CHENGDU, China, Feb. 9 /PRNewswire-Asia/ -- Tianyin Pharmaceutical Co., Inc., (NYSE Alternext: TPI), a manufacturer and supplier of modernized traditional Chinese medicine ("TCM") based in Chengdu, China, today announced fiscal results for its second quarter ended December 31, 2009.
-- Q2 2010 Revenue Increased 47.9% to $14.9 Million, Net Income Increased
24.8% to $2.6 Million with adjusted EPS of $0.11 on a diluted basis
-- Cash and Equivalents of $19.9 Million on December 31, 2009
-- First-half 2010 Cash Flow from Operations Increased 24.5% to
$4.9 million
-- Tianyin secured SFDA approvals for four new products during the second
quarter addressing multiple indications, bringing total number of
products in the portfolio to 48
Q2 FY2010 Results
Q2 FY2010 Q2 FY2009 CHANGE (%)
Net Sales $14.9 million $10.1 million +48%
Gross Profit $7.8 million $5.2 million +50%
GAAP Net Income $2.6 million $2.1 million +25%
Adjusted Net Income* $3.4 million $2.1 million +62%
GAAP EPS (Diluted) $0.08 $0.13 -38%
Adjusted EPS (Diluted) $0.11 $0.13 -15%
Weighted Shares Outstanding 30.4 million 15.7 million +94%
Six Months FY2010 Results
Six Months Six Months CHANGE
FY2010 FY2009 (%)
Net Sales $28.3 million $19.7 million +44%
Gross Profit $14.8 million $10.0 million +48%
GAAP Net Income $4.8 million $3.8 million +24%
Adjusted Net Income $5.5 million $3.8 million +48%
GAAP EPS (Diluted) $0.17 $0.16 +6%
Adjusted EPS (Diluted) $0.19 $0.16 +19%
Weighted Shares Outstanding 28.5 million 24.7 million +15%
Second Quarter Ending December 31, 2009 Financial Results
Revenue for the second quarter of fiscal 2010 was approximately $14.9 million, an increase of 47.9% compared to $10.1 million for the second quarter of fiscal 2009. The increase was attributable to higher sales of both existing and new products, channel expansion efforts that increased market penetration, and increased utilization of the Company's expanded production facility. Revenues from the top three selling products, Ginkgo Mihuan Oral Liquid, Arpu Shuangxin Oral Liquid and Azithromycin Dispersible Tablets, were $7.6 million and represented approximately 51% of total revenues collectively for the quarter.
Cost of goods sold for the three months ended December 31, 2009 was approximately $7.2 million or 48.1% of revenue as compared to $4.9 million or 49.0% of revenue for the three months ended December 31, 2008, yielding a gross profit of $7.8 million and gross margins of 51.9%, compared to $5.2 million in gross profit and gross margins of 51.0% during the second quarter of fiscal 2009. Gross margins improved as a result of an increase in higher margin products in the sales mix along with greater efficiencies in our production and manufacturing processes.
Operating expenses for the three months ended December 31, 2009 were approximately $4.6 million, up 72.0% compared to the same period in 2008. Selling, general and administration expenses for the period increased to approximately $4.4 million from $2.6 million in the second quarter of fiscal 2009 as a result of the implementation of Tianyin's sales and marketing strategy, including increased sales payrolls and direct marketing expenses, in addition to non-cash stock compensation expense of $0.9 million. Research and development expenses for the three months ended December 31, 2009 increased 134.4% to $0.2 million compared to the second quarter of fiscal 2009.
Operating income for the second quarter of fiscal 2010 totaled approximately $3.2 million, a 27.2% increase from the $2.5 million reported for the second quarter of fiscal 2009. Operating margins were 21.1% and 24.5% for the second quarter of fiscal 2010 and fiscal 2009, respectively as the Company continued to spend aggressively on sales and marketing initiatives to generate incremental and future product sales.
GAAP net income was approximately $2.6 million in the second quarter of fiscal 2010, a 24.8% increase, compared to $2.1 million for the second quarter of fiscal 2009. The company had an effective tax rate of 18.2% and 16.6%, for the second quarter of fiscal 2010 and 2009, respectively. Diluted earnings per share were $0.08 compared to $0.13 for the second quarter of fiscal 2010 and fiscal 2009 respectively, based upon 30.4 million and 15.7 million shares. Adjusted net income, which adds back the non-cash equity compensation charge of $0.9 million, was $3.4 million, representing 62.0% year-over year growth with earnings of $0.11 per diluted share. The divergence in the share count relates to the preferred shares which have been and are convertible into common, in addition to common shares issued in October 2009 private placement, and warrants both exercised and outstanding.
"Our strong performance in the second quarter and first half of fiscal year 2010 was driven by continued execution of our growth strategy, including the expansion of our sales force and distribution channels, increased sales and marketing activities to support market share gains for our expanding portfolio of products, in addition to rapid utilization of our newly added manufacturing capacity," stated Dr. Guoqing Jiang, Tianyin's Chief Executive Officer. "To facilitate our future growth strategy and to diversify our product offering, we formalized a joint venture named Sichuan Jiangchuan Pharmaceutical Co., Ltd. to produce macrolide antibiotics, which addresses a large and rapidly growing market in China. We have secured the property and commenced construction for our new production facility and expect this to be a key contributor to growth during fiscal 2011. In addition, we received SFDA approval for four new generic products, which complement our portfolio and address established billion dollar plus markets that cover multiple indications. We currently have 40 drug candidates under SFDA review and believe the Chinese stimulus plan, favorable health care policies, increased consumer disposable income, and favorable demographic trends will continue driving overall growth in demand for the pharmaceutical market."
Six Months Ending December 31, 2009 Financial Results
For the six months ended December 31, 2009, revenues increased 44.1% to $28.3 million from $19.7 million reported for the prior year period. Ginkgo Mihuan, one of Tianyin's flagship products, contributed approximately $9.2 million or 33% of total revenues for the first six months of fiscal 2010, representing 102% year-over-year growth. Revenues generated from the Arpu Shuangxin Oral Liquid were $2.9 million, or 16% of total revenues, a 2% increase from fiscal 2009. Tianyin's top 5 selling products generated revenue of $14.7 million and represented 53% of total revenue.
Cost of goods sold for the first six months of fiscal year 2010 was approximately $13.5 million, yielding a gross profit of $14.8 million and gross margins of 52.3%, compared to $10.0 million in gross profit and a gross margin of 51.0% for the same period in fiscal year 2009.
Operating expenses for the first six months of fiscal year 2010 were $8.9 million, compared to $5.4 million in the same period in fiscal 2009. Selling, general and administration expenses for the period increased to approximately $8.5 million from $5.2 million, which included the previously disclosed non-cash equity compensation expense.
Operating income totaled approximately $5.9 million, a 27.1% increase from the $4.6 million reported for the first half of fiscal 2009. Operating margins were 20.8% and 23.6% for the first half of fiscal year 2010 and 2009, respectively, and were impacted by a non recurring $0.9 million equity compensation expense for consulting.
For the six months ended December 31, 2009, net income was approximately $4.8 million, a 23.6% increase from $3.8 million recorded for the same period in fiscal 2009. Diluted earnings per share were $0.17, compared to $0.16 in the same period 2009, based on 28.5 million and 24.7 million shares for 2010 and 2009, respectively. Adjusted net income, which adds back the non-cash equity compensation charge of $0.9 million, was $5.5 million, representing 44.7% year-over year growth with earnings of $0.20 per diluted share.
The provision for income taxes was $1.1 million and $0.8 million for the first half of fiscal 2010 and 2009 with an effective tax rate of 18.5% and 16.6%, respectively.
Balance Sheet and Cash Flow
Cash and cash equivalents and restricted cash totaled $19.9 million on December 31, 2009 compared to $12.4 million on June 30, 2009, which was the result of cash flow from operations, a $4.5 million net equity raise completed in October, 2009, and proceeds from exercised warrants. Net cash used in investing activities for the six months ended December 31, 2009 was $4.3 million for the acquisition of intangible drug, and property and equipment. The Company had a current ratio of 6.8 to 1 and total stockholders' equity of $54.0 million, with total assets of $58.8 million versus total liabilities of $4.8 million on December 31, 2009. For the first six months of fiscal 2010, the Company generated $4.9 million in cash from operations versus $3.9 million for the same period in fiscal 2009.
Business Development & Outlook
-- On October 29, 2009, Tianyin announced the Sichuan Jiangchuan
Pharmaceutical Co., Ltd. ("Jiangchuan") joint venture, which will focus
on production of macrolide antibiotics, such as Azithromycin, one of
the world's best-selling antibiotics. Jiangchuan holds a license from
Chinese State Food and Drug Administration (SFDA) to produce macrolide
antibiotics and a related business license from the Industry and
Commerce Bureau and Tax department. Tianyin owns 77% of Jiangchuan and
will utilize this as the foundation for a broader, longer term strategy
to build a significant presence in the rapidly growing Chinese
macrolide antibiotics market, while diversifying its revenue base of
western pharmaceuticals. Construction on a new production facility in
Xinjin Industry Development Area commenced January 8, 2010, with Phase
I expected to operational by July, 2010 and Phase II to be operational
by the second half of 2010, with total anticipated capital expenditures
of $20 million. The Company anticipates significant revenue and
earnings contributions from this initiative during fiscal 2011.
-- On December 1, 2009, Tianyin received SFDA approvals to produce two
generic products, including a Pediatric Fever and Cough Oral Liquid and
an Antibacterial/Anti-inflammatory Capsule. The Pediatric Fever and
Cough Oral Liquid is a generic prescription TCM that is used for
respiratory tract infections and influenza in children to effectively
reduce symptoms such as fever, shakes, cough, shortness of breath, and
sore throat. According to Tianyin's market research and estimation,
annual sales of this type of products are approximately $1.1 billion in
China. The Antibacterial/Anti-inflammatory Capsules are a generic OTC
TCM used as natural antibiotics to treat bacterial infection and
inflammation with minimal side effects as compared to western
antibiotics. Tianyin estimates that total annual sales of associated
with products in this category are approximately $1.5 billion in China.
-- Tianyin announced that 23 of its medicine compounds were included in
the 2009 Edition of the National Basic Medical Insurance, Industrial
Injury Insurance and Maternity Insurance Medicine Directory, which
lists a total of 2,151 medicines and became effective on December 1,
2009. The 23 medicines treat a variety of common indications and
diseases and make up approximately 70% of Tianyin's total revenues for
the fiscal year 2009.
-- On January 11, 2010, Tianyin declared a quarterly cash dividend of 2.5
cents to be paid to its common stock shareholders for the fiscal second
quarter of 2010 on March 10, 2010.
-- On January 13, 2010, Tianyin received approvals from the Chinese State
Food and Drug Administration (SFDA) to produce two generic antibiotics,
Ofloxacin Tablets and Fleroxacin Tablets, which target new indications
for the Company. Ofloxacin addresses several indications including
staph, strep throat (Streptococcus), pneumonia, E. Coli, and several
sexually transmitted bacterial diseases. Fleroxacin addresses several
indications including chronic and acute bronchitis and pneumonia,
salmonella, multiple gastrointestinal and abdominal infections, and
skin/soft tissue infections. Both drugs are included in China's
Essential Drug List (EDL), which is increasing demand for these
products throughout the PRC.
Fiscal 2010 and 2011 Guidance
On October 29, 2009 management increased fiscal 2010 guidance for the year which ends June 30, 2010 and expects to report revenues of more than $63.6 million and net income of at least $11.3 million, representing 48.3% and 43.0% year-over-year growth respectively.
On December 3, 2009 management announced financial guidance for fiscal year ending June 30 2011. The Company forecasted revenues of $113.3 million for fiscal 2011, representing a 78.1% increase over projected fiscal year 2010 revenues of $63.6 million, with net income of $19.6 million, representing 73.5% over projected net income of $11.3 million for fiscal 2010.
Conference Call
The Company will host a conference call to discuss the 2010 second quarter financial results on Monday, February 8, 2010 at 4:30 p.m. ET. Interested participants should call +1-877-941-8418 within the United States, or US +1-480-629-9809 if calling internationally. The conference ID is 4207607. It is advisable to dial in approximately 5-10 minutes prior to 4:30 p.m. EDT. If you are unable to participate in the call at the scheduled time, a playback will be available through February 22, 2010. To listen to the playback, please call +1-800-406-7325 from within the United States, or US +1-303-590-3030 internationally. Please use passcode 4207607 for the replay.
This call is being web cast by ViaVid Broadcasting and can be accessed at ViaVid's website at the following link http://viavid.net/dce.aspx?sid=00007061
To access the web cast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp
About Tianyin Pharmaceuticals
Tianyin is a manufacturer and supplier of modernized Traditional Chinese Medicine ("TCM") in China. It was established in 1994 and acquired by the current management team in August 2003. It has a comprehensive product portfolio of 39 products, 22 of which are listed in the highly selective National Medicine Catalog of the National Medical Insurance program. Tianyin owns and operates two GMP manufacturing facilities and an R&D platform supported by leading Chinese academic institutions. The Company has a pipeline of 17 pharmaceutical products pending approval. Tianyin has an extensive nationwide distribution network throughout China with a sales force of 720 salespeople. Tianyin is headquartered in Chengdu, Sichuan Province with two manufacturing facilities and a total of 1,365 employees. For more information about Tianyin, please visit http://www.tianyinpharma.com .
Safe Harbor Statement
The Statements which are not historical facts contained in this press release are forward-looking statements that involve certain risks and uncertainties including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, government approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the Company's filings with the Securities and Exchange Commission.
This press release utilizes Non GAAP financial measures, such as adjusted net income and earnings per share. Management believes that adjustments reflecting certain non cash charges are more representative of the Company's operating results. Investors should not rely on such measures in making decisions
Consolidated Balance Sheets (Unaudited)
December 31, June 30,
2009 2009
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $19,866,573 $12,352,223
Accounts receivable, net of allowance
for doubtful accounts of $172,182
and $171,947 at December 31, 2009
and June 30, 2009, respectively 8,642,875 5,620,519
Inventory 3,220,937 3,808,289
Advance payments 381,420 1,188,115
Loan receivable 293,400 --
Other receivables 201,321 601,912
Other current assets 43,811 81,277
Total current assets 32,650,337 23,652,335
Property and equipment, net 10,646,495 9,642,526
Intangibles, net 15,470,215 12,037,483
Total assets $58,767,047 $45,332,344
Liabilities
Current liabilities:
Accounts payable and accrued expenses $1,650,451 $1,392,639
Short-term bank loans 1,400,985 1,399,075
VAT taxes payable 542,629 458,930
Income taxes payable 571,885 490,514
Other taxes payable 15,696 11,890
Dividends payable 98,538 325,417
Other current liabilities 501,851 307,934
Total current liabilities 4,782,035 4,386,399
Total liabilities 4,782,035 4,386,399
Equity
Stockholders' equity:
Common stock, $0.001 par value,
50,000,000 shares authorized,
25,795,902 and 17,908,912 shares
issued and outstanding at December
31, 2009 and June 30, 2009,
respectively 25,796 17,909
Series A convertible preferred stock,
$0.001 par value, 10,000,000 shares
authorized, 2,322,750 and 7,146,500
shares issued and outstanding at
December 31, 2009 and June 30, 2009,
respectively 2,323 7,147
Additional paid-in capital 28,337,810 19,694,514
Statutory reserve 2,299,807 2,299,807
Treasury stock (111,587) (111,587)
Retained earnings 20,393,640 16,486,775
Accumulated other comprehensive
income 2,598,164 2,551,380
Total stockholders' equity 53,545,953 40,945,945
Noncontrolling interest 439,059 --
Total equity 53,985,012 40,945,945
Total liabilities and equity $58,767,047 $45,332,344
Consolidated Statements of Operations and Comprehensive Income (Unaudited)
For the Three Months Ended For the Six Months Ended
December 31, December 31,
2009 2008 2009 2008
Sales $14,936,378 $10,101,869 $28,341,581 $19,663,809
Cost of sales 7,177,503 4,944,980 13,526,730 9,627,603
Gross profit 7,758,875 5,156,889 14,814,851 10,036,206
Operating expenses:
Selling, general and
administrative 4,409,735 2,595,311 8,527,501 5,228,672
Research and
development 197,380 84,220 389,870 166,858
Total operating
expenses 4,607,115 2,679,531 8,917,371 5,395,530
Income from operations 3,151,760 2,477,358 5,897,480 4,640,676
Other income
(expenses):
Interest income
(expense), net (10,443) 15,564 (19,995) 29,808
Other expenses -- (26,975) (39,510) (54,695)
Total other expenses (10,443) (11,411) (59,505) (24,887)
Income before
provision for income
tax 3,141,317 2,465,947 5,837,975 4,615,789
Provision for income
tax 571,756 408,827 1,081,691 767,677
Net income 2,569,561 2,057,120 4,756,284 3,848,112
Less: Net income
attributable to
noncontrolling
interest 1,485 -- (1,040) --
Net income
attributable to
Tianyin 2,568,076 2,057,120 4,757,324 3,848,112
Other comprehensive
income
Foreign currency
translation
adjustment 10,927 256,933 46,784 346,367
Comprehensive income $2,579,003 $2,314,053 $4,804,108 $4,194,479
Basic earnings per
share $0.10 $0.11 $0.20 $0.20
Diluted earnings per
share $0.08 $0.13 $0.17 $0.16
Weighted average
number of common
shares outstanding
Basic 24,906,965 15,691,495 22,323,116 15,637,623
Diluted 30,439,912 15,691,495 28,521,127 24,697,018
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended
December 31,
2009 2008
Cash flows from operating activities:
Net Income $4,757,324 $3,848,112
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 393,575 237,619
Noncontrolling interest (1,040) --
Share-based payments 1,055,395 --
Loss on disposal of fixed assets 39,510 --
Changes in current assets and current
liabilities:
Accounts receivable (3,013,450) 132,660
Inventory 592,309 (1,117,856)
Other receivables 401,237 608,042
Other current assets 37,500 227,140
Accounts payable and accrued expenses 256,055 (119,588)
VAT taxes payable 83,038 71,402
Income tax payable 80,668 66,275
Other taxes payable 3,788 (35,705)
Other current liabilities 193,483 732
Total adjustments 122,068 70,721
Net cash provided by operating
activities 4,879,392 3,918,833
Cash flows from investing activities:
Additions to property and equipment (1,288,234) (570,491)
Additions to intangible assets - drug (2,742,168) (130,323)
Advance payments for research and
development -- (2,155,450)
Loan receivable (293,280) --
Net cash used in investing activities (4,323,682) (2,856,264)
Cash flows from financing activities:
Repayment of bank loans -- (512,505)
Additional paid-in capital 7,590,962 --
Proceeds from minority shareholders 439,920 --
Payment of dividends (1,077,335) --
Net cash provided by (used in)
financing activities 6,953,547 (512,505)
Effect of foreign currency
translation on cash 5,093 66,124
Net increase in cash and cash
equivalents 7,514,350 616,188
Cash and cash equivalents - beginning 12,352,223 12,057,150
Cash and cash equivalents - ending $19,866,573 $12,673,338
Supplemental schedule of non cash
activities
Advance payments exchanged for
intangible assets - drug $807,986 $--
Non-GAAP Financial Measures and Reconciliations
As used herein, "GAAP" refers to generally accepted accounting principals in the United States. We use various numerical measures in conference calls, investor meetings and other forums, which are or may be considered "Non-GAAP financial measures" under the SEC's Regulation G. We have provided below for your reference supplemental financial disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation.
Preliminary and Non-audited Second Quarter and Year to Date Fiscal 2010
Earnings Reconciliation
Three Months Ended Six Months Ended
December 31, 2009 December 31, 2009
Net Income (GAAP) $2,568,076 $4,756,324
Stock Compensation Charges (a) $900,000 $900,000
Less: Tax Adjustment $163,800 $166,500
Adjusted Net Income $3,304,276 $5,489,824
Three Months Ended Six Months Ended
December 31, 2009 December 31, 2009
Earnings Per Share - Diluted
(GAAP) $0.08 $0.17
Stock Compensation Charges (a) $0.03 $0.03
Adjusted Earnings Per Share
- Diluted $0.11 $0.20
(a) Net Income and diluted earnings per share for the second quarter and
first six months of fiscal year 2010 includes a non-cash Stock
Compensation Charge of $900,000 or approximately $0.03 in Earnings Per
Share for the Three Months Ended December 31, 2009 in connection with
consulting services. The company has not previously incurred on a
regular basis a charge of this nature.
Note: To supplement our consolidated financial statements presented in accordance with GAAP, Tianyin Pharmaceutical Corp. uses non-GAAP measures, such as Adjusted Net Income and Adjusted Diluted Earnings per share, which exclude certain non cash expenses. This non-GAAP adjustment is provided to enhance the user's overall understanding of our historical and current financial performance and our prospects for the future. We believe the non-GAAP results provide useful information to both management and investors by excluding certain expenses we believe are not indicative of our core operating results.
