BioPharm Asia third quarter revenue increases 68% to $44.7 million

BioPharm Asia, Inc. (OTCBB: BFAR), a producer, distributor and retailer of medical products in China, today announced its financial results for the three months and nine months ended September 30, 2010.

Third Quarter 2010 Financial Highlights:

• Revenue in the third quarter of 2010 rose to $44.7 million, an increase of $18.1 million, or 68%, over last year's comparable period revenue of $26.6 million.
• Gross profit in the third quarter was $12.9 million, an increase of $2.5 million or 24%, as compared to the $10.4 million for the same period in 2009.
• Net income increased to $6.5 million, compared to $4.8 million in the third quarter of 2009.
• Fully diluted earnings per share for the quarter increased to $0.13 from $0.10 in the prior year period.

The Company's revenue increased by $18.1 million during the third quarter of 2010 over the comparable 2009 period largely as the result of the $12.1 million, or 129%, increase in revenue of the Company's retail segment, and 62% revenue increase of $4.2 million from the Company's drug manufacturing segment.

The revenue for nine months ended September 30, 2010 was $102.0 million, reflecting an increase of $32.8 million, or 47% from the comparable 2009 period. This primarily resulted from the Company's retail segment, which realized a 228% revenue increase of $27.0 million, due to 150 stores opening in May 2009 and another 210 commencing operations in July 2009, and a 47% revenue increase of $8.8 million from the Company's manufacturing segment. The improved performance of our manufacturing segment resulted from a variety of favorable factors including the government's introduction of an expanded health care plan to cover 90% of China's population with basic medical insurance by 2011. Revenue also grew as a result of market trends, supported by recent government policies, moving the sale of medicines from hospitals to retailers, thus increasing store traffic and sales in our stores.

Gross profit for three months ended September 30, 2010 was $12.9 million, up 24% from $10.4 million in the third quarter of 2009. Gross margin as a percentage of revenue decreased to 29% for the third quarter 2010 from 39% for the same period in 2009. This decrease was primarily due to the lower gross profit margin of the Company's drug stores. The retail segment's reduced profit margin was attributable in part to PRC government-mandated price reductions for products included in the national and provincial medical insurance catalogs and in the national essential drug list, compounded by product cost increases during the period caused in part by the introduction of the minimum wage in the third quarter. Gross profit for nine months ended September 30, 2010 was $31.2 million, up from the prior year's level of $22.3 million. Gross margin was 30.6%, slightly lower than the prior year's gross margin of 32.2%.

Operating expenses for the third quarter of 2010 totaled $3.9 million, flat with the comparable 2009 period. For the nine months ended September 30, 2010, operating expenses were $10.3 million, a $2.7 million increase from last year's nine month results. This increase resulted primarily from additional expenses related to the retail drug stores, reflecting the cost structure associated with retailing, higher labor and rental costs, and the increased costs due to the Company's transition to a public company.

The Company's improved revenue and gross profit resulted in net income for the third quarter 2010 of $6.5 million, or $0.13 per share, up 37% from the $4.8 million, or $0.10 per share, in the same period in 2009. For the nine months ended September 30, 2010, net income increased 46% to $15.6 million, or $0.31 per share, from $10.7 million, or $0.21 per share, in the comparable 2009 period.

BioPharm's newly appointed Chief Financial Officer, Ms. Ruiying Dong, said, "I am pleased to report that BioPharm Asia has continued its outstanding results in the third quarter of 2010. We look forward to realizing further solid operating results in future quarters, especially from our herbal planting segment's upcoming harvest. The Company is continuing to develop its expansion plans to exploit vertical integration benefits, and is responding to the opportunities resulting from China's expanded healthcare reform policies. While we are quite optimistic about our future, we remain focused on our product costs and operational expenses."

As of September 30, 2010, the Company's cash, and cash equivalents were $15.4 million as compared to $11.1 million as of December 31, 2009.