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Tianyin Pharmaceutical Co. Inc. (NYSEMKT:TPI)

F2Q2011 Earnings Call

February 15, 2011 9:00 AM ET

Executives

James Jiayuan Tong – CFO, Chief Business & Development Officer

Jiang Guoqing – Chairman and CEO

Analysts

Adam Waldo [ph] – Lismore Partners [ph]

Mark McLachlan [ph] – Mainstream Investment Advisers

Angel Liu – Pope Asset Management

Saul Rosenthal [ph] – Private Investor

Boyd Hinds – Equinox Capital

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Tianyin Pharmaceutical Incorporated Second Quarter Earnings Conference Call. (Operator Instructions).

And at this time, I would now like to turn the conference over to Dr. James Tong, who’s Chief Financial Officer and Chief Business Development Officer. Please go ahead.

James Jiayuan Tong

Thank you, operator. Good morning. Good evening. Ladies and gentlemen, welcome to Tianyin Pharmaceutical TPI Second Quarter Fiscal Year 2011 Earnings Conference Call. I am James Jiayuan Tong, Chief Financial Officer and Chief Business and Development Officer at TPI along with Dr. Jiang Guoqing, Chief Executive Officer and Chairman of the company; and Simon Min Ren, Director of Investor Relations; and May Yenyuhan [ph], Assistant to CFO.

During this conference call, we will be reviewing the second quarter fiscal year 2011 financial highlights followed by the question and answer period. Before we continue, please not that this call will contain forward-looking statements made under the Safe Harbor provisions of the US Private Security Litigation Reform Act of 1995.

Any statements set forth in this presentation, that are not historical facts or forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include but are not limited to such factors as unanticipated changes in the product demand, increased competition, failure to obtain or maintain intellectual property protection, fluctuation in the economy, results of research and development, failure to obtain regulatory approvals and other information detailed from time to time in TPI’s filing and future filings with the United States Securities and Exchange Commission.

The forward-looking statements contained in this presentation are made only for this date and TPI’s under no obligation to revise or update these forward-looking statements.

Now, I’d like to invite Dr. Jiang to speak to the audience.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Second quarter fiscal year 2011 ending December 31st, 2010, financial highlight. Revenue increased 69.6% year-over-year to $25.3 million, from $14.9 million in second quarter fiscal year 2010.

Operating income increased 69% year-over-year to $5.3 million from $3.2 million in second quarter of fiscal year 2010 with the operating margins at 21%, respectively. Net income was $4.4 million, up 69.2% year-over-year from $2.6 million in second quarter fiscal year 2010 with net margins improved to 17.4% from 17.2% in second quarter fiscal year 2010.

Earnings per share of $0.16 per basic share or $0.14 per diluted share, up from $0.10 per basic share or $0.08 per diluted share a year earlier, a gain of 52.5% and 70.9%, respectively. Cash and cash equivalents total $31.2 million on December 31st, 2010 or $1.11 per basic share in cash.

Sichuan Jiangchuan macrolide facility construction is completed.

For the sales, sales for the quarter ended December 31st, 2010 was $25.3 million, up 69.6% as compared to $14.9 million for the quarter ended December 31st, 2009.

The China expansion and market penetration continued to be the major drivers for the revenue growth. Our current hospital coverage reached 880 hospitals, up from 850 hospitals from the beginning of fiscal year 2011.

Revenues from the top selling products are listed as follows; Ginkgo Mihuan, $5.4 million; Apu Shuangxin, $1.8 million; Azithromycin Tablet, $1 million; Xuelian Chongcao, $1.1 million; Qingre Jiedu, $0.8 million. These products total $10.1 million in sales, representing 40% of the quarterly revenue.

Cost of sales for the quarter ended December 31st, 2010 or $14 million or 55.3% of the sales as compared to $7.2 million or 48.3% of sales in the quarter ended December 31st, 2009.

Gross margins for the quarter ended December 31st, 2010, was 44.7%, compared to 51.9% for the quarter ended December 31st, 2009. The gross margins were attributable to the addition of the revenues from Tianyin Medicine Trading, TMT, the distribution arm of TPI, in the current year. TMT related gross margins average approximately 15%. While in this quarter, our organic portfolio delivered approximately 55% gross margins, an increase of 3% over the 52% gross margins recognized for the quarter ended December 31st, 2009.

Operating Expenses for the quarter ended December 31st, 2010, were $6 million, compared with $4.6 million a year earlier. The increase was due to continuing sales expansion-related sales payroll and marketing expenses and the remaining cost of $0.5 million financial cost on the previous restricted stock compensation.

Net Income was $4.4 million for the quarter ended December 31st, 2010, as compared to net income of $2.6 million for the quarter ended December 31st, 2009, a net increase of $1.8 million or 69.2% year-over-year. Net profit margins rose to 17.4% from 17.2% for the quarter ended December 31st, 2009, as the leverage in the TPI’s business operation further drives the revenue while keeping the operating expenses in-line with the sales expansion.

Diluted earnings per share for the three months ended December 30, 2010 were $0.14, up 70.9% from the earnings of $0.08 per diluted share for the three months ended December 31st, 2009, based on 30.5 million shares and 30.4 million shares, respectively.

Balance sheet. As of December 31st, 2010, we had working capital totaling $35.7 million, including cash and cash equivalents, $31.2 million or $1.11 per share in cash. Net cash generated from operating activities for the six months ended was $10.8 million, compared with $4.9 million for the six months ended December 31st, 2009. The significant increase in cash generated from operating activity was mainly driven by the 69.7% increase of the operating income year-over-year and then net margin improved to 17.4% from 17.2%. We believe that TPI is adequately funded to meet all of the working capital and capital expenditure needs for fiscal year 2011.

Business Development & Outlook. Jiangchuan Macrolide Project. By the end of the second quarter, we have completed construction of the Phase I, 240-ton capacity JCM for the development, manufacturing and sales of macrolide antibiotic API. We anticipate meaningful macrolide API revenue contribution from JCM in the current fiscal year ending June 30th, 2011.

Tianyin Medicine Trading Distribution Business, TMT. In November 2010, we obtained one-year distribution rights from Jiangsu Lianshui Pharmaceutical to distribute approximately 15 Lianshui-branded generic injection products including cough suppressants, antibiotics, anti-inflammatory medicines and products for other healthcare indications. The estimated annual distribution revenue from TMT is approximately $15 million.

Research and Development. Currently, we have 10 pipeline drugs pending SFDA’s approval that includes – Huangtengsu Tablet, Lifei Tablet, Fuyang Granules, Shuxiong Tablet, Suxiao Zhixie Capsule, Shuanghuang Xiaoyan Tablet, Huoxiang Zhengqi Capsule, Jiegu Xujing Ointment, Runing Tablet, Dengzhan Huasu Tablet.

Fiscal Year 2011 Financial Guidance. We reiterate our fiscal year 2011 revenue guidance of $113 million, representing 76.8% year-over-year growth and net income guidance of $18 million, representing 50% year-over-year growth.

In our forecast, we have seen a steady pricing for our product. Net income forecast excludes any non-cash expense associated with the stock compensation plans or stock option expenses.

The ongoing healthcare reform in China provides opportunities for our growth as well as challenges to our pipeline development, market expansion and margin improvements. The management will continue to evaluate TPI’s business outlook and communicate with any changes on a quarterly basis or when appropriate. Here is the conclusion for the financial highlights.

Operator, could you please open the question and answer period?

Question-and-Answer Session

Operator

Sure. (Operator Instructions). And our first question does come from the line of Adam Waldo with Lismore Partners. Please go ahead.

Adam Waldo [ph] – Lismore Partners [ph]

Yes. Hello, all. Thank you for having the call. My questions concerns future uses of surplus cash. Obviously, you’ve – actually this is the second quarter with a little over $1 shared surplus cash. The business is obviously cash flowing nicely now and given the remaining capital expenditure path for the – and I apologize, I can’t pronounce the macrolide facility.

But can you talk a little bit about what we might expect in the future as it relates to uses of surplus cash, particularly for share repurchases under the existing plan and perhaps a return to a dividend policy.

James Jiayuan Tong

So, thanks, Adam. This is James Tong. Yes, we do have $31 million on the books. And we have spent about $8 million on our Jiangchuan Pharmaceutical, which is the API macrolide business. So, we can acronym as JCM; probably easier for you to pronounce.

Adam Waldo [ph] – Lismore Partners [ph]

JCM.

James Jiayuan Tong

Yes, JCM. So, JCM spent about $8 million a week. We expect that for another $5 million to $7 million to finish up. So, if you look at the balance sheet there is a $5 million payable and we believe that the GNP certification, the new GNP guidelines just issued by Chinese government probably were acquired about under $1 million further investments. So that will be – some of the CapEx from our $31 million and the rest of it, certainly, there’s a chance that we can extend it to Phase II, which will be the total capacity will be 500-ton, and that’s one way to use cash to create to expand the capacity to create further value.

Yes, we are certainly conserving that. If there is the timing of any possible acquisitions or extension of the capacity is not necessarily right, then we will reinitiate, restate the dividend, of course.

Adam Waldo [ph] – Lismore Partners [ph]

And your thoughts on share repurchases, Dr. Tong, given that the shares offer at high teens, below 20s internal rate of return without any future growth just buying back the stocks that was priced.

James Jiayuan Tong

Yes, exactly. So, we have bought back stock. We bought back close to 100,000 shares during 2009. And we found our stock – now that liquidity has – the past few days, the liquidity actually improved. But there’s some of these liquidity with just 40,000 shares. So, it’s just kind of difficult for us to further buy back stock just technically yet.

Adam Waldo [ph] – Lismore Partners [ph]

Absolutely [ph].

James Jiayuan Tong

If you look at that we will be buying back stocks, if the market continues to undervalue it.

Adam Waldo [ph] – Lismore Partners [ph]

Thank you very much.

James Jiayuan Tong

Thank you, Adam.

Operator

And our next question does come from Mark McLachlan with Mainstream Investment Advisers.

Mark McLachlan [ph] – Mainstream Investment Advisers

Hey, James. It’s been awhile. Nice quarter.

James Jiayuan Tong

Thank you.

Mark McLachlan [ph] – Mainstream Investment Advisers

Just a question on your auditor and I know this question hits a lot of U.S.-based smaller Chinese companies. But can you tell us a little bit more about your auditor and maybe give us some things that could comfort us about the auditor, and do you have any plans to change the auditor?

James Jiayuan Tong

Sure. Thanks for the question. Yes, our auditor, Patrizio & Zhou, have been with us more than three years. They’re very experienced in China market. Their website has just been updated and then there are some of the brochures, which I think there is some online versions, which I can send it to you.

They currently cover about eight Chinese companies, the last update with them. And I had just – our co-manager actually is a former Deloitte accountant. So, we’ve been working with them very closely and they have a team in China as well about, I think, what I have seen about eight people. So, they have China office, they have U.S. office, they have traveled to China very frequently, almost every quarter, so they know the China business even though they’re certainly not a Big Four.

And we have been interviewing some of the auditors including the Big Four or Big Six; but at this moment, if there were any material developments that we will be certainly exposed to the public in the year in investment community.

Mark McLachlan [ph] – Mainstream Investment Advisers

Thanks for that. If I could just get in one more, you talked about serving 880 hospitals now. How many could that go to in the next few years? How big is the runway that you have in front of you?

James Jiayuan Tong

There are thousands of hospitals in China. So, 880 is a smaller portion of it. And then, this 880 can be selling some of our products instead of 56 products, so there is the quite a bit depth and the width we can explore. So, by the numbers and by the volume of the ordering how many drugs to how many kinds of drugs in the volume. So, a lot of growth just at the 880 and there will be further growth beyond the 880 number.

Mark McLachlan [ph] – Mainstream Investment Advisers

Thank you. Once again, good quarter.

James Jiayuan Tong

Thank you. Thank you, Mark.

Operator

And our next question does come from the line of Angel Liu from Pope Asset Management.

Angel Liu – Pope Asset Management

Hey, James, congratulations for the good quarter.

James Jiayuan Tong

Hi, Angel. Thank you.

Angel Liu – Pope Asset Management

My question is on the JCM. What will be the main product in producing the average Azithromycin or?

James Jiayuan Tong

Yes, the main product now is Azithromycin raw material.

Angel Liu – Pope Asset Management

Okay. And my question is that I saw the model on this raw material, actually was pretty good content, price going up. And I find that there are some industrial numbers showing in the 2010 is total production is about 1,400 tons. So, if you have your 250-ton dosage production actually has a pretty nice market share.

James Jiayuan Tong

Yes.

Angel Liu – Pope Asset Management

So, I wonder if how will – for TPI, are you compete with the other Azithromycin producers and…

James Jiayuan Tong

Yes.

Angel Liu – Pope Asset Management

And how soon you think you’re production will be consumed by the customers?

James Jiayuan Tong

Okay. So, I think it’s a good question and I think Dr. Jiang is the right person to answer that. Let me translate it for him.

Angel Liu – Pope Asset Management

Okay.

James Jiayuan Tong

[Foreign Language – Chinese].

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Yes, let me translate. So, first of all, that the market is currently not saturated. So, there is a discrepancy between the demands, which is a huge demand for Azithromycin. It’s reflected by the increase of, pricing increase; literally doubling for the past two years. And this gap that is far bigger than 250 tons we can put in.

And we have the technical advantages that we actually – the JCM is a venture with Mingxin Pharmaceutical and they hold the licenses and also some of the inventions, intellectual properties, which have the higher standard of Azithromycin, very pure. The purity is higher.

And also that we have recently or discussing with Tianjin [ph] Pharmaceuticals distribution export company to discuss the possibilities to export to India, Pakistan with our macrolide intermediate or Azithromycin raw material. So, first of all, for the gap, that 250 tons would be a nice niche for us to get into a good market niche. Second of all, is that the expansion of the manufacturing facility will actually exceed some other – our competitors speed.

As Dr. Jiang mentioned, there are some competitors, they’re expansion might only be available until 2012, so two years from now. So, we will have a good market advantage for a good two years and then ahead of them. So, that’s it. Thanks.

Angel Liu – Pope Asset Management

Okay. Well, James, I think that they say the price was higher $1,300 [ph]. If that’s the case, it means your 240-ton will tend to be like $47 million just total revenue. Is that correct?

James Jiayuan Tong

Yes. So, the export price, it will be higher. You’re right. It’s about 280 to $200. And the domestic price kind of lowers about 200 to $200 per kilograms. So, there is – so, if there is a good inflow of export revenue. So, yes, the 240 tons could be a higher revenue number.

Angel Liu – Pope Asset Management

And what’s the gross margin for this one, if the price stays high?

James Jiayuan Tong

The gross margin will be around $0.33.

Angel Liu – Pope Asset Management

Okay. Okay, thank you. Surely, that’s all.

Operator

And our next question does come from the line of Saul Rosenthal. He’s a private investor. Please go ahead.

Saul Rosenthal [ph] – Private Investor

First, I’d like to congratulate you on your excellent quarter. Secondly, I’d like to ask what’s your stock-based compensation was for the quarter. You gave the stock-based compensation for six months. I just like to know what it was for the quarter.

James Jiayuan Tong

Okay, sure. Thanks, Saul. So, the stock-based compensation for the six months is $1.7 million. And the first quarter is $1.2 million, and the just ended quarter was I think for $483,000, that’s $483,000.

Saul Rosenthal [ph] – Private Investor

Okay.

James Jiayuan Tong

And that’s all there is on it, which I’m going to –

Saul Rosenthal [ph] – Private Investor

And then, I’d like to ask you – I think I’ve asked you this again, but I’ve asked you this before. But I would appreciate if you – and I’m sure other people will appreciate, if you would give you your stock-based compensation each quarter because a lot of people add that – ignore that expense.

And also, most companies give adjusted or non-GAAP earnings taking into account the non-cash items such as stock-based compensation. And it would probably very helpful for people if you would do that. I think TPI used to do it, actually, before you became the CFO, but then you’ve stopped doing it recently.

James Jiayuan Tong

You mean the non-cash sort of option and restricted compensation [inaudible]?

Saul Rosenthal [ph] – Private Investor

Well, some companies have repricing of ones and stuff like that, which is a non-cash change, but on the GAAP, you have to report it.

James Jiayuan Tong

Sure.

Saul Rosenthal [ph] – Private Investor

So, they report if there are non-GAAP earnings per share.

James Jiayuan Tong

We, so…

Saul Rosenthal [ph] – Private Investor

And they also ignore the – as if they didn’t have the stock-based compensation. In other words, they give both. They give the GAAP earnings and they give non-GAAP earnings.

James Jiayuan Tong

We believe the GAAP earning is sufficient and then comparable with previous earnings results. We can certainly give GAAP at – I think previously there are options and then there are a lot of stock compensation expenses. I think 2009, due to the stock volatility. But some of the numbers were recorded.

And so now the stock prices, fairly stable, and we were certainly considering that give two numbers – at this moment, that we only have non-cash expenses other than the restricted stock compensation we have. The 5,000, 1,000 [ph] shares of options exercised at various type that was included, and also it’s GAAP counting.

We can exclude that, but that will make our net income all higher. And so, we think that GAAP will – a very clearly and fairly value evaluate our performance with those charges in there. But, yes, we can back calculate. I can certainly help you to back calculate and then you would see the sort of pro-forma number of net income.

Saul Rosenthal [ph] – Private Investor

Yes, if you would at least give the stock-based compensation each quarter that would be very helpful.

James Jiayuan Tong

Okay, of course, yes. Thank you.

Saul Rosenthal [ph] – Private Investor

Thank you.

James Jiayuan Tong

I would do that.

Operator

(Operator Instructions). And our next question is a follow-up question from the line of Angel Liu with Pope Asset Management. Please go ahead.

Angel Liu – Pope Asset Management

Hey, James, I just want to tap on the selling and do you know the [inaudible] and expenses? It seems that this quarter is relatively low in terms of the advantage. I wonder when JCM start running, will this number go up or your company has like percentage guidance for the selling SG&A?

James Jiayuan Tong

You mean the SG&A?

Angel Liu – Pope Asset Management

Yes.

James Jiayuan Tong

Yes. If you look at the last quarter, SG&A includes the $1.26917 [ph] million stock compensations cost. In this quarter, it’s lower because it has only $400,000. So, that might be the reason why it’s lower, so you showed a good leverage there.

Yes, so we are certainly – we don’t – probably if you need a model, we put in 24%, it’d be 22% to 24% of the revenue for SG&A will be, I think, appropriate.

Angel Liu – Pope Asset Management

Okay, thank you.

James Jiayuan Tong

Thanks.

Operator

And our next question is a follow-up question from the line of Mark McLachlan with Mainstream Investment Advisers.

Mark McLachlan [ph] – Mainstream Investment Advisers

Hey, James. Is there anything that you can say beyond fiscal ‘11 about growth in either the traditional pharmaceutical business or the distribution, the TMT business? I mean have you given any guidance beyond ‘11 for growth of either those businesses?

James Jiayuan Tong

We so far haven’t given our 2012 guidance. But I think that Dr. Jiang will certainly be good to talk about. Let me translate it. [Foreign Language – Chinese].

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Yes. So, there are – through the ongoing healthcare reform, it’s a very dynamic environment in healthcare in China.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

In the agriculture area, which is vast area in China since this year that there is an inclination to use Essential Drug List drugs.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

So, for the top tier hospitals like AAA or AA hospitals, which are in major cities like Beijing, Shanghai or the major capitals, their policy are not changed.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Currently, in the top tier hospitals contribute about 33% of our revenue and the agricultural area contribute about 60% to our revenue.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

So, the generic non-EDL product in these agriculture areas will probably be affected going forward along with this policy.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Currently, we have seven products, which are listed in Essential Drug List considering 56 is a little bit over 15%.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

So, we believe that for the second quarter you will see an uptick of our revenue in particularly in the 56, the organic portfolio, is because ahead of healthcare reform that could be a sort of increase of ordering and buying activities, which that in the third quarter and fourth quarter, we need to monitor whether it will repeat itself or it will change.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Probably in this healthcare reform, our Azithromycin raw material will seem to have a very favorable future. That there is inclination for the EDL drugs and we are making the raw materials for these EDLs. And we are having a new production capacity, 240 tons to 250 tons coming along. So, we think that we’re going to focus on our new JCM project.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Due to the top tier hospitals sales mode and sales sort of pattern are very stabilized and mature, so we’re actually going to expand our exposure to the AAA and AA hospitals, top tier hospital.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

The third that our TMT, which is from inception 2009 to have distributed more and more EDL type of drugs, which we believe that during this healthcare reform will actually do in fairly well under this current ongoing healthcare reform policy.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

This dynamic sort of adaptation to this dynamic healthcare atmosphere that will take a period of the time to be adjusted to.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

So, we believe that there could be some of the sales adjustment for the third quarter.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

So, we believe that within six months, the fourth quarter – in this fourth quarter, will be the ending of the transitional period that the overall growth and portfolio with the JCM plus our distribution arm TMT will actually carry the growth of the company.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Yes. So, for the Essential Drug List bidding process, tendering process, we will be updating for our investors as it – because at the moment, the policy have not completely rolled out, so we’ll be updating for our investor as we go along.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

So, we believe that – what we can see now is the TMT distribution revenue will actually benefit during this very dynamic moment.

Jiang Guoqing

[Foreign Language – Chinese].

James Jiayuan Tong

Yes. So, at this moment that we would now – so for the 2012, we will probably will give guidance in the next quarter. For the next two quarters, we would like to tell our investors that we’re doing our best and will update any potential policy changes going forward and any particular effect on our sales.

Okay, is that good?

Mark McLachlan [ph] – Mainstream Investment Advisers

Yes, that’s good. Thank you.

James Jiayuan Tong

Okay. No problem.

Operator

And our next question just comes from the line of Boyd Hinds with Equinox Capital.

Boyd Hinds – Equinox Capital

Hi, thanks for taking question. James, very nice quarter. Congratulations.

James Jiayuan Tong

Thanks.

Boyd Hinds – Equinox Capital

The first question is how much of your $31 million is held in banks that are offshore?

James Jiayuan Tong

About half.

Boyd Hinds – Equinox Capital

Half of it. Okay, so approximately $15 million to $16 million.

James Jiayuan Tong

Yes.

Boyd Hinds – Equinox Capital

Okay, so that gives you some flexibility, if you decide you wants to buy back stock or issue dividends.

James Jiayuan Tong

Yes.

Boyd Hinds – Equinox Capital

Okay. The second question is that based on your guidance for the rest of this fiscal year. If I could sort of quickly summarize it, it looks like very strong revenue growth. But most of its going to be lower margin, so that’s going to drive down pre-tax margin as well.

My question is about going forward with JCM and TMT as you just mentioned, that’s going to be carrying the future growth of the company. Can you just talk a little bit about the cash generation cycle that those particular products will be going through? Will your DSOs be declining? You have – we’ll you see better cash flow even though your generating lower margin on those sales?

James Jiayuan Tong

So, JCM, the cash flow will actually improve. If you look at account receivable for JCM, these are raw material in China that the raw material, especially pharmaceutical raw material, usually there’s no account receivable. There are even the pre-payments. So, DSOs supposedly, potentially would be zero.

And for TMT that you will see inventory increase even in the last quarter for the TMT. And the cash turnover will be similarly or even better than our current 47 days. So, I think that we don’t expect that there’s any delay of the payment or any deterioration or actually we expect improvement of our cash cycle.

Boyd Hinds – Equinox Capital

Okay, great. Thanks very much, James.

James Jiayuan Tong

Thank you.

Operator

And at this time, there are no further questions. I’d like to turn it back for any closing comments.

James Jiayuan Tong

Thanks for investors, analysts, to attend the second quarter fiscal year 2011 conference call. Our JCM facility has just been completed and we have – let me send our cordial invitation to our investors and analysts and our shareholders to visit Tianyin headquarters to meet with management.

And we will be attending Rodman Conference in Shanghai, March 6th in Shanghai and then the ROTH Conference in Orange County, Dana Point on March 13th until the 16th.

And we will be holding our annual meeting in NYSE, New York Stock Exchange Meeting room on March 21st, that’s 3/21. And we look forward to meet our shareholders in the West Coast as well as on the East Coast.

Thanks again to attend our conference call and have a good morning and good evening.

Operator

Thank you. Ladies and gentlemen this does conclude the Tianyin Pharmaceuticals Incorporated second quarter earnings conference call. We do thank you for participation on today’s call. You may now disconnect your lines at this time.

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