Lotus Pharmaceuticals reports EBIT increase of 29% in 2009

Lotus Pharmaceuticals, Inc. (OTC Bulletin Board: LTUS) ("Lotus" or the "Company"), a growing developer, manufacturer and seller of medicine and drugs in the People's Republic of China (the "PRC") reported that its 2009 net earnings were approximately $16.4 million, or $0.33 per diluted share, compared with approximately $12.8 million, or $0.27 per diluted share, in 2008. Net revenues were approximately $57.8 million in 2009 compared with $73.8 million in 2008.

Full Year 2009 Results -- Earnings Before Interest and Taxes (EBIT) in 2009, were approximately $19.0 million, an increase of 29%, as compared with EBIT of $14.7 million in 2008. -- Gross margin as a percentage of net revenues was 56 percent in 2009 as compared with 45 percent in 2008. -- Selling expenses were approximately $8.0 million in 2009 as compared to approximately $14.9 million in 2008.

For the year ended December 31, 2009, wholesale revenues accounted for 78% of net revenues a decrease of 17% compared to the year ended December 31, 2008. This decrease was a result of the reduced unit prices of wholesale drugs in 2009 as a result of deflation in raw material prices, and reduced commissions paid to our sales representatives. Eight products accounted for approximately 84% of the our total wholesale revenues for the year ended December 31, 2009, including Maixin (Valsartan), Junxin (Levofloxacin Lactate for Injection), Muxin (Brimonidine), Ni Mai Jiao Lin (Nicergoline for Injection), Yipubishan (Octreotide Acetate Injection Solution), Recombinant Human Erythropoietin Injection, Recombinant Human Granulocyte Colony Stimulating Factor Injection, Recombinant Human Interleukin-2 for Injection. Offsetting the impact of a 37% decrease in average unit selling prices for these eight wholesale products was an increase in the sales quantities of these eight drugs by approximately 18% compared to 2008. The impact of these efforts resulted in EBIT margin in 2009 being 33%, compared to 20% in 2008.

Our retail sales accounted for 20% of net revenues in 2009, a decrease of 17% as compared to 2008. Lotus believes that this decrease was due to increased competition in Beijing.

Liquidity and Capital Resources

As of December 31, 2009, the Company had approximately $4.0 million in cash, compared to approximately $1.3 million as of December 31, 2008. Net cash provided by operating activities was approximately $31.4 million in 2009 as compared to approximately $37.4 million in 2008.

The Company believes that its internal cash flows and external financings will be able to support its proposed capital expenditures in 2010.

Outlook

"I'm pleased with our strong results for 2009," said Dr. Zhong Yi Liu, chairman and chief executive officer. "China's pharmaceutical sector presents us with tremendous growth opportunities. We have maintained strong relationships with our clients, leading research and development institutes and leading drug makers. At such time as we begin to use our new Beijing building complex, we hope to increase our sales and achieve both top and bottom line growth."

Based on information available to management at this time, Lotus anticipates its EBIT of fiscal year 2010 to grow by 15-20%, because its direct sales of drugs to third-party pharmacies in Beijing are expected to generate additional earnings.