i n v e st or p r ese n t a t i on june 20 1 4
DESCRIPTION
I n v e st or P r ese n t a t i on June 20 1 4. F o r w a r d Looking S t a t eme n t. T h i s p r ese n t a ti o n i n c l u de s st a t eme n t s t h a t a re “ f o r w a r d - l oo k i n g st a t eme n t s ” . W h il e - PowerPoint PPT PresentationTRANSCRIPT
Investor Presentation
June 2014
Forward Looking Statement
This presentation includes statements that are “forward-looking statements”. Whilemanagement has based any forward-looking statements contained in the presentation onits current expectations, the information on which such expectations were based maychange. These forward-looking statements rely on a number of assumptions concerningfuture events and are subject to a number of risks, uncertainties, and other factors, manyof which are outside of Biostar’s control, that could cause actual results to materially differfrom such statements. Such risks, uncertainties, and other factors include, but are notnecessarily limited to, those set forth under the caption “Item 1A. Risk Factors” in Biostar’smost recent Form 10-K filing, as and to the extent revised and updated to date in itssubsequent Form 10-Q filings. In addition, Biostar operates in a highly competitive andrapidly changing environment, and new risks may arise. Accordingly, you should not placeany reliance on forward-looking statements as a prediction of actual results. Biostardisclaims any intention to, and undertakes no obligation to, update or revise any forward-looking statement. You are also urged to carefully review and consider the variousdisclosures in Biostar’s most recent Annual Report on Form 10-K, as well as other publicfilings with the SEC since the filing of Biostar’s Annual Report.
2
Introduction
Biostar Pharmaceuticals, Inc. (Nasdaq: BSPM) is a China based developer,manufacturer and marketer of pharmaceutical and health supplement products for avariety of diseases and conditions
•Strong R&D capabilities (two high-tech laboratories)
•Two world-class production facilities
•Diverse portfolio of products
•Extensive and efficient distribution network in 25 provinces
•82 acres raw material & herbs plantation
3
Investment Considerations• Unique vertically integrated business model
- R&D, raw material plantation, processing, manufacturing, distribution and sales
• A history of strong profitable growth---
Revenue: 2007-2011 CAGR of 55%Net Income: 2007 – 2011 CAGR of 54%Business remains strong despite the recent temporary setback due to industry-wide issues
• Large product portfolio and a strong pipeline of new products to drive continues growth----
Currently produces and sells 22 products and 1 medical deviceInnovative product pipeline of eight products (OTC and prescription drugs)In 2011, acquired permits and approvals for 86 drugs and one health productIn March 2013, acquired additional 13 drug approval numbers
• Xin Aoxing - leading market position, strong brand recognition throughout China--
Targets hepatitis B virus (HBV) which affects more than 10% of China’s populationStrong recognition: OTC drug approved by China’s State Food and Drug Administration (SFDA)
• Well positioned to take advantage of market opportunities such as:---
China’s $124 billion healthcare reform planNew Rural Medical Care Cooperative ProgramMilestone: won a bid to supply hospitals In three provinces with Huangyangning Tablets
4
R&D LabLab, Processing, Warehouse and DrugManufacturing
Raw Material
Vertically Integrated Business Model
Offices in XianyangFarm
Two world-class
productionfacilities
Xianyang & Weinan
Sales
network covering
25 province
s
Covers retailoutlets,
hospitalsand
pharmacies
Rawmaterial
plantation
82 acres
Two R&DLaboratories
5
Self-farming: Reduces CostsQuality
& Controls
In 2008 acquired 82 acres in Qinling Mountains
Planted and growing 13 herbs including:
Salvia miltiorrhiza Pricklyash peel Eucommia bark Gingko Honeysuckle Shizandra berryScutellaeria baicalensis georgiMilk vetehRadix codonopsitis
To control quality and reduce cost of raw materialsIn 2010 - all raw materials were purchased from suppliers; planted herbs were not yet ready for
harvest and use yetIn 2011 - Salvia miltiorrhiza is ready and being used as raw materialIn 2012 - Additional herbs to harvest and be ready for useGoal - increase production and fulfill all its needs for raw material or trade for other herbs: furtherreduce costs and control quality
6
Strong R&D Capabilities
•Two R&D laboratories (Xianyang & Weinan)
30 internal scientists & researchers
Average 10 years of experience
•External R&D – Biostar sponsors and ownsthe Intellectual Property
Shaanxi College of Traditional Chinese Medicine
Shaanxi University of Science and Technology
Northwest University - College of Life Science
The Fourth Military Medical University
Xianyang lab
Weinan lab
7
World-class Production Facilities - Xianyang
Xianyang facility
•Four Good Manufacturing Production (GMP)certified production lines producing tenproducts and one medical device
•Has annual production capacity of over $100million
•Two new production lines are under construction and waiting for GMP certification:
-Zushima spray line - estimated to generateapproximately $10 million in revenues annually
-Health products line - estimated to generateapproximately $20 million in revenues annually
8
World-class Production Facilities - Weinan
Weinan facility
•In October 2011, acquired Shaanxi WeinanHuaren Pharmaceuticals
•Five production lines
•One high-tech laboratory
•Currently produces ten drugs and one health product
•$2.1million in net sales for the first quarter of2013
9
New Facility Established in the Gansu ProvinceGansu Facility
• January 10th: Biostarestablishes new office in the Gansu Province of the People’s Republic of China.• FOCUS: the sales of Biostar’s Hepatitis B products in Gansu, Qinghai and Tibet.
• Historically, the three provinces have shown a good consistent sales record primarily due to poor medical conditions and high incidences of Hepatitis B in the population from the three provinces.• Due to China’s ongoing expansion of their national healthcare reform, it was logical for Biostar to set up a headquarter in Gansu to expand the company’s market share.
9
Significant Designation for Biostar’s China Subsidiary
• January 15th: Biostar’s China operating subsidiary, Shaanxi Aoxing Pharmaceutical Co., Ltd., was designated as the Shaanxi Province Liver Disease Health Education Base.• Shaanxi Aoxing Pharmaceutical has been awarded numerous honors of Shaanxi Pharmaceutical and Health Products Cooperation Association Director Unit•The new title for the facility will now provide a new platform for promotion, research and development of Biostar’s Hepatitis B products.•The reach and development of current and future products will not increase significantly.
9
New Partnership with Shaanxi University
• March 6th: Partnered with the Research Institute of Pharmaceuticals at Shaanxi University of Chinese Medicine to develop a new liver cancer drug.• Current cases of cancer on a global scale has been increasing drastically with China holding the larger percentage of the demographic
o According to the World Health Organization (WHO), in 2012 on a global basis, there were 14 million new cancer cases and 8.2 million deaths; China accounted for 3.07 million of the new cases and 2.2 million of the deaths.
o In 2012, China accounted for approximately 50% of the world’s liver cancer cases.
9
A Diverse Portfolio of Products - Xianyang
Xin Aoxing Capsule GanWang Taohuasan Tianqi Dysmenorrhea Capsule Danshen Granule
10
Category Name Treatment SFDA
OTC
Xin Aoxing Oleanolic Acid Capsule Acute and chronic hepatitis B (“HBV”) Approved
Ganwang Compound Influenza Approved
Tianqi Dysmenorrhea Capsule Menstrual swelling and cramping Approved
PrescriptionDanshen Granule Alleviates blood stasis and angina Approved
Taohuasan Pediatric Children respiratory tract infection Approved
Health Product
Yizi Capsules Aids fertility and fetal development Provincial level approved
Tangning Capsules Type II diabetes Provincial level approved
Shengjing Capsules Replenish kidney function Provincial level approved
Aoxing Ointment Psoriasis, vitiligo and dermatitis Provincial level approved
Aoxing Ganbaodai Hepatic and liver protection Provincial level approved
Medical Device Hernia Belt Hernia Provincial level approved
A Diverse Portfolio of Products - Weinan
Common cold ApprovedAmantadine Hydrochloride
inflammatory
•
•
In April 2012, Biostar won a bid to supply hospitals In three provinces with Huangyangning Tablets
Penetration of hospital prescription drug market marks important milestone for Biostar
11
Category Name Treatment SFDA
OTC
Zhitong Tougu Plaster Cream Pain reliever Approved
Compound Paracetamol and
Prescription
Fosfomycin Calcium Urinary tract infections Approved
Huangyangning Tablets* Cardiovascular disease Approved
Jiakangling Capsule Hyperthyroidism Approved
Qianlietong Capsule Prostate disease Approved
Wenweishu Capsules Chronic gastritis Approved
Danshen Tablets Coronary heart disease Approved
Piracetam Tablets Cerebrovascular disease Approved
Erythromycin Estolate Coated Particles Anti-bacterial anti- Approved
Health Product Huaren Changweitong Capsule Gastrointestinal function Approved
Flagship Product – Xin Aoxing• OTC drug for the treatment of HBV
––
Approved by SFDA
Recognized by China Consumer Association
• Targets a highly contagions disease
– More than 130 million people (10% of China’s population) are infected with HBV
• Has high effectiveness rateSolid Growth Over a 4-Year
Period– High effectiveness rate in relieving HBV symptoms
per People’s Hospital of Shaanxi Province)
- (as
Revenue Generated by Xin Aoxing ($ Million)
• Nationally branded product and easily accessible 60.553
– Sold at local pharmacies since 199837
• Low cost/high margin 1910
• Highly affordable
– In most cases covered by personal health insurance 2007 2008 2009 2010 2011
12
Innovative Product Pipeline
13
Category Name Treatment Status
OTCKunLingWan Irregular menses Finished clinical testing
Zushima Aerosol pain suppressant Pending SFDA approval
Prescription
Azithromycin Tympanitis, pharyngitis, bronchitis Pending SFDA final testing
Yinyangsuo Kidney disease Finished clinical testing
Zhixuening Uterine Bleeding Finished clinical testing
Xiao’aiping Tumors, esophagus cancer Finished clinical testing
Zhenbao Wan Thrombus & coronary heart disease Finished clinical testing
Large Distribution Network
Beijing
Beijing
Factory locations inXianyang and Weinan –Shaanxi province
Weinan
Xianyang
Provinces – Biostar’ssales networkcoverage- Extensive sales network across
China’s 25 provincesApproximately 13,000 rural medicalsales outlets in ShaanxiSales team of over 400 members
-
-
14
s & Marketing Stra
istribution Strateg
Sales and Distribution Strategy
RURAL Marketing:MASS Advertising:Widen
Coverage
BroadenAwarenes
sSales & Markteing Strategy
• •Mass media advertising toincrease brand awareness
Continue to invest in new sales offices and sales- force
Build closer relationship with pharmacies and doctors
Increase penetration in25 existing provincialmarkets
Deepen penetration in rural markets by opening additional rural distribution centers
Invest in village clinics and sales centers
••
•
•
15
Two-DimensionalSales Strategy
Distribution Strategy
16
1 About Biostar
2 Financial Highlights3 Growth Opportunities
Historical Financial Performance
* Net income and EPS for 2011 and 2012 was based on 27.9 million shares outstanding and it was affected by: a) lower selling prices to the Chinesegovernment’s price control policy, and higher competition for Xin Aoxing b) higher advertising expenditures, c) $1.5 million higher general and administrativeexpenses mainly related to stock-based compensation and the acquisition of Shaanxi Weinan in late 2011, d) a $2.3 million increase in research anddevelopment expenses for acquiring a proprietary technology, and e) $1.8 million non-cash impairment loss on land use rights.
17
2012 & 2011 Revenue BreakdownProduct
by
2012: $49.3 Million 2011: $92 Million
Xin Aoxing
Taohuasan0.9%
0.0%8.6% Gan Wang7.2%
Tianqi
4.5%Danshen
7.1% Paracetamol65.8%
7.2% Health Products total
5.9% Shaanxi WeinanproductsMedical Device
18
2013 vs. 2012 Highlights•
•
•
•
In April 2012 – PRC government suspended sales of gel capsule products
All China-based pharmaceutical companies that use gelatin capsules to manufacture drugs, were severely affected
Many large pharmaceutical companies reported substantial losses for the April – July period
Biostar was not immune to the industry-wide losses
As a result…
Sales and overall results for 2012 were similarly adversely affected•
19
$ in millions (except in per shares) 2013 2012Net Sales $52.7 $49.3Gross Margins 40% 60.5%Operating Income (loss) $0.51 $(21.80)Net Income (loss) $0.81 $(20)EPS $.06 $(2.09)
Moving Forward:
In late July, Xianyang (SFDA) gave the “green light” approval to restart sales of gel capsule products
Despite the temporary setback, business remains strong
Business plan: Continue to bring new products to market
Expand geographic reachBroaden channels of distributionReinvigorate sales of flagship gel capsule product Xin Aoxing
Steps taken: Ramp up production: Employees are working overtime, a second shift was added
Rebuild consumer confidence: aggressive advertising campaign was initiated, including medical journals and health magazines
New sales business model: establishing a B2C call center – direct sales to customers
20
Balance Sheet Highlights at 3/31/2013
21
Highlights December 31, 2013 December 31, 2012
Cash and cash equivalents $80,072 $1,759,078
Total Current assets $35,985,502 $41,974,131
Total Assets $67,564,444 $70,475,300
Total current laibilities $4,791,505 $12,702,552
Total stockholder's equity $62,772,939 $57,772,748
Total liabilities and stockholder's equity $67,564,444 $70,475,300
22
1 About Biostar
2 Financial Highlights
3 Growth Opportunities
Other Growth Opportunities
China’s medicine and pharmaceutical industry is one of the fastest growing industries of theChinese economy (according to Data Monitor & IMS Health)
• The world’s third largest prescription drugmarket
• Grown at over 16% annually (since 2000)
Mentality of patients living in rural areas ischanging
• 70% of China’s 1.3 billion people live in ruralareas
• Number of patients seeking cures through “modern” medicines offered in hospitals and healthcare centers is rapidly increasing
Highly fragmented market and government backed consolidation initiatives provide M&Aopportunities
23
China’s Healthcare Reform
• China's $124 billion healthcare reform plan was launched in 2009. Two majorguidelines of the plan are accessibility and affordability
––
The first phase completed by the end of 2011 increased accessibilityThe second phase to be completed by 2020 aims to increase affordability bymaking medicines and medical services affordable to everyone.
• Chinese government increased the number of medicines included in the NationalReimbursement Drug list (fully or partially reimbursable)Private health insurance has become more affordable•
• $5.6 billion investment over 3 years has facilitated the“New rural cooperative medical care program”
– Investment on patient education and encouragementto use “modern” medicineProvides patients suffering form severe diseases withadditional financial assistanceShaanxi, Sichuan, Chongqing, Gansu, Henan, Hubei,and Hunan comprised 30% of the $5.6 billion spending
–
–
24
Regulatory Compliances
• Quality Control Related
– Good Manufacturing Practice (“GMP”) Certification, regulated by the State Foods and DrugsAdministration (“SFDA”) – All Chinese pharmaceutical manufacturers must be GMP certified to producemedicines of any kind. Biostar received its first GMP certification in 2006 and received another verificationin 2011 for a period of five years.
• New drug approval and licensing
– SFDA and China Traditional Medicine Administration Bureau regulate the process of new drug approvaland licensing in China. Redwood Capital estimates that only 15% of new-to-market drug applications gotapproval by SFDA.
• Environmental regulations
– Subject to environmental laws and regulations stipulated by national and local environment protectionbureaus in China.
• Intellectual Property Rights and Patents
– Biostar has filed for copyright protection for the various names and brands of products.
25
How to Contact Us
Corporate website:www.biostarpharmaceuticals.com
Contact:Ally GongTel: +86-29-3368-6638Email: [email protected]
26
BiostarNasdaq: BSPM
Pharmaceuticals, Inc.
Investor PresentationJune 2014