TPI Reports Fiscal Year 2014 Financial Results

Dec 10, 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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http://www.tianyinpharma.com