Biostar Pharmaceuticals, Inc. (OTC Bulletin Board: BSPM) ("Biostar" or "the Company"), the Xianyang-based manufacturer of a leading over-the-counter Hepatitis B medicine, Xin Aoxing Oleanolic Acid Capsule ("Xin Aoxing"), and other pharmaceutical products, today announced its 2009 year-end financial results.
FINANCIAL HIGHLIGHTS -- FY 2009 revenues increased 57.2% to $53.3 million, from $33.9 million for FY 2008 -- FY 2009 gross profit increased 96.0% to $39.0 million, compared to $19.9 million for FY2008; and gross margin increased 1,470 basis points to 73.2% -- FY 2009 cash flow from operations increased 171.0% to $5.7 million -- At December 31, 2009, cash and equivalents of $8.6 million, working capital of $24.1 million and current asset to current debt ratio ("current ratio") of 5.0 to 1.0 -- FY2009 net income increased 56.7% to $10.5 million, or diluted EPS of $0.32, from $6.7 million for FY2008, or diluted EPS of $0.22 SUMMARY FINANCIALS Fiscal 2009 Results FY 2009 FY 2008 CHANGE Net Sales $53.3 million $33.9 million +57.2% Gross Profit $39.0 million $19.9 million +96.0% GAAP Net Income $10.5 million $6.7 million +56.7% GAAP EPS (Fully Diluted) $0.32 $0.22 +45.5%
Biostar's 2009 revenues increased 57.2% to $53.3 million from $33.9 million reported for the prior year period as a direct result of newly established sales offices in Tianjin municipality, Fujian province and Xinjiang province, as well as expanded sales efforts through rural networks. Demand for Biostar's leading Hepatitis B medicine, Xin Aoxing Capsules ("Xin Aoxing") and the balance of the Company's product portfolio peaked in the second half of the year. Xin Aoxing contributed approximately $36.7 million or 68.9% to total revenues for the fiscal 2009, representing 95.8% year-over-year growth. The significant increase was primarily due to market expansion of Xin Aoxing in 2009 and the Company's strategy to target rural communities and networks in China.
Cost of goods sold for fiscal 2009 was approximately $14.3 million, yielding a gross profit of $39.0 million and gross margins of 73.2%, compared to $19.9 million in gross profit and a gross margin of 58.5% for fiscal 2008. The 1,470 basis point improvement in gross margins was primarily attributable to the decrease in the raw material prices of Xin Aoxing and Danshen Granule and the Company's strategy to use its direct sales force to sell to dealers and end-users primarily in rural communities.
Operating expenses for 2009 were $23.9 million, up 97.7% compared to the same period in 2008. Selling, general and administration expenses for the period increased to approximately $22.9 million from $12.1 million, primarily due to enhanced marketing efforts including increased sales payrolls and direct marketing expenses. In addition, we incurred non-cash equity compensation charge of $1.0 million in 2009, which was not present in 2008.
Operating income for 2009 totaled approximately $15.1 million, a 94.6% increase from 2008 operating income of $7.8 million. Operating margins were 28.3% and 22.9% for 2009 and 2008, respectively. Excluding the non-cash equity compensation charge of $1.0 million recorded during 2009, adjusted operating income for fiscal 2009 is $16.1 million with operation margins of 30.2%.
2009 net income was approximately $10.5 million, a 56.7% increase from $6.7 million recorded for 2008. Adjusted net income for 2009, excluding the equity compensation charge, was $11.5 million, or $0.36 per diluted common share based on 24.3 million diluted common shares for 2009.
The income tax provision was $4.3 million and $1.0 million for fiscal 2009 and 2008 with an effective tax rate of 28.8% and 13.4%, respectively. The increase was due to the expiration of a 50% income tax reduction on December 31, 2008, raising Biostar's statutory income tax rate in China to 25%.
"We are very pleased to report our fiscal 2009 results which included strong revenue growth. Our marketing strategy for our flagship Xin Aoxing Capsule was successful and was complemented by the expansion of our rural network, which enabled us to achieve record sales and earnings for the year," commented Ronghua Wang, Chairman and Chief Executive Officer of Biostar. "Our Xin Aoxing Capsule, the only OTC Hepatitis drug available in China, is sold directly through our own sales forces in 17 provinces as of March 31, 2010. In addition, we expect to expand our rural network coverage from 6,000 sales outlets as of March 31, 2010, to over 10,000 by the end of 2010, with projected full-year revenue contribution of approximately $17.2 million. We have established a solid foundation which optimizes revenue opportunities for both our flagship and new products in major metropolitan and rural areas, and leverages support from both the government's health care reform under the New Rural Cooperative Medical System, and the consumers' desire to improve their quality of life."
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $8.6 million at December 31, 2009, compared to $0.8 million at December 31, 2008. Accounts receivable balance was approximately $19.8 million at December 31, 2009 versus approximately $11.7 million at December 31, 2008. Days sales outstanding (DSO) were at 135 days. Net intangible assets were $11.1 million at December 31, 2009, compared to $7.4 million at December 31, 2008, which included $2.9 million for land use right in connection with Company's raw material processing plant. The Company had a current ratio of 5.0 to 1.0, and stockholders' equity of $40.9 million, with total assets of $47.0 million versus total liabilities of $6.1 million at December 31, 2009.
For fiscal 2009, the Company generated $5.7 million in cash from operations as compared to $2.1 million in cash from operations in 2008.
"In addition to expanding distribution and sales of Xin Aoxing, we will start marketing our Ganwang Capsule and several nutrient products approved last year. We expect to receive approval for Zushima Analgesic Aerosol Spray from Chinese Military Drug Administration, which will generate incremental revenues and net income. We remain focused on the initiatives which will contribute to our long-term growth and increased profitability, thus enhancing shareholder value," concluded Mr. Wang.
-- Launched Xin Aoxing Capsule in Tianjin in November 2009 and in Beijing and Shanghai in January 2010. Beijing, Shanghai, and Tianjin are three of the largest markets in China with a total population estimated at 50 million, and Biostar will leverage both distributors and direct sales in these three markets. Management anticipates approximately $11 million in incremental revenues during 2010 from these three new markets with average gross margins of approximately 72%.
-- Entered into an agreement on March 18, 2010 to acquire 100% of Xi'an Meipude Bio-Technology Co., Ltd., a Xi'an-based medical equipment and nutrients manufacturer ("Meipude") for $1.1 million, and officially took control over the operations and the assets of Meipude on March 29, 2010. Meipude manufactures and distributes topical hernia treatment belts with seven traditional Chinese medicine bags for application to body points associated with hernias. Meipude also manufactures a liquid product for treatment of gynecological inflammation in young and middle-aged women. Meipude has been manufacturing and selling its products in Xi'an and an adjacent province since 2004. Biostar expects revenue contribution from the acquisition to add approximately $3.0 million in 2010.
Management is raising its 2010 guidance and now expects to report revenues of $80.0 to $82.0 million with net income of $18 million to $20 million. This represents between 50.1% to 53.8% revenue growth and between 71.4% to 90.5% net income growth year over year. The improved outlook is based on new market development of Biostar's flagship Xin Aoxing Capsule, including the launch in four new markets including Jiangxi, Jiangsu, Hebei and Guangxi provinces planned for early April 2010. Management anticipates approximately $9.3 million in incremental revenues during 2010 from these new markets, and for Xin Aoxing to comprise approximately 66% to 70% of total 2010 revenues. In addition, the addition of Meipude will open up a medical equipment distribution opportunity for Biostar and is expected to contribute approximately $3 million in incremental revenue during 2010. Net income guidance excludes non-cash expenses associated with stock-based compensation and/or future interest expense. The Company's guidance does not include any contribution from future acquisitions previously announced by the Company or otherwise. Management will continue to evaluate its business outlook as necessary and communicate any changes on a quarterly basis or when appropriate.
SOURCE Biostar Pharmaceuticals, Inc.