TPI Reports Fiscal Year 2014 Financial Results

10 Dec, 2014, 16:38 ET from Tianyin Pharmaceutical Co., Inc.

CHENGDU, China, Dec. 10, 2014  /PRNewswire/ -- Tianyin Pharmaceutical Inc. (NYSE Amex: TPI), a pharmaceutical company that specializes in the patented biopharmaceutical, modernized traditional Chinese medicine (mTCM), branded generics and active pharmaceutical ingredients (API) announced financial results for the fiscal year 2014.

Fiscal Year 2014 Ended June 30, 2014 Financial Highlights:

-- Revenue was $46.6 million versus $67.5 million in the FY2013;

-- Gross profit was $15.9 million with gross margin at 34% versus gross profit of $26.0 million with gross margin at 39% in the FY 2013;

-- Operating income was $2.7 million, compared with $9.3 million in FY 2013;

-- Net Income was $(0.8) million compared with $6.6 million in FY 2013;

-- Earnings per share of $(0.03) per basic and diluted share, compared with $0.23 per basic and diluted share in the FY 2013; 

-- Cash and cash equivalents totaled $16.1 million on June 30, 2014;

Comparison of results (in $ million) for the fiscal years ended June 30, 2014 and 2013

Years Ended June 30

2014

2013

Sales

$

46.6

$

67.5

Cost of Sales

$

30.7

$

41.5

Gross profit

$

15.9

$

26.0

Selling, general and administrative and R&D expenses

$

13.2

$

16.7

Other income (expenses)

$

(3.3)

$

(0.3)

Income taxes

$

(0.2)

$

2.4

Net income attributable to TPI

$

(0.8)

$

6.6

Sales for the fiscal year ended June 30, 2014 was $46.6 million, decreased by 31% from $67.5 million for the fiscal year 2013, mainly due to the Hugan incidence, along with generic pricing pressure, sales volume decrease and prolonged JCM production ramp up. We witnessed a 43% reduction of total revenue of TPI's organic portfolio which excludes the distribution revenue, from $51.0 million for the fiscal year ended June 30, 2013 to $29.3 million for the fiscal year ended June 30, 2014. With the recovery of production capacity and sales, we are implementing various strategies to stabilize our generic sales.

Cost of Sales for the fiscal year ended June 30, 2014 was approximately $30.7 million or 66% of the revenue, compared with $41.5 million or 62% of the revenue for the fiscal year ended June 30, 2013. Our cost of sales primarily consists of the direct raw material costs, labor, depreciation and amortization of manufacturing equipment and facilities and other overhead. The slight increase of our cost of sales percentage from the previous year was mainly due to a margin decrease of our products amid the healthcare reform and intensified market competition and written off of obsolete inventory in the year ended June 30, 2014, which was further discussed in the following "Gross profit" segment.

Gross profit for fiscal year ended June 30, 2014 was approximately $15.9 million with 34% gross margin, compared with $26.0 million with 39% gross margin for fiscal year ended June 30, 2013. The sales of GMOL were $16.0 million compared with $26.1 million in fiscal year 2013, along with other core products revenue growth that totaled $23.0 million. During the fiscal year 2014, our organic product portfolio delivered approximately 46% gross margin, a decrease from 52% in fiscal year 2013 mainly due to the pricing controls and fierce competition amid the current healthcare market compounded by the interruption by GMP recertification. Provided the blend of core product sales growth along with TMT lower margin distribution revenue and lower margin generic sales as the current pricing trend continues, we anticipate our overall gross margin in the near term to stabilize above 36% for the fiscal 2015, influenced by JCM macrolide API revenue as compared to the core product portfolio performance. The factors that influence the gross margins of our major products include raw material price (85% of the cost of goods sold) and production cost (15% of the cost of goods sold).

Operating and R&D Expenses were $14.6 million in fiscal year ended June 30, 2014, compared with $16.7 million in fiscal year ended June 30, 2013. The decrease of $2.1 million operating and R&D expenses is proportional to the sales compression. As a result of the sales impact caused by the Hugan incidence, our operating margin was compressed to 6% compared with 14% a year earlier. We expect the operating expenses percentage to stabilize above 12% of the revenue for fiscal year 2015. The income from operation of $3.0 million compared with $9.3 million in the previous year was mainly the result of decrease of sales and gross margins.

Net loss attributable to TPI was $0.8 million for the fiscal year ended June 30, 2014, compared with a net income of $6.6 million in fiscal year ended June 30, 2013. The loss was mainly caused by the production interruption, sales decrease and related costs that resulted from GMP re-certification.

Income Taxes for the year ended June 30, 2014 and 2013 were $0.20 million and $2.4 million. The decrease in provision for income tax was mainly due to the decrease of pre-tax income due to decrease of income from operation and non-operational expenses.

Balance Sheet and Cash Flow

As of June 30, 2014, we had working capital totaling $24.5 million, including cash and cash equivalents of $16.1 million. Net cash generated from operating activities was $2.5 million for fiscal year ended June 30, 2014 as compared with $12.9 million for fiscal year ended June 30, 2013. The decrease was mainly due to the decrease of the net income. At the end of fiscal year 2014, the accounts receivable was $9.1 million, 19% of the total revenue, compared with $10.1 million, or 15% of the total revenue for fiscal 2013, mainly due to the decreased annual sales. We believe that TPI is adequately funded to meet all of our working capital and capital expenditure needs for fiscal year 2015.

Net cash used in investing activities for the fiscal year ended June 30, 2014 totaled $(15.4) million compared with $(16.1) million in the fiscal year ended June 30, 2013 which are mainly related to the construction and equipment purchase of the Qionglai Facility (QLF) project. We anticipate that in fiscal year 2015, the capital expenditure will be approximately $5.0 million as a result of the QLF relocation.

Net cash provided by financing activities for fiscal year ended June 30, 2014 totaled $2.2 million compared with $(1.1) million for fiscal year 2013 which were related to a net result from the proceeds and repayments of short-term bank loans.

Business Development & Outlook

Research and Development (R&D)

The partnership-based R&D strategy supports TPI to commercialize, produce, and broaden our product pipeline and to market those products through our sales and marketing infrastructure. Currently, we have been monitoring the progress of several pipeline drugs with our partnership research institutes, of which we could be able to register intellectual property rights of these products upon milestone results.

R&D for additional indications of GMOL

Our flagship product GMOL (CFDA certification number: H20013079; patent number: 20061007800225) contributes significantly to our revenue. Clinical application and information gathered from physicians showed that in addition to our approved indication for GMOL: cardiovascular disorders, coronary heart disease and cerebral ischemic attack including strokes, off-label use of GMOL have been indicated in hepatic diseases and ophthalmological diseases. The validity of these observations is currently being investigated.

Jiangchuan Macrolide Project (JCM)

TPI has completed the 240-ton JCM facility for the R&D, manufacturing and sale of API and chemical intermediates of macrolide antibiotics. In January 2012, JCM was approved for its GMP certification designated as "CHUAN M0799," which is valid for the period of December 31, 2011 until December 31, 2015. Following the efficiency improvement and calibration, JCM started the production of the macrolide API for TPI's Azithromycin Dispersible Tablets (SFDA No: H20074145) since July 2012. Currently the monthly production capacity of JCM is 5 - 10 tons of Azithromycin macrolide API. The API produced by JCM is mainly to supply for TPI's own Azithromycin Tablets.

Tianyin Medicine Trading Distribution Business (TMT)

TMT is established to distribute products manufactured by both TPI and other pharmaceutical companies to fuel our expanding sales network as well as to provide synergy to our existing organic product portfolio. TMT has been distributing mainly TPI's own products since its inception in 2009. Since 2010, TPI has signed and later extended distribution contracts with Jiangsu Lianshui Pharmaceutical ("Lianshui") to distribute Lianshui-branded generic injection products including cough suppressant, antibiotics, anti-inflammatory medicines and other healthcare indications. On average, TMT distribution revenue contributed approximately $1-2 million sales per quarter.

Pre-extraction and formulation plant development at Qionglai Facility (QLF)

In preparation for the new Good Manufacturing Practice (GMP) standards stipulated by the PRC government in early 2011, TPI initiated a process to optimize the manufacturing facilities and production lines of the Company in compliance with the new GMP standards. TPI received our current GMP certificate for both of our pre-extraction plant and formulate facilities on August 27, 2013 for the next three years until the end of 2015. In addition, under the guidance by provincial government, our facility is scheduled to be relocated to Qionglai County, south of Chengdu, which is designated for the pharmaceutical industry. Both the pre-extraction plant and the formulation plant will be relocated to Qionglai County to become a combined QLF plant, which is estimated to be 80 mu or approximately 13 acres. The combined QLF plant, designed and constructed according to the latest GMP standards, is expected to relieve the current capacity saturation at the current facilities. The re-location cost for Phase I is estimated at $25 million, which, when completed, is expected to expand the current capacity by approximately 30%. If the Company decides to further expand the capacity, Phase II QLF, an additional $10 million may be invested to double the current capacity. The phase I construction along with GMP preparation has been completed in August 2014. In late September 2014, TPI successfully passed the site visit by the CFDA inspection team. TPI will start the production at QLF immediately following the issuance of GMP certification which is expected to be in late December 2014 or January 2015. 

Guidance

Our revenue of approximately $46.6 million came significantly below our previously estimated modest 0-5% projection year over year mainly due to the production interruption and sales and marketing impact as a result of the Hugan incidence. The situation was also related to the prevailing pricing control of generic medicines in China and the government's channeling sales toward low margined essential drugs on the EDL through various policies that adversely affected generic sales. Though our JCM's Azithromycin API sales have gained momentum towards the end of fiscal year 2014, it was not sufficient to offset the sales and profit margin impact from the Hugan incidence. In addition, the challenges remain at JCM's growth trajectory due to the price competition of Azithromycin APIs combined with existing excessive production capacity.

The following factors, in our opinion, will influence the Company's growth perspectives for fiscal year 2015:

1)

Market expansion and revenue growth of TPI's core product portfolio led by flagship product Gingko Mihuan Oral Liquid (GMOL) and other major products;

2)

JCM revenue at both domestic and international markets in the fiscal year 2015;

3)

Generic sale stablization following the Hugan incidence and our strategy to cope with pricing restrictions and market competition under the ongoing healthcare reform; and

4)

QLF GMP certification (ongoing)/relocation and smooth transition of production capacity.  

We forecast that the revenue growth for TPI may range from 5-10% for the coming year, along with a net margin of 8-10% based on our assessment of production and sales recovery during the first half of fiscal 2015 and sales forecast of TPI's core products and JCM sales. The net income guidance excluded any non-cash expenses associated with stock compensation plans or stock option expenses. 

Management will continue to evaluate the Company's business outlook and communicate any changes on a quarterly basis or as when appropriate.

Senior management of TPI will host the earnings conference call following the reporting of the financial results of our first quarter of fiscal year 2015.  

About TPI

Headquartered at Chengdu, China, TPI is a pharmaceutical company that specializes in the development, manufacturing, marketing and sales of patented biopharmaceutical, mTCM, branded generics and API. TPI currently manufactures a comprehensive portfolio of 58 products, 24 of which are listed in the highly selective national medicine reimbursement list, 10 are included in the essential drug list (EDL) of China. TPI's pipeline targets various high incidence healthcare indications. For more information about TPI, 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.

For more information, please contact: Investors Contact: ir@tpi.asia Web:   http://www.tianyinpharma.com Tel: +86-28-8551-6696 (Chengdu, China)

Address: 23rd Floor Unionsun Yangkuo Plaza No. 2, Block 3, South Renmin Road Chengdu, 610041 China

 

TIANYIN PHARMACEUTICAL CO., INC. Consolidated Balance Sheets

June 30,

June 30,

2014

2013

Assets

Current assets:

Cash and cash equivalents

$

16,120,041

$

26,827,008

Restricted cash

994,017

4,536,000

Accounts receivable, net of allowance for doubtful accounts of $102,401 and $102,149 at June 30, 2014 and 2013, respectively

9,074,576

10,112,718

Inventory

3,841,712

6,036,014

Loan receivable

1,981,280

-

Deferred tax assets

1,180,510

-

Other current assets

376,504

313,320

Total current assets

33,568,640

47,825,060

Property and equipment, net

45,378,356

40,603,232

Intangibles, net

27,699,733

21,505,012

Goodwill

211,120

210,600

Total assets

$

106,857,849

$

110,143,904

Liabilities and Equity

Current liabilities:

Accounts payable and accrued expenses

$

1,592,459

$

1,352,560

Accounts payable – construction related

2,238,927

2,723,290

Short-term bank loans

4,547,200

5,929,200

Income tax payable

35,832

701,311

Other taxes payable

179,610

740,800

Other current liabilities

522,995

449,062

Total current liabilities

9,117,023

11,896,223

Total liabilities

9,117,023

11,896,223

Equity

Stockholders' equity:

Preferred stock, $0.001 par value, 25,000,000 shares authorized, no shares issued and outstanding at    June 30, 2014 and 2013

-

-

Common stock, $0.001 par value, 50,000,000 shares authorized, 29,546,276 shares issued,    29,432,791 shares outstanding at June 30, 2014 and 29,496,276 shares issued, 29,382,791 shares    outstanding at June 30, 2013

29,546

29,496

Additional paid-in capital

30,189,802

30,134,852

Treasury stock, 113,485 shares at cost

(135,925)

(135,925)

Statutory reserve

6,976,412

6,847,315

Retained earnings

50,193,258

50,967,308

Accumulated other comprehensive income

10,423,712

10,178,358

Total stockholders' equity

97,676,805

98,021,404

Noncontrolling interest

64,021

226,277

Total equity

97,740,826

98,247,681

Total liabilities and equity

$

106,857,849

$

110,143,904

  

TIANYIN PHARMACEUTICAL CO., INC. Consolidated Statements of Operations

For the Years Ended June 30,

2014

2013

Sales

$

46,555,021

$

67,500,476

Cost of sales

30,674,098

41,496,812

Gross profit

15,880,923

26,003,664

Operating expenses

Selling expenses

7,800,507

11,442,664

General and administrative expenses

4,449,587

4,351,592

Research and development

946,300

894,995

Total operating expenses

13,196,394

16,689,251

Income from operations

2,684,529

9,314,413

Other income (expenses):

Interest income

165,533

162,563

Interest expense

(392,010)

(437,897)

Other expense

(3,070,795)

-

Total other income (expenses)

(3,297,272)

(275,334)

Income (loss) before provision for income tax

(612,743)

9,039,079

Provision for income tax

195,325

2,423,906

Net income (loss)

(808,068)

6,615,173

Less: Net income (loss) attributable to noncontrolling interest

(163,115)

(56,978)

Net income attributable to Tianyin Pharmaceutical Co., Inc.

$

(644,952)

$

6,672,151

Basic and diluted earnings per share

$

(0.03)

$

0.23

Weighted average number of common shares outstanding:

Basic and diluted

29,400,599

29,345,668

 

TIANYIN PHARMACEUTICAL CO., INC. Consolidated Statements of Comprehensive Income

For the Years Ended June 30,

2014

2013

Net income (loss)

$

(808,068)

$

6,615,173

Other comprehensive income

Foreign currency translation adjustment

246,213

2,083,061

Total other comprehensive income

246,213

2,083,061

Total Comprehensive income (loss)

(561,855)

8,698,234

Less: Comprehensive income (loss) attributable to the noncontrolling interest

(162,256)

(51,749)

Comprehensive income (loss) attributable to Tianyin Pharmaceutical Co., Inc.

$

(399,599)

$

8,749,983

 

TIANYIN PHARMACEUTICAL CO., INC. Consolidated Statements of Cash Flows

For the Years Ended June 30,

2014

2013

Cash flows from operating activities:

Net Income (loss)

$

(808,068)

$

6,615,173

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

Depreciation and amortization

2,587,565

2,435,138

Deferred tax assets

(1,180,510)

-

Provision for inventory obsolescence and markdown

1,527,483

159,123

Provision for bad debts

-

(14,004)

Share-based payment

55,000

30,000

Changes in current assets and current liabilities:

Accounts receivable

1,065,075

1,400,397

Inventory

685,804

(201,972)

Advance payments

-

645,923

Other current assets

(62,525)

130,893

Accounts payable and accrued expenses

236,997

(264,388)

Accounts payable – construction related

(491,994)

1,935,150

Income tax payable

(668,443)

(119,146)

Other taxes payable

(564,060)

225,356

Other current liabilities

72,959

(27,787)

Net cash provided by operating activities

2,455,283

12,949,856

Cash flows from investing activities:

Addition to property and equipment

-

(1,704,154)

Addition of Construction in progress

(6,450,737)

(13,274,213)

Additions to intangible assets – land use right

(6,973,301)

(886,611)

Loans receivable

(1,984,940)

-

Acquisition of subsidiary

-

(207,285)

Net cash used in investing activities

(15,408,978)

(16,072,263)

Cash flows from financing activities:

Trade notes payable

-

(4,703,775)

Restricted cash

3,559,747

(908,865)

Proceeds from short-term bank loans

4,555,600

10,300,470

Repayments of short-term bank loans

(5,954,820)

(10,523,700)

Net cash provided by (used in) financing activities

2,160,527

(5,835,870)

Effect of foreign currency translation on cash

86,201

632,990

Net decrease in cash and cash equivalents

(10,706,967)

(8,325,287)

Cash and cash equivalents – beginning of year

26,827,008

35,152,295

Cash and cash equivalents – ending of year

$

16,120,041

$

26,827,008

Supplemental cash flow disclosure

Cash paid for interest

$

391,942

$

437,605

Income tax paid

$

2,421,477

$

2,543,053

 

TIANYIN PHARMACEUTICAL CO., INC. Consolidated Statements of Stockholders' Equity

 

Common Stock

 

Treasury

 

Preferred Stock

 

Additional Paid in

 

Statutory

 

Retained

 

Accumulated other Comprehensive

 

Total Stockholders'

 

Noncontrolling

 

Total

Number

Par Value

stock

Number

Par Value

Capital

Reserve

Earnings

Income

Equity

interest

Equity

Balance at June 30, 2012

29,446,276

$

29,446

$

(135,925)

0

$

-

$

30,104,902

$

6,120,143

$

45,022,329

$

8,100,526

$

89,241,421

$

278,026

$

89,519,447

Net income

6,672,151

6,672,151

(56,978)

6,615,173

Other comprehensive income:

Foreign currency translation adjustment

2,077,832

2,077,832

5,229

2,083,061

Comprehensive income

8,749,983

(51,749)

8,698,234

Common shares issued

50,000

50

29,950

30,000

30,000

Statutory reserve

727,172

(727,172)

-

-

Balance at June 30, 2013

29,496,276

29,496

(135,925)

0

0

30,134,852

6,847,315

50,967,308

10,178,358

98,021,404

226,277

98,247,681

Net income

(644,953)

(644,953)

(163,115)

(808,068)

Other comprehensive income:

Foreign currency translation adjustment

245,354

245,354

859

246,213

Comprehensive income

(399,599)

(162,256)

(561,855)

Common shares issued for services

50,000

50

54,950

55,000

55,000

Statutory reserve

129,097

(129,097)

-

-

Balance at June 30, 2014

29,546,276

$

29,546

$

(135,925)

0

$

-

$

30,189,802

$

6,976,412

$

50,193,258

$

10,423,712

$

97,676,805

$

64,021

$

97,740,826

SOURCE Tianyin Pharmaceutical Co., Inc.



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