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Bohai Pharmaceuticals (BOPH.OB) Posts Record Q2 Results, Supported by Solid Sales and Chinese Government Support

Bohai Pharmaceuticals Group Inc., a China-based pharmaceutical company engaged in the production, manufacturing and distribution of Traditional Chinese Medicine (NYSE:TCM) in China, today posted record second quarter fiscal 2011 financial results for the period ended December 31, 2010.

Net revenues for the second quarter increased 32 percent to $22.2 million compared to the second quarter of 2009. Net revenues for the six months ended December 31, 2010, increased 27 percent to $39.2 million compared to the same period in 2009.

Net income for the second fiscal quarter increased 100 percent to $6.5 million compared to the comparable quarter of 2009. Net income from operations increased 47 percent to $6.4 million. The company reported that net income included a non-cash gain of $2.9 million for changes in fair value of warrants and non-cash charges for approximately $867,000 for unamortized beneficial conversion of our convertible notes and restricted stock and option based compensations.

The company attributes its record results to the success of its leading TCM products and the introduction of 5 new products in April 2010.

“During the second quarter, we continued our track record of growth through sales of our three lead TCM products, and our growth was augmented by continued market acceptance of our five new TCM products introduced last year,” Hongwei Qu, chairman, president and CEO of Bohai stated in the press release. “During the quarter, we saw our net revenues increase by over 32 percent compared to the same quarter last year as we reaped the benefits of the strong marketing efforts on our lead products and the continuing the roll out of our newer products. Our efforts to keep administrative costs down have also shown significant benefits to our net income.”

In the second quarter the company also entered into an acquisition agreement for 14 approved TCM medicines, which the company expects to generate a “tremendous opportunity” for its future sales growth. Qu said the Chinese government’s growing support of the TCM industry and the company’s growing portfolio positions the company for additional growth.

The Chinese government has authorized Bohai to produce 43 Traditional Chinese Medicine products, of which 15 are currently being produced by the company. The company attributes its sales performance in the second quarter to its lead products, Lung Nourishing Syrup, Tongbi Capsules and Tongbi Tablets, which together account for approximately 67 percent of Bohai’s total net revenues.

“As we move into 2011, our balance sheet remains strong and we are well situated in the Chinese TCM market with a growing portfolio of government supported products,” Qu stated. “Not only are Bohai’s three lead products reimbursable through the National Drug Reimbursement List in China – and therefore not affected by the recent pricing caps – two of them are also partially sheltered from competition. Tongbi Capsules are a ‘protected’ medicine in China, meaning Bohai is one of the few manufacturers permitted to sell the product, and Lung Nourishing Syrup was recently awarded a patent in China that lasts 20 years, allowing Bohai to sell these medicines at a premium. We believe these advantages, together with our strong marketing efforts, create the potential for continued growth for our company.”

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