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China Sky One Medical, Inc. Announces Record Fourth Quarter and Fiscal Year 2008 Results

HARBIN, China, April 15 /PRNewswire-Asia-FirstCall/ -- China Sky One Medical, Inc. ("China Sky One Medical" or "the Company") (Nasdaq: CSKI), a leading fully integrated pharmaceutical company producing over-the-counter drugs in the People's Republic of China ("PRC"), today announced record financial results for the fourth quarter and fiscal year ended December 31, 2008.

    Fourth Quarter 2008 Highlights
    -- Total revenues increased 104.0% year-over-year to $26.0 million
    -- Gross profit increased 95.2% year-over-year to $19.3 million
    -- Operating income increased 80.4% to $8.9 million from $4.9 a year ago
    -- Net income increased 68.8% year-over-year to $6.9 million, or $0.45 per
       diluted share

    Full Year 2008 Highlights
    -- Total revenues increased 86.2% to $91.8 million
    -- Gross profit increased 80.9% to $69.4 million
    -- Operating income increased 91.6% to $35.7 million
    -- Net income increased 88.2% to $28.9 million, or $1.87 per diluted share
    -- Common shares began trading on the NASDAQ Global Market under the
       symbol "CSKI" on September 15, 2008
    -- Completed the acquisitions of Heilongjiang Tianlong Pharmaceuticals
       Inc., Heilongjiang Haina Pharmaceuticals Inc., and Peng Lai Jin Chuang
       Pharmaceutical Company
    -- Received SFDA final approval for 19 drugs
    -- Reached an agreement to acquire a proprietary breast drug from Harbin
       Medical University

"We are happy to report another quarter of excellent results and a very strong year filled with many accomplishments. We achieved record financial performance in 2008 with significant increases in revenue and net income as we successfully executed our business strategy and made solid progress in establishing ourselves as a leading pharmaceutical company in China," said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc. "As part of our strategy, we made a number of important strategic acquisitions that contributed to our growth and signed several distribution agreements for our top selling products. We also continued to build and enhance our brand awareness through a successful marketing and advertising campaign that helped to increase demand for our products."

Fourth Quarter 2008 Results

China Sky One's total revenues increased 104.0% in the fourth quarter to $26.0 million. This was mainly a result of the Company's continued efforts to develop and enhance its sales distribution channels and to insure that its sales agents and products are visible by those making or influencing key purchasing decisions.

Gross profit in the fourth quarter was $19.3 million, an increase of 95.2% on a year-over-year basis. Gross margin decreased to 74.4% of total revenues from 77.7% in the fourth quarter of 2007. The decrease was attributable to lower unit selling prices in 2008, by which the Company aims to maintain the competitiveness in the PRC markets. However, the Company was able to negotiate a lower purchase price from its suppliers.

Operating expenses in the fourth quarter of 2008 were $10.4 million, up 110.0% from $4.9 million in the fourth quarter of 2007. The increase was primarily the result of higher selling, general and administrative expenses associated with the Company's sales growth, and an increase in R&D spending during the quarter. Research and development expenses were $2.7 million in the fourth quarter, compared to $1.4 million in the fourth quarter of 2007.

Operating income was $8.9 million, representing an 80.4% increase from $4.9 million in the fourth quarter of 2007. Operating margin was 34.4%, compared to 38.9% in the fourth quarter of 2007.

Provision for income taxes was $2.1 million in the fourth quarter of 2008, compared to $0.9 million in the same period last year.

Net income for the fourth quarter of 2008 was $6.9 million, or $0.45 per diluted share, compared to net income of $4.1 million, or $0.25 per diluted share, in the fourth quarter of 2007.

Full Year 2008 Results

For the full year 2008, total revenues were $91.8 million, up 86.1% from $49.3 million in 2007. Product sales increased 137% year-over-year to $86.2 million, or 93.8% of total revenues, and contract sales decreased 56.5% year- over-year to $5.7 million, or 6.2% of total revenues, in 2008.

Gross profit for the full year 2008 was $69.4 million, an increase of 80.9% from $38.4 million in 2007. Gross profit margin was 75.6% in 2008 compared to 77.8% in 2007.

Operating income was $35.7 million, up 91.6% from $18.6 million in 2007. Operating margin was 38.8%, up from 37.7% in 2007.

Net income for 2008 was $28.9 million, or $1.87 per diluted share, compared to net income of $15.3 million, or $1.15 per diluted share, in the year 2007.

Financial Condition

As of December 31, 2008, China Sky One had $40.3 million in cash and equivalents, approximately $58.0 million in working capital, and no debt. Stockholders' equity at December 31, 2008, was $94.9 million, a 194.4% increase over the $32.2 million recorded at December 31, 2007. In 2008, the Company raised approximately $23.5 million in net proceeds under a January 2008 private placement of equity.

The Company generated $27.5 million in net cash flow from operating activities in 2008, up from $11.6 million in 2007.

Recent Events of 2009

In January, the Company qualified for a preferential income tax rate of 15%, versus the regular rate of 25%, when three of its wholly-owned subsidiaries -- Harbin Tian Di Ren Medical Science and Technology ("TDR"), Heilongjiang Tianlong Pharmaceutical ("Tianlong"), and Harbin First Bioengineering ("First") -- were granted the High-Technology Enterprise Certificate by the provincial government in Heilongjiang Province.

In February, the Company's wholly-owned subsidiary, Peng Lai Jin Chuang Pharmaceutical Company ("Jin Chuang"), signed an exclusive distribution agreement with Shaanxi Buchang Group ("Buchang") for naftopidil dispersible tablets with an expected sales target of 100 million RMB (US $14.6 million) over five years. Jin Chuang received SFDA approval to produce and distribute naftopidil dispersible tablets, which are used to treat benign enlargement of the prostate, in 2005. Also in February, the Company announced that it had expanded the sale of its best-selling Slim Patch into South Korea and Sudan after engaging PAX-Medicare and Lai Li Investment Company as exclusive sales agents. The product is now available in 26 countries and regions.

In March, the Company announced that it received SFDA approval to manufacture two new drugs, Calcium Folinate injection, intended as an auxiliary therapy for sprue, (a disease of the small intestine), infancy- related megaloblastic anemia, and colonic and rectal cancer; and Policresulen vaginal suppositories indicated for the treatment of cervical erosion, cervicitis, and various vaginal inflammations.

2009 Outlook

"We are confident about the prospects for our business in 2009 and will continue to focus on increasing market share by both strengthening and further refining our successful sales and distribution network, building and enhancing our brand image, and making strategic acquisitions that continue to support our growth," said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc.

"In 2009, we expect full year revenue to increase by 40%, or approximately $37.0 million, to $128-$130 million, driven by growth in all of our product sales categories. We expect that net income will increase to $38-$39 million, resulting in net profit margin of approximately 30%. We expect 2009 gross margin to be approximately 74% due to higher raw material costs," Mr. Yan-Qing Liu added.

Conference Call

The Company will conduct a conference call at 10:00 a.m. Eastern Daylight Time on Thursday, April 16, 2009 to discuss its fourth quarter and fiscal year 2008 results. To participate in the call, please dial the following number five to ten minutes prior to the scheduled call time: 866-573-1052. International callers should dial 404-537-3305. The conference ID for this call is 95492620. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Thursday, April 16, 2009 at 12:00 p.m. Eastern Daylight Time. To access the replay, dial 800-642- 1687, international callers dial 706 645-9291, conference ID 95492620.

About China Sky One Medical, Inc.

China Sky One Medical, Inc., a Nevada corporation, is a holding company. The Company engages in the manufacturing, marketing and distribution of pharmaceutical, medicinal and diagnostic products. Through its wholly-owned subsidiaries, Harbin Tian Di Ren Medical Science and Technology Company, Harbin First Bio- Engineering Company Limited, Heilongjiang Tianlong Pharmaceutical, Inc. and Peng Lai Jin Chuang Pharmaceutical Company the Company manufactures and distributes over-the-counter pharmaceutical products, which make up its major revenue source. For more information, visit

Safe Harbor Statement

Certain of the statements made in the press release constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward- looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.


                               Three Months Ended          Years Ended
                                  December 31,             December 31,
                                  2008        2007        2008        2007
                                  (Unaudited)              (Audited)

    Revenues                $25,954,879 $12,723,375 $91,816,183 $49,318,308
    Cost of Goods Sold        6,654,502   2,835,176  22,403,303  10,939,531
    Gross Profit             19,300,377   9,888,199  69,412,880  38,378,777

    Operating Expenses
          Selling, general
           and administrative 7,341,394   3,365,194  25,482,201  16,163,577
          Depreciation and
           amortization         335,031     166,556     858,406     443,063
          Research and
           development        2,693,341   1,406,727   7,412,895   3,158,351
                 expenses    10,369,766   4,938,477  33,753,502  19,764,991

    Income From Operations    8,930,661   4,949,722  35,659,378  18,613,786
    Other Income (Expense)
           income               110,598      40,517     813,704      38,332

    Net Income Before
     Provision for Income
     Tax                      9,041,209   4,990,239  36,473,082  18,652,118

    Provision for Income
          Current             2,103,309     885,209   7,616,169   3,319,173

    Net Income               $6,937,901  $4,109,829 $28,856,914 $15,332,945

    Basic Earnings Per Share     $ 0.45      $ 0.34      $ 1.91      $ 1.27
    Basic Weighted Average
     Shares Outstanding              --          --  15,101,833  12,094,949

    Diluted Earnings Per
     Share                       $ 0.45      $ 0.25      $ 1.87      $ 1.15
    Diluted Weighted
     Average Shares
     Outstanding             16,566,776  13,907,696  15,429,136  13,370,528

                   China Sky One Medical, Inc. and Subsidiaries
                            Consolidated Balance Sheet

                                         December 31, 2008  December 31, 2007

    Current Assets
             Cash and cash equivalents         $40,288,116         $9,190,870
             Accounts receivable                14,978,648         10,867,106
             Inventories                           462,351            371,672
             Prepaid and other current assets      106,386             57,907
             Land and construction deposit       8,513,284          8,003,205
                      Total current assets      64,348,785         28,490,760

    Property and equipment, net                 21,058,779          6,861,432
    Intangible assets, net                      15,851,765          1,933,014

                                              $101,259,329        $37,285,206


    Current Liabilities
             Accounts payable and
              accrued expenses                  $2,937,068         $3,448,701
             Taxes payable                       3,362,888          1,567,188
             Deferred revenue                       26,079             24,504
                      Total current
                       liabilities               6,326,035          5,040,393

    Stockholders' Equity
             Preferred stock ($0.001 par
              value, 5,000,000 shares
              authorized, none issued and
              outstanding)                              --                --
             Common stock ($0.001 par
              value, 50,000,000 shares
              authorized, 16,306,184 and
              12,228,363 issued and
              outstanding, respectively)            16,306             12,228
             Additional paid-in capital         40,105,134          9,572,608
             Accumulated other
              comprehensive income               5,566,806          2,271,843
             Retained earnings                  49,245,048         20,388,134
                      Total stockholders'
                       equity                   94,933,294         32,244,813

                                              $101,259,329        $37,285,206

                  China Sky One Medical, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows

                                               Years Ended December 31,
                                               2,008             2,007
    Net income                                 $28,856,914       $15,332,945
    Adjustments to reconcile net income
     to net cash provided (used) by
     operating activities:
          Allowance for bad debt                    37,883                --
          Depreciation and amortization            858,406           443,063
          Share-based compensation
           expenses                                315,662           235,468
    Decrease (increase) in operating
          Accounts receivable and other
           receivables                          (3,398,228)       (7,478,964)
          Inventories                              (65,762)          (73,142)
          Prepaid expenses and others              (23,840)           93,463
          Land and construction deposit              4,084                --
    Increase (decrease) in operating
          Accounts payable and accrued
           liabilities                            (677,722)        2,136,356
                                                 1,660,382           960,170
          Deferred revenue                         (25,674)          (47,879)

          Net cash provided (used) by
           operating activities                 27,538,021        11,601,480

          Purchase of fixed assets             (11,167,396)       (2,222,448)
          Purchase of land use rights                4,084        (8,003,205)
          Purchase of intangible assets        (11,951,210)          (35,280)

          Net cash provided (used) by
           investing activities                (23,114,522)      (10,260,933)

          Sales of common stock for cash,
           net of offering costs                23,487,963                --
          Proceeds from warrants
           conversion                            1,867,507           515,834
          Payment to short-term loan                    --          (548,350)

          Net cash provided (used) by
           financing activities                 25,355,470           (32,516)

    Effect of exchange rate changes on
     cash                                        1,318,277         1,296,039

     EQUIVALENTS                               $31,097,246        $2,604,070

     BEGINNING OF YEAR                           9,190,870         6,586,800

     YEAR                                      $40,288,116        $9,190,870

    For more information, please contact:

    Company Contact:
    China Sky One Medical, Inc.
     Mr. Yu-Bo Hao, CFO
     Tel:   +86-451-5399-4069

    Investor Relations Contact:
    CCG Investor Relations
     Mr. Crocker Coulson, President
     Tel:   +1-646-213-1915

SOURCE China Sky One Medical, Inc.
Copyright©2009 PR Newswire.
All rights reserved

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