Tianyin Pharmaceutical reports 40.2% increase in revenues for the first quarter of fiscal 2010

Nov 13 2009

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 first quarter ended September 30, 2009.

Revenue for the first quarter of fiscal 2010 was approximately $13.4 million, an increase of 40.2% compared to $9.6 million for the first quarter of fiscal 2009. The increase resulted from higher sales volume of portfolio products, increased market penetration through the Company's broad distribution channels, which was supported by additional production capacity from the new facility. Revenues from the top three selling products, Ginkgo Mihuan Oral Liquid, Arpu Shuangxin Oral Liquid, and Azithromycin Dispersible Tablets, were collectively $7.1 million and represented approximately 53.1% of total revenues for the quarter. During the fourth quarter of fiscal 2009 sales of the top three selling products were approximately $7.8 million, or 58.6% of total revenues.

Cost of goods sold for the three months ended September 30, 2009 was approximately $6.3 million or 47.4% of revenue as compared to $4.7 million or 49.0% of revenue for the three months ended September 30, 2008, yielding a gross profit of $7.1 million and gross margins of 52.6%, compared to $4.9 million in gross profit and gross margins of 51.0% during the first quarter of fiscal 2009. Gross margins improved as a result of the product mix, in addition to enhanced cost controls and manufacturing efficiencies implemented during the production process.

Operating expenses for the three months ended September 30, 2009 were approximately $4.3 million, up 58.7% compared to the same period in 2008. Selling, general and administration expenses for the period increased to approximately $4.1 million from $2.6 million in the first 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 a consulting expense amounted to $0.5 million paid to external service providers. Research and development expenses for the three months ended September 30, 2009 increased 134.1% to $0.2 million from the first quarter of fiscal 2009.

Operating income for the first quarter of fiscal 2010 totaled approximately $2.7 million, a 26.9% increase from the $2.2 million reported for the first quarter of fiscal 2009. Operating margins were 20.5% and 22.6% for the first quarter of fiscal 2010 and fiscal 2009, respectively as the Company continued to spend aggressively on sales and marketing initiatives to generate incremental product sales.

Net income was approximately $2.2 million in the first quarter of fiscal 2010, a 22.3% increase, compared to $1.8 million for the first quarter of fiscal 2009. The company had an effective tax rate of 18.9% and 16.7%, for the first quarter of fiscal 2010 and 2009, respectively. Diluted earnings per share were $0.08 compared to $0.07 for the first quarter of fiscal 2010 and fiscal 2009 respectively, based upon 27.5 million and 24.6 million shares. The divergence in the share account relates to accounting for the company's preferred shares which are convertible into common, in addition to warrants which were exercised.

"We are pleased to report another quarter of strong revenue growth and improved profitability. The results of our marketing strategies to support a high quality product portfolio are driving measured improvements in our revenue base. Additionally, increased production capacity is enabling us to accommodate higher volumes of several leading drugs, including Gingko Mihuan, through our distribution channels," stated Dr. Guoqing Jiang, Tianyin's Chief Executive Officer."

Balance Sheet and Cash Flow

Cash and cash equivalents and restricted cash totaled $14.4 million on September 30, 2009 compared to $12.4 million on June 30, 2009. The Company had a current ratio of 5.8 to 1 and total stockholders' equity of 46.2 million, which includes noncontrolling interest of $0.4 million, with total assets of $50.8 million versus total liabilities of $4.6 million on September 30, 2009. For the first three months of fiscal 2010, the Company generated $2.2 million in cash from operations versus $0.5 million for the same period in fiscal 2009.

Business Development & Outlook

On September 28, 2009, Tianyin appointed Mr. Tao Yang to the position of Chief Operating Officer. Mr. Yang has more than 18 years experience in the sales and marketing industry. He was appointed in November 2008 as Chief Advisor for Sales and Marketing and Special Advisor to Dr. Jiang, the CEO of the Company. Since then, Mr. Yang has helped implement a strategy to boost sales of leading products and further improve the efficiency of Tianyin's sales and marketing team.

On October 29, 2009, Tianyin announced it has formed a joint venture with Sichuan Mingxin Pharmaceutical Co., Ltd ("Mingxin") named Sichuan Jiangchuan Pharmaceutical Co., Ltd. ("Jiangchuan"). 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.

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.

"The Chinese stimulus plan and favorable policies for the health care industry are now starting to manifest themselves throughout the pharmaceutical industry by driving sales of many popular pharmaceutical products and creating the catalyst for long-term secular growth. We are extremely excited about our recently announced Joint Venture, which is named Sichuan Jiangchuan Pharmaceutical Co. Ltd. This will enable us to capitalize on the large and rapidly growing macrolide antibiotics market. Supported by our existing marketing expertise and extensive distribution channels, we are confident that this new initiative will create a meaningful growth driver in fiscal 2011 and beyond, while complementing the organic growth of our current product portfolio with widely used western style medications. With a solid business foundation and favorable policies from the Chinese government, we will continue to execute on our long-term growth plan while creating both near and long-term value for our shareholders," concluded Dr. Jiang.