XIANYANG, China, March 25, 2011 /PRNewswire-Asia-FirstCall/ — Biostar Pharmaceuticals, Inc. (Nasdaq: BSPM) (“Biostar” or “the Company”), Xianyang-based manufacturer of a leading PRC over-the-counter Hepatitis B medicine, Xin Aoxing Oleanolic Acid Capsules (“Xin Aoxing Capsules”), and a variety of pharmaceutical products, today announced financial results for the fourth quarter and full year ended December 31, 2010.

• 2010 revenue increased 50.4% to $80.2 million
• Aoxing sales increased 45.5% to $53.4 million in 2010
• 2010 gross profit increased 54.1% to $60.1 million; gross margin up 170 basis points to 74.9%
• 2010 cash flow from operations increased 126.4% to $12.8 million
• Company’s rural distribution network surpasses 10,000 locations; Company focused on increasing sales and market penetration from these locations in 2011

SUMMARY FINANCIALS

Fourth Quarter 2010 Financial Results

Revenue for the fourth quarter of 2010 increased 65.7% to approximately $28.2 million compared to $17.1 million for the fourth quarter of 2009. Sales of Xin Aoxing Capsules, Biostar’s flagship product, increased by 56.5% from the fourth quarter of 2009 to $18.6 million, with a gross margin of 87.0%. Xin Aoxing represented approximately two thirds of total fourth quarter 2010 revenues. The order rate for Xin Aoxing started to rebound at the end of the third quarter and continued to accelerate through the fourth quarter. Sales of Gan Wang Compound Paracetamol Capsules (“Gan Wang”), used to fight colds, were also strong, growing by 37.3% to $2.2 million. Sales of other products launched since the second quarter of 2010, including Tangning Capsule, Shengjing Capsule and Aoxing ointment, totaled $1.1 million in the fourth quarter. The Company continued its expansion into rural communities in China with products now being sold at over 10,000 locations. $5 million in revenues were generated through this sales channel during the fourth quarter, up 400% from the year ago period.

“We are very pleased to report solid operating progress for both the fourth quarter and full year, which was supported by robust revenue growth across several products. We implemented a broader marketing strategy for our flagship Xin Aoxing Capsule, complemented by our expansion into more retail locations in rural areas. This enabled us to achieve record sales and earnings for the year,” commented Ronghua Wang, Chairman and Chief Executive Officer of Biostar. “We expect to have 13,000 rural locations by the end of 2011, up from approximately 10,000 at the end of 2010, and believe this sales channel will further drive incremental growth for the year.”

Cost of goods sold for the three months ended December 31, 2010 was approximately $6.8 million, as compared to $4.5 million for the three months ended December 31, 2009. Gross profit for the fourth quarter of 2010 increased 72% to $21.5 million from $12.5 million in the year ago period, while gross margin increased 310 basis points to 76.2%.

Operating expenses for the three months ended December 31, 2010 were approximately $13.6 million, an increase of 46% compared to $9.3 million in the same period of 2009.

Operating income for the fourth quarter of 2010 totaled approximately $7.9 million, a 146% increase from $3.2 million reported for the fourth quarter of 2009. Operating margins were 27.9% and 18.7% for the fourth quarter of 2010 and 2009, respectively. Excluding non-cash equity compensation charge of $0.2 million, adjusted operating income for the fourth quarter of 2010 was $8.1 million with operation margins of 28.7%. (Please see “About Non-GAAP Financial Measures“ below.)

Net income was approximately $6.1 million for the fourth quarter of 2010, a 259% increase from the fourth quarter of 2009. Diluted earnings per share were $0.22 and 0.07 for the fourth quarter of 2010 and 2009, based upon 27.4 million and 24.3 million diluted common stocks outstanding, respectively. Adjusted Non-GAAP net income for the fourth quarter was $6.3 million, or $0.24 per diluted common share. (Please see “About Non-GAAP Financial Measures“ below.)

For the twelve months ended December 31, 2010, revenue increased approximately 50.4% to $80.2 million. Drug sales were up 37.9% to $73.5 million, including a 45.5% increase in Aoxing sales. Gross profit was approximately $60.1 million for the twelve months of 2010, representing an increase of 54.1% from the twelve months of 2009. Gross margins improved by 170 basis points to 74.9%.

Selling, general and administrative expenses increased approximately 64% to $32.3 million, representing 40% of sales compared to 37% of sales in 2009. The increase was a result of higher advertising expenses to support the Company’s growth plans. Operating income was $23.6 million, representing an increase of 56.3% over the twelve months of 2009. Operating margins were 29.4% for the twelve months of 2010, compared to 28.3% for 2009.

Net income was $17.4 million for the twelve months ended December 31, 2010, an increase of approximately 65.7% from the same period in 2009. Fully diluted earnings per share were $0.63 and $0.32 for the twelve months of 2010 and 2009 based up on 27.4 million and 24.3 million shares, respectively. Adjusted Non-GAAP net income for the twelve months of 2010 was $18.1 million, or $0.66 per diluted common share. (Please see “About Non-GAAP Financial Measures“ below.)

Balance Sheet and Cash Flow

Cash and cash equivalents totaled $13.2 million on December 31, 2010, compared to $8.6 million on December 31, 2009. Accounts receivable balance was approximately $28.5 million on December 31, 2010, versus approximately $19.8 million on December 31, 2009. Days sales outstanding (DSO) for the twelve months of 2010 were at 130 days, compared to 134 days for the same period in 2009, in line with management’s target range of 130 to 150 days. The Company had a current ratio of 5.7 to 1 and stockholders’ equity of $60.5 million, with total assets of $68.1 million versus total liabilities of $7.6 million on December 31, 2010. Working capital on December 31, 2010 was $35.8 million, compared to $23.9 million in the year ago period.

For the full year 2010, the Company generated $12.8 million in cash from operations and spent $1.5 million on capital expenditures.

Business Developments

As of December 31, 2010, Biostar has expanded its rural supply network to over 10,000 sales outlets in 22 provinces. Sales to rural areas increased approximately 95% to $14.2 million during the twelve months ended 2010, representing 18% of total sales. The Company plans to include all 10 products at all rural locations, in addition to select pharmaceuticals from other producers, in order to increase market share and drive incremental revenues through existing locations.

Aoxing had another successful year, with $45.7 million of sales, a 50.4% increase from 2009. The Company plans to add 130 new staff to the sales team during 2011 which would bring the total number to 400 and will continue to make meaningful investments in its marketing strategy, by incorporating television, print and radio across multiple provinces. Aoxing is currently sold in 22 provinces and the management team plans to expand into four additional provinces, including Hainan, Hunan, Guangxi, and Zhejiang during 2011.

Biostar launched 5 new products during 2010, including health products such as Tangning Capsule, Yizi Capsule, Shengjing Capsule and Aoxing Ointment. Total revenue from new products was approximately $6.7 million during 2010, a 30% increase and further increases are anticipated during 2011. The Company expects to receive final SFDA approval to produce Zushima Analgesic spray, a pain reliever product intended for use by military personnel during the first half of 2011. Management expects total sales from new products to represent 10% of its forecast for 2011.

Conference Call

The Company will host a conference call to discuss the 2010 year-end financial results on Friday, March 25, 2011 at 10:00 a.m. ET. Interested participants should call +1-877-941-2068 within the United States, or US +1-480-629-9712 if calling internationally. The conference ID is 4276443. It is advisable to dial in approximately 5-10 minutes prior to 10:00 a.m. ET.

A playback will be available through April 8, 2011. To listen, please call 1-800-406-7325 within the United States or 1-303-590-3030 when calling internationally. Utilize the pass code 4276443 for the replay.

This call is being webcast by ViaVid Broadcasting and can be accessed at ViaVid’s website at http://www.viavid.net or at the following link: http://viavid.net/dce.aspx?sid=000072BD. To access the web cast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp.

About Biostar Pharmaceuticals, Inc.

Biostar Pharmaceuticals, Inc., through its wholly-owned subsidiary and controlled affiliate in China, develops, manufactures and markets pharmaceutical and health supplement products for a variety of diseases and conditions. The Company’s most popular product is its Xin Ao Xing Oleanolic Acid Capsule, an over-the-counter (“OTC”) medicine for chronic hepatitis B, a disease affecting approximately 10% of the Chinese population. In addition to its hepatitis product, Biostar currently manufactures two broad-based OTC products, two prescription-based pharmaceuticals, one medical device and five health supplements.

Safe Harbor relating to the Forward-Looking Statements

Certain statements in this release concerning our future growth prospects are forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The company uses words and phrases such as “guidance,” “forecasted,” “projects,” “is expected,” “remain confident,” “will” and similar expressions to identify forward-looking statements in this press release, including forward-looking statements. Undue reliance should not be placed on forward-looking information. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Biostar and described in the forward-looking information contained in this news release. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our most recent Annual Report on Form 10-K for the year ended December 31 ,2010, and other subsequent filings. These filings are available at www.sec.gov. We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

About Non-GAAP Financial Measures

To supplement the Company’s consolidated financial statements, which statements are prepared and presented in accordance with GAAP, the Company uses the following non-GAAP financial measures: non-GAAP adjusted net income and non-GAAP adjusted EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s performance and liquidity by excluding certain expenses and expenditures that may not be indicative of “recurring core business operating results”, meaning operating performance excluding non-cash stock-based compensation charge. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to historical performance and liquidity as well as comparisons to competitors’ operating results. The Company believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of the business.

Financial Tables Follow

The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.

–Financial Tables–

SOURCE Biostar Pharmaceuticals, Inc.