Biostar Pharmaceuticals, Inc. Announces 2012 First Quarter Financial Results Strategy for Growth in 2012: Developing a New Flagship OTC Product; Expand Hospital Prescription Drug Sales

XIANYANG, China, May 15, 2012 /PRNewswire-Asia/ -- Biostar Pharmaceuticals, Inc. (NASDAQ GM: BSPM) ("Biostar" or "the Company"), a PRC-based manufacturer and marketer of pharmaceutical and health supplement products in China for a variety of diseases and conditions, today announced its financial results for the first quarter ended March 31, 2012.

First Quarter 2012 vs. First Quarter 2011

  • Net sales increased 4.0% to $15,899,541 from $15,288,927
  • Gross margin decreased to 68.2% as compared to 69.9%;
  • Income from operations decreased to $3,187,824, as compared to $3,728,163; and,
  • Net income decreased to $2,167,415, or $0.23 per diluted share, as compared to $2,723,513, or $0.30 per diluted share.(1)
  • Net income for first quarter of 2012 included $791,127 in research and development (R&D) expense which was not included in the first quarter of 2011.  Excluding that expense, net income for the first quarter of 2012 was $2,958,542, or $0.32 per diluted share. 

(1)  Note: earnings per share for the first quarter of 2012 and 2011 are calculated based on 9,398,892 and 9,132,404 diluted weighted average shares outstanding, which retroactively reflect the reverse split effective April 3, 2012.  

Additional Quarterly Highlights by Product/Facility

$ in millions

 

For the quarters ended 3/31

All Biostar products*

Xin Aoxing product*

(at Xianyang Facility)

All other Xianyang Facility products*

Weinan Facility products**

2012

2011

% change

2012

2011

% change

2012

2011

% change

2012

2011

% change

Net Sales

$15.9

$15.3

4%

$10.4

$11.1

(6%)

$3.9

$4.2

(7%)

$1.6

-

100%

% of Total Net Sales




65%

72%


25%

28%


10%



Gross Profit

$10.8

$10.7

1%

$8.3

$9.4

(13%)

$1.7

$1.2

42%

$0.8

-

100%

Gross Margin

68%

70%


79%

85%


45%

30%


54%



* Biostar's products are manufactured at two facilities: Xianyang and Weinan.  Xin Aoxing, the Company's flagship product is manufactured at the Xianyang facility.
** There were no sales reported in the first quarter of 2011 for Weinan facility as Shaanxi Weinan was acquired in October 2011.

Ronghua Wang, Biostar's Chief Executive Officer and Chairman commented, "The 4% increase in total net sales for the 2012 first quarter was due to approximately $1.6 million of net sales of products manufactured at the Weinan facility, offset by a slight decrease in sales for Xin Aoxing and all other products manufactured at the Xianyang facility."

Mr. Wang continued, "Net sales and gross margin for the current first quarter were affected by fierce competition in the marketplace and also by the PRC government's essential drug list price control policy.  Specifically for the Xianyang facility:

  • Net sales of our flagship product Xin Aoxing decreased to $10.4 million as compared to $11.1 million in the first quarter of 2011.  During the current first quarter, we continued the "Buy 3 Get 1 Free" promotion for Xin Aoxing and we have gained market share as a result.  Due to this promotion, sales volume increased by over 19% but gross margin decreased to 79% as compared to 85% in the same period of 2011.
  • Net sales for the other Xianyang products decreased to $3.9 million as compared to $4.2 million in the first quarter of 2011.  The exceptions were the Gan Wang and Shengjing capsules for which sales increased by 4.5% and 37%, respectively.  Gross margin for all other Xianyang products increased to 45% as compared to 30% in 2011's first quarter, mainly due to a substantially improved gross margin of 56% for Taohuasan, compared to a negative margin in the same period of last year when raw material costs were unusually high."

Mr. Wang continued, "Selling and advertising expenses both in US dollars and as percentage of net sales decreased mainly due to a 9% decrease in advertising expenses as compared to the first quarter of last year.  General and administrative (G&A) expenses as a percentage of net sales increased slightly, mainly due to expenses incurred at the Weinan facility, acquired in October 2011, which in the current first quarter accounted for 32% of total G&A expenses, offset by a 17% decrease in G&A expenses at our Xianyang facility.

"R&D expenses accounted for 5% of total net sales; we did not incur R&D expenses in the first quarter of last year.  During the year 2011, we deposited 20,000,000 RMB (approximately $3.2 million) as part of the 4-year R&D contract to develop a new drug for the treatment of cardiovascular disease, which was recorded as a long-term deposit at December 31, 2011.  During the first quarter of 2012, we evaluated the progress of the clinical tests (stage one and stage two) of the R&D project and expected the tests would be completed within a year.  In addition, the Company agrees that such deposits paid would be utilized as a reimbursement of research and development expenses incurred instead of purchase acquisition, provided that the Company's total commitment and benefits in respect of the project would be remained unchanged.  Accordingly, the long-term deposit was reclassified into current assets and we started to amortize the R&D expense during 2012.  As of March 31, 2012, $791,127 was amortized as expense, and $2,371,654 was reclassified as prepaid R&D expenses in current assets."

Biostar's CFO, Zack Pan noted, "Our balance sheet remains strong.  Total current assets at March 31, 2012 were $66.9 million vs. total current liabilities of $6.5 million for a 10:1 current ratio.  We continue to fund our business from our free cash flow.  As of March 31, 2012, we had cash and cash equivalents of approximately $22 million compared with approximately $17 million at year-end 2011.  The Company's cash balance at year-end 2011 held in financial institutions in China has been verified by its independent registered public accounting firm.   This independent verification was completed in March of 2012, prior to the issuance of 2011 full year results and was done by members of the auditing firm visiting each of the institutions and physically observed bank employees printing or otherwise preparing or completing documentation which substantiated the cash balance for the accounts.  Because of the internal controls we have in place, such costly independent on-site verification, as part of the audit procedures, will only be done once a year.  Net cash provided by operating activities through March 31, 2012 was approximately $5.7 million and net cash used in investing activities in the first quarter of 2012 was approximately $0.8 million.   We believe our existing cash and cash equivalents are sufficient to fund our current operations."

Mr. Wang also added, "In response to questions about product safety related to the pharmaceutical gelatin used to manufacture capsule drugs in China, last month China's State Food and Drug Administration (SFDA) launched an investigation into the use of industrial gelatin, which contains higher chromium content than edible gelatin, by several capsule manufacturers based in Zhejiang, Hebei and Jiangxi provinces.  To address this issue, on April 27, 2012, SFDA promulgated a set of regulations, requiring all producers of pharmaceutical gelatin, capsules and capsule drugs to (a) inspect their inventory by employing toxic substance detection devices (we have purchased the capsule inspection equipment to ensure that all of the gel capsules we purchased and use comply with the regulatory chromium content requirements) and immediately recall from the market any type of product found to contain excessive levels of chromium, and (b) conduct strict checks into every batch of raw materials in every category prior to production.  Additionally, the Shaanxi Province branch of SFDA dispatched an investigation group for onsite inspection and investigation of pharmacies and plants within its jurisdiction.  We have not purchased any capsules from these manufacturers and none of our products are on the list of pharmaceutical products maintained and published by SFDA inspectors in connection with the gel capsule safety investigation.  All capsules purchased by the Company maintain quality inspection certificates from the manufacturing facilities and have passed quality inspections by municipal department of SFDA."

He added, "As a result, while this inspection continues, we expect the current second quarter to be adversely affected by lower consumer demand.  Once SFDA concludes its investigation in late May or early June, and the above referenced remedial inspection measures have been fully implemented, we expect consumer demand to significantly improve in the third quarter and for the remainder of the year.  Currently, since the investigation is still ongoing, and the restoration of consumer confidence in capsule products may take additional time, we therefore are not in a position to provide guidance for 2012.  As circumstances change, we will revisit this subject."

Mr. Wang concluded, "Our 2012 goals are to grow our business by:

  • Continuing to make efforts to increase the market share of our current products, while introducing additional new products as we have a large portfolio of OTC and prescription drugs already approved by SFDA. 
  • Introducing a new OTC product later this year which we believe has the potential to become another flagship product, similar to Xin Aoxing.  Based upon our research, this product addresses a large underserved market and we therefore expect it to become a growth catalyst for Biostar.
  • Continue bidding on new hospital contracts for prescription drugs.  We are encouraged by the recently won bid to supply hospitals based in the provinces of Liaoning, Hebei and Shandong with Huangyangning Tablets for up to three years.  This win marked an important milestone, as hospital contracts for prescription drugs provide us with a more predictable recurring revenue stream."

Conference Call

Biostar's Chairman and CEO, Ronghua Wang and CFO, Zack Pan will host a conference call on Tuesday, May 15th at 10:00 am E.T. to discuss these results as well as recent corporate developments.

Live conference call details

Interested parties may participate in the call by dialing (480) 629-9856.  Please call in 10 minutes before the conference is scheduled to begin and ask for the Biostar call or use pass code 4537685.  After opening remarks, there will be a question and answer period.  Questions may be asked during the live call, or alternatively, you may e-mail questions in advance to lcati@equityny.com.

Webcast

The conference call will also be broadcast live over the Internet.  To listen to the webcast, please go to  http://viavid.net/dce.aspx?sid=0000977A or visit Biostar's website http://www.biostarpharmaceuticals.com and then to the Event Calendar page where the conference call is posted.  Please go to the website at least 15 minutes early to register, and download and install any necessary audio software.  If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days.  We suggest listeners use Microsoft Internet Explorer as their web browser.

Replay

A replay will be available until 11:59 pm E.T. May 22, 2012. To listen, please call (858) 384-5517 and use pass code 4537685.

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 Aoxing Oleanolic Acid Capsule, an over-the-counter ("OTC") medicine for chronic hepatitis B, a disease affecting approximately 10% of the Chinese population. For more information please visit: http://www.biostarpharmaceuticals.com.

Safe Harbor relating to the Forward-Looking Statements

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 company uses words and phrases such as "guidance," "forecasted," "projects," "is expected," "remain confident," "will" and similar expressions to identify forward-looking statements in this press release, including forward-looking statements. Undue reliance should not be placed on forward-looking information. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Biostar and described in the forward-looking information contained in this news release. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the Company's ability to recover its sales following the SFDA investigation, the Company's ability to integrate the recently acquired Shaanxi Weinan product lines into the Company's current product line and current operations, the state of consumer confidence and market demand or the Company's products,  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 most recent Annual Report on Form 10-K for the year ended December 31, 2011, and other subsequent filings. These filings are available at 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.

For more information contact: 


Biostar Pharmaceuticals, Inc. 

The Equity Group, Inc.

Zack Pan, CFO            

Lena Cati

Tel: 405-996-8829             

Tel: 212 836-9611

Email: zpan@aoxing-group.com         

Email: lcati@equityny.com

~FINANCIAL TABLES FOLLOW~

BIOSTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



Three Months Ended




March 31,




2012



2011









Sales, net


$

15,899,541



$

15,288,927











Cost of sales



5,063,150




4,603,713











Gross profit



10,836,391




10,685,214











Operating expenses:









   Selling expenses



5,756,734




6,057,025


   General and administrative expenses



1,100,706




900,026


   Research and development expenses



791,127




-











           Total operating expenses



7,648,567




6,957,051











Income from operations



3,187,824




3,728,163











Other income (expense)









  Interest income



95,694




44,815


  Interest expense



(15,035)




-


  Other income



248




94


Total other income



80,907




44,909











Income before income taxes



3,268,731




3,773,072











Provision for income taxes



1,101,316




1,049,559











Net income



2,167,415




2,723,513











Other comprehensive income









 Foreign currency translation adjustment



255,460




419,133











Total comprehensive income


$

2,422,875



$

3,142,646




















Earnings per share, on net income









  Basic


$

0.23



$

0.30


  Diluted


$

0.23



$

0.30











Weighted average number of common stock outstanding









  Basic



9,398,892




9,129,145


  Diluted



9,398,892




9,132,404


 


BIOSTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS



March 31,



December 31,




2012



2011




(Unaudited)





ASSETS







Current Assets







  Cash and cash equivalents


$

21,970,258



$

16,971,789


  Accounts receivable



34,469,892




35,033,650


  Inventories



951,446




1,373,459


  Prepaid expenses and other receivables



7,160,982




7,129,911


  Prepaid research and development expenses



2,371,654




-


     Total Current Assets



66,924,232




60,508,809











Deposits



-




3,148,466


Deferred tax assets



1,108,619




1,617,688


Property and equipment, net



7,262,543




7,379,982


Intangible assets, net



10,067,994




10,406,931


     Total Assets


$

85,363,388



$

83,061,876











LIABILITIES AND STOCKHOLDERS' EQUITY


















Current Liabilities









Accounts and other payables


$

4,288,595



$

3,334,418


Short-term bank loans



790,551




787,116


Value-added tax payable



831,998




895,487


Income tax payable



584,387




1,643,155


     Total Current Liabilities



6,495,531




6,660,176











Commitment and contingencies


















Stockholders' Equity









  Common stock, $0.001 par value, 100,000,000 shares authorized,

     9,398,892 shares issued and outstanding as of March 31, 2012* and December 31, 2011*



9,399




9,399


  Additional paid-in capital



22,488,943




22,445,661


  Statutory reserve



6,490,600




6,490,600


  Retained earnings



45,641,249




43,473,834


  Accumulated other comprehensive income



4,237,666




3,982,206


     Total Stockholders' Equity



78,867,857




76,401,700











     Total Liabilities and Stockholders' Equity


$

85,363,388



$

83,061,876











*Number of shares issued and outstanding retroactively reflects reverse stock split effective on April 3, 2012.

 

 

BIOSTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Three Months Ended




March 31,




2012



2011


CASH FLOWS FROM OPERATING ACTIVITIES







  Net income


$

2,167,415



$

2,723,513


  Adjustments to reconcile net income to net cash provided by operating activities:









 Deferred tax assets



516,128




-


 Research and development expenses



791,127




-


  Depreciation and amortization



456,376




107,085


  Stock-based compensation and other non-cash expenses



43,282




178,018


  Changes in operating assets and liabilities:









Accounts receivable



716,639




576,149


Inventories



428,007




(395,190)


Prepaid expenses and other receivables



43




46,712


Accounts payable and accrued expenses



1,761,799




(131,727)


Value-added tax payable



(67,397)




(672,336)


Income tax payable



(1,065,938)




(1,053,447)


  Exchange difference



(901)




9,662


     Net cash provided by operating activities



5,746,580




1,388,439











CASH FLOWS FROM INVESTING ACTIVITIES









  Purchase of property and equipment



-




(84,902)


  Balance payment for acquisition of business *



(822,173)




-


     Net cash used in investing activities



(822,173)




(84,902)











CASH FLOWS FROM FINANCING ACTIVITIES









  Advance from a shareholder



-




199,957


  Short-term bank loan



-




458,008


     Net cash provided by financing activities



-




657,965











Effect of exchange rate changes on cash and cash equivalents



74,062




124,428











Net increase in cash and cash equivalents



4,998,469




2,085,930











Cash and cash equivalents, beginning balance



16,971,789




13,211,443











Cash and cash equivalents, ending balance


$

21,970,258



$

15,297,373











SUPPLEMENTAL DISCLOSURES:









  Income tax payments


$

1,660,292



$

2,099,563











* In October 2011, Aoxing Pharmaceutical entered into a Shared Transfer Agreement to acquire Shaanxi Weinan from the holders of 100% of equity interest in Shannxi Weinan. The aggregate purchase price is RMB 61 million (approximately $9.55 million), in cash and payable in several tranches. The payment of $822,173 represents the last tranche which was included in "accounts and other payables" as of December 31, 2011.

SOURCE Biostar Pharmaceuticals, Inc.



RELATED LINKS
http://www.biostarpharmaceuticals.com

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