China Sky One Reports Another Record Quarter

China Sky One Medical (CSKI.OB) announced record results for the first quarter of 2008. Revenues climbed 140% to $12.4 million and net income jumped a remarkable 170% to $3.9 million. That equates to earnings per share of 26 cents, fully diluted.

The 140% increase in revenue continues a series of 140% increases that the company recorded in late 2007 quarters and for all of 2007. These big jumps in revenue started in Q2 of 2007, so comparisons for the rest of 2008 will be more challenging. From here forward, the revenue increases versus year-earlier numbers are projected by analysts to be in the 60%-70% range – that’s still very respectable growth, and especially strong when compared with the revenues of two years earlier.

In the beginning of Q2, China Sky One completed its acquisition of Heilongjiang Tianlong Pharmaceutical, Inc. China Sky One paid $8.3 million to buy the company, which has the same sort of externally-applied drugs (patches, sprays, ointments) that serve as the mainstay of China Sky One pharmaceutical products. Tianlong has a GMP-certified manufacturing facility and 69 approved drugs (in 98 forms), plus another 38 drugs awaiting SFDA approval. To finance the acquisition and other projects, China Sky One raised $25 million in a private placement.

The company also entered an agreement to acquire Heilongjiang Haina Pharmaceutical Inc., which interests China Sky One because of its Good Supply Practice [GSP] license, allowing the company to distribute medical products. By acquiring Haina, China Sky One avoids having to undergo the lengthy license application process. Terms were not disclosed.

China Sky One said the acquisitions and the increasing interest in its existing products would lead to increased revenues – though it did not make specific projections. The company did say, however, that it expects its gross margin to rise to 78.5% from its present level of 77%.

China Sky One also reminded investors that it is seeking to migrate its listing from the OTC Bulletin Board to the American Exchange. Bulletin Board stocks do not, as a rule, enjoy rich PE multiples, so a move to the AMEX would give the company greater respectability and, over the longer term, a higher stock price.

Besides its external use products, China Sky One also develops in-vitro diagnostic tests. It expects to begin clinical testing of eight biologic testing kits in the second half of 2008, and intends to market its AMI, early pregnancy and other types of diagnostic kits in Southeastern Asia and eventually Africa. The company also plans to build a cord stem cell and tissue bank at a newly established facility outside Harbin, which is expected to be completed by 2009.

At the end of Q1, China Sky One had $38.2 million in cash and equivalents, approximately $43.6 million in working capital, and no debt. The company generated $5.2 million in net cash flow from operating activities in the first quarter of 2008. The company is selling for about 7 times its projected 2008 net earnings. China Sky One had 14.8 million shares outstanding, before the secondary offering, giving it a market cap of $177 million.

Disclosure: none.

Comments

[spirit_long71:]

Looks like they're printing money!!!

2008 May 29 01:44 PM