TPI Reports Third Quarter Fiscal Year 2011 Financial Results

CHENGDU, China, May 16, 2011 /PRNewswire-Asia-FirstCall/ -- Tianyin Pharmaceutical Co., Inc. (NYSE Amex: TPI), a pharmaceutical company that specializes in the patented biopharmaceutical, modernized traditional Chinese medicine, branded generics and other pharmaceuticals, announced the financial results for the third quarter of Fiscal Year 2011.

Third quarter fiscal year 2011 ending March 31, 2011 financial highlights

• Revenue increased 56.3% year over year to $24.9 million from $15.9 million in third quarter fiscal year 2010;
• Operating income increased 39.9% year over year to $5.0 million from $3.6 million in third quarter fiscal year 2010;
• Net Income increased to $3.7 million, up 27.7% year over year from $2.9 million in third quarter fiscal year 2010;
• Earnings per share of $0.13 per basic share, or $0.12 per diluted share, up from $0.11 per basic share, or $0.09 per diluted share a year earlier, a gain of 19.3% and 35.5%,  respectively;
• Cash and cash equivalents totaled $31.1 million on March 31, 2011 or $1.10 per basic share in cash;
• Targeting 900 hospitals coverage by the end of fiscal year 2011 up from the current 880 hospitals network;
• Forecasting $30 million JCM macrolide API revenue for the first year of operation.

Sales for the quarter ended March 31, 2011 was $24.9 million, up 56.3% as compared to $15.9 million for the quarter ended March 31, 2010. Although our generic pharmaceutical sales have been under pricing pressure since the beginning of the third quarter, the channel expansion, optimized production facility usage, and the continuous stream of Tianyin Medicine Trading (TMT) distribution revenue supported the quarterly sales growth.

With the current hospital coverage at 880 hospitals up from 850 hospitals from the beginning of fiscal year 2011, we are targeting to reach 900 hospitals by the end of fiscal year 2011 ending June 30, 2011.

Revenues from the top selling products are listed as follows,

• Gingko Mihuan Oral Liquid (GMOL): $5.6 million, revenue driving prescription patented proprietary medicine for stroke treatment, nationally reimbursed;  
• Apu Shuangxin Benorylate Granules (APU): $1.8 million, flagship OTC product with proprietary granular formulation for inflammation and rheumatism;  
• Azithromycin Tablets (AZI): $0.98 million, branded Essential Drug Listed (EDL) highly effective broad spectrum antibiotics;
• Xuellian Chongcao Oral Liquid (XLCC): $1.1 million, formulated proprietary TCM oral liquid for immunity and sexual function enhancement;
• Qing Re Jie Du Oral Liquid (QR): $0.77 million, modernized TCM legacy product for viral infections such as H1N1 influenza.

These products totaled $10.2 million in sales, representing 41.2% of the quarterly revenue.

Cost of Sales for the quarter ended March 31, 2011 was $14.0 million or 56.2% of sales as compared to $7.5 million or 47.2% of the sales of the quarter ended March 31, 2010. Our cost of sales consists of the raw material cost, labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead.

Gross Margin for the quarter ended March 31, 2011 was 43.6% as compared to 52.8% for the quarter ended March 31, 2010. The decrease in gross margins was attributable to the addition of TMT revenues, the distribution arm of TPI, whose gross margins average approximately 15%. In addition, the pricing pressure on our generic products also contributes to the gross margin reduction. During this quarter, our 56 product organic portfolio delivered approximately 51.4% gross margins, about 1.4% lower than the gross margin of 52.8% from a year earlier. Given the blend of the TMT lower margin distribution revenue and recent decline of the gross margins associated with our proprietary portfolio under the current pricing trend, we anticipate that 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 and improve depending upon the revenue mix percentages of TMT revenue, upcoming JCM macrolide API revenue as compared to the proprietary portfolio's revenue performance.

Operating Expenses for the quarter ended March 31, 2011 were $5.8 million, compared with $4.8 million for the quarter ended March 31, 2010. Continuing sales payroll and marketing expenses are the main components of the operating expenses.

Net Income was $3.7 million for the quarter ended March 31, 2011, as compared to net income of $2.9 million for the quarter ended March 31, 2010, a net increase of $0.8 million or 27.6% year over year. Net profit margins for the quarter ended March 31, 2011 decreases to 14.9% from 18.3% for the quarter ended March 31, 2010 mainly attributable to 1) recent pricing pressure on the generic pharmaceutical business, 2) lower margin TMT distribution revenue, 3) increase of income tax provision to 25% starting January 2011 from the previous 15% for Chengdu Tianyin at the expiration of the three year tax benefit for high tech enterprise. We expect the stabilization of the net profit margin at approximately 15% going forward under the current pharmaceutical sales market condition.

Diluted earnings per share for the three months ended March 31, 2011 were $0.12, up 35.5% from the earnings of $0.09 per diluted share for the three months ended March 31, 2010, based on 29.8 million and 31.6 million shares, respectively.

Balance Sheet and Cash Flow

As of March 31, 2011, we had working capital totaling $37.2 million, including cash and cash equivalents of $31.1 million or $1.10 per share in cash. Net cash generated from operating activities for the nine months ended March 31, 2011 was $12.3 million, compared with $11.5 million for the nine months ended March 31, 2010. We believe that TPI is adequately funded to meet all of the working capital and capital expenditure needs for FY2011.

Business Outlook

Jiangchuan Macrolide Project - JCM

Since the construction completion of JCM, we have entered into the equipment installation and GMP certification preparation phase of the JCM project. We forecast the first year JCM macrolide API revenue contribution to reach $30 million.

Tianyin Medicine Trading Distribution Business - TMT

Since the signing of one-year distribution rights in last November with Jiangsu Lianshui Pharmaceutical to distribute 15 Lianshui-branded generic injection products including cough suppressant, antibiotics, and anti-inflammatory medicines, our TMT business continues to revenue contribution for TPI. The annual distribution revenue is estimated to be approximately $15 million.

Fiscal Year 2011 Financial Guidance

Due to the recent healthcare reform and the resulting pricing pressure on  generic pharmaceutical sales nationwide, since January 2011, our generic division which makes up approximately 40% of our total revenue is expected to experience sales reduction for the next few quarters. In addition, the longer than expected equipment installation and GMP certification preparation process following the newly issued SFDA GMP standards by the PRC government at the beginning of March 2011, are expected to reduce the previously forecast revenue of JCM macrolide facility. We therefore revise our fiscal year 2011 revenue guidance to $90.0 million representing 40.8% year over year growth, from the previously guided $113.0 million in total revenue.

Based on the revised revenue forecast of $90.0 million along with the new 25% income tax rate starting in January 2011 from the previous 15% for Chengdu Tianyin, we revise our net income forecast to $16 million, representing 32.9% year over year growth from previous $18 million. The forecasted net income excludes any non-cash expenses associated with stock compensation plans or stock option expenses. 

Our analysis of the market condition suggests that although the pricing pressure on the generic division is likely to continue for the remainder of 2012 calendar year, the JCM along with TMT distribution business are expected to support the growth of TPI for the coming fiscal year.

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

Conference Call

Senior management will host the earnings conference call for the third quarter of fiscal year 2011 ending March 31, 2011 to be held at 9:00 a.m. ET on Tuesday, May 17, 2011.

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

The conference ID is 4441371. 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 05/17/2011 at 12:00 Noon ET till 05/31/2011 at 11:59 pm ET.

Replay Pin Number: 4441371

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=0000869E

About Tianyin Pharmaceutical

Tianyin Pharmaceutical Co., Inc. (TPI), headquartered at Chengdu, China, specializes in the development, manufacturing, marketing and sale of patented biopharmaceutical, modernized traditional Chinese medicines, branded generics and other pharmaceuticals. TPI currently manufactures and markets a comprehensive portfolio of 56 products, 23 of which are listed in the highly selective National Reimbursement List, 7 are included in the Essential Drug List of China. TPI's pipeline targets cardiovascular diseases, women's health, immune system and respiratory disorders. TPI has an extensive nationwide distribution network with 730 sales representatives out of totaled 1,365 employees. 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.

SOURCE Tianyin Pharmaceutical Co., Inc.