China Sky One Expects Synergies from Pharma Acquisition

China Sky One Medical, Inc. (CSKI.OB) will pay $8.3 million to buy Heilongjiang Tianlong Pharmaceutical, Inc. Like China Sky One, Tianlong focuses on external-use pharmaceuticals. The payment will be $8 million in cash and $300,000 of shares in China Sky One.

China Sky One announced a $25 million private placement on February 1 of this year, saying that the new equity would be used to finance acquisitions.

According to China Sky One, Tianlong has $8.3 million worth of assets, including inventory, land use rights, GMP-certified manufacturing facilities, production equipment, and an R&D center. The company also boasts a portfolio of 69 approved drugs (in 98 forms), plus 38 new drugs that are awaiting approval from the SFDA.

2007 revenues for Tianlong totaled $5.2 million with net earnings of $676,000, a profit margin of 13%. China Sky One projects that Tianlong will be accretive from the start, adding $7.5 million in 2008 revenues and producing net earnings of 30% or $2.25 million. The purchase price means that CSKI is paying about 1.6 times 2007 revenues and 12 times 2007 net earnings.

Tianlong’s lead products include externally applied treatments for dermatitis and eczema. Recently, Tianlong introduced an injectable drug for the treatment of coronary heart disease and cardiomyopathy. The company’s distribution network covers about one-third of China; it is strongest in the northeast and northwest regions.

China Sky One expects synergies from the acquisition, as Tianlong expands CSKI’s products, leverages the sales and marketing efforts, and adds manufacturing and R&D to CSKI’s existing operations. In the first nine months of 2007, China Sky One produced net income of $11.2 million on $36.6 million of revenue.

Disclosure: none.

Comments

[xxxmike]

The column simply copied what was on the SEC filing. Not very original.