China Yongxin Pharmaceuticals first-quarter 2010 revenues increase 16.3% to $10.68M

China Yongxin Pharmaceuticals Inc. (OTC Bulletin Board: CYXN) ("the Company"), one of the leading health products distribution and retail sales companies in China, today announced its financial results for the first quarter ending March 31, 2010.

Revenues for the first quarter of 2010 were $10.68 million, a 16.3% increase from $9.18 million for the same period of 2009. Revenues from retail drug stores for the first quarter of 2010 were $3.99 million, an increase of 19.5% compared to $3.34 million for the first quarter of 2009. Revenues from the wholesale pharmaceutical distribution business for the first quarter of 2010 were $7.69 million, an increase of 7.0% from $7.19 million for the first quarter of 2009.

A substantial portion of the increase in sales was attributable to the Chinese government's national medical insurance program and its provision for National Essential Drug List which drugs are allowed for healthcare reimbursement by recipients. Approximately 95% of Yongxin's drugs are included in the National Essential Drug List.

The cost of goods sold for the first quarter of 2010 was $8.28 million, an increase of 1.8% compared to $6.95 million for the first quarter of 2009. The slight increase was due to the increased sales of seasonal medications driven by market demand, such as cold medicine and antibiotics, the sales of which typically increase during the winter cold and flu season. Gross profit for the first quarter of 2010 was $2.40 million compared to $2.23 million for the same period in 2009.

Net income increased to $2.35 million for the first quarter of 2010, a 505.3% increase over the $0.39 million for the first quarter of 2009. The increase was primarily due to the sale of the Company's digital e-learning business during the first quarter of 2010 in which we were able to eliminate approximately $1.9 million of liabilities associated with the e-learning business. As part of its strategic plan, it was the Company's intention to divest the digital e-learning business and focus on its core business.

Fully diluted earnings per share increased to $0.04 for the first quarter of 2010 compared to $0.01 for the first quarter of 2009, based on 59.6 million shares and 31.0 million shares for the first quarter of 2010 and 2009, respectively.

Operating expenses for the first quarter of 2010 were $1.64 million, compared to $1.16 million for the first quarter of 2009. Selling expenses for the first quarter of 2010 were $0.79 million, a decrease of 3.2% from $0.82 million for the first quarter of 2009. The decrease was mainly attributable to better control of selling expenses through certain cost-cutting efforts such as the reduction of utilities usage, office supplies and changes in the packaging of products. General and administrative expenses for the first quarter of 2010 increased approximately 150% to $0.85 million, compared to $0.34 million in the same period of 2009. The increase was primarily due to an increase in accrued litigation settlement costs, and the settlement of such litigation is expected to be a non-recurring expense.

As of March 31, 2010, the Company had approximately $2.00 million in cash and cash equivalents, current assets of $33.39 million and total liabilities of $13.69 million.

Mr. Yongxin Liu, Chairman and Chief Executive Officer of China Yongxin commented, "During the first quarter of 2010, we were selected as the sole pharmaceutical distributor for the Shenyang Military Region medical centers located throughout three of China's northeast region provinces, including Jilin, Liaoning and Heilongjiang, and one of the qualified distributors for Jilin province. We have also opened six new drug stores including three in Changchun City and three in Baishan City. This is in line with our strategy to further our new retail oriented sales strategy. We plan to open an additional 35 new retail stores in 2010, including 15 additional retail stores located in Changchun City, ten retail stores in Baishan City and ten retail stores in Tianjin City. The opening of new stores will continue to reflect the growth of our retail drugstore business to drive revenue growth."

Mr. Liu also added, "Our steady revenue growth, especially growth from our retail business in the first quarter of 2010, we believe indicates that our business is well-positioned to take advantage of increased government support for expanded health care. In 2010, the government accelerated implementation of its reforms, extending benefits to rural areas. We are very confident that the Chinese Government's efforts toward healthcare reform will continue to boost domestic spending on the products we sell. "