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American Oriental Bioengineering Reports Second Quarter 2009 Financial Results

NEW YORK, Aug. 7 /PRNewswire-Asia/ --

--2Q09 Revenue Increased 20.7% YoY to $71.2 Million--

--2Q09 Net Income Attributable to Controlling Interest was $13.2 million or $0.17 per Diluted Share--

-- Company Generates Approximately $22.9 Million of Operating Cashflow--

American Oriental Bioengineering, Inc. (NYSE: AOB), ("the Company" or "AOBO"), 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 second quarter ended June 30, 2009.

Revenue in the second quarter of 2009 increased 20.7% to $71.2 million from $59.0 million in the second quarter of 2008, reflecting continued demand for the Company’s core pharmaceutical and nutraceutical products. Revenue from pharmaceutical products increased 17.4% to $58.4 million from $49.8 million in the prior year’s second quarter. Revenue from prescription pharmaceutical products increased 23.2% to $25.2 million during the second quarter of 2009, reflecting an increase in sales from prescription formulation Jinji and CCXA products, which offset declines in sales of Shuanghuanglian Injection Powder ("SHL"). OTC pharmaceutical products generated $33.3 million in revenue during the second quarter of 2009, up from $29.4 million in the prior year’s period, reflecting continued demand for Boke and GLP products, as a result of marketing efforts and improved recognition of the products. Nutraceutical products generated revenue of approximately $9.5 million in the second quarter of 2009, up 3.3% from $9.2 million in the prior year’s period, reflecting increased sales of new beverage products launched in the beginning of 2009. The Company generated $3.3 million from its distribution business.

Gross profit in the second quarter of 2009 increased 3.9% to $41.6 million from $40.1 million in the second quarter of 2008. Gross margin was 58.4%, compared to 67.9% in the prior year’s period, reflecting continued revenue mix shift to CCXA’s generic product sales, increasing raw material prices and low margin distribution business.

Operating income in the second quarter of 2009 was $18.3 million compared to $18.7 million in the second quarter of 2008. Selling and marketing expenses increased 22.2% to $9.4 million from $7.7 million in the prior year period. The increase primarily reflects marketing and promotional initiatives to support the continuous growth of revenues. Advertising expense was $7.8 million in the second quarter of 2009, compared to $7.5 million in the prior year’s period.

Net income attributable to controlling interest for the second quarter of 2009 was $13.2 million, compared to $13.9 million in the prior year’s period. Excluding $1.4 million of interest expense and $0.2 million of amortized financing costs related to the Company’s outstanding convertible notes, the Company’s net income attributable to controlling interest increased 6.5% to $14.8 million, or $0.17 per diluted share. In the prior year’s second quarter, net income per diluted share was approximately $0.18.

As of June 30, 2009, the Company had $100.7 million in cash and generated approximately $22.9 million of operating cashflow during the second quarter of 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "We are pleased with our second quarter performance as we continued to enhance our diversified product portfolio and pursue further vertical integration. Our marketing capabilities, extensive distribution platform, diversified product offering and ongoing rural expansion offset anticipated challenges in SHL sales during the second quarter of 2009. We also made significant progress this quarter optimizing our distribution business, so that we solidify our presence in Tier I and II hospital channels and remain on-track for net income contributions for the full year. We continue to drive revenue growth and consistently generate cash despite the uncertain regulatory environment in China’s healthcare sector, and we are confident in our ability to be a top-five pharmaceutical company in China."

Conference Call

The Company will hold a conference call at 8:00 am ET on August 7, 2009 to discuss second quarter 2009 results. Listeners may access the call by dialing 1-866-761-0749 or 1-617-614-2707 for international callers, access code: 54060064. A webcast will also be available through AOB’s website at http://www.bioaobo.com . A replay of the call will be available through August 14, 2009. Listeners may access the replay by dialing 1-888-286-8010 or

1-617-801-6888 for international callers, access code: 18519426.

About American Oriental Bioengineering, Inc.

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

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.

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

JUNE 30, DECEMBER 31,

2009 2008

(UNAUDITED)

CURRENT ASSETS

Cash and cash equivalents $100,730,402 $70,636,510

Accounts receivable, net of reserve of

$505,433 and $226,330 at June 30, 2009

and December 31, 2008, respectively 31,396,881 36,982,167

Inventories, net 16,829,834 13,042,123

Advances to suppliers 3,135,694 3,593,979

Notes receivable 81,075 708,076

Refundable deposit -- 6,396,996

Deferred tax assets 421,660 347,216

Other current assets 937,087 744,903

Total Current Assets 153,532,633 132,451,970

LONG-TERM ASSETS

Property, plant and equipment, net 96,151,689 98,154,443

Land use rights, net 148,301,203 148,988,870

Deposit for long-term assets 6,717,514 6,347,174

Construction in progress 25,871,656 25,385,835

Deferred tax assets 1,327,627 1,313,832

Other intangible assets, net 21,146,928 23,690,440

Goodwill 28,543,226 28,543,226

Long-term investment and advance 55,452,267 54,963,064

Unamortized financing cost 3,751,838 4,215,983

Total Long-Term Assets 387,263,948 391,602,867

TOTAL ASSETS $540,796,581 $524,054,837

LIABILITIES AND EQUITY

JUNE 30, DECEMBER 31,

2009 2008

(UNAUDITED)

CURRENT LIABILITIES

Accounts payable $12,548,451 $12,287,887

Notes payables 3,011,486 3,262,877

Other payables and accrued expenses 14,251,673 19,766,652

Taxes payable 625,261 420,671

Short-term bank loans 6,720,430 7,140,148

Current portion of long-term bank loans 59,396 58,659

Other liabilities 2,511,295 2,253,440

Deferred tax liability 1,121,738 846,026

Total Current Liabilities 40,849,730 46,036,360

LONG-TERM LIABILITIES

Long-term bank loans, net of current

portion 774,641 804,521

Long-term notes payable -- 269,908

Deferred tax liabilities 15,963,766 16,083,768

Convertible notes 115,000,000 115,000,000

Total Long-Term Liabilities 131,738,407 132,158,197

TOTAL LIABILITIES 172,588,137 178,194,557

COMMITMENTS

EQUITY

SHAREHOLDERS’ EQUITY

Preferred stock, $0.001 par value;

2,000,000 shares authorized;

1,000,000 shares issued and

outstanding at June 30, 2009 and

December 31, 2008, respectively 1,000 1,000

Common stock, $0.001 par value;

150,000,000 shares authorized;

78,301,439 and 78,249,264 shares

issued and outstanding at June 30,

2009 and December 31, 2008, respectively 78,301 78,249

Common stock to be issued 311,999 376,335

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

Additional paid-in capital 196,752,860 195,741,544

Retained earnings (the restricted

portion of retained earnings is

$29,532,699 at June 30, 2009 and

December 31, 2008, respectively) 171,019,548 149,923,681

Accumulated other comprehensive income 29,510,788 29,086,006

Total Shareholders’ Equity 367,675,880 345,208,199

NON-CONTROLLING INTEREST 532,564 652,081

TOTAL EQUITY 368,208,444 345,860,280

TOTAL LIABILITIES AND EQUITY $540,796,581 $524,054,837

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

THREE MONTHS ENDED SIX MONTHS ENDED

JUNE 30, JUNE 30,

2009 2008 2009 2008

REVENUES $71,222,037 $59,010,005 $117,299,227 $97,778,603

COST OF GOODS SOLD 29,594,923 18,928,447 47,255,261 31,406,083

GROSS PROFIT 41,627,114 40,081,558 70,043,966 66,372,520

Selling and

marketing 9,396,129 7,687,892 14,607,631 12,717,600

Advertising 7,779,936 7,452,231 13,347,293 11,846,572

General and

administrative 4,315,714 5,253,274 8,881,357 9,165,957

Depreciation and

amortization 1,850,274 1,010,461 3,709,189 1,987,671

Total operating

expenses 23,342,053 21,403,858 40,545,470 35,717,800

INCOME FROM

OPERATIONS 18,285,061 18,677,700 29,498,496 30,654,720

EQUITY IN EARNINGS

(LOSS) FROM

UNCONSOLIDATED

ENTITIES (173,258) (640,008) 264,536 (641,067)

INTEREST INCOME

(EXPENSE), NET (1,620,069) (30,616) (3,199,338) (13,769)

OTHER INCOME

(EXPENSE), NET (16,329) (255,770) (114,938) (356,502)

INCOME BEFORE INCOME

TAXES 16,475,405 17,751,306 26,448,756 29,643,382

INCOME TAXES 3,369,107 3,891,614 5,472,406 6,361,562

NET INCOME 13,106,298 13,859,692 20,976,350 23,281,820

NET INCOME

ATTRIBUTABLE TO NON-

CONTROLLING INTEREST 123,068 -- 119,517 --

NET INCOME

ATTRIBUTABLE TO

CONTROLLING INTEREST 13,229,366 13,859,692 21,095,867 23,281,820

OTHER COMPREHENSIVE

INCOME

Foreign currency

translation gain,

net of tax 46,316 5,154,761 424,782 12,089,196

TOTAL OTHER

COMPREHENSIVE

INCOME, NET OF TAX 46,316 5,154,761 424,782 12,089,196

COMPREHENSIVE INCOME $13,275,682 $19,014,453 $21,520,649 $35,371,016

NET INCOME PER SHARE

BASIC $0.18 $0.18 $0.28 $0.30

DILUTED $0.17 $0.18 $0.28 $0.30

WEIGHTED AVERAGE

NUMBER OF SHARES

OUTSTANDING

BASIC 74,582,920 78,223,659 74,560,809 78,207,405

DILUTED 88,815,593 78,223,659 86,939,711 78,208,181

Source: American Oriental Bioengineering, Inc.
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