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TPI Reports Fiscal Year 2013 Financial Results

September 27, 2013

CHENGDU, China, Sept. 27, 2013 /PRNewswire/ — 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 fiscal year 2013.

Fiscal Year 2013 Ended June 30, 2013 Financial Highlights:

    --  Revenue was $67.5 million compared with $69.6 million in fiscal year
        2012, a decrease of 3.0% year over year;
    --  Operating income was $9.3 million, compared with $8.5 million in fiscal
        year 2012, an increase of 9.0% year over year;
    --  Net Income was $6.6 million compared with $6.2 million in fiscal year
        2012, an increase of 6.0% year over year;
    --  Earnings per share of $0.23 per basic share, $0.23 per diluted share,
        compared with $0.22 per basic share, or $0.22 per diluted share in
        fiscal year 2012;
    --  Cash and cash equivalents totaled $26.8 million on June 30, 2013; and
    --  Operating cash flow for the fiscal year 2013 ended June 30, 2013 was
        $8.2 million, compared with operating cash flow of $8.0 million for the
        fiscal year 2012 ended June 30, 2012.

Comparison of results for the quarters ended June 30, 2013 and 2012:


                              Fiscal Years

                             Ended June 30,
                             --------------

                               2013             2012
                               ----             ----

                                     (In millions)

    Sales                             $67.5          $69.6

    Cost of sales                     $41.5          $45.3

    Gross profit                      $26.0          $24.3

    Total operating expenses          $16.7          $15.8

    Operating income                   $9.3           $8.5

    Provision for income
     taxes                             $2.4           $2.4

    Net income                         $6.6           $6.4

Sales for the fiscal year ended June 30, 2013 was $67.5 million, decreased by 3.0% from $69.6 million for the fiscal year 2012, as a result of generic pricing pressure, coupled with prolonged JCM production ramp up. We are currently exploring and implementing various strategies to stabilize our generic sales. In addition to the distribution revenue from TMT and JCM macrolide API revenue, we are also focusing on expanding sales efforts at tier 3 and tier 2 hospitals in major cities of China to strengthen our high-end hospital pharmaceutical market segment. Our top five products by sales in fiscal year 2013 are:


    Product Description                             Amount
    -------------------                             ------

    Ginkgo Mihuan Oral Liquid (GMOL)
     for cardiovascular diseases                          $  26.1 million

    Mycophenolate mofetil capsules (MM)
     for renal transplant                                 $  6.9 million

    Azithromycin Dispersible Tablets
     (AZI) for infectious diseases                        $  4.6 million

    Qingre Jiedu Oral Liquid (QRE) for
     viral infections                                     $  3.6 million

    Yanyan Tablets (YY) for throat
     inflammation                                         $  1.6 million

The core product portfolio totaled $42.7 million or 84% of the organic portfolio revenue.

Gross profit for fiscal year ended June 30, 2013 was approximately $26.0 million with 38.5% gross margins an increase of 7% year over year, compared with $24.3 million with 35.0% gross margin for fiscal year ended June 30, 2012. The improvement in gross margins was mainly attributable to the increase of the sales of GMOL by 53.0% year over year from $17.1 million in fiscal year 2012 to $26.1 million, along with other core products revenue growth that totaled $42.7 million with higher margins. This offset the prevailing generic pricing pressure and the lower margined TMT distribution revenues, whose gross margins average about 10%. During the fiscal year 2013, our organic product portfolio delivered approximately 51.6% gross margins, a significant improvement from 45.0% in fiscal year 2012. Provided the blend of core product sales growth along with TMT lower margin distribution revenue and lower margin generic sales as the current pricing trend continues, we anticipate our overall gross margin in the near term to stabilize above 36% for the fiscal 2014, influenced by the revenue mix of TMT revenue and JCM macrolide API revenue, as compared to the core product portfolio performance.

Operating and R&D Expenses were $16.7 million in fiscal year 2013, compared with $15.8 million in fiscal year 2012. The increase is associated with the increase of selling and marketing expenses. We expect the operating expenses percentage to stabilize between 20 – 25% of the revenue for the coming year.

Net income was $6.6 million in fiscal year ended June 30, 2013, an increase of 6.0% from $6.2 million in fiscal year ended June 30, 2012.

Diluted earnings per share for the fiscal year 2013 were $0.23 based on 29.3 million shares compared with the earnings of $0.22 per diluted share for the fiscal year 2012, based on 29.3 million shares.

Balance Sheet and Cash Flow

As of June 30, 2013, we had working capital totaling $35.9 million, including cash and cash equivalents of $26.8 million. Net cash generated from operating activities was $8.2 million for fiscal year ended June 30, 2013 as compared with $7.9 million for fiscal year ended June 30, 2012. The increase was mainly due to the increase of net income. At the end of fiscal year 2013, the accounts receivable was $10.1 million, 15.0% of the total revenue, improved from $11.3 million, or 16.2% of the total revenue for fiscal 2012, which is mainly due to the shortened payment cycle by distributors driven by core products revenue performance. Net cash used in investing activities for the fiscal year ended June 30, 2013 totaled $(16.1) million compared with $(5.1) million in the fiscal year ended June 30, 2012 which were mainly related to the construction and equipment purchase of the QLF project. We anticipate that in the first half of fiscal year 2014 the capital expenditure will be approximately $10 million due to our QLF relocation. We believe that TPI is adequately funded to meet all of our working capital and capital expenditure needs for fiscal year 2014.

Business Development & Outlook

R&D for additional indications of flagship product Gingko Mihuan (GMOL)

Our flagship product Gingko Mihuan Oral Liquid (GMOL, CFDA certification number: H20013079; patent number: 20061007800225) contributed approximately 39% to our total revenue in fiscal year 2013. Clinical application and information gathered from our physicians showed that in addition to our approved indication for GMOL: cardiovascular disorders, coronary heart disease and cerebral ischemic attack including strokes, off-label use of GMOL have been indicated in hepatic diseases and ophthalmological diseases. The validity of these observations is currently being investigated.

Jiangchuan Macrolide Facility (“JCM”)

In April 2009, we entered into a land supply agreement with the Sichuan Xinjin County Government to acquire 100 mu (approximately 66,700 square meters) of land within the Xinjin Chemical Industrial Park to establish a manufacturing plant for Active Pharmaceutical Ingredients (“API”) of macrolides antibiotics. In August 2009, we partnered with Sichuan Mingxin Pharmaceutical Co., Ltd. in the launch of a new joint venture, Sichuan Jiangchuan JV (“JCM”), which primarily engages in the R&D, manufacturing, sales and marketing of API and chemical intermediates of macrolide antibiotics. The joint venture is 87% owned by TPI. The JCM construction was completed in 2011.

In January 2012, JCM was approved for its GMP certification designated as “CHUAN M0799,” which is valid for the period of December 31, 2011 until December 31, 2015. JCM has started producing macrolide API for TPI’s production of Azithromycin Dispersible Tablets (CFDA No: H20074145) since July 2012. Currently the monthly production capacity of JCM is 10 tons of Azithromycin macrolide API. As of September 27, 2013, the JCM facility has been in operation and mainly supporting TPI’s production of Azthromycin tablets.

Tianyin Medicine Trading Distribution Business (“TMT”)

We have been developing the distribution portfolio of TMT which distributes products manufactured by both TPI and other pharmaceutical companies to fuel our expanding sales network as well as to provide synergy to our existing organic product portfolio. TMT has been distributing mainly TPI’s own products since its inception in 2009. In 2010 we signed a distribution contract with Jiangsu Lianshui Pharmaceutical, one of the most celebrated national brand injection pharmaceutical manufacturers, to distribute approximately 15 Lianshui-branded generic injection products including cough suppressant, antibiotics, anti-inflammatory medicines and products for other healthcare indications. The distribution contract was successfully extended for the following year until 2014. The annual distribution revenue from TMT reached approximately $16.2 million for the fiscal year 2013.

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

In preparation for the new Good Manufacturing Practice (GMP) standards stipulated by the PRC 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 on August 27, 2013 for the next three years until the end of 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. The Qionglai facility (QLF) post-relocation is approximately 18 miles from the Company’s recently completed JCM facility. The proposed relocation project also includes our TCM pre-extraction plant which is currently located near the center of the city of Chengdu surrounded by a rapidly expanding residential area. Both the pre-extraction plant and the formulation plant will subsequently be relocated to Qionglai County to become a combined QLF plant, which is estimated to be 80 mu or approximately 13 acres. The combined QLF plant, designed and constructed according to the latest GMP standards, is expected to relieve the current capacity saturation at the current facilities. The re-location cost for Phase I is estimated at $25 million, which, when completed, is expected to expand the current capacity by approximately 30%. If the Company decides to further expand the capacity, Phase II QLF, an additional $10 million may be invested to double the current capacity. Since the official start of the relocation project in February 2012, the construction of the QLF project has been progressing on schedule. The Phase I of relocation of pre-extraction plant is expected to complete by the end of 2013 calendar year.

In order to facilitate the relocation of Chengdu Tianyin’s business operation to Qionglai County and to secure land use rights for the relocation of manufacturing facilities, Chengdu Tianyin needed to establish its presence at Qionglai County during the process of construction, while TMT is registered in Longquan County. Therefore, the Company decided to acquire a pharmaceutical distribution company and registered it in Qionglai County as a subsidiary of Chengdu Tianyin. On August 29, 2012, Chengdu Tianyin entered into a Share Transfer Agreement with the shareholders of Sichuan Hengshuo Pharmaceutical Co., Ltd (“Sichuan Hengshuo” or “HSP”), a PRC pharmaceutical trading company, to acquire 100% ownership of HSP for a total consideration of approximately $0.2 million (RMB 1.3 million). The share transfer was closed on November 30, 2012, pursuant to which Chengdu Tianyin now owns 100% of HSP and Dr. Guoqing Jiang has become the legal representative of HSP.

Fiscal 2013 Guidance

Our revenue of approximately $67.5 million came below our previously estimated 5% growth projection year over year. This was mainly due to the tightened pricing control of generic medicines in China amid the healthcare reform and from the government’s efforts to promote lower margined essential drugs (EDL) prices that simultaneously compressed our margins as well as our sale volumes of those generic products. Those factors, together with the negative market environment of Azithromycin API pricing led to intensified market and pricing competition combined with an excess of capacity that may continue to last for a few years.

Our net margin guidance met our estimated 10% goal and delivered net income for our fiscal year 2013 of $6.8 million, a growth of 6% from fiscal year 2012. This was primarily attributable to the improvement of our gross margins driven by growth in our core product sales growth.

The following factors, in our opinion, will influence the future growth perspectives of our Company:

    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. Gradual ramp up of JCM revenue in the fiscal year 2014;
    3. The stabilization of generic sales following the progressive pricing
       restrictions as a result of the ongoing healthcare reform;
    4. Steady TMT distribution revenue contribution; and
    5. QLF relocation and smooth transition of production capacity.

Considering the continuous generic pricing pressure going forward, along with gradual development of our JCM business and the steady TMT distribution revenue for the following year, we forecast that the revenue growth for TPI may range from 0% to 5% for the coming year, along with a 10% net margin. (The forecasted net income guidance excluded any non-cash expenses associated with stock compensation plans or stock option expenses.)

Management will continue to evaluate the Company’s business outlook and communicate any changes on a quarterly basis or as when appropriate.

Conference Call

Senior management of TPI will host its earnings conference call for the fiscal year 2013 ended June 30, 2013 at 9:00 a.m. ET on Friday, September 27(th) , 2013.

Interested parties may access the call by dialing: TOLL-FREE 1-877-941-2068; TOLL/INTERNATIONAL 1-480-629-9712

The conference ID is 4640745. It is advisable to dial in approximately 5 minutes prior to the start of the call.

A replay will be available by calling: TOLL-FREE 1-877-870-5176; TOLL/INTERNATIONAL 1-858-384-5517

From: 09/27/13 @ 12:00 pm Eastern Time

To: 10/11/13 @ 11:59 pm Eastern Time

Replay Pin Number: 4640745

This call is being web cast by ViaVid Broadcasting and can be accessed at ViaVid’s website at the following link: http://public.viavid.com/index.php?id=106103

About TPI

Headquartered at Chengdu, China, TPI is a pharmaceutical company that specializes in the development, manufacturing, marketing and sales of patented biopharmaceutical, mTCM, branded generics and API. TPI currently manufactures a comprehensive portfolio of 58 products, 24 of which are listed in the highly selective national medicine reimbursement list, 10 are included in the essential drug list (EDL) 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 Statements of Operations

                                          For the Years Ended June 30,
                                          ----------------------------

                                            2013                    2012
                                            ----                    ----

    Sales                                         $67,500,476            $69,605,758

    Cost of sales                                  41,496,812             45,274,326
                                                   ----------             ----------

    Gross profit                                   26,003,664             24,331,432

    Operating expenses

    Selling expenses                               11,442,664             10,672,817

    General and
     administrative expenses                        4,351,592              4,255,528

    Research and development                          894,995                860,081
                                                      -------                -------

    Total operating expenses                       16,689,251             15,788,426
                                                   ----------             ----------

    Income from operations                          9,314,413              8,543,006

    Other income (expenses):

    Interest income                                   162,563                209,037

    Interest expense                                 (437,897)              (331,334)

    Other income                                            -                189,268
                                                          ---                -------

    Total other income
     (expenses)                                      (275,334)                66,971
                                                     --------                 ------

    Income before provision
     for income taxes                               9,039,079              8,609,977

    Provision for income
     taxes                                          2,423,906              2,368,059
                                                    ---------              ---------

    Net income                                      6,615,173              6,241,918

    Less: Net loss
     attributable to
     noncontrolling interest                          (56,978)              (116,772)
                                                      -------               --------

    Net income attributable
     to Tianyin
     Pharmaceutical Co., Inc.                       6,672,151              6,358,690

    Basic earnings per share                            $0.23                  $0.22
                                                        =====                  =====

    Diluted earnings per
     share                                              $0.23                  $0.22
                                                        =====                  =====

    Weighted average number
     of common shares
     outstanding:

    Basic                                          29,341,695             29,308,442
                                                   ==========             ==========

    Diluted                                        29,341,695             29,308,442
                                                   ==========             ==========


    TIANYIN PHARMACEUTICAL CO., INC.

    Consolidated Statements of Comprehensive Income

                                                    For the Years Ended June 30,
                                                    ----------------------------

                                                      2013                   2012
                                                      ----                   ----

    Net income                                              $6,615,173            $6,241,918

    Other comprehensive
     income

    Foreign currency
     translation
     adjustment                                              2,083,061             2,065,066
                                                             ---------             ---------

    Total other
     comprehensive income                                    2,083,061             2,065,066
                                                             ---------             ---------

    Total Comprehensive
     income                                                  8,698,234             8,306,984

    Less: Comprehensive
     income attributable
     to the noncontrolling
     interest                                                  (51,749)              (74,933)
                                                               -------               -------

    Comprehensive income
     attributable to

    Tianyin Pharmaceutical
     Co., Inc.                                              $8,749,983            $8,381,917
                                                            ==========            ==========


    TIANYIN PHARMACEUTICAL CO., INC.

    Consolidated Statements of Changes in Equity

                                                                                                                    Series A                  Additional                                                          Accumulated other

                                                                                                                                                                                                                                      Total

                                                             Common Stock             Treasury   Preferred Stock         Paid in            Statutory        Retained     Comprehensive Stockholders'             Noncontrolling    Total
                                                             ------------                        ---------------

    Number
    Par Value
                                                                                                      Stock              Number             Par Value         Capital        Reserve       Earnings                   Income        Equity           Interest              Equity
                                                                                                      -----              ------             ---------         -------        -------       --------                   ------        ------           --------              ------

    Balance at June 30, 2011                                              29,312,491                        $29,396              $(111,587)                -            $             -               $30,065,452                         $5,409,764          $39,374,018          $6,077,299 $80,844,342  $435,220  $81,279,562

    Net income                                                                     -                              -                      -                 -                          -                         -                                  -            6,358,690                   -   6,358,690  (116,772)   6,241,918

    Other comprehensive income:

    Foreign currency translation                                                   -                              -                      -                 -                          -                         -                                  -                    -           2,023,227   2,023,227    41,839    2,065,066

         adjustment

    Comprehensive income                                                           -                              -                      -                 -                          -                         -                                  -                    -                   -   8,381,917   (74,933)   8,306,984

    Common shares issued                                                      50,000                             50                      -                 -                          -                    39,450                                  -                    -                   -      39,500         -       39,500

    Treasury stock                                                           (29,700)                             -                (24,338)                -                          -                         -                                  -                    -                   -     (24,338)        -      (24,338)

                                                                                   -                              -                      -                 -                          -                         -                                  -                    -                   -           -   252,352      252,352

    Contribution from noncontrolling interest for Jiangchuan
     Pharmaceutical Co., Ltd.

    Purchase of subsidiary shares from noncontrolling
     interest                                                                      -                              -                      -                 -                          -                         -                                  -                    -                   -           -  (334,613)    (334,613)

    Statutory reserve                                                              -                              -                      -                 -                          -                         -                            710,379             (710,379)                  -           -         -            -
                                                                                 ---                            ---                    ---               ---                        ---                       ---                            -------             --------                 ---         ---       ---          ---

    Balance at June 30, 2012                                              29,332,791                        $29,446              $(135,925)                -            $             -               $30,104,902                         $6,120,143          $45,022,329          $8,100,526 $89,241,421  $278,026  $89,519,447
                                                                          ==========                        =======              =========               ===          ===           ===               ===========                         ==========          ===========          ========== ===========  ========  ===========

    Net income                                                                     -                              -                      -                 -            $             -                         -                                  -            6,672,151                   -   6,672,151   (56,978)   6,615,173

    Other comprehensive income:

    Foreign currency translation                                                   -                              -                      -                                                                      -                                  -                    -           2,077,832   2,077,832     5,229    2,083,061

         adjustment

    Comprehensive income                                                           -                              -                      -                 -                          -                         -                                  -                    -                   -   8,749,983   (51,749)   8,698,234

    Common shares issued                                                      50,000                             50                      -                 -                          -                    29,950                                  -                    -                   -      30,000         -       30,000

    Treasury stock                                                                 -                              -                      -                 -                          -                         -                                  -                    -                   -           -         -            -

    Statutory reserve                                                              -                              -                      -                 -                         --                         -                            727,172             (727,172)                  -           -         -            -
                                                                                 ---                            ---                    ---               ---                        ---                       ---                            -------             --------                 ---         ---       ---          ---

    Balance at June 30, 2013                                              29,382,791                        $29,496              $(135,925)                -            $             -               $30,134,852                         $6,847,315          $50,967,308         $10,178,358 $98,021,404  $226,277  $98,247,681
                                                                          ==========                        =======              =========               ===          ===           ===               ===========                         ==========          ===========         =========== ===========  ========  ===========


    TIANYIN PHARMACEUTICAL CO., INC.

    Consolidated Statements of Cash Flows

                                                                                                For the Years Ended June 30,
                                                                                                ----------------------------

                                                                                                 2013                     2012
                                                                                                 ----                     ----

    Cash flows from operating activities:

    Net Income                                                                                           $6,615,173             $6,241,918

    Adjustments to reconcile net income to net cash provided by (used in) operating activities:

    Depreciation and amortization                                                                         2,435,138              1,215,233

         Provision for bad debts                                                                            (14,004)                15,968

    Share-based payment                                                                                      30,000                 39,500

    Changes in current assets and current liabilities:

    Accounts receivable                                                                                   1,400,398            (2,006,964)

    Inventory                                                                                               (42,848)              (805,520)

    Advance payments                                                                                        645,923              1,032,919

    Other current assets                                                                                    130,893               (384,778)

    Accounts payable and accrued expenses                                                                  (264,388)              (398,896)

    Accounts payable - construction related                                                               1,935,150            (1,122,489)

    Trade notes payable                                                                                  (4,703,775)             4,652,740

    Income tax payable                                                                                     (119,146)              (147,945)

    Other taxes payable                                                                                     225,356               (316,410)

    Other current liabilities                                                                               (27,787)               (65,062)
                                                                                                            -------                -------

    Total adjustments                                                                                     1,630,910              1,708,296
                                                                                                          ---------              ---------

    Net cash provided by operating activities                                                             8,246,083              7,950,214

    Cash flows from investing activities:

    Addition to property and equipment                                                                   (1,704,154)              (555,731)

    Addition to construction in progress                                                               (13,274,213)                      -

    Proceeds from disposal of fixed assets                                                                        -                545,374

    Additions to intangible assets - approved drugs                                                               -               (772,828)

    Additions to intangible assets - land use right                                                        (886,611)           (3,974,544)

    Acquisition of subsidiary - Hengshuo                                                                   (207,285)                     -

    Payment to minority interest for ownership acquisition of JCM                                                 -               (334,613)
                                                                                                                ---               --------

    Net cash used in investing activities                                                              (16,072,263)            (5,092,342)

    Cash flows from financing activities:

    Restricted cash                                                                                        (908,865)           (3,517,156)

    Proceeds from short-term bank loans                                                                   5,835,870              3,154,400

    Repayments of short-term bank loans                                                                  (6,059,100)                     -

    Treasury stock                                                                                                -                (24,338)

    Capital contribution from minority shareholder of JCM                                                         -                252,352
                                                                                                                ---                -------

    Net cash used in financing activities                                                                (1,132,095)              (134,742)

    Effect of foreign currency translation on cash                                                          632,988                704,259
                                                                                                            -------                -------

    Net increase (decrease) in cash and cash equivalents                                                 (8,325,287)             3,427,389

    Cash and cash equivalents - beginning                                                                35,152,295             31,724,906
                                                                                                         ----------             ----------

    Cash and cash equivalents - ending                                                                  $26,827,008            $35,152,295
                                                                                                        ===========            ===========

    Supplemental schedule of non-cash activities

    Exchange of construction in progress to intangible assets                                       $             -             $1,171,928
                                                                                                  ===           ===             ==========

SOURCE Tianyin Pharmaceutical Inc.


Source: PR Newswire