Bohai Pharmaceuticals Group Reports 37.2% Increase in Revenue and 54.6% Growth in Net Income for Fiscal 2011

NEW YORK and YANTAI, China, Sept. 29, 2011 (GLOBE NEWSWIRE) -- Bohai Pharmaceuticals Group, Inc. (OTCBB:BOPH) (OTCQB:BOPH), a China-based pharmaceutical company engaged in the production, manufacturing and distribution of modernized traditional Chinese medicine (TCM) in China, today reported financial results for the twelve months ended June 30, 2011.

Fiscal 2011 Financial Highlights:

• Revenue increased 37.2% to $81.3 million in fiscal 2011 from $59.3 million in fiscal 2010
   
• Gross profit increased 30.4% to $64.0 million versus $49.1 million for the fiscal 2010
   
• Income from operations increased 42.1% to $18.3 million compared to $12.8 million in fiscal 2010
   
• Net income was $14.0 million, or $0.75 per diluted share in fiscal 2011, versus $9.1 million, or $0.55 per diluted share in fiscal 2010
   
• Non-GAAP net income increased 37.4% to $11.8 million, or $0.66 per diluted share, versus $8.6 million, or $0.52 per diluted share, in fiscal 2010

Mr. Hongwei Qu, Chairman, President and CEO of Bohai Pharmaceuticals, stated, "A combination of company-driven initiatives, quality products and favorable healthcare coverage trends in China are the driving forces behind Bohai's impressive growth. We are pleased to report a 37.2% increase in sales for 2011 and 37.4% growth in adjusted, non-GAAP net income. Our four lead products continue to gain traction in the markets we serve and now comprise 76% of our total revenue. These products include Lung Nourishing Syrup, Tongbi Capsules, Tongbi Tablets and Shantongning Tablets. We currently manufacture 19 varieties of approved traditional Chinese herbal medicines of which 12 are prescription drugs and seven are over-the-counter."

"We will continue to roll out new products already in our pipeline and we recently expanded our product lines through the acquisition of Yantai Tianzheng Pharmaceutical Co., Ltd., in August 2011. Yantai Tianzheng has a sales network that covers 14 major provinces in China and had revenue of $37.9 million in 2010, an increase of 60.5% over 2009. We plan to leverage our respective distribution channels and manufacturing capabilities, as well as streamline operations through the integration of our respective companies. The acquisition also expands Bohai's pipeline of SFDA approved, exclusive and/or protected TCM medicines. The government's plan to provide 90% of China's population with healthcare coverage by the end of 2011 will further enhance Bohai's penetration into its intended market."

In concluding, Mr. Qu stated, "With Bohai's strong and growing pipeline of both prescription and non-prescription products and the Chinese government's plan to provide reimbursement for an expanded universe of traditional Chinese medicines, we believe we are in an exceptionally strong position to increase sales as well as shareholder value."

Summary Financial Results

Revenue for the fiscal year ended June 30, 2011 increased 37.2% to $81,328,555 as compared to $59,264,724 for the fiscal year ended June 30, 2010. This increase was primarily due to a 28.3% increase in the Company's four lead products (Lung Nourishing Syrup, Tongbi Capsules, Tongbi Tablets and Shantongning Tablets), which accounted for over 76% of total revenues. 

Gross profit for the fiscal year ended June 30, 2011 was $64,034,875, compared to $49,099,871 for the same period last year. Gross profit margin as a percentage of revenue declined to 78.7% from 82.5% for the same period last year. The decrease in gross profit margin was principally due to lower gross profit margins from five products introduced in May of 2010 due to higher manufacturing costs and lower unit sales prices. Excluding gross profit from the five new products, total gross profit margin would have been 81.9%, in line with gross profit margin of 82.8% for the twelve months ended June 30, 2010.

Operating income for the twelve months ended June 30, 2011 increased 42.1% to $18,255,865 compared to $12,846,796 for the twelve months ended June 30, 2010. Selling, general and administrative expenses increased 26.3% due to increased marketing and promotion expenses related to the company's lead products.

Net income for the twelve months ended June 30, 2011 was $14,004,875, or $0.75 per diluted share, compared to $9,056,972, or $0.55 per diluted share, for the twelve months ended June 30, 2010. The increase in net income for the twelve months ended June 30, 2011 over the same period last year was primarily attributable to an increase in total gross profit of $14,935,004 offset by an increase in selling, general and administrative expenses of $9¸525,935 and an increase in the tax provision of $1,360,509 this fiscal year compared to the same period in 2010. Non-GAAP net income increased 37.4% to $11,769,996 or $0.66 per diluted share versus $8,563,129 or $0.52 per diluted share in fiscal 2010. Total other income included a non-cash gain for change in fair value of investor and placement agent warrants of $4,544,061 for the twelve months ended June 30, 2011 compared to $925,063 for the same period in 2010. Total other income for the twelve months ended June 30, 2011 was also comprised of non-cash interest expenses for the unamortized discount of the convertible notes converted in connection with the company's private placement on January 5, 2010 and non-cash charges for deferred tax expense of $434,726. At June 30, 2011, Bohai had cash and cash equivalents of $13,344,426 and restricted cash of $11,043.

About Bohai Pharmaceuticals Group

Bohai Pharmaceuticals Group, Inc. (OTCBB:BOPH) (OTCQB:BOPH),  is engaged in the production, manufacturing and distribution of modernized herbal pharmaceuticals based on Traditional Chinese Medicine in China. Bohai's medicines address common health problems such as rheumatoid arthritis, viral infections, gynecological diseases, cardio vascular issues and respiratory diseases. Bohai's products are sold either by prescription through hospitals or over-the-counter through local pharmacies and retail drug store chains. Bohai has approximately 600 employees, including approximately 300 sales representatives, operating from 20 offices throughout China. Bohai's three lead products, Tongbi Capsules, Tongbi Tablets and Lung Nourishing Cream, are eligible for reimbursement under China's National Medical Insurance Program.

For more information, please visit the Company's website at   www.bohaipharmaceutical.com.

Earnings Conference Call Details

Bohai will host a conference call today at 11 a.m. Eastern Time to discuss its financial results for fiscal year 2011 ended June 30, 2011. The call can be accessed through the Company's website at www.bohaipharmaceutical.com, or by calling (877) 407-8031 for U.S. callers or (201) 689-8031 for international callers. A Webcast will also be archived on the Company's website for 90 days and a telephone replay of the call will be available approximately one hour following the call, through midnight Thursday, October 6, 2011, and can be accessed by calling: (877) 660-6853 (U.S. Callers) or (201) 612-7415 (international callers) and entering account # 286 and conference ID: 380014.

Additional Information Relating to Bohai's Trading Data

Due to certain recent disruptions in the marketplace relating to quotations on the OTC Bulletin Board operated by FINRA (OTCBB), incomplete trading data may exist for certain companies like Bohai. Real-time trading data for Bohai on the OTCQB market is available through the below link. Readers are advised that OTCQB market is operated by the owner of otcmarkets.com, and Bohai Pharmaceuticals Group, Inc. makes no representation or warranty regarding the OTCQB market.

For real-time trading data for Bohai on the OTCQB market, including Level 2 quotes, please visit: www.otcmarkets.com/stock/boph/quote.

Note on Non-GAAP Financial Measures

This press release contains references to "Non-GAAP" financial measures. A Non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principals (GAAP).  The Non-GAAP measures included in this release, however, should be considered in addition to, and not as a substitute for or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP.  A reconciliation of non-GAAP to GAAP net income is set forth in the table below.

Cautionary Note Regarding Forward-Looking Statements

This press release and the statements of representatives of our officers, directors, employees and representatives related thereto or in the conference call referred to herein contain or may contain forward-looking statements which are based upon the current beliefs and expectations of our management. Such statements contained in this release are based on management's exercise of business judgment as well as assumptions made by and information currently available to management. When used in this document, the words "guidance," "projects," "may," "could," "would," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "ultimately" and words of similar import, are intended to identify any forward-looking statements. The information contained in the forward looking statements is inherently uncertain, and our actual results may differ materially due to a number of factors, many of which are beyond our ability to predict or control, including, among others: (i) changes in the level of consumer spending or preferences or demand for our products; (ii) pressures from competition; (iii) our ability to hire and retain key personnel and our relationship with our employees; (iv) the performance of our distributors and other key vendors; (v) effectively carrying out and managing our growth strategies; (vi) failure to maintain the value and image of our brand and protect our intellectual property rights; (vii) seasonality; (viii) costs of materials and labor; (ix) sales, manufacturing, supply or distribution difficulties or disruptions; (x) compliance with or changes in Chinese, U.S. or international laws and regulations; (xi) costs as a result of operating as a public company; (xii) material weaknesses in internal controls; (xiii) interest rate and foreign currency risks; (xiv) our ability to maintain our land use and drug manufacturing rights in China; (xv) general economic and industry conditions in China and internationally, and other risks as more fully detailed in our filings with the Securities and Exchange Commission ("SEC"). Our filings with the SEC are available at www.sec.gov. You are urged to consider these factors carefully in evaluating our forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements which are qualified in their entirety by this cautionary statement. The forward-looking statements speak only as of the date on which they are made, and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances unless as required by applicable laws or regulations.