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China Sky One Medical, Inc. Announces Record Third Quarter 2008 Results

HARBIN, China, Nov. 10 /Xinhua-PRNewswire-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 third quarter ended September 30, 2008.

Third Quarter 2008 Highlights:

-- Total revenues increased 77.1% to $29.7 million

-- Gross profit increased 70.5% to $22.3 million; gross margin fell

slightly to 75.2%

-- Operating income increased 78.3% to $11.8 million; operating margin

improved to 39.5% from 39.3%

-- Net income increased 82.6% to $9.9 million, or $0.60 per diluted share

-- Completed acquisition of Peng Lai Jin Chuang Company

-- Passed first phase of examinations for Conformite Europeenne (CE)


-- Developed 37 new drugs currently in clinical trials, including 12

administered by injection

-- Developed a propyl gallate injection for treatment of coronary heart

disease and related diseases; and a nasal spray for the treatment of

rheumatic disease

-- Signed a distribution agreement with Harbin Baolong Pharmaceutical


-- Began trading on the NASDAQ Global Market under the symbol "CSKI"

"We continued to experience strong growth in product sales in the third quarter of 2008 due to robust organic growth and initial contributions of our recent acquisitions and we are very pleased with our record results," said Mr. Yan-Qing Liu, Chairman, CEO and President of China Sky One Medical, Inc. "Broken down by category, sales of weight loss products, which include our top-selling Sumei Slim Patch, continued trending up in the third quarter, accounting for 27% of revenues. Sales of products from newly acquired Heilongjiang Tianlong Pharmaceutical, Inc. made up 18% of revenues. That was followed by sales of ointments, which made up 13% of revenues in the quarter, and sales of plaster products such as our Pain Relief Patch, which made up 11% of revenues. Our top-selling branded products in the third quarter were our Sumei Slim Patch, and our Compound Camphor Ointment."

"Our continued strong sales momentum during the quarter coincided with a number of significant accomplishments, including the listing of our common shares on the NASDAQ Global Market under the symbol "CSKI," said Mr. Yan-Qing Liu. "Also, we completed the acquisition of Peng Lai Jin Chuang Company, a newly established pharmaceutical company with Good Manufacturing Practice Certification (GMP) approval issued by the country's State Food and Drug Administration (SFDA), and entered into a distribution agreement with Harbin Baolong Pharmaceutical Company for our prescription drugs," he added.

During the quarter, the China Sky One Medical developed 37 new drugs that are currently in clinical trials, including twelve administered by injection. The Company also developed a propyl gallate injection for the treatment of acute cerebral infarction, coronary heart disease, thrombosis, dysmenorrheal and nephropathy; and a nasal spray for the treatment and prevention of rheumatic disease, which it expects to launch in the fourth quarter of 2008.

On September 5, 2008, the Company completed the acquisition of Peng Lai Jin Chuang Company ("Jin Chuang"), a newly established pharmaceutical company, for approximately $7.1 million, consisting of about $2.5 million in cash and $4.6 million of China Sky One Medical's common stock (381,606 shares). The Jin Chuang acquisition includes rights to a portfolio of 20 approved drugs that are taken orally, an important addition to the Company's existing portfolio. Production at Jin Chuang, which commenced manufacturing on October 14, is progressing smoothly and according to the Company's schedule.

Third Quarter 2008 Results

Total revenue for the third quarter of 2008 increased 77.1% to $29.7 million from $16.8 million in the third quarter of 2007. This was primarily driven by the Company's strong sales distribution channel, a successful marketing and advertising campaign that was launched in the second quarter, and revenue generated from the products of Heilongjiang Tianlong Pharmaceutical, Inc., ("Tianlong") which it acquired in April, 2008. Product sales in the third quarter increased 127% year-over-year to $28.2 million, accounting for 94.8% of total revenues. Contract sales decreased 65% to $1.5 million and accounted for 5.2% of revenues during the quarter. In 2008, the Company began to discontinue contract sales as part of its strategy in order to focus on developing its portfolio of proprietary products.

Gross profit in the third quarter of 2008 was $22.3 million, an increase of 70% over the same period a year ago. Gross margin was 75.2% of total revenues, a slight decrease compared to gross margin of 78.1% for the third quarter of 2007. The sequential decrease is attributable to higher Research & Development costs tied to clinical trials for the Company's products and expenses related to preparations for the Company's acquisition of Jin Chuang.

Operating expenses in the third quarter of 2008 were $10.6 million, up 62.5% from $6.5 million in the third quarter of 2007. This increase was less than the increase in sales, and was primarily a result of higher selling, general and administrative expenses associated with marketing the Company's products, and the acquisitions of Tianlong and Jin Chuang. Research and development expenses were $2.7 million in the third quarter, compared to $1.4 million in the third quarter of 2007. The increased expense was primarily due to additional clinical trials and the developing of patents. Operating expenses were 35.6% of total revenues in the third quarter of 2008, down from 38.8% in the third quarter of 2007, due to efficiencies as the Company grows in scale.

Operating income was $11.8 million, up by 78.3% compared to $6.6 million in the third quarter of 2007. Operating margin was 39.5%, compared to 39.3% in the third quarter of 2007. Provision for income taxes was $2.6 million in the third quarter of 2008, compared to $1.1 million in the same quarter of the previous year.

Net income for the third quarter of 2008 increased 82.6% to $9.9 million, or $0.60 per diluted share, compared to $5.4 million, or $0.44 per diluted share, in the third quarter of 2007. Diluted weighted average shares increased to 16,492,414 from 12,502,332 in the third quarter of 2007 due to common stock associated with the Company's private placement in February 2008, the Tianlong and Jin Chuang acquisitions, and the conversion of warrants.

Nine Month Results

For the nine months ended September 30, 2008, revenues increased to $65.9 million, up 80% from $36.6 million in the corresponding period of 2007. Gross profit increased 76% to $50.1 million in the nine months ended September 30, 2008, versus $28.5 million in the same period a year ago. Gross margin was 76.1% in the nine months ended September 30, 2008, compared to 77.9% during the nine months ended September 30, 2007. Operating income in the nine months ended September 30, 2008, grew 95.6% to $26.7 million compared to $13.7 million in the nine months ended September 30, 2007. Net income for the first nine months of 2008 was $21.9 million or $1.39 per diluted share, up from $11.2 million, or $0.90 per diluted share in the nine months ended September 30, 2007.

Financial Condition

As of September 30, 2008, China Sky One had $50.9 million in cash and equivalents, approximately $53 million in working capital, and no debt. Stockholders' equity at September 30, 2008 was $85.9 million, a 166.4% increase over $32.2 million recorded at December 31, 2007. The Company generated $26.7 million in net cash flow from operating activities in the nine months ended September 30, 2008, up from $10.2 million in the same quarter of 2007.

Recent Events

On October 14, 2008, China Sky One Medical announced that it started production at Jin Chuang, a newly established pharmaceutical company that it acquired on September 5, 2008. Jin Chuang's products include Chinese health remedies such as Oyster Shell Calcium tablets for the treatment of osteoporosis, and Naftoipidil Dispersible tablets for the treatment of benign prostatic hyperplasia. The acquisition was completed on September 5, 2008, and is expected to contribute $3-$5 million in sales in fiscal 2008, and $0.95- $1.55 million in net profit.

On October 22, 2008, China Sky One Medical announced that its wholly-owned subsidiary, Harbin First Bio-Engineering Co. Ltd., received $800,000 in tax savings from the Heilongjiang Binxi Economic Zone on August 4, 2008, as the result of an agreement it entered into in 2005, when the Company decided to invest in Harbin First Bio-Engineering Co. Ltd. The Company said it would invest this refund back into its business to further improve operations and execute its growth strategy, which includes strengthening its distribution channel and developing exciting new drugs.

On October 23, 2008, China Sky One Medical signed an agreement with Shaanxi Xintai Pharmaceutical Company to distribute the Company's Asthma Patch product, which is intended for the treatment of asthma and bronchitis. The distribution agreement with Shaanxi Xintai initially runs over three years. China Sky One Medical expects it will generate sales of approximately $5 million in 2009, and believes it will increase sales of its Asthma Patch by 50% each year. China Sky One Medical and Shaanxi collaborated on the distribution of the Company's Slim Patch products early this year.

On October 28, 2008, China Sky One Medical reached a purchase agreement for a proprietary breast drug from Harbin Medical University for approximately $1.46 million. The Company collaborated with Harbin Medical University to develop the drug, which is intended to treat lobular hyperplasia in women, a type of mastitis that may lead to breast cancer. First phase clinical trials have been completed, and the drug has been shown to be 100% effective, with an 89% curability rate. Following the completion of additional clinical trials, the Company expects to obtain production approval for the drug from the SFDA in two to three years after the purchase is complete.

On October 30, 2008, the China Sky One Medical announced that it obtained production approval from the SFDA in China for two of its newly developed drugs, sodium ferulate by injection and doxofylline by injection. Sodium ferulate by injection is intended for the treatment of cardiovascular disease. Doxofylline by injection is intended for the treatment of asthma and bronchitis.

Business Outlook

"Despite the recent turmoil in the global economy, China Sky One continues to experience very strong demand for our pharmaceutical products. We have a rich pipeline of new products that are in the process of seeking SFDA approval, including external use TCM products, drugs for injection, diagnostic kits and biological pharmaceutical products. In addition, our very strong balance sheet and cash flows provide the flexibility to pursue additional acquisitions that can further strengthen our market position," said Mr. Yan-Qing Liu. "As a result of the synergies we will realize from our strategic acquisitions, and by focusing on developing high-quality products and expanding our sales and marketing efforts globally, we expect to see a significant increase in our top- and bottom-line performance in 2009 and beyond."

As a result of both strong organic growth and the recent acquisitions, the Company recently raised its full-year 2008 revenue guidance to $88-$90 million, and full year 2008 guidance for net income to $27-$28 million. China Sky One Medical expects 2008 gross margin to be approximately 77%, but expects that gross margin will improve once production capacity at its newly acquired facilities reaches normalized levels.

Conference Call

The Company will conduct a conference call at 8:00 a.m. Eastern Time on Monday, November 10, 2008, to discuss the third quarter 2008 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (866) 573-1052 International callers should dial (702) 696-4500. The Conference ID for this call is 72520119. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Monday, November 10, 2008 at 12 p.m. Eastern Time. To access the replay, dial (800) 642-1687, international callers dial (706) 645-9291, conference ID 72520119.

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 ("TDR") and Harbin First Bio-Engineering Company Limited ("First"), 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. Additional statements that are necessarily forward looking in nature also include, without limitation, statements relating to our research and development activities, expected revenues or sales margins, results of recent acquisitions and our ability to increase sales and expand our presence in the global market place, and risks or uncertainties relating to PRC socioeconomic issues. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. The Company cannot provide any assurance that it will be able to establish listing of its securities on any national or regional securities exchange or market system. Actual results could differ materially from the expectations reflected in such forward- looking statements as a result of a variety of factors, including the inability of the company to meet listing standards of an exchange, 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 both in China and throughout the world 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.

China Sky One Medical, Inc. and Subsidiaries Condensed Consolidated Statements of Operations

Three Months Ended Nine Months Ended

September 30, September 30,

2008 2007 2008 2007

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Revenues $29,699,282 $16,770,570 $65,861,304 $36,594,933

Cost of Goods Sold 7,366,059 3,669,012 15,748,801 8,104,355

Gross Profit 22,333,223 13,101,558 50,112,503 28,490,578

Operating Expenses

Selling, general

and administrative 7,596,953 5,100,408 18,140,807 12,798,383

Depreciation and

amortization 308,023 55,565 523,375 276,507

Research and

development 2,677,142 1,355,784 4,719,554 1,751,624



expenses 10,582,118 6,511,757 23,383,736 14,826,514

Other Income (Expense)

Other income 810,733 2,282 838,242 14,309

Interest expense (1,494) -- (135,136) (16,494)

Total other


(expense) 809,239 2,282 703,106 (2,185)

Net Income Before

Provision for

Income Tax 12,560,344 6,592,083 27,431,873 13,661,879

Provision for Income


Current 2,616,909 1,145,812 5,512,860 2,433,964

Net Income $9,943,435 $5,446,271 $21,919,013 $11,227,915

Basic Earnings Per

Share $0.64 $0.45 $1.50 $0.93

Basic Weighted

Average Shares

Outstanding 15,464,084 12,110,201 14,657,059 12,077,491

Diluted Earnings Per

Share $0.60 $0.44 $1.39 $0.90

Diluted Weighted

Average Shares

Outstanding 16,492,414 12,502,332 15,745,542 12,468,186

The Components of

Other Comprehensive


Net Income $9,943,435 $5,446,271 $21,919,013 $11,227,915

Foreign currency


adjustment 1,788,369 288,267 7,152,503 874,804

Comprehensive Income $11,731,804 $5,734,538 $29,071,516 $12,102,719 China Sky One Medical, Inc. and Subsidiaries Condensed Consolidated Balance Sheets


September 30, 2008 December 31, 2007


Current Assets

Cash and cash equivalents $ 50,948,530 $ 9,190,870

Accounts receivable 9,288,941 10,867,106

Other receivables -- 40,200

Inventories 1,803,429 371,672

Prepaid expenses 28,470 17,707

Total current assets 62,069,370 20,487,555

Property and equipment, net 17,752,876 6,861,432

Land Deposit 8,003,205 8,003,205

Intangible assets, net 7,181,577 1,933,014

$ 95,007,028 $ 37,285,206


Current Liabilities

Accounts payable and accrued

expenses $ 4,246,767 $ 2,845,308

Wages payable 640,019 381,482

Welfare payable 177,574 221,911

Taxes payable 4,042,230 1,567,188

Deferred revenues -- 24,504

Total current liabilities 9,106,590 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,

20,000,000 shares authorized,

15,884,939 and 12,228,363 issued

and outstanding, respectively) 15,885 12,228

Additional paid-in capital 34,153,060 9,572,608

Accumulated other

comprehensive income 9,424,346 2,271,843

Retained earnings 42,307,147 20,388,134

Total stockholders' equity 85,900,438 32,244,813

$ 95,007,028 $ 37,285,206 China Sky One Medical, Inc. and Subsidiaries Consolidated Statements of Cash Flows

Nine Months Ended September 30,

2008 2007

(Unaudited) (Unaudited)

Cash flows from operating activities

Net Income $21,919,013 $11,227,915

Adjustments to reconcile net cash

provided by operating activities

Depreciation and amortization 523,375 355,811

Share-based compensation expense 30,351 225,351

Net change in assets and liabilities

Accounts receivables and other

receivables 1,618,365 (4,562,183)

Inventories (1,431,757) (695,618)

Prepaid expenses and other (10,763) 84,714

Accounts payable and accrued

liabilities 1,375,209 2,229,397

Advances by customers -- (67,541)

Wages payable 258,537 119,678

Welfare payable (44,337) 54,232

Taxes payable 2,475,042 1,238,456

Deferred revenue (24,504) --

Net cash provided by operating

activities 26,688,531 10,210,212

Cash flows from investing activities

Purchases of fixed assets (784,137) (280,168)

Land deposit -- (7,780,234)

Increase in construction in progress -- (2,056,063)

Purchases of subsidiaries (10,917,280) --

Purchase of intangible assets (7,139) (54,095)

Net cash used in investing activities (11,708,556) (10,170,560)

Cash flows from financing activities

Sale of common stock for cash, net

of offering costs 23,487,963 --

Proceeds from warrants conversion 1,044,169 116,256

Proceeds from short-term loan -- (511,672)

Net cash provided by (used in)

financing activities 24,532,132 (395,416)

Effect of exchange rate 2,245,553 751,585

Net increase (decrease) in cash 41,757,660 395,821

Cash and cash equivalents at

beginning of period 9,190,870 6,586,800

Cash and cash equivalents at end of

period $50,948,530 $6,982,621

Supplemental disclosure of cash flow


Interest paid $135,136 $5,940

Taxes paid $5,512,860 $--

For more information, please contact:

Company Contact:

China Sky One Medical, Inc.

Mr. Yu-bo Hao, Board Secretary

Tel: +86-451-5399-4069


Investor Relations Contact:

CCG Investor Relations

Mr. Crocker Coulson, President

Tel: +1-646-213-1915


Web site:

SOURCE China Sky One Medical, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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