Biostar Pharmaceuticals, Inc. Announces 2012 Second Quarter Financial Results

XIANYANG, China, Aug. 14, 2012 /PRNewswire-Asia/ -- Biostar Pharmaceuticals, Inc. (NASDAQ GM: BSPM) ("Biostar" or "the Company"), a PRC-based manufacturer and marketer of pharmaceutical and health supplement products in China for a variety of diseases and conditions, today announced its financial results for the second quarter and six months ended June 30, 2012, which were severely affected by the temporary PRC government imposed suspension of gel capsule sales.

Second Quarter 2012 vs. Second Quarter 2011^*

• Net sales decreased to $8.2 million from $25.9 million; 
• Gross margin decreased to 56.0% as compared to 71.9%;
• Loss from operations was $12.2 million, as compared to income from operations of $6.0 million.  Loss from operations for the current period included a charge to operations of $7.9 million shown on the following tables as "credits for negative publicity" relating to a write-down of accounts receivables.  Excluding this write-down, loss from operations for the current period was $4.3 million;
• The net loss was $9.5 million, or $1.01 per diluted share, as compared to net income of $4.2 million, or $0.45 per diluted share.  Excluding the aforementioned credits to negative publicity, the net loss for the current period would have been $3.6 million or $0.38 per diluted share.

First Half 2012 vs. First Half 2011^*

• Net sales decreased to $24.1 million from $41.2 million; 
• Gross margin decreased to 64.0% as compared to 71.1%;
• Loss from operations was $9.1 million, as compared to income from operations of $9.7 million.  As noted above, loss from operations for the current period included the aforementioned $7.9 million credits for negative publicity (write-down to accounts receivables).  Excluding this write-down, loss from operations for the current period was $1.1 million;
• The net loss was $7.3 million, or $0.78 per diluted share, as compared to net income of $6.9 million, or $0.75 per diluted share.  Excluding the aforementioned credits to negative publicity, the net loss for the current period would have been $1.4 million or $0.15 per diluted share.

Net Sales by Product/Facility  

Ronghua Wang, Biostar's Chief Executive Officer and Chairman commented, "As previously announced, the suspension of sales of gel capsule products severely affected all China-based pharmaceutical companies that use gelatin capsules to manufacture their drugs, including Biostar.  This has been a major issue for China's pharmaceutical industry as many large pharmaceutical companies reported substantial losses for the April – July period.  Unfortunately, we were not immune to the industry-wide losses and our sales and overall results for the 2012 second quarter were similarly adversely affected."

Mr. Wang continued, "Sales of our flagship gel capsule product Xin Aoxing decreased approximately 83% and 53% for the three and six months ended June 30, 2012, respectively, as we did not record sales of this product in May and June.  Sales for all other gel capsule products also declined. Only two non-gel capsule drugs, Danshen Granule and Taohuasan Pediatrics were not affected during the current second quarter.  Net sales from our newly acquired Weinan facility accounted for approximately 22% and 14% of sales for the three and six months ended June 30, 2012, respectively.  There were no sales reported from drugs manufactured at this facility for the 2011 corresponding periods since this business was acquired during the fourth quarter of 2011.

"Selling expenses decreased by approximately $3.7 million and $4.0 million for the three and six months ended June 30, 2012, respectively, compared to the same periods last year, due to lower net sales.  Also general and administrative expenses decreased by approximately $0.8 million and $0.6 million for the three and six months ended June 30, 2012, respectively, compared to the same periods last year.

"R&D expenses for the three and six months ended June 30, 2012, accounted for 10% and 7% of total net sales, respectively; we did not incur R&D expenses in the same periods of last year.  As previously announced, during 2011, we deposited 20,000,000 RMB (approximately $3.2 million) as part of the 4-year R&D contract to develop a new drug for the treatment of cardiovascular disease, which was recorded as a long-term deposit at December 31, 2011.  Earlier this year, we evaluated the progress of the clinical tests (stage one and stage two) of the R&D project and expected the tests would be completed within a year.    Accordingly, the long-term deposit was reclassified into current assets and we started to amortize the R&D expense during 2012.  As of June 30, 2012, approximately $1.6 million was amortized as expense (of which $0.8 million was amortized in the first quarter), and $1.6 million was reclassified as prepaid R&D expenses in current assets. 

"Of note, during the three months ended June 30, 2012 we recorded a $7.9 million credit to negative publicity, directly reducing accounts receivable.  These credits were given to maintain customer relationships following the negative publicity in the PRC related to gel capsule drugs.  Although the credits were issued to our customers in August 2012, the negative impact to our customers occurred in the second quarter, therefore this write-down was recognized during the three months ended June 30, 2012." 

Biostar's CFO, Zack Pan noted, "Our balance sheet remains strong.  Total current assets at June 30, 2012 were $51.8 million vs. total current liabilities of $2.6 million for a 20:1 current ratio.  We continue to fund our business from our free cash flow.  As of June 30, 2012, we had cash and cash equivalents of approximately $18.7 million compared with approximately $17 million at year-end 2011."

Mr. Wang added, "In late July, we received the "green light" approval from Xianyang State Food and Drug Administration (SFDA) authorities to restart sales of gel capsule products.  Due to the steps we have taken, we expect sales for 2012 third quarter to significantly improve as compared to the 2012 second quarter."

The steps that we have taken to achieve our goal include the following:

• Our employees are working overtime and we have added a second shift to ramp up production and handle expected increased customer demand going forward. 
• We also initiated an aggressive advertising campaign, including medical journals and heath magazines, to rebuild consumer and physician confidence in our products.
• We are in the process of establishing a B2C call center adding a direct to the consumer dimension to our sales model.

Mr. Wang concluded, "Despite the temporary setback, our business remains strong.  We will continue to bring new products to market, expand our geographic reach, broaden our channels of distribution, and reinvigorate sales of our flagship gel capsule product Xin Aoxing."

Conference Call

Biostar's Chairman and CEO, Ronghua Wang and CFO, Zack Pan will host a conference call on Wednesday, August 15th at 10:00 am E.T. to discuss these results as well as recent corporate developments.

Live conference call details

Interested parties may participate in the call by dialing (480) 629-9857.  Please call in 10 minutes before the conference is scheduled to begin and ask for the Biostar call or use pass code 4559554.  After opening remarks, there will be a question and answer period.  Questions may be asked during the live call, or alternatively, you may e-mail questions in advance to [email protected].

Webcast

The conference call will also be broadcast live over the Internet.  To listen to the webcast, please go to  http://p2.viavid.com/player/index.php?id=101467 or visit Biostar's website http://www.biostarpharmaceuticals.com and then to the Event Calendar page where the conference call is posted.  Please go to the website at least 15 minutes early to register, and download and install any necessary audio software.  If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days.  We suggest listeners use Microsoft Internet Explorer as their web browser.

Replay

A replay will be available until 11:59 pm E.T. on August 22, 2012. To listen, please call (858) 384-5517 and use pass code 4559554.

About Biostar Pharmaceuticals, Inc.

Biostar Pharmaceuticals, Inc., through its wholly owned subsidiary and controlled affiliate in China, develops, manufactures and markets pharmaceutical and health supplement products for a variety of diseases and conditions. The Company's most popular product is its Xin Aoxing Oleanolic Acid Capsule, an over-the-counter ("OTC") medicine for chronic hepatitis B, a disease affecting approximately 10% of the Chinese population. For more information please visit: http://www.biostarpharmaceuticals.com.

Safe Harbor relating to the Forward-Looking Statements

Certain statements in this release concerning our future growth prospects are forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The company uses words and phrases such as "guidance," "forecasted," "projects," "is expected," "remain confident," "will" and similar expressions to identify forward-looking statements in this press release, including forward-looking statements. Undue reliance should not be placed on forward-looking information. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Biostar and described in the forward-looking information contained in this news release. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the Company's ability to recover its sales following the SFDA investigation in the 3^rd quarter of 2012 and for the year ended, the Company's ability to integrate the recently acquired Shaanxi Weinan product lines into the Company's current product line and current operations, the state of consumer confidence and market demand or the Company's products,  success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our most recent Annual Report on Form 10-K for the year ended December 31, 2011, and other subsequent filings. These filings are available at www.sec.gov. We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders.  We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

 

 

~FINANCIAL TABLES FOLLOW~

 

SOURCE Biostar Pharmaceuticals, Inc.