American Oriental Bioengineering's fiscal 2009 revenues up 11.9%

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 fourth quarter and fiscal year ended December 31, 2009.

Fourth Quarter 2009 Financial Performance

Revenue in the fourth quarter of 2009 increased 3.9% year over year to $100.0 million from $96.3 million, reflecting continued demand for the Company's core prescription and OTC pharmaceutical products.

-- Revenue from pharmaceutical products increased 4.8% to $85.0 million from $81.2 million in the prior year's fourth quarter, driven by increased demand for the Jinji Series of products, Shuanghuanglian Injection Powder, the Cease Enuresis Soft Gel and Patch, as well as the newly-launched products such as YuYeQingHuo Capsules and Shedanchan beiye. Revenue from prescription pharmaceutical products increased 56.2% to $44.6 million from $28.5 million in the prior year, reflecting a year over year increase in sales from prescription formulated Jinji capsule, Boke and CCXA products. The overall increase in sales was also supported by continuous marketing efforts, an increase in new product offerings, as well as expansion of coverage to previously unaddressed rural markets. OTC pharmaceutical products generated $40.4 million in revenue during the fourth quarter of 2009, in comparison to $52.6 million in the prior year's period, reflecting lower sales performance of Jinji Yimucao, a drug included in China's Essential Drug list, as distributors reduced orders in anticipation of price reductions in government tenders, starting in the fourth quarter. -- Nutraceutical products generated revenue of approximately $11.4 million in the fourth quarter of 2009, up 18.7% from $9.6 million in the prior year period, reflecting increased sales of new beverage products launched in the beginning of 2009. -- The Company generated $3.6 million from its distribution business, Nuo Hua, in the fourth quarter of 2009.

Gross profit in the fourth quarter of 2009 was $52.6 million compared to $60.0 million in the fourth quarter of 2008. Gross margin was 52.6%, compared to 62.4% 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 fourth quarter of 2009 increased 28.5% to $14.9 million compared with $11.6 million in the prior year period. Selling and marketing expenses decreased 17.4% to $14.1 million from $17.1 million in the prior year period, and advertising expense decreased 22.7% to $9.5 million in the fourth quarter of 2009, compared to $12.3 million in the prior year period. Research and development expenses increased to $6.7 million compared with $0.6 million in the prior year, reflecting the Company's efforts in R&D activities including the setup of the centralized R&D centre in Beijing, China in 2009. General and administrative expenses increased 35.5% to $6.5 million from $4.8 million in the prior year period, primarily driven by increased expenses on optimizing the management team in view of the changing market environment and on the accounting-related professional fees resulting from the increased number of subsidiaries being audited and additional audit fees.

Net income attributable to controlling interest for the fourth quarter of 2009 was $11.7 million, compared to $7.8 million in the prior year period. Excluding $1.4 million of interest expense on convertible securities, $0.2 million of amortized financing costs related to the Company's outstanding convertible notes and $0.3 million capitalization of debt interest, the Company's net income attributable to controlling interest was $0.14 per diluted share, reflecting an increase of approximately 40.0% compared to $0.10 per diluted share in the same period of 2008.

2009 Financial Performance

Revenue for the fiscal year 2009 increased 11.9% to $296.2 million from $264.6 million in 2008. During the same time period, gross profit decreased by 3.9% to $166.8 million from $173.6 million in the year 2008. Prescription pharmaceutical products generated revenue of $115.8 million, up 32.4% from $87.4 million in the year 2008, and OTC pharmaceutical products generated revenue of $128.4 million, down 6.6% from $137.5 million in 2008. The CCXA and Boke businesses contributed revenue of $34.9 million and $49.0 million, respectively, during the fiscal year 2009, compared with $24.8 million and $38.2 million in 2008. Revenue from CCXA and Boke increased by 40.8% and 28.2%, respectively, compared to the prior year, reflecting sustainable growth of the subsidiaries. Revenue from nutraceutical products increased 14.2% to $39.1 million from $34.3 million in the year before. Revenue from Nuo Hua's distribution business was $12.9 million compared to $5.5 million in 2008.

Operating income in the year 2009 was $58.8 million compared to $63.5 million in the year 2008. Net income attributable to controlling interest for the year 2009 was $41.4 million, compared to $47.1 million in the prior year period. Excluding $5.8 million of interest expense on convertible securities, $0.9 million of amortized financing costs related to the Company's outstanding convertible notes and $0.8 million capitalization of debt interest, the Company's net income attributable to controlling interest was $0.53 per diluted share.

Balance Sheet

As of December 31, 2009, the Company had $94.4 million in cash and cash equivalents, including restricted portions, and generated approximately $25.4 million of operating cash flow during the year of 2009. Working capital was $130.9 million in 2009, reflecting an increase of 50.4% compared to $87.1 million in 2008. Accounts receivable turnover days was 58 and inventory turnover days was 32 in 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "We are very pleased with our 2009 performance despite the increasingly challenging economic environment worldwide and China's rapidly changing regulatory environment. In 2009, we expanded our product portfolio, strengthened our leading brands and diversified our operations. Going into 2010, we'll continue to strengthen our core competencies in production, sales and marketing and distribution reach, and we'll particularly focus on R&D efforts to ensure that we are well-prepared to capture the tremendous amount of opportunities in China's dynamic healthcare sector."

SOURCE American Oriental Bioengineering, Inc.