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Biostar Pharmaceuticals, Inc. (NASDAQ:BSPM)

Q1 2013 Earnings Call

May 16, 2013 9:00 AM ET

Executives

Chris Lee

Ronghua Wang – Chairman and CEO

Qinghua Liu – CFO

Operator

Ladies and gentlemen thank you for standing and welcome to the Biostar Pharmaceuticals Incorporated First Quarter 2013 Earnings Conference Call. During today’s presentation all participants will be in a listen only mode. Following the presentation there will be a question and answer session and instruction will be given at that time. (Operator Instructions). At this time I would now like to turn the call over to Chris Lee. Please go ahead.

Chris Lee

Okay. Thank you and welcome everyone to Biostar’s first quarter 2013 earnings conference call. My name is Chris and I am a translator of Biostar. With us today Mr. Ronghua Wang, Chief Executive Officer and Chairmen of the Board of Directors; Mrs. Qinghua Liu, Chief Financial Officer and Ally Gong, Secretary to the Board. After management’s prepared remarks there will be a Q&A session. Before we continue I would like to remind our listeners that this conference call may include items of our forward-looking nature with respect to certain securities regulation. We refer you to the forward looking statement disclaimers made in 10-K and 10-I filing with the security and exchange commission as well as those forward looking statements made in company’s press release.

The details of the results are available in the news release and the form 10-I we filed yesterday afternoon. If you have not received the copy of our press release please send the email to office@aoxing-group.com and we will email you a copy.

Now I will hand the conference call over to our Chairmen and CEO Mr. Ronghua Wang who will discuss recent development and then our CFO Mrs. Qinghua Liu will review the financial result. Mr. Wang.

Ronghua Wang

[Foreign Language - Chinese]

Thanks for everyone for attending Biostar’s first quarter 2013 earnings conference call. I'm the Chairmen and CEO Ronghua Wang. As here announced in the 10-Q on news release we were profitable in the first quarter of 2013 it is the first profitable quarter in the first quarter of 2012 and Capsule incident earlier last year.

[Foreign Language - Chinese]

Since the approval from Xianyang SFDA authorities to restart sales of gel capsule product in July 2012 we have been diligently implementing the plan to recover our sales of capsule product. We have seen improvements quarter-over-quarter in a way fact the negative impact from the Capsule incident is now behind us. We will continue to expand our product portfolio enhance our marketing and distribution is the positive growth in the rest of 2013.

[Foreign Language - Chinese]

Our net sales for the first quarter of 2013 decreased approximately 23.9% of $3.8 million as compared to the first quarter of 2012 the decrease was mainly due to decrease in sales of Biostar capsule product as a result of the Capsule incident partially offset by the introduction of several new products.

[Foreign Language - Chinese]

I will now turn the call over to our CFO Mrs. Qinghua Liu who will discuss our first quarter 2013 results. She will also discuss the new development of our payments then we will be available to answer your question. Mrs. Liu please go ahead.

Qinghua Liu

[Foreign Language - Chinese]

Thank you, Ronghua as of now we were profitable in the first quarter of 2013.

[Foreign Language - Chinese]

Premium for the first quarter of 2013 decreased 23.9% to approximately $12.1 million compared to $15.9 million for the first quarter of 2012. The decrease was primarily due to decrease in sales of Biostar Capsule product as a result of the Capsule incident partially offset by the introduction of several new products. Sales of products under the Aoxing Pharmaceutical brand decreased by approximately $6.3 million of 43.8% for the three months ended March 31st, 2013 compared to the same period in 2012. Sales of Shannxi Weinan's product increased by approximately $0.5 million or 33.2% for the three months ended March 31st, 2013 compared to the same period in 2012. The company introduced three new products to a local hospital in the third quarter of 2012 and the sales of this product contributed approximately $2 million to total net sales for the three months ended March 31st, 2013.

[Foreign Language - Chinese]

Cost of goods sold for the three months ended March 31st 2013 was approximately $5.4 million of 44.7% of revenue as compared to $5.1 million of 31.8% of revenues for the three months ended March 31st 2012. The increase in cost of goods sold was due to the introduction of new products and increase in the cost of raw material and labor partially offset by the decrease in net sales and temporarily discontinuation of several product.

[Foreign Language - Chinese]

Gross profit for the first quarter of 2013 was approximately $6.7 million with gross margin of 55.3% compared to gross profit of $10.8 million and gross margin of 68.2% for the first quarter of 2012. The decrease in gross margin was due to the increase in cost of goods sold and significant change in the sales of products mix.

[Foreign Language - Chinese]

Operating expenses for the three months ended March 31, 2013 were approximately $6 million a decrease of 21.7% compared to the same period in 2012. The decrease was mainly attributable to approximately $1 million decrease in advertising expenses and approximately $0.7 million decrease in selling expenses.

[Foreign Language - Chinese]

Net income was approximately $0.6 million for the first quarter of 2013, a 74.1% decrease compared to $2.2 million for the first quarter of 2012. Diluted earnings per share were $0.06 for the first quarter of 2013 compared to $0.23 for the first quarter of 2012 based upon approximately $10 million and $9.4 million diluted common shares outstanding respectively.

[Foreign Language - Chinese]

Cash and cash equivalents totaled approximately $6.5 million on March 31 2013 compared to $1.8 million on December 31 2012. Accounts receivable balance was approximately $16.5 million on March 31 2013 versus approximately $21.9 million on December 31 2012. Days sales outstanding DSO were at 123 days. The company had a current ratio of 3.7 to 1 and stockholders equity of approximately $58.8 million, with total assets of approximately $70.3 million versus total liability of approximately $11.5 million on March 31 2013.

[Foreign Language - Chinese]

For the first three months of 2013 the company generated approximately $6.2 million in cash from operations versus $5.7 million in cash generated from operations reported from the same period in 2012.

[Foreign Language - Chinese]

Before opening the line to questions I would like to emphasis that despite the recent temporary setback our business remain solid.

[Foreign Language - Chinese]

We have taken a number of steps to reduce sales of gel capsule drug immediately following the FDA approval. We expect our sales continues to recover in addition to the sales generated from recently introduce products.

[Foreign Language - Chinese]

Going forward we expect our net sales to significantly improve in the rest of the year 2013. We look forward to reporting our progress in August.

[Foreign Language - Chinese]

Ladies and gentlemen this concludes our prepared remarks. We would like to open the line to your questions. Operator?

Question-and-Answer Session

Operator

Thank you very much. Ladies and gentlemen at this time we will begin the question and answer session. (Operator Instructions). And management I’m not showing any questions. Please continue with any comments.

[Foreign Language - Chinese]

Again I want to thank everyone for joining us today. We look forward to updating you on our second quarter 2013 results in late August. Thank you very much.

[Foreign Language - Chinese]

[Foreign Language - Chinese]

Chris Lee

Thank you, operator.

Operator

Ladies and gentlemen that will conclude the conference for today. We do thank you for your participation. You may now disconnect your lines at this time.

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