Tianyin third-quarter revenue up 60%

Tianyin Pharmaceutical Co., Inc., (NYSE Amex: TPI), a biopharmaceutical company that specializes in the modernized traditional Chinese medicine ("TCM") and branded generics today announced fiscal results for its third quarter ended March 31, 2010.

Third quarter fiscal year 2010 ending March 31, 2010 financial highlights -- Q3 FY2010 revenue increased 60% year over year to $15.9 million, net Income Increased 53% to $2.9MM with EPS of $0.11 per share (basic), or $0.09 per share (diluted) -- Cash and cash equivalents were $23.3 million on March 31st, 2010 -- Nine month 2010 Cash Flow from Operations Increased 95% year over year to $8.6 million -- Sichuan Jiangchuan joint venture progress on schedule Q3 FY2010 Results Q3 FY2010 Q3 FY2009 YoY Sales $15.9 million $10.1 million +60% Gross Profit $8.4 million $4.9 million +71% Net Income $2.9 million $1.9 million +53% EPS (Diluted) $0.09 $0.08 +12% Diluted Shares 31.6 million 24.8 million +27% Nine Months FY2010 Results Nine Months Nine Months YoY FY2010 FY2009 Sales $44.3 million $29.6 million +50% Gross Profit $23.2 million $14.9 million +55% Net Income $7.7 million $5.7 million +35% EPS (Diluted) $0.26 $0.23 +13% Diluted shares 29.9 million 24.7 million +21%

Sales for 3Q FY2010 was $15.9 million, up 60.0%, as compared to sales of $9.9 million for 3Q FY2009. Sales for the nine months ended March 31, 2010 were $44.3 million, as compared to total sales of $29.6 million for the nine months ended March 31, 2009, an increase of $14.7 million or 50%. The sales growth was primarily the result of the continuous channel expansion, market penetration and optimized usage of our expanded production facility. We expect greater unit sales as a result of the expansion of both our sales channels and sales force as we continue to implement our sales and marketing strategy.

Revenues from the our top selling products, Ginkgo Mihuan Oral Liquid (GMOL), Apu Shuangxin Oral Liquid (ASOL), Xuelian Chongcao (XLCC) and Azithromycin Dispersible Tablets, were $8.8 million, representing 62.9% of the total quarterly revenue.

Cost of sales for the three months ended March 31, 2010 was $7.5 million or 47% of sales as compared to $5.1 million or 51% of sales for the three months ended March 31, 2009. Cost of sales for the nine months ended March 31, 2010 was $21.0 million or 47.5% of sales as compared to $14.7 million or 50% of sales for the nine months ended March 31, 2009. Our cost of sales consists of the raw material cost, labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead. The improvement of our cost of sales was due to an increase in higher margin products in our sales mix along with enhanced cost control measures that yielded greater efficiencies during the manufacturing process.

Gross margin for the three months ended March 31, 2010 was 53% as compared to 49% for the three months ended March 31, 2009. This was achieved by optimizing portfolio with higher margin products, such as Ginkgo Mihuan Oral Liquid and Apu Shuangxin, while reducing the production of lower margin products, such as Qingrejiedu Oral Liquid and Hugan Tablets.

Operating expenses were $4.8 million for the three months ended March 31, 2010, as compared to $2.6 million for the three months ended March 31, 2009. Operating expenses were $13.7 million for the nine months ended March 31, 2010, as compared to $8.0 million for the nine months ended March 31, 2009, an increase of $5.8 million or 73%. The increase was primarily due to our recent sales and marketing strategy that increased our sales payroll and marketing expenses, along with the increased compensation expenses to external service providers.

Net income was $2.9 million for the three months ended March 31, 2010, as compared to net income of $1.9 million for the three months ended March 31, 2009, an increase of $1.0 million or 53%. Net income was $7.7 million for the nine months ended March 31, 2010, as compared to net income of $5.7 million for the nine months ended March 31, 2009, an increase of $1.9 million or 33%. The net income gain was primarily the result of increase in our revenue along with higher product margins.

Diluted earnings per share for the three months ended March 31, 2010 were $0.09, compared to $0.08 in the same period 2009, based on 31.6 million and 24.8 million shares for 2010 and 2009, respectively.

"Our steadfast efforts in sales expansion, market penetration, new production utilization and portfolio optimization were reflected by another quarter of solid growth in both top and bottom line." stated Dr. Jiang, Guoqing, Tianyin's Chief Executive Officer. "To fuel our future growth, we are continuing the Sichuan Jiangchuan Pharmaceutical Joint Venture (Jiangchuan) to produce macrolide antibiotics, which addresses a large and rapidly growing market in China. Our construction is progressing on schedule and we expect Jiangchuan to contribute to our growth starting fiscal 2011. Our 52 product portfolio featuring patented as well as modernized TCMs and branded generics that target a series of high incidence diseases with addressable billion dollar market. We believe that the favorable health care reform policies, along with growing disposable income, and urbanization of vast agricultural regions remain to be strong growth drivers for China's pharmaceutical market."

Balance Sheet and Cash Flow

As of March 31, 2010, we had cash and cash equivalents of $23.3 million. Net cash generated from operating activities was $8.6 million for the nine months ended March 31, 2010 as compared to $4.4 million for the same period of 2009. The strong cash flow was primarily the result of revenue growth which led to an increased net income. We believe that Tianyin is adequately funded to meet all of our working capital and capital expenditure needs for 2010.

Net cash used in investing activities for the nine months ended March 31, 2010 and 2009 totaled $5.5 million and $5.2 million respectively. The increase was mainly due to our new drugs development and the construction of Jiangchuan production facility.

Business Development & Outlook

Progress update on Sichuan Jiangchuan Pharmaceutical (Jiangchuan):

Since our announcement of the Jiangchuan JV on October 29, 2009 focusing on the production of macrolide antibiotics, such as Azithromycin, one of the world's best-selling antibiotics. Jiangchuan holds a license from China's SFDA to produce macrolide antibiotics and a related business license from the Industry and Commerce Bureau and Tax department. Tianyin owns 77% of the JV and plans to utilize Jiangchuan as the foundation of a broader, longer term strategy to build a significant presence in the rapidly growing macrolide antibiotics market. Construction on a new production facility in Xinjin Industrial Development Area commenced January 8, 2010 with Phase I expected to be operational by August, 2010 and Phase II to be operational by the second half of 2010, with total anticipated capital expenditures of $20 million. Tianyin anticipates the revenue contribution from the initiative starting fiscal 2011.

Fiscal 2010 Guidance

The management reaffirms FY2010 guidance of $63 million and net income of $11 million, representing 48% and 40% year over year growth respectively.