American Oriental Bioengineering first-quarter revenue increases 16.7% to $53.7 million

American Oriental Bioengineering, Inc. (NYSE: AOB), ("the Company" or "AOBO"), a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter ("OTC") products, today announced financial results for the first quarter ended March 31, 2010.

First Quarter 2010 Financial Performance

Revenue in the first quarter of 2010 increased 16.7% year over year to $53.7 million from $46.1 million, reflecting continued demand for the Company's core prescription and OTC pharmaceutical products.

-- Revenue from pharmaceutical products increased 17.8% to $40.9 million from $34.7 million in the first quarter of 2009, driven by increased demand for the Shuanghuanglian ("SHL") Injection Powder, BOKE and CCXA pharmaceutical products, as well as the newly-launched products such as YuYeQingHuo Capsules. Revenue from prescription pharmaceutical products increased 29.3% to $20.9 million from $16.2 million in the prior year period, reflecting a year over year increase in sales from the prescription Jinji capsule, SHL powder, Boke and CCXA prescription products. The overall increase in sales was also supported by continuous marketing efforts, an increase in new product offerings, and expansion of coverage to previously unaddressed rural markets. OTC pharmaceutical products generated $19.9 million in revenue during the first quarter of 2010, in comparison to $18.5 million in the prior year period, reflecting increased sales of our Boke and CCXA products as a result of improved recognition of those products. -- Nutraceutical products generated revenue of approximately $9.7 million in the first quarter of 2010, up 8.5% from $8.9 million in the prior year period, reflecting increased sales of new beverage products launched in the second quarter of 2009. -- The Company generated $3.2 million from its distribution business, Nuo Hua, in the first quarter of 2010. An increase of 29.5% was mainly attributed to the Nuo Hua's expanding market coverage.

Gross profit in the first quarter of 2010 was $28.2 million, compared to $28.4 million in the first quarter of 2009. Gross margin was 52.5%, compared to 61.7% in the prior year period, reflecting continued revenue mix shift to CCXA's generic product sales as well as increasing raw material prices.

Operating income in the first quarter of 2010 was $6.4 million, compared to $10.9 million in the prior year period. Selling and marketing expenses increased 14.7% to $6.0 million from $5.2 million in the prior year period, and advertising expense increased 21.2% to $6.7 million in the first quarter of 2010 from $5.6 million in the prior year period. General and administrative expenses increased 8.6% to $4.8 million from $4.4 million in the prior year period. Research and development expenses increased to $2.8 million from $0.7 million in the prior year period. This reflects the Company's continuing efforts to invest in the centralized R&D centre in Beijing.

Net income attributable to controlling interest for the first quarter of 2010 was $3.1 million, compared to $7.2 million in the prior year period. The Company's net income attributable to controlling interest was $0.04 per diluted share, compared to $0.10 per diluted share in the same period of 2009.

Balance Sheet

As of March 31, 2010, the Company had $99.0 million in cash and cash equivalents, including restricted portions, and generated approximately $5.8 million of operating cash flow during the first quarter of 2010. Working capital was $136.9 million as of March 31, 2010, reflecting an increase of 4.6% from $130.9 million as of December 31, 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "We are very satisfied with our performance in the first quarter, despite the challenging global economic environment and the changing Chinese regulatory environment. During the past quarter, we continued to invest heavily in R&D, which consumed 5% of total revenue, in order to upgrade our existing products and develop new proprietary products to lay a solid foundation for AOBO's near term and long term growth. Meanwhile, we continued to fortify our market position, strengthen our presence in rural areas, and diversify our business operations through cost control, advertising campaigns, and sales network expansion. We are confident that we will achieve initial success from the above combined efforts in the latter part of this year."