Tianyin Pharmaceutical releases unaudited preliminary financial results for Q1 FY 2015

Dec 25 2014

Tianyin Pharmaceutical Inc. (NYSE Amex: TPI), a pharmaceutical company that specializes in the patented biopharmaceutical, modernized traditional Chinese medicine (mTCM), branded generics and active pharmaceutical ingredients (API) released unaudited preliminary financial results for the first quarter of fiscal year 2015.

Fiscal Year 2015 Ended September 30, 2014 Financial Highlights:

• Revenue was $9.7 million compared with $14.7 million in 1Q14 with gross margins improved to 52% compared with 40% in 1Q14;
• Operating income was $1.4 million, compared with $2.2 million in 1Q14 as a result of increased R&D spending on Gingko Mihuan Oral Liquid (GMOL) cardiovascular franchise;
• Net Income was $1.0 million (10% net margin) compared with $1.5 million (10% gross margin) in 1Q14;
• Earnings per diluted share were $0.03 per share compared with $0.05 per share in 1Q14;
• Cash and cash equivalents totaled $15.6 million on September 30, 2014.

Comparison of results for the three months ended September 30, 2014 and 2013:

Sales for the quarter ended September 30, 2014 was $9.7 million as compared to $14.7 million for the quarter ended September 30, 2013. The sales decrease was a result of continuous pricing pressure and restrictive sales policies on generic products compared with the same period last year.

Gross Margin for the quarter ended September 30, 2014 was 52% as compared to 40% for the quarter ended September 30, 2013. As discussed above, our gross margin improved, predominately as a result of an increased higher margin products being sold during the period. We see the trend to continue for the rest of fiscal 2015.

Income from Operations was $1.4 million for the quarter ended September 30, 2014, as compared to $2.2 million for the quarter ended September 30, 2013. The decrease of income from operations was mainly due to the amount of research & development costs towards cardiovascular portfolio centered on GMOL.

Net Income was $1.0 million with net margin of 10% for the quarter ended September 30, 2014, as compared to net income of $1.5 million with net margin of 10% for the quarter ended September 30, 2013.

Diluted earnings per share was $0.03 per share based on 29.4 million shares for 1Q15 compared with the earnings of $0.05 per share for 1Q14, based on 29.4 million shares.

Balance Sheet and Cash Flow

As of September 30, 2014, the Company had working capital totaling $22.3 million, including cash and cash equivalents of $15.6 million. Net cash provided by operating activities was $(1.1) million for the three months ended September 30, 2014 as compared with net cash provided from operating activities as $0.2 million for the three months ended September 30, 2013. We believe that TPI is adequately funded to meet all of our working capital and capital expenditure needs for fiscal year 2015.

Business Development & Outlook

Research and Development (R&D)

We focused on innovative products as well as modifications and improvements of existing marketed products with substantial market potential. Our R&D partners include a number of most prestigious academic institutions in China. The partnership-based R&D strategy supports TPI to commercialize, produce, and broaden our product pipeline and to market those products through our sales and marketing infrastructure. In July 2014, the TPI's subsidiary, Chengdu Tianyin, entered into a research and development agreement with a pharmaceutical research company to expand formulation varieties from Gingko Mihuan Oral Liquid (GMOL) to Capsule formulation. The project is expected to be completed before August 2017. TPI has also been in discussion with industrial leading enterprises in integrating sales network resources to boost the revenue of GMOL cardiovascular franchise for the coming year.

Jiangchuan Macrolide Facility (JCM)

In April 2014, JCM has developed a new line of Azithromycin API products that support steady monthly export orders to South Asia. Following a series of tests on quality, purity, intermediates contents, stereochemistry, stability in comparison with the international standards of Azithromycin API, JCM has received monthly orders for manufacturing one of the major intermediates of Azithromycin, Azithromycin Amine (AA) at a competitive international price which varies from month to month according to the market demands and the foreign exchange rate. The current monthly orders for Azithromycin APIs were 5-8 tons per month.

Pre-extraction and formulation plant development at Qionglai Facility (QLF)

In preparation for the new GMP standards stipulated by the government in early 2011, TPI initiated a process to optimize the manufacturing facilities and production lines of the Company in compliance with the new GMP standards. We received our current GMP certificate for both of our pre-extraction plant and formulate facilities until December 2015. In addition, under the guidance by provincial government, our facility is scheduled to be relocated to Qionglai County, south of Chengdu, which is designated for the pharmaceutical industry. Both the pre-extraction plant and the formulation plant will subsequently be relocated to form a combined QLF. The combined QLF, designed and constructed according to the latest GMP standards. The re-location cost for Phase I, which includes both the pre-extraction and formulation plant is estimated at $25 million, which is to boost the current capacity by at least 30-50%. The Phase II QLF, an additional $10 million may be invested to double the current capacity. By the first quarter of fiscal year 2015, the QLF construction project has been completed. TPI has just achieved GMP public notice status which is essential for the final issuance of the GMP certification which is expected by the end of December 2014.

Fiscal 2015 Guidance

The following factors, in our opinion, will influence the Company's growth perspectives for fiscal year 2015:

1. Market expansion and revenue growth of TPI's core product portfolio led by flagship product Gingko Mihuan Oral Liquid (GMOL) and other major products;
2. JCM revenue at both domestic and international markets in the fiscal year 2015;
3. Generic sale stabilization and recovery along with our strategy to cope with pricing restrictions and market competition under the ongoing healthcare reform; and
4. QLF GMP certification/relocation and smooth transition of production capacity.

We forecast that the organic revenue growth for TPI may range from 5-10% for the fiscal year 2015. Management will continue to evaluate the Company's business outlook and communicate any changes on a quarterly basis or as when appropriate.

Non-Compliance with NYSE MKT Continued Listing Requirements

On December 16, 2014 the Company received notice from the NYSE MKT Staff indicating that the Company is below certain of the Exchange's continued listing standards, as set forth in Sections 134 and 1101 of the NYSE MKT Company Guide, due to the delay in filing of its first quarter of fiscal year 2015 Form 10-Q. The Staff further indicated to the Company that it believed that it had made a reasonable demonstration of its ability to regain compliance with the continued listing standards by the end of the Plan Compliance period, which the Staff has determined shall be no later than February 19, 2015. The Company will be subject to periodic review by Exchange Staff during the extension period. Failure to make progress consistent with the plan or to regain compliance with the continued listing standards by the end of the extension period could result in the Company being delisted from the NYSE MKT LLC.