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 second quarter of the fiscal year 2013.
Second Quarter Fiscal Year 2013 Ended December 31, 2012 Financial Highlights:
Revenue was $17.6 million compared with $18.2 million in 2Q12 a decrease of 3.3% year over year,
Operating income was $2.6 million, compared with $2.1 million in 2Q12, an increase of 23.8% year over year,
Net Income was $1.8 million compared with $1.7 million in 2Q12, an increase of 5.9% year over year,
Earnings per share of $0.06 per basic share, and $0.06 per diluted share, compared with $0.06 per basic share, or $0.06 per diluted share in 2Q12,
Cash and cash equivalents totaled $25.4 million on December 31, 2012; Operating cash flow for the six months ended December 31, 2012 was $(0.7) million, compared with operating cash flow of $7.9 million for the six months ended December 31, 2011.
Comparison of results for the quarters ended December 31, 2012 and 2011:
Sales for the quarter ended December 31, 2012 was $17.6 million, a decrease of 3.3% as compared to $18.2 million for the quarter ended December 31, 2011. The sales decrease was mainly due to continuous generic pricing pressure amid healthcare reform further augmented by restrictive government policies to prioritize the Essential Drug List (EDL) drug sales, which simultaneously reduced the sales of our higher margin generic pharmaceuticals. Our top five product sales are: Gingko mihuan oral liquid (GMOL) for stroke and cardiovascular disorders: $6.5 million; Mycophenolate mofetil capsules (MM) for renal transplant: $2.2 million; Azithromycin tablets (AZI) for infection: $1.0 million; Qingre jiedu oral liquid (QR): $0.8 million and Qianlie Shule capsules (QS) for prostate conditions: $0.38 million. These products totaled $10.9 million in sales, representing 62% of the quarterly revenue. Similar to the first quarter of fiscal 2013, the former two core products Apu Shuangxin (Apu) and Xuelian Chongcao (XLCC) which are not covered by EDL or National Reimbursement List (NRL) lists have not reached the level to be included in the top five products mainly because the healthcare reform regulations favor EDL and NRL drugs. Compared with a year earlier, the total core product sales have risen significantly from $7.5 million for the quarter ended December 31, 2011 mainly due to the significant rise in GMOL sales of 51% year over year from $4.3 million for the quarter ended December 31, 2011. This is attributable to the inclusion of GMOL in Provincial EDL such as the provinces of Henan and Shandong and the City of Chongqing. The contribution from our distribution business through TMT amounted to $4.6 million at 13% gross margin.
Gross Margin for the quarter ended December 31, 2012 was 38.7% as compared to 33.4% for the quarter ended December 31, 2011. Our gross margin improved mainly as a result of a greater mix of higher margin products sold during the period supported by a stabilization of generic pricing pressure. While a trend of continuous margin improvement has not yet been affirmed the present sales data supports a flattening and slightly positive trend in our gross margins.
Operating Expenses were $4.2 million for the quarter ended December 31, 2012, as compared to $4.0 million for the quarter ended December 31, 2011. The increase in operating expenses was mainly associated with an increase in sales and marketing costs.
Net Income was $1.8 million at a net margin of 10.2% for the quarter ended December 31, 2012, as compared to net income of $1.7 million with net margin of 9.5% for the quarter ended December 31, 2011. This was mainly due to improvements in our gross margins.
Diluted earnings per share for the quarter ended December 31, 2012 were $0.06 based on 29.3 million shares compared with the earnings of $0.06 per diluted share for the quarter ended December 31, 2011, based on 29.4 million shares.
Balance Sheet and Cash Flow
As of December 31, 2012, we had working capital totaling $34.1 million, including cash and cash equivalents of $25.4 million. Net cash used in operating activities was $(0.7) million for the six months ended December 31, 2012 as compared to net cash generated from operating activities as $7.9 million for the six months ended December 31, 2011. The net decrease in operating cash flow was predominately the result of: 1) the payment of trade notes payable of $(4.7) million that was due during the six months ended December 31, 2012; 2) an increase of inventory of $(1.1) million, and 3) an increase of accounts receivables of $0.8 million and advance from customer of $0.6 million. We believe that TPI is adequately funded to meet all of our working capital and capital expenditure needs for fiscal year 2013.
Business Development & Outlook
R&D for additional indications of flagship product Gingko Mihuan (GMOL)
Our flagship product GMOL (SFDA certification number: H20013079; patent number: 20061007800225) contributes approximately 37% to our total revenue. Clinical application and information gathered from our 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. After an initial three month period of efficiency improvement and calibration for large scale production, JCM has started producing macrolide API for TPI's production of Azithromycin Dispersible Tablets (SFDA No: H20074145) since July 2012. Currently the monthly production capacity of JCM is 10 tons of Azithromycin macrolide API.
Tianyin Medicine Trading Distribution Business (TMT)