3% for the first nine months of 2009 compared to 42.1% for the same period in 2008.
Income from operations was $6.9 million for the first nine months of 2009, representing an increase of 22.7% over the first nine months of 2008. Operating margins were at 23.4% for both nine month periods, respectively. Net income was $5.7 million for the nine months ended March 31, 2009, an increase of 29.2% from the same period in 2008. Diluted earnings per share were $0.23 compared to $0.27 for the first nine months of 2009 and 2008 respectively, based up on 25 million and 16.7 million shares.
“We are pleased to report another quarter of revenue growth and improved profitability. While revenue growth was impacted by capacity constraints, we are very enthusiastic about the launch of our new production facility which is expected to be online during the summer of 2009,” commented Dr. Guoqing Jiang, Tianyin’s Chief Executive Officer. “The Chinese government recently announced that it will significantly increase the overall investment in the Traditional Chinese Medicine (TCM) sector while implementing favorable policies to accelerate the development of new drugs, which we believe will provide a solid foundation for sustained future growth. Companies like Tianyin will be a beneficiary of this enhanced government support, which includes China’s $123 billion health care reform plan focused on bringing a broader spectrum of services and pharmaceutical products to all Chinese residents. We are confident that our extensive product portfolio and drug pipeline, proven sales and marketing capabilities, and committed management team will enable us to accelerate our growth and capitalize on a long-term, secular growth opportunity.”
Balance Sheet and Cash Flow
Cash and cash equivalents and restricted cash totaled $10.7 million on March 31, 2009 compared to $12.1 million on June 30, 2008. The Company had a current ratio of 5.8 to 1 and stockholders’ equity of 39.2 million, with total assets of $42.9 million versus total liabilities of $3.8 million on March 31, 2009. For the first nine months of 2009, the Company generated $4.4 million in cash from operations versus $1.8 million for the same period in 2008.
Business Development
On January 30, 2009, Tianyin began initial purchases under its previously announced stock repurchase program to buy back up to $3.0 million of its common stock. These shares will be retired to the treasury while reducing the number of outstanding common shares. As of March 31, 2009, 79,285 shares have been bought back at prevailing market prices.
During the third quarter of fiscal 2009, Tianyin adopted the “Cost Preference Strategy” for Azithromycin Dispersible Tablets which could yield over $3.7 million in incremental revenues on an annual basis in the future.
On March 26, 2009, Tianyin announced that the Board of Directors declared an annual cash dividend of $0.10 per common share that will be paid quarterly. On April 14, the majority of the Company’s Series A Preferred Shareholders approved the cash dividend to common stockholders. The initial dividend of $.025 will be paid to common shareholders of record on April 30, 2009, with the actual distribution occurring on or about June 10, 2009. The decision was made so the company could provide its common shareholders with ongoing participation in company profits while ensuring that adequate capital was available for future growth.
During the quarter, Tianyin completed installing the steel framework and roofing of the new production facility with production expected to commence in the summer of 2009. The Company recently completed the construction and began testing its production line recently. The new plant will expand production capacity of solid dosage drugs by 300% and will be utilized to meet growing demand for the Company’s current products, while also accommodating new product launches for those in the development pipeline.
During the first nine months of fiscal 2009, Tianyin received ten new approvals from the SFDA to produce Laonian Kechuan Tablet (SFDA approval number H2008S02059), Fuke Zhidai Tablet (SFDA approval number Z20083375), Tongbianling Capsule (SFDA approval number Z20083424), Baotailing Tablets (SFDA approval numberZ20093087), Duyiwei Dispersible Tablets (SFDA approval number Z20090239), Compound Dantong Capsules (SFDA approval number Z20093012), Mycophenolate Mofetil Capsule(SFDA approval number H20080819), Tongqiao Biyan Tablets(SFDA approval number Z20093063), Child Qingrezhike Oral Liquid(SFDA approval number Z20093060), Yiqing Capsules(SFDA approval number Z20093084). In addition, Tianyin currently has 17 drug candidates under the Chinese State Food and Drug Administration (SFDA) review.
“We are making progress on all aspects of our business. We have completed construction of the new production facility and are in the testing production phase. As of today, we have successfully tested most equipment and anticipate finishing this phase by the end of May 2009. The tripled capacity of solid dosage drugs will accommodate increasing production volumes and expected future growth. In addition, we received ten approvals from the Chinese State Food and Drug Administration (SFDA) during the first nine months of fiscal 2009. The increased production capacity and new additions to our production portfolio, along with other initiatives, have set a foundation for long-term growth and profitability of our business. We will continue to execute our growth plan and maximize value for our shareholders,” concluded Dr. Jiang.
Business Outlook
Management is confirming fiscal 2009 guidance for the year which ends June 30 and expects to report revenues of more than $46 million and net income of at least $7.5 million, representing 37.3% and 25% year over year growth respectively.
Conference Call
The Company will host a conference call to discuss the 2009 third quarter financial results on Friday, May 15, 2009 at 11:00 a.m. EDT. Interested participants should call +1-877-941-2927 within the United States, or US +1-480-629-9725 if calling internationally. The conference ID is 4076664. It is advisable to dial in approximately 5-10 minutes prior to 11:00 a.m. EDT. If you are unable to participate in the call at the scheduled time, a playback will be available through May 29, 2009. To listen to the playback, please call +1-800-406-7325 from within the United States, or US +1-303-590-3030 internationally. Please use passcode 4076664 for the replay.
About Tianyin Pharmaceuticals
Tianyin is a manufacturer and supplier of modernized Traditional Chinese Medicine (“TCM”) in China. It was established in 1994 and acquired by the current management team in August 2003. It has a comprehensive product portfolio of 39 products, 22 of which are listed in the highly selective National Medicine Catalog of the National Medical Insurance program. Tianyin owns and operates two GMP manufacturing facilities and an R&D platform supported by leading Chinese academic institutions. The Company has a pipeline of 40 pharmaceutical products pending approval. Tianyin has an extensive nationwide distribution network throughout China with a sales force of 720 salespeople. Tianyin is headquartered in Chengdu, Sichuan Province with two manufacturing facilities and a total of 1,365 employees. Tianyin achieved revenue of approximately $33.5 million and net income of approximately $6 million in FY2008 ending June 30, 2008. For more information about Tianyin, please visit http://www.tianyinpharma.com .
Safe Harbor Statement
The Statements which are not historical facts contained in this press release are forward-looking statements that involve certain risks and uncertainties including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, government approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the Company’s filings with the Securities and Exchange Commission.
CONTACT: Allen Tang, Ph.D., MBA, Assistant to the CEO at +86-158-2122-5642
or Allen.y.tang@gmail.com; Investors: Matthew Hayden, HC International at
+1-561-245-5155 or matt.hayden@hcinternational.net
Web site: http://www.tianyinpharma.com/
