TPI Reports Second Quarter Fiscal Year 2012 Financial Results

CHENGDU, China, Feb. 14, 2012 /PRNewswire-Asia/ -- 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 second quarter of Fiscal Year 2012.

Second quarter fiscal year 2012 ended December 31, 2011 financial highlights:

  • 2Q FY2012 revenue delivered $18.2 million compared with $25.3 million in 2Q FY2011,
  • 2Q FY2012 operating income delivered $2.1 million, compared with $5.3 million in 2Q FY2011,
  • Net Income was $1.7 million compared with $5.9 million in 2Q FY2011,
  • Earnings per share of $0.06 per basic share, or $0.06 per diluted share, compared with $0.21 per basic share, or $0.20 per diluted share in 2Q FY2011,  
  • Cash and cash equivalents totaled $36.9 million on December 31, 2011,
  • Operating cash flow for the six months ended December 31, 2011 was $8.2 million, compared with $10.8 million for the six months ending December 31, 2010.  

2Q FY2012 Results


2Q FY2012

2Q FY2011

YoY

Sales

$18.2 million

$25.3 million

-28.0%

Gross Profit

$6.1 million

$11.3 million

-46.3%

Operating Income

$2.1 million

$5.3 million

-60.3%

Net Income

$1.7 million

$5.9 million

-71.2%

EPS (Diluted)

$0.06

$0.20

-70.0%

Diluted Shares

29.4 million

30.5 million

-3.6%



Sales for the quarter ended December 31, 2011 was $18.2 million, a decrease of 28.0% as compared to $25.3 million for the quarter ended December 31, 2010, but a slight gain from the first quarter of fiscal 2012 which was $17.5 million. The sales decrease from the prior year was mainly due to 1) generic pricing pressure, 2) government policy to prioritize Essential Drug List (EDL) drug sales that led to the sales and margin compression of higher margined generic pharmaceuticals, and 3) in the quarter ended December 31, 2010, ahead of the current healthcare reform policies being enforced, downstream customers had significantly built up their inventory which led to a revenue gain of 69.6% for TPI from the prior year.

Our five core product sales are: Gingko Mihuan (GMOL): $4.3 million; Apu Shuangxin (APU): $0.77 million; Azithromycin (AZI): $0.80 million; Xue Lian Chong Cao (XLCC): $0.78 million; and Qing Re Jie Du (QR): $0.83 million. These products totaled $7.5 million in sales, representing 41% of the total quarterly revenue. This is a gain of 33.9% from the first quarter fiscal 2012 during which core product sales totaled $5.6 million, or 32% of the quarterly revenue.

Gross Margin for the quarter ended December 31, 2011 was 33.1% as compared to 44.7% for the quarter ended December 31, 2010. The factors that influence the gross margins are mainly raw material prices and production cost.

During the second quarter, our organic product portfolio delivered 42.4% gross margins, 9% lower than 51.4% for the quarter ended December 31, 2010. The reduction in gross margins are due to 1) generic pricing pressure, 2) distribution business through Tianyin Medicine Trading (TMT) delivered $4.5 million at approximately 10% gross margin, and 3) increase of raw material costs.

Based on the blend of the TMT lower margin revenue and the current pricing restriction, our overall gross margin in the near term, on a quarter to quarter comparison basis, may trend lower, but on a sequential basis should stabilize depending on the sales mix of TMT, JCM API revenue as compared to the proprietary portfolio revenue performance.

Operating Expenses were $4.0 million for the quarter ended December 31, 2011, as compared to $6.0 million for the quarter ended December 31, 2010 and also compared with $3.7 million in the first quarter of fiscal 2012. The decrease in operating expenses is mainly associated with 1) the lower sales and marketing costs as a result of lower sales, and 2) in the prior year, there was a one-time restricted stock compensation impact of approximately $0.5 million in the quarter ended December 31, 2010.

Net Income was $1.7 million for the quarter ended December 31, 2011, as compared to the net income of $1.5 million for the first quarter of fiscal 2012, and also compared to net income of $6.0 million which includes $1.6 million non-cash gain due to the change in fair value of warrants liability for the quarter ended December 31, 2010, a decrease of $4.3 million. Net profit margins for the three months ended December 31, 2011 decreased to 9.0% from 17.4% for the three months ended December 31, 2010, and also compared with 8.6% for the first quarter of fiscal 2012.

Diluted earnings per share for the quarter ended December 31, 2011 were $0.06 based on 29.4 million shares, a decrease of 70% from the earnings of $0.20 per diluted share for the quarter ended December 31, 2010, based on 30.5 million shares which include approximately $0.05 per share non-cash gain due to the change of fair value of warrants liability.

Balance Sheet and Cash Flow

As of December 31, 2011, we had cash and cash equivalents of $36.9 million. Net cash generated from operating activities was $8.1 million for the six months ended December 31, 2011, compared with $10.8 million operating cash flow for the six months ended December 31, 2010. The improvement in operating cash flow was primarily the result of accounts receivable collection and reduced inventory. The Days Sale Outstanding (DSO) for the quarter was 20.4 days improving from 27.5 days for the quarter ended December 31, 2010. We believe that TPI is adequately funded to meet all of the working capital and capital expenditure needs for FY2012.

Business Development & Outlook

GMOL Capsule formulation

In November 2011, we announced the formulation expansion program for our flagship product GMOL (SFDA certification number: H20013079; patent number: 20061007800225). GMOL, the proprietary prescription medicine for TPI, is used nationwide in China to treat brain ischemia and infarction, coronary heart diseases, memory dysfunction and other neurological disorders. The new capsule formulation is more convenient to carry while traveling, adding to its ease of use for those long term treatment users. In addition, the cost of production and packaging material for the capsule formulation will reduce the overall cost of sales by 70% while extending the expiration period to 3 years from the current 2 years for oral liquid form. The new capsule formulation is expected to support the revenue growth of GMOL at approximately 30% year over year and improve the gross margin of GMOL products to 75% or higher. TPI will also apply for patent protection for the new capsule formulation. The R&D cost associated with the capsule formulation is estimated at $1-2 million.

Jiangchuan Macrolide Project (JCM)

In January 2012, following a series of the internal quality assessment and the environmental safety and impact assessment, JCM was approved for its GMP certification designated as "CHUAN M0799" valid through the period of December 31, 2011 until December 31, 2015.

Qionglai (QLF) Project

In preparation for the new Good Manufacturing Practice (GMP) standards stipulated by the PRC government in early 2011, TPI initiated the process of optimizing the manufacturing facilities and production lines in compliance with the new GMP standards by 2013. Concurrently, the city of Chengdu has re-designated various industrial parks of nearby counties to for particular industries such as automobile, biotechnologies, pharmaceuticals and chemical engineering for individual locations. As a consequence, TPI's manufacturing facility at the Longquan district, east of Chengdu, which is designated for automotive industry, is scheduled to be relocated to Qionglai city, south of Chengdu, which is designated for pharmaceutical industry. The QLF is approximately 18 miles from the Company's recently completed Jiangchuan macrolide (JCM) facility. The proposed relocation project also includes our TCM pre-extraction plant which is located near the center of city of Chengdu surrounded by rapidly expanding residential area.

On February 13, 2012, TPI announced the official start of its Qionglai Facility (QLF) project following the initial planning period. The Phase I of QLF project will be the construction of the pre-extraction plant which is targeted for completion by the end of 2012 calendar year.

The pre-extraction is the first step of the manufacturing process of modernized traditional Chinese medicine (mTCM). The pre-extraction facility will conduct initial processing of TCM raw material, separation using alcohol or water precipitation, filtration, centrifugation, concentration and purification of TCM pharmaceutical ingredients which will be further processed for the production of mTCM at the formulation facility.

The QLF occupies 80 mu or 53,000 m2. Both pre-extraction plant and the formulation plant are to be relocated. The combined QLF plant, designed and constructed according to the latest GMP standards, is expected to relieve the current capacity saturation at TPI's facilities. The re-location and construction cost is estimated at $25 million for Phase I which will expand the current capacity by 30%. For Phase II QLF, an additional $10 million may be employed to double the current capacity by 2013.ally begun after the initial planning stage.

Conference Call

Senior management of TPI will host its earnings conference call for the second quarter of fiscal 2012 ending December 31, 2011 at 8:30 a.m. ET on Tuesday, February 14, 2012.

Interested parties may access the call by dialing +1-877-941-1427 (U.S.), 1-480-629-9664 (International)

The conference ID is 4512254. It is advisable to dial in approximately 5 minutes prior to the start of the call.

A replay will be available by calling +1-877-870-5176 (U.S.), 1-858-384-5517 (International), from 2/14/2012 at 11:30 am ET till 2/28/2012 at 11:59 pm ET, Replay Pin Number:  4512254

This call is being web cast by ViaVid Broadcasting and can be accessed at ViaVid's website at the following link: http://viavid.net/dce.aspx?sid=00009369

About TPI

Headquartered at Chengdu, China, TPI is a pharmaceutical company that specializes in the development, manufacturing, marketing and sales of patented biopharmaceutical, modernized traditional Chinese medicines, branded generics and other pharmaceuticals. TPI currently manufactures a comprehensive portfolio of 58 products, 24 of which are listed in the highly selective national medicine reimbursement list, 7 are included in the essential drug list 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)
      +86 134-36-550011 (China)

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

TIANYIN PHARMACEUTICAL CO., INC.

Consolidated Balance Sheets



December 31,



June 30,




2011



2011


Assets


(Unaudited)





Current assets:







Cash and cash equivalents


$

36,908,404



$

31,724,906


Restricted cash



3,116,520




-


Accounts receivable, net of allowance for doubtful accounts of $141,034









   and $421,079 at December 31, 2011 and June 30, 2011, respectively



9,021,527




9,036,030


Inventory



4,106,289




4,932,353


Advance payments



-




1,639,820


Other current assets



205,051




62,951


Total current assets



53,357,791




47,396,060











Property and equipment, net



27,504,810




27,465,915











Intangibles, net



17,889,581




15,339,194











Total assets


$

98,752,182



$

90,201,169











Liabilities









Current liabilities:









Accounts payable and accrued expenses


$

2,703,892



$

2,063,792


Accounts payable – construction related



1,274,220




1,824,067


Short-term bank loans



4,407,200




2,784,600


Trade notes payable



2,675,800




-


VAT taxes payable



339,095




674,974


Income taxes payable



600,114




930,418


Other taxes payable



85,810




124,154


Other current liabilities



497,281




519,602


Total current liabilities



12,583,412




8,921,607











Total liabilities



12,583,412




8,921,607











Equity









Stockholders' equity:









Common stock, $0.001 par value, 50,000,000 shares authorized,



29,396




29,396


   29,396,276 shares issued and outstanding at December 31, 2011









   and June 30, 2011









Additional paid-in capital



30,065,452




30,065,452


Statutory reserve



5,409,764




5,409,764


Treasury stock



(111,587)




(111,587)


Retained earnings



42,562,805




39,374,018


Accumulated other comprehensive income



7,592,341




6,077,299


Total stockholders' equity



85,548,171




80,844,342











Noncontrolling interest



620,599




435,220











Total equity



86,168,770




81,279,562











Total liabilities and equity


$

98,752,182



$

90,201,169





TIANYIN PHARMACEUTICAL CO., INC.

Consolidated Statements of Operations

(Unaudited)




For the Three Months Ended



For the Six Months Ended




December 31,



December 31,




2011



2010



2011



2010















Sales


$

18,236,701



$

25,333,853



$

35,765,279



$

47,284,667



















Cost of sales



12,148,399




13,999,623




23,823,928




25,139,312



















Gross profit



6,088,302




11,334,230




11,941,351




22,145,355



















Operating expenses:

















Selling expenses



2,801,630




4,414,759




5,278,956




8,376,898


General and administrative expenses



1,022,039




1,332,676




2,041,161




3,357,763


Research and development



210,784




258,702




421,499




516,677


Total operating expenses



4,034,453




6,006,137




7,741,616




12,251,338



















Income from operations



2,053,849




5,328,093




4,199,735




9,894,017



















Other income (expenses):

















Interest income



43,246




27,318




78,207




57,598


Interest expense



(82,930)




(21,734)




(132,775)




(42,808)


Change in fair value of warrants liability



-




1,555,421




-




1,282,404


Gain on disposal of fixed assets



229,110




-




229,110




-


Other expenses



(5,115)




-




(9,833)




-


Total other income



184,311




1,561,005




164,709




1,297,194



















Income before provision for income tax



2,238,160




6,889,098




4,364,444




11,191,211



















Provision for income tax



556,590




942,068




1,175,657




1,847,507



















Net income



1,681,570




5,947,030




3,188,787




9,343,704



















Less: Net loss attributable to

















noncontrolling interest



(56,035)




(8,785)




(74,058)




(16,629)



















Net income attributable to Tianyin

















Pharmaceutical Co., Inc.



1,737,605




5,955,815




3,262,845




9,360,333



















Basic earnings per share


$

0.06



$

0.21



$

0.11



$

0.33


Diluted earnings per share


$

0.06



$

0.20



$

0.11



$

0.31



















Weighted average number of common

















shares outstanding

















Basic



29,396,276




27,986,026




29,396,276




27,939,271


Diluted



29,396,276




30,524,479




29,396,276




30,477,723





TIANYIN PHARMACEUTICAL CO., INC.

Consolidated Statements of Comprehensive Income

(Unaudited)




For the Three Months Ended



For the Six Months Ended




December 31,



December 31,




2011



2010



2011



2010















Net income


$

1,681,570



$

5,947,030



$

3,188,787



$

9,343,704



















Other comprehensive income

















Foreign currency translation adjustment



567,535




814,035




1,515,042




1,766,917



















Comprehensive income



2,249,105




6,761,065




4,703,829




11,110,621



















Less: comprehensive income (loss) attributable

















to noncontrolling interest



(52,025)




178,443




185,379




389,762



















Comprehensive income attributable to

















Tianyin Pharmaceutical Co., Inc.


$

2,301,130



$

6,582,622



$

4,518,450



$

10,720,859





TIANYIN PHARMACEUTICAL CO., INC.

Consolidated Statements of Cash Flows

(Unaudited)




For the Six Months Ended




December 31,




2011



2010


Cash flows from operating activities:







Net Income


$

3,188,787



$

9,343,704


Adjustments to reconcile net income to net cash









provided by (used in) operating activities:









Depreciation and amortization



518,131




602,584


Change in fair value of warrants



-




(1,282,404)


Gain on disposal of fixed assets



(229,110)




-


Share-based payments



-




1,762,572


Bad debt expense



43,726




-


Changes in current assets and current liabilities:









Accounts receivable



46,185




(949,316)


Inventory



908,557




(1,744,837)


Advance payments



1,662,080




-


Other current assets



(154,593)




46,231


Accounts payable and accrued expenses



608,143




(170,205)


Accounts payable – construction related



(579,391)




2,918,583


Trade notes payable



2,665,260




-


VAT taxes payable



(346,290)




(1,020)


Income taxes payable



(345,177)




61,860


Other taxes payable



(40,352)




151,575


Dividends payable



-




(18,138)


Other current liabilities



(31,265)




45,190


Total adjustments



4,725,904




1,422,675











Net cash provided by operating activities



7,914,691




10,766,379











Cash flows from investing activities:









Addition to property and equipment



(2,836)




(7,400,717)


Proceeds from disposal of fixed assets



377,164




-


Addition of construction in progress



(136,400)




-


Additions to intangible assets – land use right



(1,822,780)




-


Additions to intangible assets – drug



(768,222)




-


Loans receivable



-




298,320











Net cash used in investing activities



(2,353,074)




(7,102,397)











Cash flows from financing activities:









Restricted cash



(3,104,244)




-


Proceeds from short-term bank loan



1,567,800




-


Dividends paid



-




(54,857)











Net cash used in financing activities



(1,536,444)




(54,857)











Effect of foreign currency translation on cash



1,158,325




550,470











Net increase in cash and cash equivalents



5,183,498




4,159,595











Cash and cash equivalents – beginning



31,724,906




27,009,066











Cash and cash equivalents – ending


$

36,908,404



$

31,168,661











Supplemental disclosures of cash flow information









Cash paid for interest


$

132,775



$

42,809


Cash paid for income taxes


$

1,560,653



$

1,847,507





SOURCE Tianyin Pharmaceutical Co., Inc.



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