Biostar Pharmaceuticals, Inc. (Nasdaq: BSPM) ("Biostar" or "the Company"), a Xianyang- based manufacturer of a leading over-the-counter Hepatitis B medicine, Xin Aoxing Oleanolic Acid Capsules ("Xin Aoxing"), and a variety of pharmaceutical products, today announced financial results of the first quarter ended March 31, 2010.
-- Q1 2010 revenue increased 66.0% to $12.4 million -- Q1 gross margins were 77.0%, a 1,270-basis point improvement -- Q1 2010 Non-GAAP adjusted net income increased 32.1% to $2.4 million with adjusted EPS of $0.09 -- Biostar reiterates guidance for 2010: Revenue expected to be between $80.0 to $82.0 million and net income between $18.0 to $20.0 million SUMMARY FINANCIALS First Quarter 2010 Results (unaudited) Q1 2010 Q1 2009 CHANGE Net Sales $12.4 million $7.4 million +66.0% Gross Profit $9.5 million $4.8 million +98.9% GAAP Net Income $2.3 million $1.8 million +23.7% Adjusted Non-GAAP Net Income $2.4 million $1.8 million +32.1% GAAP EPS (Diluted) $0.08 $0.08 +0% Adjusted Non-GAAP EPS (Diluted) $0.09 $0.08 +12.5% Excluding non-cash stock-based compensation charge of $0.2 million for Q1 2010. For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below.
First Quarter 2010 Financial Results
Revenue for the first quarter of 2010 increased 66.0% to approximately $12.4 million compared to $7.4 million for the first quarter of 2009. The increase was primarily due to Biostar's flagship product, Xin Aoxing Oleanolic Acid Capsule ("Xin Aoxing"), which saw increased sales by 138.2% to $9.2 million with a gross margin of 85.1%, compared to $3.9 million in the first quarter of 2009. Sales of Xin Aoxing represented 74.4% of total revenues and benefited from the expansion into the Beijing and Shanghai markets during the first quarter of 2010, in addition to the implementation of a retail-direct selling strategy to select high-volume pharmacies who accept direct shipments from the Company's Xianyang-based production facility. Another notable contributor from Biostar's portfolio was its Taohuasan Pediatrics Medicine, which contributed $1.0 million in revenue in the first quarter of 2010, an increase of 13.1% compared to $0.9 million in the first quarter of 2009. The Company continued its expansion into rural communities in China with products now being sold at the Company's rural supply network of approximately 6,000 locations out of a target market which includes an estimated 10,000 total locations.
Cost of goods sold for the three months ended March 31, 2010 was approximately $2.8 million or 23.0% of revenues, as compared to $2.7 million or 35.7% of revenues for the three months ended March 31, 2009. Gross profits for the first quarter of 2010 were $9.5 million with gross margins of 77.0%, compared to $4.8 million in gross profit and gross margins of 64.3% for the first quarter of 2009. The increase in gross margins was due to the increased sales volumes of Xin Aoxing and Taohuasan as wells as lower raw material costs for Xin Aoxing experienced in the first quarter of 2010. Gross profits increased by 98.9% for the three months ended March 31, 2010 as compared to the same period in 2009.
Operating expenses for the three months ended March 31, 2010 were approximately $6.4 million, an increase of 157.7% compared to the same period in 2009. Selling and distribution cost increased 197% to $5.6 million in the first quarter of 2010, compared to $1.9 million in the same period in 2009. The increase in selling cost is primarily due to $2.2 million in incremental advertising and promotional efforts which included billboards, newsprints and in-store advertising designed to drive sales in existing and new markets and to promote brand awareness of Xin Aoxing. These increased sales activities drove higher commissions and travel expenses, which increased $1.1 million and $0.3 million, respectively. In addition, the Company incurred non-cash equity compensation charge of $0.2 million in the first quarter of 2010, which was not present for the same period in 2009.
Operating income for the first quarter of 2010 totaled approximately $3.1 million, a 35.7% increase from $2.3 million reported for the first quarter of 2009. Operating margins were 25.3% and 31.0% for the first quarter of 2010 and 2009, respectively. The decrease was mainly attributed to the increase of SG&A in the first quarter of 2010. Excluding the non-cash equity compensation charge of $0.2 million recorded during the first quarter of 2010, adjusted operating income for the first quarter is $3.3 million with operation margins of 26.6%.
Net income was approximately $2.3 million for the first quarter of 2010, a 23.7% increase compared to $1.8 million for the first quarter of 2009. Diluted earnings per share were $0.08 for the first quarter of 2010 compared to $0.08 for the first quarter of 2009, based upon 27.3 million and 23.5 million diluted common shares outstanding, respectively. Adjusted Non-GAAP net income for the first quarter was $2.4 million, or $0.09 per diluted common share based on 27.3 million diluted common shares outstanding for the first quarter of 2010. The Company's effective tax rate was at 27.6% for the first quarter of 2010.
"We are pleased to report another quarter of strong revenue growth, as Biostar gains further brand recognition and awareness for our Xin Aoxing Capsules. With momentum in several key markets, we are confident that this flagship product is becoming known as one of the major medical treatments for Hepatitis B in China," commented Ronghua Wang, Chairman and Chief Executive Officer of Biostar. "We are optimistic that with our continued expansion into new markets, supported by comprehensive marketing and distribution strategies, including direct sales, we are in position to leverage our product portfolio for optimal growth." Wang concluded.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $8.6 million on March 31, 2010, compared to $8.6 million on December 31, 2009. Accounts receivable balance was approximately $20.8 million on March 31, 2010, versus approximately $19.8 million on December 31, 2009. Days sales outstanding (DSO) were at 149 days. The Company had a current ratio of 5.7 to 1 and stockholders' equity of $43.4 million, with total assets of $48.9 million versus total liabilities of $5.6 million on March 31, 2010.
For the first three months of 2010, the Company generated $0.6 million in cash from operations versus $0.06 million used in operations reported for the same period in 2009.
Business Developments
As of March 31, 2010, Biostar has expended its rural supply network to approximately 6,000 sales outlets.
On April 27, Biostar addressed and resolved a concern that its main product, Xin Aoxing, was to be suspended from selling by the local State Food and Drug Administration (SFDA) due to non-compliance with approved advertising use.
On April 23, 2010, Biostar was approved by NASDAQ to list its common stock on the NASDAQ Global Market and commenced trading under the ticker symbol BSPM.
On April 12, 2010, Biostar completed Chinese Military Drug Administration clinical trials for Zushima Analgesic Aerosol Spray ("Zushima"). Zushima is a traditional Chinese herbal product used to relieve pain through a topical application of the medicine to affected areas or closed wounds. Zushima spray can also be used in the treatment of certain rheumatic conditions. The product was classified as "Specially Needed Drug" by the Chinese Military Drug Administration and will also be available to the public.
On March 29, 2010, Biostar officially took control over the assets of Xi'an Mei pude Bio-Technology Co., Ltd., a Xi'an-based medical equipment and nutrients manufacturer ("Meipude"). Biostar is working on a production marketing program and anticipates starting sales using the acquired assets in May 2010.
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