CHENGDU, China, February 14, 2012 /PRNewswire-Asia/ -- 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) announced financial results for the second quarter of Fiscal Year 2012.
Second quarter fiscal year 2012 ended December 31, 2011 financial highlights:
2Q FY2012 Results | ||||
2Q FY2012 | 2Q FY2011 | YoY | ||
Sales | $18.2 million | $25.3 million | -28.0% | |
Gross Profit | $6.1 million | $11.3 million | -46.3% | |
Operating Income | $2.1 million | $5.3 million | -60.3% | |
Net Income | $1.7 million | $5.9 million | -71.2% | |
EPS (Diluted) | $0.06 | $0.20 | -70.0% | |
Diluted Shares | 29.4 million | 30.5 million | -3.6% | |
Sales for the quarter ended December 31, 2011 was $18.2 million, a decrease of 28.0% as compared to $25.3 million for the quarter ended December 31, 2010, but a slight gain from the first quarter of fiscal 2012 which was $17.5 million. The sales decrease from the prior year was mainly due to 1) generic pricing pressure, 2) government policy to prioritize Essential Drug List (EDL) drug sales that led to the sales and margin compression of higher margined generic pharmaceuticals, and 3) in the quarter ended December 31, 2010, ahead of the current healthcare reform policies being enforced, downstream customers had significantly built up their inventory which led to a revenue gain of 69.6% for TPI from the prior year.
Our five core product sales are: Gingko Mihuan (GMOL): $4.3 million; Apu Shuangxin (APU): $0.77 million; Azithromycin (AZI): $0.80 million; Xue Lian Chong Cao (XLCC): $0.78 million; and Qing Re Jie Du (QR): $0.83 million. These products totaled $7.5 million in sales, representing 41% of the total quarterly revenue. This is a gain of 33.9% from the first quarter fiscal 2012 during which core product sales totaled $5.6 million, or 32% of the quarterly revenue.
Gross Margin for the quarter ended December 31, 2011 was 33.1% as compared to 44.7% for the quarter ended December 31, 2010. The factors that influence the gross margins are mainly raw material prices and production cost.
During the second quarter, our organic product portfolio delivered 42.4% gross margins, 9% lower than 51.4% for the quarter ended December 31, 2010. The reduction in gross margins are due to 1) generic pricing pressure, 2) distribution business through Tianyin Medicine Trading (TMT) delivered $4.5 million at approximately 10% gross margin, and 3) increase of raw material costs.
Based on the blend of the TMT lower margin revenue and the current pricing restriction, our overall gross margin in the near term, on a quarter to quarter comparison basis, may trend lower, but on a sequential basis should stabilize depending on the sales mix of TMT, JCM API revenue as compared to the proprietary portfolio revenue performance.
Operating Expenses were $4.0 million for the quarter ended December 31, 2011, as compared to $6.0 million for the quarter ended December 31, 2010 and also compared with $3.7 million in the first quarter of fiscal 2012. The decrease in operating expenses is mainly associated with 1) the lower sales and marketing costs as a result of lower sales, and 2) in the prior year, there was a one-time restricted stock compensation impact of approximately $0.5 million in the quarter ended December 31, 2010.
Net Income was $1.7 million for the quarter ended December 31, 2011, as compared to the net income of $1.5 million for the first quarter of fiscal 2012, and also compared to net income of $6.0 million which includes $1.6 million non-cash gain due to the change in fair value of warrants liability for the quarter ended December 31, 2010, a decrease of $4.3 million. Net profit margins for the three months ended December 31, 2011 decreased to 9.0% from 17.4% for the three months ended December 31, 2010, and also compared with 8.6% for the first quarter of fiscal 2012.
Diluted earnings per share for the quarter ended December 31, 2011 were $0.06 based on 29.4 million shares, a decrease of 70% from the earnings of $0.20 per diluted share for the quarter ended December 31, 2010, based on 30.5 million shares which include approximately $0.05 per share non-cash gain due to the change of fair value of warrants liability.
Balance Sheet and Cash Flow
As of December 31, 2011, we had cash and cash equivalents of $36.9 million. Net cash generated from operating activities was $8.1 million for the six months ended December 31, 2011, compared with $10.8 million operating cash flow for the six months ended December 31, 2010. The improvement in operating cash flow was primarily the result of accounts receivable collection and reduced inventory. The Days Sale Outstanding (DSO) for the quarter was 20.4 days improving from 27.5 days for the quarter ended December 31, 2010. We believe that TPI is adequately funded to meet all of the working capital and capital expenditure needs for FY2012.
Business Development & Outlook
GMOL Capsule formulation
In November 2011, we announced the formulation expansion program for our flagship product GMOL (SFDA certification number: H20013079; patent number: 20061007800225). GMOL, the proprietary prescription medicine for TPI, is used nationwide in China to treat brain ischemia and infarction, coronary heart diseases, memory dysfunction and other neurological disorders. The new capsule formulation is more convenient to carry while traveling, adding to its ease of use for those long term treatment users. In addition, the cost of production and packaging material for the capsule formulation will reduce the overall cost of sales by 70% while extending the expiration period to 3 years from the current 2 years for oral liquid form. The new capsule formulation is expected to support the revenue growth of GMOL at approximately 30% year over year and improve the gross margin of GMOL products to 75% or higher. TPI will also apply for patent protection for the new capsule formulation. The R&D cost associated with the capsule formulation is estimated at $1-2 million.
Jiangchuan Macrolide Project (JCM)
In January 2012, following a series of the internal quality assessment and the environmental safety and impact assessment, JCM was approved for its GMP certification designated as "CHUAN M0799" valid through the period of December 31, 2011 until December 31, 2015.
Qionglai (QLF) Project
In preparation for the new Good Manufacturing Practice (GMP) standards stipulated by the PRC government in early 2011, TPI initiated the process of optimizing the manufacturing facilities and production lines in compliance with the new GMP standards by 2013. Concurrently, the city of Chengdu has re-designated various industrial parks of nearby counties to for particular industries such as automobile, biotechnologies, pharmaceuticals and chemical engineering for individual locations. As a consequence, TPI's manufacturing facility at the Longquan district, east of Chengdu, which is designated for automotive industry, is scheduled to be relocated to Qionglai city, south of Chengdu, which is designated for pharmaceutical industry. The QLF is approximately 18 miles from the Company's recently completed Jiangchuan macrolide (JCM) facility. The proposed relocation project also includes our TCM pre-extraction plant which is located near the center of city of Chengdu surrounded by rapidly expanding residential area.
On February 13, 2012, TPI announced the official start of its Qionglai Facility (QLF) project following the initial planning period. The Phase I of QLF project will be the construction of the pre-extraction plant which is targeted for completion by the end of 2012 calendar year.
The pre-extraction is the first step of the manufacturing process of modernized traditional Chinese medicine (mTCM). The pre-extraction facility will conduct initial processing of TCM raw material, separation using alcohol or water precipitation, filtration, centrifugation, concentration and purification of TCM pharmaceutical ingredients which will be further processed for the production of mTCM at the formulation facility.
The QLF occupies 80 mu or 53,000 m2. Both pre-extraction plant and the formulation plant are to be relocated. The combined QLF plant, designed and constructed according to the latest GMP standards, is expected to relieve the current capacity saturation at TPI's facilities. The re-location and construction cost is estimated at $25 million for Phase I which will expand the current capacity by 30%. For Phase II QLF, an additional $10 million may be employed to double the current capacity by 2013.ally begun after the initial planning stage.
Conference Call
Senior management of TPI will host its earnings conference call for the second quarter of fiscal 2012 ending December 31, 2011 at 8:30 a.m. ET on Tuesday, February 14, 2012.
Interested parties may access the call by dialing +1-877-941-1427 (U.S.), 1-480-629-9664 (International)
The conference ID is 4512254. It is advisable to dial in approximately 5 minutes prior to the start of the call.
A replay will be available by calling +1-877-870-5176 (U.S.), 1-858-384-5517 (International), from 2/14/2012 at 11:30 am ET till 2/28/2012 at 11:59 pm ET, Replay Pin Number: 4512254
This call is being web cast by ViaVid Broadcasting and can be accessed at ViaVid's website at the following link: http://viavid.net/dce.aspx?sid=00009369
About TPI
Headquartered at Chengdu, China, TPI is a pharmaceutical company that specializes in the development, manufacturing, marketing and sales of patented biopharmaceutical, modernized traditional Chinese medicines, branded generics and other pharmaceuticals. TPI currently manufactures a comprehensive portfolio of 58 products, 24 of which are listed in the highly selective national medicine reimbursement list, 7 are included in the essential drug list of China. TPI's pipeline targets various high incidence healthcare indications.
For more information about TPI, please visit: http://www.tianyinpharma.com.
Safe Harbor Statement
The Statements which are not historical facts contained in this press release are forward-looking statements that involve certain risks and uncertainties including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, government approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the Company's filings with the Securities and Exchange Commission.
For more information, please contact:
Investors Contact: ir@tpi.asia
Web: http://www.tianyinpharma.com
Tel: +86-28-8551-6696 (Chengdu, China)
+86 134-36-550011 (China)
Address:
23rd Floor Unionsun Yangkuo Plaza
No. 2, Block 3, South Renmin Road
Chengdu, 610041
China
TIANYIN PHARMACEUTICAL CO., INC. Consolidated Balance Sheets | |||||||||
December 31, | June 30, | ||||||||
2011 | 2011 | ||||||||
Assets | (Unaudited) | ||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 36,908,404 | $ | 31,724,906 | |||||
Restricted cash | 3,116,520 | - | |||||||
Accounts receivable, net of allowance for doubtful accounts of $141,034 | |||||||||
and $421,079 at December 31, 2011 and June 30, 2011, respectively | 9,021,527 | 9,036,030 | |||||||
Inventory | 4,106,289 | 4,932,353 | |||||||
Advance payments | - | 1,639,820 | |||||||
Other current assets | 205,051 | 62,951 | |||||||
Total current assets | 53,357,791 | 47,396,060 | |||||||
Property and equipment, net | 27,504,810 | 27,465,915 | |||||||
Intangibles, net | 17,889,581 | 15,339,194 | |||||||
Total assets | $ | 98,752,182 | $ | 90,201,169 | |||||
Liabilities | |||||||||
Current liabilities: | |||||||||
Accounts payable and accrued expenses | $ | 2,703,892 | $ | 2,063,792 | |||||
Accounts payable - construction related | 1,274,220 | 1,824,067 | |||||||
Short-term bank loans | 4,407,200 | 2,784,600 | |||||||
Trade notes payable | 2,675,800 | - | |||||||
VAT taxes payable | 339,095 | 674,974 | |||||||
Income taxes payable | 600,114 | 930,418 | |||||||
Other taxes payable | 85,810 | 124,154 | |||||||
Other current liabilities | 497,281 | 519,602 | |||||||
Total current liabilities | 12,583,412 | 8,921,607 | |||||||
Total liabilities | 12,583,412 | 8,921,607 | |||||||
Equity | |||||||||
Stockholders' equity: | |||||||||
Common stock, $0.001 par value, 50,000,000 shares authorized, | 29,396 | 29,396 | |||||||
29,396,276 shares issued and outstanding at December 31, 2011 | |||||||||
and June 30, 2011 | |||||||||
Additional paid-in capital | 30,065,452 | 30,065,452 | |||||||
Statutory reserve | 5,409,764 | 5,409,764 | |||||||
Treasury stock | (111,587) | (111,587) | |||||||
Retained earnings | 42,562,805 | 39,374,018 | |||||||
Accumulated other comprehensive income | 7,592,341 | 6,077,299 | |||||||
Total stockholders' equity | 85,548,171 | 80,844,342 | |||||||
Noncontrolling interest | 620,599 | 435,220 | |||||||
Total equity | 86,168,770 | 81,279,562 | |||||||
Total liabilities and equity | $ | 98,752,182 | $ | 90,201,169 | |||||
TIANYIN PHARMACEUTICAL CO., INC. Consolidated Statements of Operations (Unaudited) | |||||||||||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||
Sales | $ | 18,236,701 | $ | 25,333,853 | $ | 35,765,279 | $ | 47,284,667 | |||||||||
Cost of sales | 12,148,399 | 13,999,623 | 23,823,928 | 25,139,312 | |||||||||||||
Gross profit | 6,088,302 | 11,334,230 | 11,941,351 | 22,145,355 | |||||||||||||
Operating expenses: | |||||||||||||||||
Selling expenses | 2,801,630 | 4,414,759 | 5,278,956 | 8,376,898 | |||||||||||||
General and administrative expenses | 1,022,039 | 1,332,676 | 2,041,161 | 3,357,763 | |||||||||||||
Research and development | 210,784 | 258,702 | 421,499 | 516,677 | |||||||||||||
Total operating expenses | 4,034,453 | 6,006,137 | 7,741,616 | 12,251,338 | |||||||||||||
Income from operations | 2,053,849 | 5,328,093 | 4,199,735 | 9,894,017 | |||||||||||||
Other income (expenses): | |||||||||||||||||
Interest income | 43,246 | 27,318 | 78,207 | 57,598 | |||||||||||||
Interest expense | (82,930) | (21,734) | (132,775) | (42,808) | |||||||||||||
Change in fair value of warrants liability | - | 1,555,421 | - | 1,282,404 | |||||||||||||
Gain on disposal of fixed assets | 229,110 | - | 229,110 | - | |||||||||||||
Other expenses | (5,115) | - | (9,833) | - | |||||||||||||
Total other income | 184,311 | 1,561,005 | 164,709 | 1,297,194 | |||||||||||||
Income before provision for income tax | 2,238,160 | 6,889,098 | 4,364,444 | 11,191,211 | |||||||||||||
Provision for income tax | 556,590 | 942,068 | 1,175,657 | 1,847,507 | |||||||||||||
Net income | 1,681,570 | 5,947,030 | 3,188,787 | 9,343,704 | |||||||||||||
Less: Net loss attributable to | |||||||||||||||||
noncontrolling interest | (56,035) | (8,785) | (74,058) | (16,629) | |||||||||||||
Net income attributable to Tianyin | |||||||||||||||||
Pharmaceutical Co., Inc. | 1,737,605 | 5,955,815 | 3,262,845 | 9,360,333 | |||||||||||||
Basic earnings per share | $ | 0.06 | $ | 0.21 | $ | 0.11 | $ | 0.33 | |||||||||
Diluted earnings per share | $ | 0.06 | $ | 0.20 | $ | 0.11 | $ | 0.31 | |||||||||
Weighted average number of common | |||||||||||||||||
shares outstanding | |||||||||||||||||
Basic | 29,396,276 | 27,986,026 | 29,396,276 | 27,939,271 | |||||||||||||
Diluted | 29,396,276 | 30,524,479 | 29,396,276 | 30,477,723 | |||||||||||||
TIANYIN PHARMACEUTICAL CO., INC. Consolidated Statements of Comprehensive Income (Unaudited) | |||||||||||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||
Net income | $ | 1,681,570 | $ | 5,947,030 | $ | 3,188,787 | $ | 9,343,704 | |||||||||
Other comprehensive income | |||||||||||||||||
Foreign currency translation adjustment | 567,535 | 814,035 | 1,515,042 | 1,766,917 | |||||||||||||
Comprehensive income | 2,249,105 | 6,761,065 | 4,703,829 | 11,110,621 | |||||||||||||
Less: comprehensive income (loss) attributable | |||||||||||||||||
to noncontrolling interest | (52,025) | 178,443 | 185,379 | 389,762 | |||||||||||||
Comprehensive income attributable to | |||||||||||||||||
Tianyin Pharmaceutical Co., Inc. | $ | 2,301,130 | $ | 6,582,622 | $ | 4,518,450 | $ | 10,720,859 | |||||||||
TIANYIN PHARMACEUTICAL CO., INC. Consolidated Statements of Cash Flows (Unaudited) | |||||||||
For the Six Months Ended | |||||||||
December 31, | |||||||||
2011 | 2010 | ||||||||
Cash flows from operating activities: | |||||||||
Net Income | $ | 3,188,787 | $ | 9,343,704 | |||||
Adjustments to reconcile net income to net cash | |||||||||
provided by (used in) operating activities: | |||||||||
Depreciation and amortization | 518,131 | 602,584 | |||||||
Change in fair value of warrants | - | (1,282,404) | |||||||
Gain on disposal of fixed assets | (229,110) | - | |||||||
Share-based payments | - | 1,762,572 | |||||||
Bad debt expense | 43,726 | - | |||||||
Changes in current assets and current liabilities: | |||||||||
Accounts receivable | 46,185 | (949,316) | |||||||
Inventory | 908,557 | (1,744,837) | |||||||
Advance payments | 1,662,080 | - | |||||||
Other current assets | (154,593) | 46,231 | |||||||
Accounts payable and accrued expenses | 608,143 | (170,205) | |||||||
Accounts payable - construction related | (579,391) | 2,918,583 | |||||||
Trade notes payable | 2,665,260 | - | |||||||
VAT taxes payable | (346,290) | (1,020) | |||||||
Income taxes payable | (345,177) | 61,860 | |||||||
Other taxes payable | (40,352) | 151,575 | |||||||
Dividends payable | - | (18,138) | |||||||
Other current liabilities | (31,265) | 45,190 | |||||||
Total adjustments | 4,725,904 | 1,422,675 | |||||||
Net cash provided by operating activities | 7,914,691 | 10,766,379 | |||||||
Cash flows from investing activities: | |||||||||
Addition to property and equipment | (2,836) | (7,400,717) | |||||||
Proceeds from disposal of fixed assets | 377,164 | - | |||||||
Addition of construction in progress | (136,400) | - | |||||||
Additions to intangible assets - land use right | (1,822,780) | - | |||||||
Additions to intangible assets - drug | (768,222) | - | |||||||
Loans receivable | - | 298,320 | |||||||
Net cash used in investing activities | (2,353,074) | (7,102,397) | |||||||
Cash flows from financing activities: | |||||||||
Restricted cash | (3,104,244) | - | |||||||
Proceeds from short-term bank loan | 1,567,800 | - | |||||||
Dividends paid | - | (54,857) | |||||||
Net cash used in financing activities | (1,536,444) | (54,857) | |||||||
Effect of foreign currency translation on cash | 1,158,325 | 550,470 | |||||||
Net increase in cash and cash equivalents | 5,183,498 | 4,159,595 | |||||||
Cash and cash equivalents - beginning | 31,724,906 | 27,009,066 | |||||||
Cash and cash equivalents - ending | $ | 36,908,404 | $ | 31,168,661 | |||||
Supplemental disclosures of cash flow information | |||||||||
Cash paid for interest | $ | 132,775 | $ | 42,809 | |||||
Cash paid for income taxes | $ | 1,560,653 | $ | 1,847,507 | |||||