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Two China Pharma Plays

At GeoInvesting, we have been tracking Tianyin Pharmaceuticals (TPI - Get Report) for some time now.

Our largest hang-up had been with the potential dilution from "in-the-money" warrants. Although the company's fiscal June 2010 net income guidance of $11.3 million represents a 43.0% increase from the fiscal 2009 reported net income of $7.9 million, the increase in shares poses some uncertainty regarding the near term EPS growth scenario, which depends upon the share price and the Treasury method of accounting for these warrants under GAAP. (Tianyin reported 32 cents per share for its 2009 fiscal year, based on 24.8 million shares.)

Having said that, on Dec. 3, Tianyin issued fiscal 2011 net income guidance of $19.6 million, implying earnings per share figure of 50 cents, fully taxed. Combine this with an overall positive outlook, a very accomplished management team, cash available to make potential future acquisitions, and the TPI story begins to gain strength.

With a vast product portfolio, the company appears poised to achieve consistent long-term growth. Tianyin currently has 39 products and a solid pipeline of 17 pharmaceutical products pending SFDA approval. The rapid pace at which TPI has obtained SFDA approval has been impressive -- 12 during the past 12 months. This bodes well for quick pipeline revenue generation and market penetration through an extensive distribution channel with full provincial coverage.

The company is also aggressively targeting the macrolide antibiotics market where it sees a significant growth opportunity. Growth should receive an additional boost from the expansion of its manufacturing capacity, which increased approximately 300% for solid dosage forms and can support annual revenues in excess of $100 million.

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