Tianyin Pharmaceutical Co., Inc. ( TPI) F2Q12 Earnings Call February 14, 2012 08:30 am ET Executives James Jiayuan Tong – Chief Financial Officer & Chief Business Development Officer Simon Minute Ren – Director of Investor Relations Analysts Adam Waldo – Lismore Partners LLC Steve Unger – Lazard Capital David Sheridan – WorldOver Capital Presentation Operator
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Any statements set forth in this presentation that are not historical facts are 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 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 filings and future filings with the United States Securities and Exchange CommissionThe forward-looking statements contained in this presentation are made only for this date and TPI is not under any obligation to revise or update these forward-looking statements. The second quarter fiscal year 2012 ended December 31, 2011 financial highlights. Second quarter fiscal year 2012, revenue delivered $18.2 million, compared with $25.3 million in second quarter fiscal year 2011. Second quarter fiscal year 2012 operating income delivered $2.1 million, compared with $5.2 million a year earlier. Net income was $1.7 million, compared with $5.9 million in second quarter fiscal year 2011. Earnings per share is $0.06 per basic share or $0.06 per diluted share, compared with 0.21 per basic share, or $0.20 per diluted share in second quarter fiscal year 2011. Cash and cash equivalents totaled $36.9 million on December 31, 2011. Operating cash flow for the six months ended December 31, 2011 was $8.2 million, compared with $10.8 million for the six months ended December 31, 2010. Sales for the quarter ended December 31, 2011 was $18.2 million, a decrease of 28% as compared to $25.3 million for the quarter ended December 31, 2010, but a slight gain from the first quarter of fiscal 2012, which was $17.5 million. The sales decrease from the prior year was mainly due to the generic pricing pressure, government policy to prioritize Essential Drug List drug sales that led to the sales and margin compression of higher margined generic pharmaceuticals, and three in the quarter ended December 31, 2010, ahead of the current healthcare reform policies being enforced, downstream customers had significantly built up their inventory, which led to a revenue gain of 69.6% for TPI from the prior year.
Our five core product sales are Gingko Mihuan, GMOL $4.3 million; Apu Shuangxin, APU: $0.77 million, Azithromycin, AZI $0.80 million; Xue Lian Chong Cao XLCC, $0.78 million; and Qing Re Jie Du QR $0.83 million. These products totaled $7.5 million in sales, representing 41% of the total quarterly revenue. This is a gain of 33.9% from the first quarter fiscal 2012 during, which core product sales totaled $5.6 million, or 32% of the quarterly revenue.Gross Margin for the quarter ended December 31, 2011 was 33.1% as compared to 44.7% for the quarter ended December 31, 2010. The factors that influence the gross margins are mainly raw material prices and production cost. During the second quarter, our organic product portfolio delivered 42.4% gross margins, 9% lower than the 51.4% for the quarter ended December 31, 2010. The reduction in gross margins are due to 1) generic pricing pressure, 2) distribution revenue business through Tianyin Medicine Trading TMT delivered $4.5 million at approximately 10% gross margin and 3) increase of raw material costs. Based on the blend of the TMT lower margin revenue and the current pricing restriction, our overall gross margin in the near-term, on a quarter-to-quarter comparison basis, may trend lower, but on a sequential basis should stabilize depending on the sales mix of TMT, JCM, which is Jiangchuan Pharmaceutical API revenue as compared to the proprietary portfolio revenue performance. Operating Expenses were $4.0 million for the quarter ended December 31, 2011, as compared to $6.0 million for the quarter ended December 31, 2010. And also compared with $3.7 million in the first quarter of fiscal 2012, the decrease in operating expenses is mainly associated with the lower sales and marketing costs as a result of the lower sales, and in the prior year, there was a one-time restricted stock compensation impact of approximately $500,000 million in the quarter ended December 31, 2010. Read the rest of this transcript for free on seekingalpha.com