American Oriental Bioengineering Reports Fourth Quarter and Full Year 2008 Financial Results

Revenue Increased 68% to $96.3 Million in 4Q08 and 65% to $264.6 Million in FY08

FY08 Non-GAAP Net Income up 45% to $62.7 Million, or $0.76 per Diluted Share

4Q08 Non-GAAP Net Income up 43% $21.7 Million, or $0.25 per Diluted Share

NEW YORK, March 9 /PRNewswire-Asia-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE: AOB), a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter ("OTC") products in China, today announced financial results for the fourth quarter and fiscal year ended December 31, 2008.

Financial Results

Revenue in the fourth quarter of 2008 increased 67.9% year over year to $96.3 million from $57.3 million, reflecting continued demand for the Company's core prescription and OTC pharmaceutical products. Revenue from pharmaceutical products increased 69.9% to $81.2 million from $47.8 million in the prior year's fourth quarter, driven by increased demand for the Jinji Series of products, Shuanghuanglian Injection Powder, and the Cease Enuresis Soft Gel and Patch. Prescription pharmaceutical products generated $28.5 million in revenue during the fourth quarter, up 39.8% year over year, and OTC pharmaceutical products generated $52.6 million in revenue during the fourth quarter, up 92.3% year over year. Nutraceutical products generated revenue of approximately $9.6 million in the fourth quarter of 2008, roughly flat compared to the prior year period. Revenue from nutraceutical products as a percentage of total revenue decreased to approximately 10.0% from approximately 16.6% in the fourth quarter of last year, as the Company continued to focus more on pharmaceutical product sales. The Company generated $5.5 million in distribution revenue since acquiring Nuo Hua on October 18, 2008.

Gross profit in the fourth quarter of 2008 increased 53.9% to $60.0 million from $39.0 million in the fourth quarter of 2007. Gross margin was 62.4%, compared with 68.1% in the prior year's period, reflecting lower margin distribution and CCXA product revenue.

Operating income in the fourth quarter was $11.8 million compared with $18.8 million in the prior year period and primarily reflects a $12.3 million expense for in-process R&D at GuangXi HuiKe ("GHK"), which the Company acquired in the fourth quarter. In line with accounting policies at the time of the acquisition, the Company was required to expense, not capitalize, the estimated future value of GHK's intangible assets. General and administration expenses as well as selling and marketing expenses increased 77% to $22.3 million from $12.6 million in the prior year period. The increase primarily reflects marketing and promotional initiatives related to Jinji and Boke products.

Net income for the fourth quarter of 2008 was $8.0 million, or $0.10 per diluted share. Non-GAAP net income, which excludes interest expense related to the Company's outstanding convertible debt as well as the in-process R&D expense described above, increased 42.7% to $21.7 million, from $15.2 million in the prior year period. Non-GAAP net income per diluted share increased to $0.25 per diluted share in the fourth quarter of 2008, from $0.20 per diluted share in the prior year period. Please refer to the Company's GAAP to

Non-GAAP reconciliation table provided below.

Fiscal 2008 Financial Results

Revenue for the fiscal year 2008 increased 64.9% to $264.6 million from $160.5 million in 2007. Prescription pharmaceutical products generated revenue of $87.4 million, up 48.1% from $59.0 million in the year 2007, and OTC pharmaceutical products generated revenue of $137.5 million, up 99.8% from $68.8 million in 2007. The CCXA and Boke businesses contributed revenue of $24.8 million and $38.2 million, respectively, during the fiscal year 2008, compared with $5.4 million and $3.2 million in 2007. CCXA and Boke businesses began contributing to revenue in the third and fourth quarters of 2007. Revenue from nutraceutical products increased 4.9% to $34.3 million from $32.7 million in the year before. Revenue from Nuo Hua's distribution business was $5.5 million and began contributing to results in the fourth quarter of 2008.

Net income in 2008 increased 10.4% to $47.8 million, or $0.61 per diluted share. Non-GAAP net income, as described above and reconciled below, was $62.7 million, compared with $43.3 million in the prior year. Non-GAAP net income per diluted share increased to $0.76 per diluted share from $0.61 per diluted share in the prior year.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "In 2008, we strengthened our leading brands, enhanced our product portfolio, and diversified our operations in a way that lends flexibility to our business model, so that we can navigate China's rapidly changing regulatory environment. We achieved these successes despite the increasingly challenging economic environment worldwide, and we are cautiously optimistic that China's healthcare industry remains somewhat insulated from the global economic crisis. Going into 2009 and 2010, we'll continue to strengthen our core competencies in production, sales and marketing and distribution reach, as well as focus on R&D efforts and our infrastructure, to ensure that we are well-prepared to capitalize on the many opportunities we see in China's healthcare sector."

Conference Call

The Company will hold a conference call at 8:00 am ET on March 9, 2009 to discuss fiscal fourth quarter and full year 2008 results. Listeners may access the call by dialing 1-866-203-2528 or 1-617-213-8847 for international callers, access code: 34183253. A webcast will also be available through AOB's website at http://www.bioaobo.com . A replay of the call will be available through March 16, 2009. Listeners may access the replay by dialing

1-888-286-8010 or 1-617-801-6888 for international callers, access code: 73734657.

About American Oriental Bioengineering, Inc.

American Oriental Bioengineering, Inc. is a China-based pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter products.

Statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. The economic, competitive, governmental, technological and other factors identified in the Company's filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2008, may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

For more information, please contact:

Integrated Corporate Relations, Inc.

Ashley M. Ammon

Tel: +1-203-682-8208

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

QUARTER ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,

2008 2007 2008 2007

Unaudited Unaudited Audited Audited

REVENUES $96,270,506 $57,332,523 $264,643,058 $160,482,383

COST OF GOODS SOLD 36,222,784 18,302,489 91,031,274 49,364,486

GROSS PROFIT 60,047,722 39,030,034 173,611,784 111,117,897

Selling and

marketing 17,117,853 8,435,612 39,774,330 20,669,303

Advertising 12,342,238 6,696,321 34,102,538 22,865,903

General and

administrative 5,132,162 4,131,923 18,765,757 13,365,156

Depreciation and

amortization 1,371,108 936,546 4,383,215 1,989,425

Purchased in-process

research and

development 12,255,248 -- 12,255,248 --

Total operating

expenses 48,218,609 20,200,402 109,281,088 58,889,787

EQUITY IN EARNINGS

(LOSS) FROM

UNCONSOLIDATED

ENTITIES (541,336) -- (1,132,986) 23,711

INTEREST INCOME

(EXPENSE), NET (1,414,233) 196,352 (2,571,015) 617,524

OTHER EXPENSE, NET 198,672 (589,087) (65,843) (525,065)

MINORITY INTERESTS (27,575) -- (27,575) --

INCOME BEFORE INCOME

TAXES 10,044,641 18,436,897 60,533,277 52,344,280

INCOME TAXES 2,003,492 3,204,281 12,727,388 9,053,399

NET INCOME 8,041,149 15,232,616 47,805,889 43,290,881

OTHER COMPREHENSIVE

INCOME

Foreign currency

translation gain,

net of tax 552 5,833,544 12,819,020 10,105,577

OTHER COMPREHENSIVE

INCOME, NET OF TAX 552 5,833,544 12,819,020 10,105,577

COMPREHENSIVE INCOME $8,041,701 $21,066,160 $60,624,909 $53,396,458

NET INCOME PER

COMMON SHARE

BASIC $0.10 $0.21 $0.62 $0.62

DILUTED $0.10 $0.20 $0.61 $0.61

WEIGHTED AVERAGE

NUMBER OF COMMON

SHARES OUTSTANDING

BASIC 74,566,818 75,386,436 76,504,035 69,870,775

DILUTED 86,915,928 75,386,436 82,254,185 71,364,244

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, DECEMBER 31,

2008 2007

CURRENT ASSETS

Cash and cash equivalents $70,636,510 $166,410,075

Accounts receivable, net of reserve of

$226,330 and $302,270 at December 31,

2008 and 2007, respectively 36,982,167 16,494,619

Inventories, net of provision for slow

moving inventories 13,042,123 12,264,536

Advances to suppliers and prepaid

expenses 3,593,979 4,309,352

Notes receivable 708,076 2,259,616

Refundable deposit 6,396,996 --

Deferred tax assets 347,216 --

Other current assets 744,903 5,134,118

Total Current Assets 132,451,970 206,872,316

LONG-TERM ASSETS

Property, plant and equipment, net 98,154,443 48,496,760

Land use rights, net 148,988,870 46,310,240

Deposit for long-term assets 6,347,174 --

Construction in progress 25,385,835 755,614

Deferred tax assets 1,313,832 1,498,481

Intangible assets, net 23,690,440 26,972,166

Goodwill 28,543,226 22,566,768

Investments in and advances to equity

investments 54,963,064 242,551

Unamortized financing costs 4,215,983 --

Total Long-Term Assets 391,602,867 146,842,580

TOTAL ASSETS $524,054,837 $353,714,896

LIABILITIES AND SHAREHOLDERS' EQUITY

DECEMBER 31, DECEMBER 31,

2008 2007

CURRENT LIABILITIES

Accounts payable $12,287,887 $3,436,352

Notes payables 3,262,877 72,254

Other payables and accrued expenses 19,766,652 7,786,157

Taxes payable 420,671 2,843,719

Short-term bank loans 7,140,148 6,289,222

Current portion of long-term bank loans 58,659 2,374,565

Other liabilities 2,253,440 3,548,776

Deferred tax liabilities 846,026 109,733

Total Current Liabilities 46,036,360 26,460,778

LONG-TERM LIABILITIES

Long-term bank loans 804,521 1,263,483

Long-term notes payable 269,908 286,365

Deferred tax liabilities 16,083,768 12,621,180

Convertible Note 115,000,000 --

Total Long-Term Liabilities 132,158,197 14,171,028

TOTAL LIABILITIES 178,194,557 40,631,806

COMMITMENTS

MINORITY INTERESTS 652,081 --

SHAREHOLDERS' EQUITY

Preferred stock, $0.001 par value;

2,000,000 shares authorized; 1,000,000

shares issued and outstanding at June

30, 2008 and December 31, 2007,

respectively 1,000 1,000

Common stock, $0.001 par value;

150,000,000 shares authorized;

78,249,264 and 77,991,935 shares

issued and outstanding at December 31,

2008 and December 31, 2007, respectively 78,249 77,992

Common stock to be issued 376,335 1,611,333

Prepaid forward repurchase contract (29,998,616) --

Additional paid-in capital 195,741,544 193,007,987

Retained earnings (the restricted

portion of retained earnings is

$29,532,699 at December 31, 2008

and December 31, 2007) 149,923,681 102,117,792

Accumulated other comprehensive

income 29,086,006 16,266,986

Total Shareholders' Equity 345,208,199 313,083,090

TOTAL LIABILITIES AND

SHAREHOLDERS' EQUITY $524,054,837 $353,714,896

AMERICAN ORIENTAL BIOENGINEERING, INC.

Reconciliation of GAAP to Non-GAAP

(In US$, except share data)

Fourth Quarter Ended Year Ended

December 31, December 31,

2008 2007 2008 2007

GAAP net income 8,041,149 15,232,616 47,805,889 43,290,881

Acquisition-related

in-process research and

development expense 12,255,248 -- 12,255,248 --

Interest expense 1,437,500 2,635,417

Non-GAAP net income 21,733,897 15,232,616 62,696,554 43,290,881

GAAP earnings per share

-Basic 0.10 0.21 0.62 0.62

-Diluted 0.10 0.20 0.61 0.61

Non-GAAP earnings per

share

-Basic 0.27 0.20 0.79 0.62

-Diluted 0.25 0.20 0.76 0.61

Shares used in computation

of GAAP / Non-GAAP

earnings per share

Ordinary shares

-Basic 74,566,818 75,386,436 76,504,035 69,870,775

-Diluted 86,915,928 75,663,385 82,254,185 71,364,244