Weikang Bio-Technology first-quarter revenue up 38.1% to record $14.0M

Weikang Bio-Technology Group Co., Inc. (OTC Bulletin Board: WKBT) ("Weikang" or the "Company"), a leading developer, manufacturer and marketer of Traditional Chinese Medicine (TCM), Western prescription pharmaceuticals and other health and nutritional products in the People's Republic of China, today announced its financial results for the first quarter of fiscal year 2010 ended on March 31, 2010.

First Quarter Highlights -- Revenue increased 38.1% year-over-year to a record $14.0 million -- Gross profit was a record $8.3 million with gross margin of 59.6% -- Net income increased 18% year-over-year to a record $4.5 million -- Fully diluted earnings per share were $0.17 -- Non-GAAP net income was $5.5 million for non-GAAP fully diluted shares of $0.20 -- Raised $2.5 million in private placement

"We are pleased to have achieved a record quarter in terms of revenue and net income. Moreover, we believe the strong quarter demonstrates our solid competitive position with our portfolio of proprietary therapeutics and ability to consistently expand our market penetration," commented Mr. Yin Wang, Chairman & CEO of Weikang Bio-Technology Group Co., Inc. "Both Tianfang and Weikang had strong sales growth as a result of our increased distribution network and market coverage."

Revenue was a record $14.0 million for the first quarter of 2010, up 38.1% from revenue of $10.1 million in the first quarter of 2009. Revenue from Tianfang was $8.9 million, or 64% of total sales, up 42.6% from revenue of $6.3 million in the first quarter of 2009. Tianfang increased market coverage by 20% throughout forty second- and third-tier cities. Revenue from Weikang was $5.0 million, or 36% of total sales, up 30.6% from revenue of $3.9 million in the first quarter of 2009.

Gross profit for the quarter increased 47.2% to $8.3 million from $5.6 million in the same period of 2009. Gross profit for Tianfang and Weikang was $4.7 million and $3.6 million, respectively. Gross margin for first quarter of 2010 was 59.6% compared to 55.9% in the first quarter of 2009. The increase in gross margin is the result of increased sales of higher margin products for both Tianfang and Weikang. Gross margin for Tianfang and Weikang was 53.0% and 71.3%, respectively.

Operating expenses were $2.0 million, or 14.0% of sales, compared to $0.6 million, or 6.3% of sales, in the first quarter of 2009. The increase in operating expenses was attributable to an increase in investor relations and consulting expenses. Adjusting for non-cash, stock-based compensation of $912,000, operating expenses were $1.0 million, or 7.5% of sales. The non-cash, stock-based compensation relates to the private placement done on January 20, 2010 and associated investor relation expense. The Company recorded $1.8 million as deferred compensation and amortized $912,000 as non-cash stock based compensation.

Operating income for the first quarter was $6.4 million, up 27.1% from $5.0 million in the first quarter of 2009. Operating margin was 45.6% compared to 49.6% in the same period a year ago. Adjusting for the previously mentioned non-cash, stock-based compensation, non-GAAP operating income was $5.5 million in the first quarter of 2010.

Net income was $4.5 million in the first quarter of 2010, up 17.8% from $3.9 million in net income from the same period a year ago. Net income for Tianfang and Weikang was $3.0 million and $2.5 million, respectively. Fully diluted earnings per share were $0.17 compared to fully diluted earnings per share of $0.15 in the first quarter of 2009. Excluding the non-cash, stock-based compensation, non-GAAP net income and fully diluted earnings per share for the first quarter of 2010 was $5.4 million and $0.20, respectively.

Financial Condition

As of March 31, 2010, Weikang Bio-Technology Group Co., Inc. had $18.1 million in cash and cash equivalents, $8.7 million in working capital and $14.2 million in total liabilities. Net cash provided by operating activities for the first quarter of 2010 was $4.9 million. Shareholders' equity stood at $31.1 million, up from $23.4 million at year-end 2009.

Recent Events

Mr. Ren Hu was appointed as Vice President of Finance as of May 5, 2010. Mr. Hu reports directly to the Chairman and CEO of the Company and is responsible for the public company capital market operations, including investor relations, SEC compliance and financing. Mr. Hu has over eleven years of work experience in Wall Street, including over five years in working for China based US public companies.

Business Outlook

Weikang intends to continue developing new products and expanding its distribution network throughout 2010. The Company has 10 therapeutics in various stages of the SFDA approval process and expects to launch its 10-HDA in the third quarter of 2010 and ShuangBaoGu by the end of 2010.

"The market opportunity for Traditional Chinese Medicine and Western medicine continues to expand in China as consumers' medical expenditure is estimated to double annually over the next two decades. We remain focused on our long-term growth and expanding our distribution network by increasing our wholesale network and dedicated sales force," Mr. Wang continued. "We also welcome Mr. Hu to the Weikang Bio-Technology executive team who will assist us in increasing our visibility in the investment community and enhancing our shareholder value as we continue to expand our market penetration."