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Biostar Pharmaceuticals, Inc. Announces 2012 Third Quarter Financial Results

2012 Third Quarter Net Sales Increase by 22% vs. 2012 Second Quarter

XIANYANG, China, Nov. 19, 2012 /PRNewswire/ -- 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 third quarter and nine months ended September 30, 2012.   Biostar's overall results continued to be affected by the temporary PRC government imposed suspension of gel capsule sales earlier this year.

Third Quarter 2012 vs. Third Quarter 2011*

  • Net sales decreased to $10.0 million from $24.8 million
  • Gross margin decreased to 52.6% as compared to 69.9%;
  • Loss from operations was $5.8 million, as compared to income from operations of $5.9 million; and,
  • The net loss was $5.9 million, or $0.63 per diluted share, as compared to net income of $4.5 million, or $0.47 per diluted share. 

Nine Months 2012 vs. Nine Months 2011*

  • Net sales decreased to $34.0 million from $66.0 million
  • Gross margin decreased to 60.7% as compared to 71.1%;
  • Loss from operations was $14.8 million, as compared to income from operations of $15.6 million; and,
  • The net loss was $13.3 million, or $1.41 per diluted share, as compared to net income of $11.3 million, or $1.22 per diluted share. 

*Per share amounts for both periods reflect the reverse split effective April 3, 2012. 

Net Sales by Product/Facility 

$ in millions

For the nine month period ended 9/30

Xin Aoxing product (1)

(at Xianyang Facility)

All other Xianyang Facility products (1)

Weinan Facility

products (2)

Hospital products (3)

(at Xianyang Facility)

2012

2011

% change

2012

2011

% change

2012

2011

% change

2012

2011

% change

Net Sales                   

$16.3

$44.5

(63.4%)

$11.1

$21.5

(48.2%)

$5.3

-

100%

$1.3

-

100%

% of Total Net Sales

47.9%

67.5%


32.8%

32.5%


15.5%

-


3.8%

-



(1)
Biostar's products are manufactured at two facilities: Xianyang and Weinan.  Xin Aoxing, the Company's flagship product, is manufactured at the Xianyang facility.


(2)
 There were no sales reported in the third quarter and nine months of 2011 because the Weinan facility was acquired in October 2011.


(3)
Products manufactured at the Xianyang facility and exclusively sold to Xijing Hospital, as per an agreement signed in September 2012.

Ronghua Wang, Biostar's Chief Executive Officer and Chairman commented, "Although as expected, our 2012 third quarter overall results were below those of the 2011 third quarter, our business has shown signs of recovery and net sales for the current quarter increased by approximately $1.8 million, or 22% as compared to the 2012 second quarter.

"Following a temporary industry-wide suspension of gel capsules sales earlier this year by the State Food and Drug Administration (SFDA), on July 30, 2012, we received the "green-light" approval from Xianyang SFDA authorities to restart sales of gel capsule products.  In anticipation of the receipt of the approval, our management team met to design, develop and implement a plan to accelerate the recovery of our business.  As a result, we:   

  • Ramped up production by adding a second shift;
  • Initiated an aggressive advertising campaign to rebuild consumer and physician confidence in our products and established incentives for the sales force in all distribution offices nationwide; 
  • In early September, we added a new dimension to our sales model by establishing a Business-to-Customer (B2C) call center, which is currently operational; and,
  • Increased efforts to complete several experimental tests for Xijing Hospital, which resulted in the signing of two one-year contracts valued at approximately $3.6 million and $3.0 million, respectively, to manufacture a total of eight drugs specifically for the needs of Xijing Hospital."

Mr. Wang continued, "Net sales for the 2012 third quarter and nine month periods of our flagship gel capsule product Xin Aoxing substantially decreased as did net sales for all other gel capsule products.   However, that was partially offset by:

  1. Net sales of approximately $1.3 million in 2012 third quarter resulting from shipments to Xijing Hospital.
  2. Net sales from our Weinan facility which accounted for approximately $2.0 million or 19.7% and approximately $5.3 million or 15.5% of sales for the 2012 third quarter and nine month period, respectively.  The Weinan facility was acquired during the fourth quarter of 2011 hence there were no sales recorded in the 2011 periods.

"Gross margin for the 2012 third quarter and nine month periods declined mainly due to substantially lower net sales for Xin Aoxing, which historically has been our highest margin product.  Also our gross margin for both periods was negatively affected by lower selling prices due to fierce competition and by the PRC government's essential drug list price control policy.

"As a  percentage of net sales, 2012 third quarter selling expenses and general expenses increased to approximately 60% and 26%, respectively as compared to approximately 42% and 4%, respectively, in the same period of 2011, mainly due to lower sales.  Similarly, selling expenses and general expenses as percentage of net sales for the 2012 nine month period, increased as compared to the same period of 2011.  R&D expenses for the 2012 third quarter and nine months accounted for 8% and 7% of total net sales, respectively.  Of note, in 2012 we reclassified long-term deposits into current assets and amortized R&D quarterly; we did not incur quarterly R&D expenses in 2011, as R&D expense was recorded as a long-term deposit at December 31, 2011.   Additionally, in the 2012 third quarter, we paid the local government a one-time, non-appealable administrative penalty of approximately $1.6 million related to the gel capsule incident."

Biostar's CFO, Zack Pan noted, "Our balance sheet remains strong.  Total current assets at September 30, 2012 were $48.6 million vs. total current liabilities of $4.2 million for a 12:1 current ratio.  We continue to fund our business from our free cash flow.  As of September 30, 2012, we had cash and cash equivalents of approximately $12.1 million compared with approximately $17 million at 2011 year-end."

Mr. Wang concluded, "Despite the temporary setback, our business remains solid.  We are confident that as a result of our efforts, our sales will continue to gradually recover in the coming months.  Based on net sales recorded for the month of October and first half of November, and we expect 2012 fourth quarter sales to be significantly higher than 2012 third quarter."

Conference Call

Biostar's Chairman and CEO, Ronghua Wang and CFO, Zack Pan will host a conference call on Monday, November 19, 2012 at 9:30 am ET / 10:30 pm China time to discuss these results as well as recent corporate developments.

Live conference call details

Interested parties may participate in the call by dialing (480) 629-9712.  Please call in 10 minutes before the conference is scheduled to begin and ask for the Biostar call or use pass code 4576907.  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://public.viavid.com/index.php?id=102669 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 November 26, 2012. To listen, please call (858) 384-5517 and use pass code 4576907.

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 3rd 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.  

For more information contact:


BioStar Pharmaceuticals, Inc.

The Equity Group, Inc.

Zack Pan, CFO

Lena Cati

Tel: 405-996-8829

Tel: 212 836-9611

Email: [email protected]

Email: [email protected]

~FINANCIAL TABLES FOLLOW~


 

BIOSTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 



Three Months Ended


Nine Months Ended



September 30,


September 30,



2012



2011


2012



2011














Sales, net

$

9,969,375



$

24,779,420


$

34,028,164



$

65,980,481

















Cost of sales                                               


4,729,894




7,465,966



13,379,287




19,352,264

















Gross profit


5,239,481




17,313,454



20,648,877




46,628,217

















Operating expenses:















   Selling expenses


6,009,227




10,391,335



18,498,671




26,908,239


   General and administrative expenses


2,640,240




983,778



5,124,789




4,103,154


   Credits for negative publicity


-




-



7,904,513




-


   Administrative penalty


1,596,174




-



1,596,174




-


   Research and development expenses


789,702




-



2,370,605




-

















           Total operating expenses


11,035,343




11,375,113



35,494,752




31,011,393

















(Loss) Income from operations


(5,795,862)




5,938,341



(14,845,875)




15,616,824

















Other income (expense)















  Interest income


55,642




127,423



247,342




271,737


  Interest expense


(1,059)




(2,984)



(33,193)




(10,371)


  Other income


152




273



598




821


Total other income (expenses)


54,735




124,712



214,747




262,187

















(Loss) Income before income taxes


(5,741,127)




6,063,053



(14,631,128)




15,879,011

















Income tax expenses (benefits)


198,508




1,599,316



(1,376,356)




4,539,127

















Net (loss) income


(5,939,635)




4,463,737



(13,254,772)




11,339,884

















Other comprehensive income















 Foreign currency translation adjustment


(117,289)




640,119



180,992




1,733,586

















Total comprehensive (loss) income

$

(6,056,924)



$

5,103,856


$

(13,073,780)



$

13,073,470
































(Loss) Earnings per share, on net income















  Basic

$

(0.63)



$

0.47


$

(1.41)



$

1.22


  Diluted

$

(0.63)



$

0.47


$

(1.41)



$

1.22

















Weighted average number of common 
  stock outstanding















  Basic


9,490,506




9,398,876



9,430,532




9,264,104


  Diluted


9,490,506




9,398,876



9,430,532




9,264,104


















 

 

BIOSTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 




September 30,



December 31,




2012



2011




(Unaudited)





ASSETS







Current Assets







  Cash and cash equivalents


$

12,119,565



$

16,971,789


  Accounts receivable



28,815,263




35,033,650


  Inventories



985,274




1,373,459


  Tax prepaid



451,121




-


  Prepaid expenses and other receivables



5,390,773




7,129,911


  Prepaid research and development expenses



789,390




-


     Total Current Assets



48,551,386




60,508,809











Deposits



-




3,148,466


Deferred tax assets



3,328,228




1,617,688


Property and equipment, net



7,038,982




7,379,982


Intangible assets, net



9,390,806




10,406,931


     Total Assets


$

68,309,402



$

83,061,876











LIABILITIES AND STOCKHOLDERS' EQUITY


















Current Liabilities









Accounts and other payables


$

3,644,084



$

3,334,418


Short-term bank loans



-




787,116


Value-added tax payable



451,088




895,487


Income tax payable



92,677




1,643,155


     Total Current Liabilities



4,187,849




6,660,176











Commitment and contingencies                                                      


















Stockholders' Equity









  Common stock, $0.001 par value, 100,000,000 shares authorized,









      9,993,549 and 9,400,216 shares issued and outstanding as of
      September 30, 2012 and December 31, 2011*



9,993




9,400


  Additional paid-in capital



23,238,700




22,445,660


  Statutory reserve



6,490,600




6,490,600


  Retained earnings



30,219,062




43,473,834


  Accumulated other comprehensive income



4,163,198




3,982,206


     Total Stockholders' Equity



64,121,553




76,401,700











     Total Liabilities and Stockholders' Equity


$

68,309,402



$

83,061,876




















*Number of shares issued and outstanding retroactively reflects reverse stock split effective on April 3, 2012











  

SOURCE Biostar Pharmaceuticals, Inc.

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