Biostar Pharmaceuticals' CEO Discusses Q3 2013 Results - Earnings Call Transcript

Nov.15.13 | About: Biostar Pharmaceutic (BSPM)

Biostar Pharmaceuticals Inc (NASDAQ:BSPM)

Q3 2013 Earnings Conference Call

November 15, 2013 9:30 AM ET

Executives

Chris Lee – Translator of Biostar Pharmaceuticals Inc.

Wang Ronghua – Chairman and Chief Executive Officer

Liu Qinghua – Interim Chief Financial Officer, Chief Financial Officer of Shaanxi Aoxing Pharmacy Co., Ltd.

Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Biostar Pharmaceuticals Inc Third Quarter 2013 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions)

I would now like to turn the conference over to our Chris Lee. Please go ahead

Chris Lee

Good morning and good evening. Welcome to Biostar Pharmaceuticals third quarter 2013 earnings conference call. With us today are Mr. Ronghua Wang, Chief Executive Officer and Chairman of the Board of Directors; Ms. Qinghua Liu, Chief Financial Officer; and Ally Gong, Secretary of the Board. After management’s prepared remarks, there will be a Q&A session.

Before we continue, I’d like to remind our listeners that this conference call may include items of a forward-looking nature with respect to certain securities regulations. We refer you to the forward-looking statement disclaimers made in the 10-K and 10-Q filings with the Securities and Exchange Commission as well as those forward-looking statements made in the company’s press releases. My name is Chris Lee, I’m the translator of Biostar. The details of results are available in the new release and the Form 10-Q we filed yesterday afternoon. If you have not received a copy of our press release, please send email to office@aoxing-group.com and we will email you a copy.

Now I will hand the conference call over to our Chairman and CEO, Mr. Ronghua Wang, who will discuss recent developments and then our CFO Ms. Qinghua Liu, who will review the financial results.

Wang Ronghua

[Foreign Language]

Thank you everyone for attending Biostar’s third quarter 2013 earnings conference call. I am Chairman and CEO, Ronghua Wang. As we announced in 10-Q and news release, the continued positive momentum in the third quarter of 2013 with 50.1% year-over-year growth and 2% quarter-over-quarter growth in sales.

[Foreign Language]

Thanks to the efforts of our entire team and the continued support shown in our market channel by both consumers and our suppliers. For the nine months ended September 30, 2013, the company achieved sales revenue of $41.75 million, cash flow from operations of $13.71 million and net profits of $0.22 million. We will continue to operate in accordance with the highest industry standards while working to deliver high quality products to our customers as well as increasing returns for our stockholders in terms of earnings and share value.

[Foreign Language]

I will now turn the call over to our CFO, Ms. Qinghua Liu, who will discuss our third quarter 2013 results. She will also discuss the new development of our business then we will be available to answer your questions. Ms. Liu, please go ahead.

Liu Qinghua

[Foreign Language]

Revenue for the third quarter of 2013 was $15.01 million which was increased by approximately $5.04 million or 50.1% compared to $9.97 million obtained in the same period in 2012. The increase is mainly attributed to the increase in sales volume offset by decrease in sales price and an introduction of several new products.

[Foreign Language]

Cost of goods sold for the three months ended September 30, 2013 was approximately $8.07 million or 53.8% of revenue as compared to $12.72 million or 47.4% of revenue for the three months ended September 30, 2012. This increase is mainly due to the increase in net sales and the introduction of the new hospital products.

[Foreign Language]

Gross profit for the third quarter of 2013 was $6.94 million with gross margins of 46.2% compared to $5.24 million in gross profit and gross margins of 52.6% for the third quarter of 2012. The increase in gross profit was due to increase of sales volume. The decrease in gross profit margin was mainly due to significant change in the sales mix of our products.

[Foreign Language]

Total operating expenses for the third quarter of 2013 decreased substantially to $6.19 million in comparison to the prior year’s 2012 value of $11.04 million on increasing sales. The decrease is primarily attributable to a lower cost structure in our advertising as well as general and administrative expense.

[Foreign Language]

Income from operations for the third quarter of 2013 totaled approximately $0.75 million, a 113% increase from $5.8 million loss reported for the third quarter of 2012. Net income was approximately $0.39 million for the third quarter of 2013 compared to $5.94 million loss for the third quarter of 2012. Diluted earnings per share were $0.03 for the third quarter of 2013 compared to minus $0.63 for the third quarter of 2012, based upon 12 million and 9.5 million diluted common stocks outstanding respectively.

[Foreign Language]

For the nine months ended September 30, 2013 revenue increased by approximately 22.7% to $41.75 million in comparison to the same period in 2012. Gross profit was approximately $20.51 million for the first nine months of 2013, representing a general decrease of 0.67% from the first nine months of 2012.

[Foreign Language]

Income loss from operation was $0.68 million and minus $14.85 for the first nine months of 2013 and 2012 respectively. Net income loss was $0.22 million for the nine months ended September 30, 2013 compared to minus $13.25 million from the same period in 2012. Fully diluted earnings per share were $0.02 compared to minus $1.41 for the first nine months of 2013 and 2012 respectively, based on 11.20 million and 9.43 million shares.

[Foreign Language]

As of September 30, 2013, we had cash and cash equivalents of approximately $10.55 million and working capital of approximately $32.84 million and had a current ratio of 4:1. Our accounts receivable balance was approximately $13.08 million on September 30, 2013 versus approximately $21.85 million at year-end 2012. Accounts receivable turnover significantly improved to 97 days for the three months ended September 30, 2013 as compared to 257 days during the same period in 2012. The company’s stockholders’ equity as of the end of third quarter of 2013 was $61.74 million with total assets of $72.38 million versus total liabilities of $10.64 million.

[Foreign Language]

For the first nine months of 2013, the company generated $13.71 million in cash from operations versus $5.04 million cash used in operations for the same period in 2012.

[Foreign Language]

Now I would like to discuss the new business development during the third quarter of 2013.

[Foreign Language]

Since our acquisition of Shaanxi Weinan in 2011 and acquisition of additional 13 drug approval numbers in the previous quarter, we continue to diversify our product offerings to consumers under the Shaanxi Weinan Huaren brand. During the nine months ended September 30, 2013, we introduced three new products. These new products are Yanlixiaocapsule, anti-inflammation capsule, Erlongtong Qiao pill, for treatment of hearing loss, and The Danxiang Rhinitis tablet or fragrant rhinitis tablets.

[Foreign Language]

Under the Aoxing Pharmaceutical brand, we have introduced Yiwei particle, a health supplement product to improve stomach functions during the nine months ended September 30, 2013. This product was jointly developed with the Fourth Military Medical University, FMMU of China. The effectiveness of this product, in combination with strong market acceptance has resulted in substantially increased production. Our partnership and cooperation with FMMU represents positive outlook in the development of the Company.

[Foreign Language]

Meanwhile, following the market disruption in the PRC pharmaceutical sector caused by the gel capsule events, as previously discussed, consumers and market confidence appear to be regaining their strength. The company is experiencing noticeable improvements and is hopeful for full market recovery of these markets in the near future.

[Foreign Language]

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

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) One moment for your first question.

Chris Lee

Okay.

Operator

And there are no questions, please continue.

Chris Lee

Again, I want to thank you to everyone for joining us today. We look forward to updating you on our annual and fourth quarter 2013 results at the end of March 2014. Thank you very much.

Operator

Ladies and gentlemen, that concludes the conference for today. Thank you for your participation. And you may now disconnect.

Question-and-Answer Session

[No Q&A session for this event]

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