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TPI Reports Fiscal Year 2013 Financial Results

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 $8.0 million for the fiscal year 2012 ended June 30, 2012.  
  • Comparison of results for the quarters ended June 30, 2013 and 2012:Fiscal YearsEnded June 30,20132012(In millions)Sales$


    69.6Cost of sales$


    45.3Gross profit$


    24.3Total operating expenses$


    15.8Operating income$


    8.5Provision for income taxes$


    2.4Net income$


    6.4Sales 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 DescriptionAmountGinkgo Mihuan Oral Liquid (GMOL) for cardiovascular diseases$

    26.1 millionMycophenolate mofetil capsules (MM) for renal transplant$

    6.9 millionAzithromycin Dispersible Tablets (AZI) for infectious diseases$

    4.6 millionQingre Jiedu Oral Liquid (QRE) for viral infections$

    3.6 millionYanyan Tablets (YY) for throat inflammation$

    1.6 millionThe 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 FlowAs 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 & OutlookR&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 GuidanceOur 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 CallSenior 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 27th , 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:

    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:

    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:
    Tel: +86-28-8551-6696 (Chengdu, China)
    +86 134-36-550011 (China)


    23rd Floor Unionsun Yangkuo Plaza
    No. 2, Block 3, South Renmin Road
    Chengdu, 610041
    ChinaTIANYIN PHARMACEUTICAL CO., INC.Consolidated Statements of OperationsFor the Years Ended June 30,20132012Sales$67,500,476$69,605,758Cost of sales41,496,81245,274,326Gross profit26,003,66424,331,432Operating expensesSelling expenses11,442,66410,672,817General and administrative expenses4,351,5924,255,528Research and development894,995860,081Total operating expenses16,689,25115,788,426Income from operations9,314,4138,543,006Other income (expenses):Interest income162,563209,037Interest expense(437,897)(331,334)Other income-189,268Total other income (expenses)(275,334)66,971Income before provision for income taxes9,039,0798,609,977Provision for income taxes2,423,9062,368,059Net income6,615,1736,241,918Less: Net loss attributable to noncontrolling interest(56,978)(116,772)Net income attributable to Tianyin Pharmaceutical Co., Inc.6,672,1516,358,690Basic earnings per share$0.23$0.22Diluted earnings per share$0.23$0.22Weighted average number of common shares outstanding:Basic29,341,69529,308,442Diluted29,341,69529,308,442 TIANYIN PHARMACEUTICAL CO., INC.Consolidated Statements of Comprehensive IncomeFor the Years Ended June 30,20132012Net income$6,615,173$6,241,918Other comprehensive incomeForeign currency translation adjustment2,083,0612,065,066Total other comprehensive income2,083,0612,065,066Total Comprehensive income8,698,2348,306,984Less: Comprehensive income attributable to the noncontrolling interest(51,749)(74,933)Comprehensive income attributable toTianyin Pharmaceutical Co., Inc.$8,749,983$8,381,917 TIANYIN PHARMACEUTICAL CO., INC.Consolidated Statements of Changes in EquitySeries AAdditionalAccumulated other 

    TotalCommon StockTreasuryPreferred StockPaid inStatutoryRetainedComprehensiveStockholders'NoncontrollingTotal


    Par Value

    StockNumberPar ValueCapitalReserveEarningsIncomeEquityInterestEquityBalance at June 30, 201129,312,491$29,396$(111,587)-$-$30,065,452$5,409,764$39,374,018$6,077,299$80,844,342$435,220$81,279,562Net income-------6,358,690-6,358,690(116,772)6,241,918Other comprehensive income:Foreign currency translation adjustment--------2,023,2272,023,22741,8392,065,066Comprehensive income---------8,381,917(74,933)8,306,984Common shares issued50,00050---39,450---39,500-39,500Treasury stock(29,700)-(24,338)------(24,338)-(24,338)Contribution from noncontrolling interest for Jiangchuan Pharmaceutical Co., Ltd.----------252,352252,352Purchase of subsidiary shares from noncontrolling interest----------(334,613)(334,613)Statutory reserve------710,379(710,379)----Balance at June 30, 201229,332,791$29,446$(135,925)-$-$30,104,902$6,120,143$45,022,329$8,100,526$89,241,421$278,026$89,519,447Net income----$---6,672,151-6,672,151(56,978)6,615,173Other comprehensive income:Foreign currency translation adjustment------2,077,8322,077,8325,2292,083,061Comprehensive income---------8,749,983(51,749)8,698,234Common shares issued50,00050---29,950---30,000-30,000Treasury stock------------Statutory reserve-------727,172(727,172)----Balance at June 30, 201329,382,791$29,496$(135,925)-$-$30,134,852$6,847,315$50,967,308$10,178,358$98,021,404$226,277$98,247,681 TIANYIN PHARMACEUTICAL CO., INC.Consolidated Statements of Cash FlowsFor the Years Ended June 30,20132012Cash flows from operating activities:Net Income$


    6,241,918Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization2,435,1381,215,233Provision for bad debts(14,004)15,968Share-based payment30,00039,500Changes in current assets and current liabilities:Accounts receivable1,400,398(2,006,964)Inventory(42,848)(805,520)Advance payments645,9231,032,919Other current assets130,893(384,778)Accounts payable and accrued expenses(264,388)(398,896)Accounts payable – construction related1,935,150(1,122,489)Trade notes payable(4,703,775)4,652,740Income tax payable(119,146)(147,945)Other taxes payable225,356(316,410)Other current liabilities(27,787)(65,062)Total adjustments1,630,9101,708,296Net cash provided by operating activities8,246,0837,950,214Cash 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-545,374Additions 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 loans5,835,8703,154,400Repayments of short-term bank loans(6,059,100)-Treasury stock-(24,338)Capital contribution from minority shareholder of JCM-252,352Net cash used in financing activities(1,132,095)(134,742)Effect of foreign currency translation on cash632,988704,259Net increase (decrease) in cash and cash equivalents(8,325,287)3,427,389Cash and cash equivalents – beginning35,152,29531,724,906Cash and cash equivalents – ending$26,827,008$35,152,295Supplemental schedule of non-cash activitiesExchange of construction in progress to intangible assets$



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