Tongjitang Chinese Medicines' net revenue rises 31.5% in fourth quarter 2009

Tongjitang Chinese Medicines Company (the "Company" or "Tongjitang") (NYSE: TCM), a leading specialty pharmaceutical company focusing on the development, manufacturing, marketing and selling of modernized traditional Chinese medicine in China, today announced its financial results for the fourth quarter of 2009 and for the full year ended December 31, 2009.

Financial Results for the Quarter Ended December 31, 2009 -- Net revenue increased 31.5% to RMB 151.5 million ($22.2 million)(1), from RMB 115.2 million in the prior year period. -- Operating income was RMB 0.3 million ($0.1 million), compared to an operating loss of RMB 86.2 million in the prior year period. -- Net income attributable to the Company was RMB 4.1 million ($0.6 million), which yielded earnings per ADS of RMB 0.15 ($0.02) and earnings per share(2) of RMB 0.04 ($0.01). -- Non-GAAP adjusted EBITDA per share was RMB 0.11 ($0.02), compared to net loss of Non-GAAP adjusted EBITDA per share of RMB 0.56 in the fourth quarter of 2008.

Xiaochun Wang, Chief Executive Officer and Chairman of Tongjitang, stated, "We are very pleased with our fourth quarter performance, which was a significant revenue improvement from the fourth quarter of last year. While our margin performance does reflect a mix shift to lower margin products, we are operating in a more stable macro environment. Uncertainty in the market has been greatly reduced by the release and implementation of healthcare reform, from which we expect to continue to benefit in the long term. The destocking issues from previous quarters have largely abated, and our sales have grown as a result. Going forward we will continue to focus on expanding our sales networks into community hospitals, and we expect these efforts to result in increased selling and marketing expenses in the near future."

Net revenue in the fourth quarter of 2009 increased 31.5% to RMB 151.5 million ($22.2 million) from RMB 115.2 million in the fourth quarter of 2008. Xianling Gubao ("XLGB") sales were RMB 92.0 million ($13.5 million) in the fourth quarter of 2009, compared to RMB 86.7 million in the fourth quarter of 2008. Net revenue from Moisturizing & Anti-itching Capsules and Zaoren Anshen Capsules reached RMB 18.8 million ($2.8 million), an increase of 41.4% from RMB 13.3 million in the prior year period. Net revenue from the Company's other products increased 167.8% to RMB 40.7 million ($6.0 million) from RMB 15.2 million in the fourth quarter of 2008. Revenue contribution from Anhui Jingfang Pharmaceutical Co., Ltd. ("Jingfang"), which was acquired at the end of the first quarter of 2009, was RMB14.0 million ($2.1 million), compared to RMB17.6 million in the third quarter of 2009.

Gross profit increased 20.0% to RMB 84.6 million ($12.4 million) in the fourth quarter of 2009 from RMB 70.5 million in the fourth quarter of 2008. Gross margin was 55.9% in the fourth quarter of 2009, compared to 61.2% in the same period of 2008. Tongjitang's decreased gross margin reflects higher revenue contribution from lower-margin products. The price of barrenwort, used in the production of XLGB, remained stable in the fourth quarter of 2009.

Operating income in the fourth quarter of 2009 was RMB 0.3 million ($0.1 million), compared to an operating loss of RMB 86.2 million in the fourth quarter of 2008. Operating loss in the fourth quarter of 2008 included significant asset impairments to goodwill and intangible assets related to the Guizhou LLF and Qinghai Pulante acquisitions.

Net income attributable to the Company was RMB 4.1 million ($0.6 million), which yielded earnings per ADS of RMB 0.15 ($0.02) and earnings per share2 of RMB 0.04 ($0.01).

Non-GAAP adjusted EBITDA in the fourth quarter of 2009 was RMB 11.4 million ($1.7 million), compared to net loss of Non-GAAP adjusted EBITDA of RMB 75.5 million in the fourth quarter of 2008. Non-GAAP adjusted EBITDA per share was RMB 0.11 ($0.02) in the fourth quarter of 2009, compared to net loss of Non-GAAP adjusted EBITDA per share of RMB 0.56 in the fourth quarter of 2008. For the fourth quarter of 2009, the number of shares used in the computation of GAAP and non-GAAP adjusted EBITDA per share was 106.2 million. Please refer to the Company's GAAP to non-GAAP reconciliation table provided below for additional details.

Financial Results for the Year Ended December 31, 2009

For the year ended December 31, 2009, revenues increased 6.5% to RMB 480.3 million ($70.4 million), from RMB 451.0 million for the full year 2008. During this same time period, gross profit decreased by 1.6% to RMB 279.1 million ($40.9 million) from RMB 283.7 million. Gross margin for the full year 2009 was 58.1%, compared to 62.9% in the year before. Operating loss improved to RMB 10.9 million ($1.6 million) from RMB 77.7 million in the full year 2008. Net loss attributable to the Company was RMB 3.8 million ($0.6 million), or RMB 0.03 ($0. 01) per share, compared to net loss of RMB 52.3 million, or RMB 0.39 per share, in the year before. Net loss per ADS was RMB 0.12 ($0.02) in the year 2009, compared to net loss per ADS of RMB 1.55 in the year 2008. The weighted average number of shares outstanding for the year 2009 was 122.9 million.

Balance Sheet

As of December 31, 2009, the Company had cash and cash equivalents of RMB 237.6 million ($34.8 million). This compares to RMB 310.6 million as of September 30, 2009, and RMB 516.1 million as of December 31, 2008.

Business Updates

On February 2, 2010, the Company announced that it set up a joint venture with a third party to acquire 100% of state-owned Guiyang Liquor Factory for RMB120.6 million in cash. Tongjitang owns 95% of the joint venture and has already completed the acquisition.

On December 23, 2009, the Company held its annual meeting of shareholders for the fiscal year ended December 31, 2009 at its executive office in Shenzhen. At the meeting, Tongjitang's Chairman of the Board of Directors and Chief Executive Officer gave an update on company affairs, and management and stakeholders discussed their views of Tongitang's progress and prospects.

On November 19, 2009, the Company announced the repurchase of 4.8 million ordinary shares, or 4% of the Company's issued and outstanding shares, in privately negotiated transactions.

On October 13, 2009, the Company announced the repurchase of 19.3 million ordinary shares, or 15% of the Company's issued and outstanding shares, in privately negotiated transactions.

On June 22, 2009, the Company announced that effective June 16, 2009, it changed its independent auditor from Deloitte Touche Tohmatsu ("Deloitte") to Ernst & Young Hua Ming.

On April 2, 2009, the Company announced the acquisition of Anhui Jingfang Pharmaceutical Co. Ltd. for RMB 60.0 million in cash. Jingfang began to contribute to Tongjitang's revenue stream upon the closing of the transaction.