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American Oriental Bioengineering Reports Fourth Quarter and Full Year 2008 Financial Results

NEW YORK, March 9 /PRNewswire-Asia-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 fourth quarter and fiscal year ended December 31, 2008.

Financial Results

Revenue in the fourth quarter of 2008 increased 67.9% year over year to $96.3 million from $57.3 million, reflecting continued demand for the Company's core prescription and OTC pharmaceutical products. Revenue from pharmaceutical products increased 69.9% to $81.2 million from $47.8 million in the prior year's fourth quarter, driven by increased demand for the Jinji Series of products, Shuanghuanglian Injection Powder, and the Cease Enuresis Soft Gel and Patch. Prescription pharmaceutical products generated $28.5 million in revenue during the fourth quarter, up 39.8% year over year, and OTC pharmaceutical products generated $52.6 million in revenue during the fourth quarter, up 92.3% year over year. Nutraceutical products generated revenue of approximately $9.6 million in the fourth quarter of 2008, roughly flat compared to the prior year period. Revenue from nutraceutical products as a percentage of total revenue decreased to approximately 10.0% from approximately 16.6% in the fourth quarter of last year, as the Company continued to focus more on pharmaceutical product sales. The Company generated $5.5 million in distribution revenue since acquiring Nuo Hua on October 18, 2008.

Gross profit in the fourth quarter of 2008 increased 53.9% to $60.0 million from $39.0 million in the fourth quarter of 2007. Gross margin was 62.4%, compared with 68.1% in the prior year's period, reflecting lower margin distribution and CCXA product revenue.

Operating income in the fourth quarter was $11.8 million compared with $18.8 million in the prior year period and primarily reflects a $12.3 million expense for in-process R&D at GuangXi HuiKe ("GHK"), which the Company acquired in the fourth quarter. In line with accounting policies at the time of the acquisition, the Company was required to expense, not capitalize, the estimated future value of GHK's intangible assets. General and administration expenses as well as selling and marketing expenses increased 77% to $22.3 million from $12.6 million in the prior year period. The increase primarily reflects marketing and promotional initiatives related to Jinji and Boke products.

Net income for the fourth quarter of 2008 was $8.0 million, or $0.10 per diluted share. Non-GAAP net income, which excludes interest expense related to the Company's outstanding convertible debt as well as the in-process R&D expense described above, increased 42.7% to $21.7 million, from $15.2 million in the prior year period. Non-GAAP net income per diluted share increased to $0.25 per diluted share in the fourth quarter of 2008, from $0.20 per diluted share in the prior year period. Please refer to the Company's GAAP to Non-GAAP reconciliation table provided below.

Fiscal 2008 Financial Results

Revenue for the fiscal year 2008 increased 64.9% to $264.6 million from $160.5 million in 2007. Prescription pharmaceutical products generated revenue of $87.4 million, up 48.1% from $59.0 million in the year 2007, and OTC pharmaceutical products generated revenue of $137.5 million, up 99.8% from $68.8 million in 2007. The CCXA and Boke businesses contributed revenue of $24.8 million and $38.2 million, respectively, during the fiscal year 2008, compared with $5.4 million and $3.2 million in 2007. CCXA and Boke businesses began contributing to revenue in the third and fourth quarters of 2007. Revenue from nutraceutical products increased 4.9% to $34.3 million from $32.7 million in the year before. Revenue from Nuo Hua's distribution business was $5.5 million and began contributing to results in the fourth quarter of 2008.

Net income in 2008 increased 10.4% to $47.8 million, or $0.61 per diluted share. Non-GAAP net income, as described above and reconciled below, was $62.7 million, compared with $43.3 million in the prior year. Non-GAAP net income per diluted share increased to $0.76 per diluted share from $0.61 per diluted share in the prior year.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "In 2008, we strengthened our leading brands, enhanced our product portfolio, and diversified our operations in a way that lends flexibility to our business model, so that we can navigate China's rapidly changing regulatory environment. We achieved these successes despite the increasingly challenging economic environment worldwide, and we are cautiously optimistic that China's healthcare industry remains somewhat insulated from the global economic crisis. Going into 2009 and 2010, we'll continue to strengthen our core competencies in production, sales and marketing and distribution reach, as well as focus on R&D efforts and our infrastructure, to ensure that we are well-prepared to capitalize on the many opportunities we see in China's healthcare sector."

Conference Call

The Company will hold a conference call at 8:00 am ET on March 9, 2009 to discuss fiscal fourth quarter and full year 2008 results. Listeners may access the call by dialing 1-866-203-2528 or 1-617-213-8847 for international callers, access code: 34183253. A webcast will also be available through AOB's website at . A replay of the call will be available through March 16, 2009. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 73734657.

About American Oriental Bioengineering, Inc.

American Oriental Bioengineering, Inc. is a China-based pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter products.

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, 2008, 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.

    For more information, please contact:

     Integrated Corporate Relations, Inc.
     Ashley M. Ammon
     Tel: +1-203-682-8208


                         QUARTER ENDED DECEMBER 31,   YEAR ENDED DECEMBER 31,
                            2008         2007           2008          2007
                          Unaudited    Unaudited      Audited       Audited
    REVENUES             $96,270,506  $57,332,523  $264,643,058  $160,482,383
    COST OF GOODS SOLD    36,222,784   18,302,489    91,031,274    49,364,486

    GROSS PROFIT          60,047,722   39,030,034   173,611,784   111,117,897

    Selling and
     marketing            17,117,853    8,435,612    39,774,330    20,669,303
    Advertising           12,342,238    6,696,321    34,102,538    22,865,903
    General and
     administrative        5,132,162    4,131,923    18,765,757    13,365,156
    Depreciation and
     amortization          1,371,108      936,546     4,383,215     1,989,425
    Purchased in-process
     research and
     development          12,255,248           --    12,255,248            --

    Total operating
     expenses             48,218,609   20,200,402   109,281,088    58,889,787

     (LOSS) FROM
     ENTITIES               (541,336)          --    (1,132,986)       23,711
     (EXPENSE), NET       (1,414,233)     196,352    (2,571,015)      617,524
    OTHER EXPENSE, NET       198,672     (589,087)      (65,843)     (525,065)
    MINORITY INTERESTS       (27,575)          --       (27,575)           --

     TAXES                10,044,641   18,436,897    60,533,277    52,344,280

    INCOME TAXES           2,003,492    3,204,281    12,727,388     9,053,399

    NET INCOME             8,041,149   15,232,616    47,805,889    43,290,881

    Foreign currency
     translation gain,
     net of tax                  552    5,833,544    12,819,020    10,105,577
     INCOME, NET OF TAX          552    5,833,544    12,819,020    10,105,577

    COMPREHENSIVE INCOME  $8,041,701  $21,066,160   $60,624,909   $53,396,458

      BASIC                    $0.10        $0.21         $0.62         $0.62
      DILUTED                  $0.10        $0.20         $0.61         $0.61
      BASIC               74,566,818   75,386,436    76,504,035    69,870,775
      DILUTED             86,915,928   75,386,436    82,254,185    71,364,244

                             CONSOLIDATED BALANCE SHEETS

                                                DECEMBER 31,     DECEMBER 31,
                                                    2008             2007
    Cash and cash equivalents                   $70,636,510     $166,410,075
    Accounts receivable, net of reserve of
     $226,330 and $302,270 at December 31,
     2008 and 2007, respectively                 36,982,167       16,494,619
    Inventories, net of provision for slow
     moving inventories                          13,042,123       12,264,536
    Advances to suppliers and prepaid
     expenses                                     3,593,979        4,309,352
    Notes receivable                                708,076        2,259,616
    Refundable deposit                            6,396,996               --
    Deferred tax assets                             347,216               --
    Other current assets                            744,903        5,134,118
             Total Current Assets               132,451,970      206,872,316

    Property, plant and equipment, net           98,154,443       48,496,760
    Land use rights, net                        148,988,870       46,310,240
    Deposit for long-term assets                  6,347,174               --
    Construction in progress                     25,385,835          755,614
    Deferred tax assets                           1,313,832        1,498,481
    Intangible assets, net                       23,690,440       26,972,166
    Goodwill                                     28,543,226       22,566,768
    Investments in and advances to equity
     investments                                 54,963,064          242,551
    Unamortized financing costs                   4,215,983               --
            Total Long-Term Assets              391,602,867      146,842,580

                 TOTAL ASSETS                  $524,054,837     $353,714,896

                                               DECEMBER 31,      DECEMBER 31,
                                                   2008              2007
    Accounts payable                           $12,287,887        $3,436,352
    Notes payables                               3,262,877            72,254
    Other payables and accrued expenses         19,766,652         7,786,157
    Taxes payable                                  420,671         2,843,719
    Short-term bank loans                        7,140,148         6,289,222
    Current portion of long-term bank loans         58,659         2,374,565
    Other liabilities                            2,253,440         3,548,776
    Deferred tax liabilities                       846,026           109,733
          Total Current Liabilities             46,036,360        26,460,778

    Long-term bank loans                           804,521         1,263,483
    Long-term notes payable                        269,908           286,365
    Deferred tax liabilities                    16,083,768        12,621,180
    Convertible Note                           115,000,000                --
         Total Long-Term Liabilities           132,158,197        14,171,028
              TOTAL LIABILITIES                178,194,557        40,631,806


    MINORITY INTERESTS                             652,081                --

    Preferred stock, $0.001 par value;
     2,000,000 shares authorized; 1,000,000
     shares issued and outstanding at June
     30, 2008 and December 31, 2007,
     respectively                                    1,000             1,000
    Common stock, $0.001 par value;
     150,000,000 shares authorized;
     78,249,264 and 77,991,935 shares
     issued and outstanding at December 31,
     2008 and December 31, 2007, respectively       78,249            77,992
    Common stock to be issued                      376,335         1,611,333
    Prepaid forward repurchase contract        (29,998,616)               --
    Additional paid-in capital                 195,741,544       193,007,987
    Retained earnings (the restricted
     portion of retained earnings is
     $29,532,699 at December 31, 2008
     and December 31, 2007)                    149,923,681       102,117,792
    Accumulated other comprehensive
     income                                     29,086,006        16,266,986
         Total Shareholders' Equity            345,208,199       313,083,090
     SHAREHOLDERS' EQUITY                     $524,054,837      $353,714,896

                        Reconciliation of GAAP to Non-GAAP
                           (In US$, except share data)

                                 Fourth Quarter Ended        Year Ended
                                     December 31,            December 31,
                                  2008        2007        2008        2007

    GAAP net income             8,041,149  15,232,616  47,805,889  43,290,881
     in-process research and
     development expense       12,255,248          --  12,255,248          --
    Interest expense            1,437,500               2,635,417
    Non-GAAP net income        21,733,897  15,232,616  62,696,554  43,290,881

    GAAP earnings per share
        -Basic                       0.10        0.21        0.62        0.62
        -Diluted                     0.10        0.20        0.61        0.61

    Non-GAAP earnings per
        -Basic                       0.27        0.20        0.79        0.62
        -Diluted                     0.25        0.20        0.76        0.61

    Shares used in computation
     of GAAP / Non-GAAP
     earnings per share
      Ordinary shares
        -Basic                 74,566,818  75,386,436  76,504,035  69,870,775
        -Diluted               86,915,928  75,663,385  82,254,185  71,364,244

SOURCE American Oriental Bioengineering, Inc.
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