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Tianyin Pharmaceutical Co., Inc. Announces Record Second Quarter 2010 Financial Results

2010-02-09 05:36 627

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.

Source: Tianyin Pharmaceutical Co., Inc.
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