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American Oriental Bioengineering Reports First Quarter 2008 Financial Results
Date:5/7/2008

-- Revenue Increased 50.7% to $38.8 Million in 1Q08 --

-- 1Q08 Net Income Increased 46.2% to $9.4 Million -- -- 1Q08 Diluted EPS $0.12 versus 1Q07 Diluted EPS $.10 on 11.6 Million

Additional Shares --

NEW YORK, May 7 /PRNewswire-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE: AOB), a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter ("OTC") products in China, today announced financial results for the first quarter ended March 31, 2008.

Revenue in the first quarter of 2008 increased 50.7% to $38.8 million from $25.7 million in the first quarter of 2007, reflecting continued increased demand for the Company's core OTC and prescription pharmaceutical products. Revenue from pharmaceutical products increased 71.6% to $31.9 million from $18.6 million in the prior year's first quarter, driven by sales of Shuanghuanglian Injection Powder, Cease Enuresis Soft Gel and Jinji Series of products. Revenue from OTC pharmaceutical products increased 138% to $21.2 million from $8.9 million in the prior year's first quarter. Sales of the Jinji series and Jinji Yimucao products were major contributors to this increase as well as sales generated by CCXA and Boke, which were not subsidiaries in the first quarter of 2007. Prescription pharmaceutical products generated $10.6 million in revenue during the first quarter of 2008, a 10% year over year increase. This increase was the result of increased brand recognition, effective pricing and expanded distribution coverage to new rural markets. Nutraceutical product revenue declined approximately 3% to $6.9 million in first quarter of 2008 from $7.2 million in the prior year's period, and decreased as a percentage of total revenue to approximately 18% versus 28% in the comparable period. The decline in Nutraceutical revenue reflects the Company's continued focus on selling and marketing higher growth pharmaceutical products.

Gross profit in the first quarter of 2008 increased 48.5% to $26.3 million from $17.7 million in the first quarter of 2007. Gross margin was approximately 67.8% compared to 68.8% in the prior year's period, reflecting the product mix shift due to the integration of CCXA.

Operating income in the first quarter of 2008 increased 51.4% to $12.0 million from $7.9 million in the first quarter of 2007 while operating margins remained relatively flat at 30.9% as compared to the prior year. For the first quarter of 2008, operating expenses increased 46.2% to $14.3 million compared to $9.8 million in the comparable period of 2007. The increase in operating expenses was primarily due to increases of $2.3 million in sales and marketing expenses, $1.0 million in general and administrative expenses as well as additional depreciation and amortization costs due to the Boke and CCXA acquisitions.

Net income for the first quarter of 2008 increased 46.2% to $9.4 million, or $0.12 per diluted share, compared to $6.4 million, or $0.10 per diluted share, in the prior year's period. Diluted share count in the first quarter of 2008 was 78.2 million compared to 66.6 million in the first quarter of 2007.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented "We completed the first quarter of 2008, which is always our slowest sales quarter of the year, with strong financial performance. We are well-positioned for 2008 as we begin to recognize the benefits of our acquisition strategy and the synergies realized from our Boke and CCXA acquisitions. We believe these transactions, as well as our recently announced strategic alliance with China Aoxing Pharmaceutical, significantly strengthen our position to achieve our goal of building a leading pharmaceutical business in China. We continue to seek acquisitions that allow us to drive growth and flexibility through product diversification, brand strength, distribution reach and vertical integration."

Mr. Liu concluded, "We continue to anticipate organic growth of at least 30 percent in 2008, but, more importantly, we expect to reach total revenue of at least $245 million in the full year 2008. This 50 percent-plus anticipated year over year top line growth reflects continued demand for our leading products, and particularly our success with CCXA and Boke integrations. We also anticipate net income performance of at least $62 million, which reflects anticipated year over year net income growth of more than 43 percent. This full year financial guidance excludes any potential acquisitions. On that note, our acquisition pipeline is particularly strong today and we remain excited about the opportunities in China's healthcare space. With our proven expertise accumulated from past acquisitions, and a cohesive strategy team in place, we believe that we are well-positioned to be the leading consolidator in this fragmented industry. We intend to move quickly and efficiently on the acquisition front and we'll strive to work responsibly and aggressively on behalf of our shareholders."

The Company will hold a conference call on May 7, 2008 at 8:00 am ET to discuss its fiscal first quarter 2008 results. Listeners may access the call by dialing 1-888-713-4209 or 1-617-213-4863 for international callers, access code: 22478874. Pre-registration and a webcast will also be available through AOB's website at http://www.bioaobo.com . A replay of the call will be available through May 21, 2008. Listeners may access the replay by dialing 1-888-286- 8010 or 1-617-801-6888 for international callers, access code: 57414303.

About American Oriental Bioengineering Inc.

American Oriental Bioengineering Inc. is a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter products in China. For more information, visit http://www.bioaobo.com .

Statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. The economic, competitive, governmental, technological and other factors identified in the Company's filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2007, may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

MARCH 31, DECEMBER 31,

2008 2007

UNAUDITED

CURRENT ASSETS

Cash and cash equivalents $159,031,217 $166,410,075

Accounts receivable, net of reserve of

$312,013 and $302,270 at March 31, 2008

and December 31, 2007, respectively 14,347,621 16,494,619

Inventories, net of provision

for slow moving inventories 20,020,657 12,264,536

Advances to suppliers 4,900,335 4,309,352

Notes receivable 1,020,944 2,259,616

Refundable deposit 16,447,719 -

Other current assets 4,960,413 5,134,118

Total Current Assets 220,728,906 206,872,316

LONG-TERM ASSETS

Plant and equipment, net 49,889,005 48,496,760

Land use rights, net 47,962,086 46,310,240

Construction in progress 734,694 755,614

Deferred tax assets 1,735,743 1,498,481

Other intangible assets, net 26,833,875 26,972,166

Goodwill 22,566,767 22,566,768

Long-term investment and advance 249,481 242,551

Total Long-Term Assets 149,971,651 146,842,580

TOTAL ASSETS $370,700,557 $353,714,896

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' EQUITY

MARCH 31, DECEMBER 31,

2008 2007

UNAUDITED

CURRENT LIABILITIES

Accounts payable $4,041,111 $3,436,352

Other payables and accrued expenses 5,367,646 7,786,157

Taxes payable 2,203,855 2,843,719

Short-term bank loans 6,550,654 6,289,222

Current portion of long-term bank loans 2,895,954 2,374,565

Other liabilities 2,940,924 3,621,030

Deferred tax liability 232,572 109,733

Total Current Liabilities 24,232,716 26,460,778

LONG-TERM LIABILITIES

Long-term bank loans, net of current portion 845,398 1,263,483

Long-term notes payable 287,311 286,365

Deferred tax liabilities 15,480,108 12,621,180

Total Long-Term Liabilities 16,612,817 14,171,028

TOTAL LIABILITIES 40,845,533 40,631,806

SHAREHOLDERS' EQUITY

Preferred stock, $0.001 par value; 2,000,000

shares authorized; 1,000,000 shares issued

and outstanding at March 31, 2008 and December

31, 2007, respectively 1,000 1,000

Common stock, $0.001 par value; 150,000,000

shares authorized; 78,222,516 and 77,991,935

shares issued and outstanding at March 31, 2008

and December 31, 2007, respectively. 78,222 77,992

Common stock to be issued 280,250 1,611,333

Additional paid-in capital 194,754,211 193,007,987

Retained earnings (the restricted portion of

retained earnings is $15,920,417 and

$15,910,685 at March 31, 2008 and

December 31, 2007, respectively) 111,539,921 102,117,792

Accumulated other comprehensive income 23,201,420 16,266,986

Total Shareholders' Equity 329,855,024 313,083,090

TOTAL LIABILITIES AND

SHAREHOLDERS' EQUITY $370,700,557 $353,714,896

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE

INCOME (UNAUDITED)

THREE MONTHS ENDED MARCH 31,

2008 2007

REVENUES $38,768,598 $25,722,577

COST OF GOODS SOLD 12,477,636 8,018,260

GROSS PROFIT 26,290,962 17,704,317

Selling and marketing 5,029,708 2,702,351

Advertising 4,394,341 3,822,911

General and administrative 3,912,683 2,933,066

Depreciation and amortization 977,210 333,462

Total operating expenses 14,313,942 9,791,790

INCOME FROM OPERATIONS 11,977,020 7,912,527

INTEREST INCOME, NET 16,847 17,759

OTHER (EXPENSE) INCOME, NET -101,790 39,084

INCOME BEFORE INCOME TAXES 11,892,077 7,969,370

INCOME TAXES 2,469,948 1,523,103

NET INCOME 9,422,129 6,446,267

OTHER COMPREHENSIVE INCOME

Foreign currency translation gain,

net of tax 6,934,434 810,798

TOTAL OTHER COMPREHENSIVE INCOME, NET

OF TAX 6,934,434 810,798

COMPREHENSIVE INCOME $16,356,563 $7,257,065

NET INCOME PER SHARE

BASIC $0.12 $0.10

DILUTED $0.12 $0.10

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

BASIC 78,191,242 64,608,561

DILUTED 78,192,795 66,545,541


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SOURCE American Oriental Bioengineering Inc.
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