Tianyin Pharmaceutical Co. Inc. ( 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

Presentation

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.

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