China Pharma Holdings, Inc. Announces Second Quarter 2008 Financial Results

NEW YORK and HAIKOU CITY, China, Aug. 6 /Xinhua-PRNewswire-FirstCall/ -- China Pharma Holdings, Inc. ("China Pharma") (OTC Bulletin Board: CPHI) which develops, manufactures, and markets generic and branded bio-pharmaceutical products in China, today announced its financial results for the second quarter of 2008.

Second Quarter 2008 Highlights

-- Second quarter revenues increased 31.6% to $11.28 million

-- Net income increases 21.32% to $4.04 million

-- Sales of bio-product Cerebroprotein increased 125.26% year-over-year.

-- EPS was $0.10, up 15.92% year-over-year

First Half Year 2008 Highlights

-- Revenue increased 45.51% for the same period in 2007 to $23 million

-- Net income was $8.23 million, up 44.34% for the same period in 2007

-- EPS was $0.22, up 39.25% for the same period in 2007

-- Company completed capital raise of $10 million

-- Company launched Bumetanide injection in June 2008

Second Quarter of 2008 Results (Unaudited):

Revenues for the second quarter of 2008 increased 31.6% to $11.3 million compared to $8.6 million for the same quarter in 2007. The growth in revenues was primarily due to organic growth of the existing product portfolio and increasing overall enhanced marketing efforts.

Quarterly gross profit for the second quarter of 2008 was $6 million, compared to $3.9 million for the same period last year, with gross margins of 52.8% and 45.5% respectively. The increase of gross margins was favorably impacted by the increase of revenues of our high margin products. The increase in gross margin reflected the management's clear vision of product selection and development.

Total operating expenses for the three months ended June 30, 2008 were $1.6 million compared to $0.53 million for the same period last year, mainly due to increased revenue and operating expenses. Selling expenses for the period increased to approximately $0.46 million from 0.33 million in the second quarter of 2007, which is due to the Company's investment in overall marketing. General and administrative expenses were $0.45 million in the three months ended June 30, 2008, an increase of $0.16 million, or 55.2% compared to the second quarter of 2007. The increase was primarily due to public relations expenses.

Operating income for the second quarter of 2008 totaled $4.4 million, a 30.6% increase, compared to $3.4 million for the same period in 2007. Operating margins were 39.0% compared to 39.3% for the second quarter of 2008 and 2007, respectively.

Net income was $4 million, representing an increase of 21.4% from $3.3 million reported in the same period a year ago. The company had an effective tax rate of 5.5% versus 0% during the second quarter of 2008 and 2007 respectively as the new PRC Enterprise Income Tax Law took effect on January 1, 2008, imposing a unified EIT of 25% on all domestic and foreign-invested companies. China Pharma is allowed a gradual transition to the new 25% tax rate over the next five years and the Company is qualified for a 50% discount of its income tax rate. As a result, the estimated Enterprise Income Tax rate is at 9% in 2008. Earnings per diluted share were $0.10 compared to $0.09 based on 39 million and 37.2 million diluted shares outstanding, respectively. The variance in shares relates to the capital we raised which closed on May 30, 2008.

"We continued to experience strong year-over-year revenue and earning growth from our current portfolio of products combined with stable profit margins, especially during the traditional slow quarter compared to the first and fourth quarters. We believe the results validate the plan that management has been implementing to focus on therapeutics targeting high mortality and high incidence diseases which yield high gross margins. We expect the benefits of these efforts will continue into the future as well. Additionally we launched Bumetanide injection and began recording revenues in June 2008. We are optimistic that this new drug will further improve our profitability and be another growth contributor to our top-line and bottom-line numbers," Ms. Zhilin Li, President and CEO of China Pharma, commented.

Six Month Results

Revenue increased approximately 45.5% to $23 million for the six months ended June 30, 2008 as compared to $15.8 million for the same period last year. Operating expenses for the six months ended June 30, 2008 were $2.7 million compared to $2 million for the same period in 2007, an increase of 36.7%. Operating income for the six months ended June 30, 2008 was $9 million, an increase of 73.5% compared to $5.2 million for the six months ended June 30, 2007.

Net income was $8.2 million for the six months ended June 30, 2008, an increase of $2.5 million, or approximately 44.3% compared to same period last year. This equated to earnings of $0.22 per diluted share, compared to $0.15 per diluted share for the first six months of 2007 based on 38.1 and 36.8 million diluted shares respectively.

Balance Sheet and Cash Flow Discussion

Cash and cash equivalents and restricted cash totaled $7 million on June 30, 2008 compared to $0.68 million on March 31, 2008. The Company had $51.5 million in working capital on June 30, 2008 and a current ratio of 11.3 to 1. Stockholders' equity was $60.1 million on June 30, 2008, representing a book value of approximately $1.42 per diluted share as of June 30, 2008. Part of the net proceeds from this financing will be used for the expansion of the dry power production line. Its production capacity will increase 4 times after this expansion.

CEO Ms Li concludes, "The new rural co-operative medical system is a government funded program; the government is investing in medical insurance for the rural population, and has opened a potential multi-billion dollar market. From the government's endeavors, the new healthcare reform program is especially directed towards expanding medical coverage, and directly increases all aspects of the pharmaceutical market. The medical reforms will be a powerful driver of a rapid and strong increase in the growth of the pharmaceutical industry. From numbers released by the SFDA news center, improvements to the RCMS will continuously boost the expansion of the pharmaceutical market.

According to calculations of a rural population of 900 million, this will increase the market by more than RMB 60 billion. The financing closed during the second quarter is sufficient to finance our new product capacity, to develop high margin products, and to launch more products that meet the need of the market. The requirements of the SFDA have raised the entrance barrier of pharmaceutical enterprises, the GMP-recertification once every five years forced a sharp increase in standards of production facilities and R&D ability of the industry. The SFDA's newly-adopted regulations caused some of China's pharmaceutical companies to close, while other companies chose to sell out their products and distribution network to others who could meet the new regulation. We are advantageously positioned in an industry full of opportunities and challenges. The consolidation of the industry provides many opportunities for mergers and acquisitions."

Conference Call

China Pharma will host a conference call on Wednesday, August 6 at 10:00 am EDT to discuss second quarter 2008 results. To participate in the conference call, please dial the following number ten minutes prior to the scheduled conference call time: (800) 591-6945 International callers should dial (617) 614-4911. The conference pass code is 11374834.

If you are unable to participate in the call at this time, a replay will be available on Wednesday, August 6, at 12:00 pm EDT, through Wednesday, August 13. To access the replay, dial (888) 286-8010. International callers should dial (617) 801-6888. The conference pass code is 77875355.

This conference call will be broadcast live over the Internet and can be accessed by copying and pasting this link into your web browser: http://phx.corporate-ir.net/playerlink.zhtml?c=145098&s=wm&e=1914439 . A replay of the call will also be available on China Pharma's website http://www.chinapharmaholdings.com .

About China Pharma Holdings, Inc.

China Pharma Holdings, Inc. develops, manufactures, and markets generic and brand bio-pharmaceutical products in China that treat a wide range of conditions, including infections, liver diseases, cardiovascular and CNS diseases, and other prevailing diseases. Helpson Bio-pharmaceutical Co., Ltd (Helpson), a specialty pharmaceutical company headquartered in Haikou City, Hainan province in China, is a wholly owned subsidiary of China Pharma Holdings. For more information about China Pharma Holdings, Inc., please visit http://www.chinapharmaholdings.com .

Safe Harbor Statement:

Certain statements in this press release and oral statements made by China Pharma on its conference call in relation to this release, constitute

forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand, increased competition, failure to obtain or maintain intellectual property protection, downturns in the Chinese economy, uncompetitive levels of research and development, failure to obtain regulatory approvals, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

CHINA PHARMA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(unaudited)

For the three months For the six months

ended June 30, ended June 30,

2008 2007 2008 2007

Revenue $11,278,803 $8,570,256 $22,995,848 $15,804,024

Cost of revenue 5,325,992 4,670,685 11,235,760 8,605,524

Gross profit 5,952,811 3,899,571 11,760,088 7,198,500

Operating expenses:

Selling expenses 456,630 326,147 794,422 474,030

General and

administrative 451,096 290,596 799,489 575,079

Research and

development 37,226 4,477 37,226 --

Bad debt expense, net

of recoveries 612,413 (87,149) 1,079,813 934,058

Total operating

expenses 1,557,365 534,071 2,710,950 1,983,167

Income from operations 4,395,446 3,365,500 9,049,138 5,215,333

Non-operating income

(expenses):

Interest income 5,035 11,633 5,035 25,408

Interest expense (50,440) (58,942) (95,713) (115,841)

Other (expense) income (77,450) 7,937 (77,450) 575,277

Total non-operating

income (expense) (122,855) (39,372) (168,128) 484,844

Income before taxes 4,272,591 3,326,128 8,881,010 5,700,177

Income tax expense 235,292 -- 653,170 --

Net income $4,037,299 $3,326,128 $8,227,840 $5,700,177

Comprehensive income -

foreign currency

translation

adjustments 974,800 216,416 2,720,042 651,683

Comprehensive income $5,012,099 $3,542,544 $10,947,882 $6,351,860

Basic and Diluted

Earnings Per Share $0.10 $0.09 $0.22 $0.15

Basic and Diluted

Weighted Average

Shares Outstanding 38,982,235 37,228,938 38,130,586 36,785,909

CHINA PHARMA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

June 30, December 31,

2008 2007

(Restated)

ASSETS

Current Assets:

Cash and cash equivalents $7,037,074 $1,830,335

Trade accounts receivable, less

allowance for doubtful accounts

of $3,661,065 and $2,440,852,

respectively 27,342,048 18,572,976

Other receivables, less allowance for

doubtful accounts of $94,997 and $43,908,

respectively 822,776 413,596

Advances to suppliers 6,260,588 2,757,320

Inventory 14,976,919 14,448,771

Total Current Assets 56,439,405 38,022,998

Non-current Assets:

Property and equipment, net of

accumulated depreciation of

$1,275,949 and $1,003,802,

respectively 2,603,819 2,625,216

Intangible assets, net of accumulated

amortization of $291,809 and

$221,715, respectively 2,498,375 2,063,252

Advances for purchases of intangible

assets 3,194,915 807,345

Deferred tax assets 375,606 187,509

Total Non-current Assets 8,672,715 5,683,322

TOTAL ASSETS $65,112,120 $43,706,320

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Trade accounts payable $607,489 $297,299

Accrued expenses 48,813 261,301

Accrued taxes payable 1,208,254 311,009

Other payables 138,311 86,161

Advances from customers 500,773 261,583

Short-term notes payable 2,473,879 2,693,428

Total Current Liabilities 4,977,519 3,910,781

Research and development commitments 36,381 34,181

Total Liabilities 5,013,900 3,944,962

Stockholders' Equity:

Common stock, $0.001 par value,

60,000,000 shares authorized,

42,278,938 and 37,278,938

shares issued and outstanding,

respectively 42,279 37,279

Additional paid-in capital 21,062,586 11,678,606

Foreign currency translation

adjustment 5,559,346 2,839,304

Retained earnings 33,434,009 25,206,169

Total Stockholders' Equity 60,098,220 39,761,358

TOTAL LIABILITIES AND STOCKHOLDERS'

EQUITY $65,112,120 $43,706,320

CHINA PHARMA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

For the six months ended June 30,

2008 2007

Cash Flows from Operating Activities: (Restated)

Net income $8,227,840 $5,700,177

Depreciation and amortization 332,077 201,540

Compensation paid with warrants 120,042 --

Gain on sale of intangibles -- (572,446)

Changes in assets and liabilities:

Trade accounts receivable (7,358,577) (4,074,259)

Other receivables (371,696) 235,008

Advances to suppliers (3,231,357) (2,079,529)

Inventory 390,430 (1,828,719)

Deferred tax assets (171,030) --

Deferred offering costs -- 60,062

Trade accounts payable 282,790 341,285

Accrued expenses (117,176) 57,740

Accrued taxes payable 852,319 (2,715)

Other payables (57,543) (75,127)

Advances from customers 216,039 33,704

Net Cash from Operating Activities (885,842) (2,003,279)

Cash Flows from Investing Activities:

Purchase of property and equipment (16,683) (25,931)

Purchase of intangible assets (424,170) --

Advances for purchases of intangibles (2,269,286) --

Net Cash from Investing Activities (2,710,139) (25,931)

Cash Flows from Financing Activities:

Proceeds from sale of common stock

and warrants 9,268,938 3,797,183

Payments of short term notes payable (381,753) --

Net Cash Proceeds from Financing

Activities 8,887,185 3,797,183

Effect of Exchange Rate Changes on

Cash (84,465) 11,691

Net Change in Cash 5,206,739 1,779,664

Cash and Cash Equivalents at

Beginning of Period 1,830,335 656,441

Cash and Cash Equivalents at End of

Period $7,037,074 $2,436,105

Supplemental Cash Flow Disclosure:

Cash paid for interest $143,893 $115,841

Cash paid for income taxes 422,553 --

For more information, please contact:

China Pharma Holdings, Inc.

Sophia Yu

Tel: +86-898-6681-1730

Email: hps@chinapharmaholdings.com

HC International, Inc.

Alan Sheinwald

Tel: +1-914-669-0222

Email: Alan.sheinwald@hcinternational.net