Aoxing Pharmaceutical Reports Fiscal 2016 Financial Results

FOSTER CITY, NJ / ACCESSWIRE / October 5, 2016 / Aoxing Pharmaceutical Company, Inc. (NYSE MKT:AXN) today announced that for the fiscal year 2016, ended June 30, 2016, the Company reported revenues of $32,329,525, representing a 26.9% increase from the revenue of $25,481,199 for the year ended June 30, 2015.

The increase in revenue was primarily attributable to the increase in the sales of other herbal therapeutics products, which supplemented the continuing strong sales of the Company's leading seller Zhongtong'an. Recently, the Company has evaluated the strength of its product portfolio, and increased its effort to market products with large growth potential. Zhongtong'an, which represents ~80% of total revenue in fiscal year 2016, had sales growth of ~7% year over year. Zhongtong'an's sales growth was below our expectations, partly due to inventory drawdown in the sales channels during the fourth quarter. The total revenues for products other than Zhongtong'an in fiscal 2016 increased more than five times compared to fiscal 2015. When compared in our local currency (Chinese Yuan), total revenue increased 33% year over year while the revenue from Zhongtong'an increased 12% year over year. The difference in the growth rate expressed in local currency and in U.S. dollars is the result of the devaluation of the Chinese yuan against the U.S. dollar during fiscal 2016.

The following table shows the dollar volume of sales of our primary product lines in each of the past two fiscal years:

Cost of sales was $7,775,524 for the fiscal year 2016, representing an increase of 36.7% from $5,688,863 for the fiscal year 2015. Gross Margin was 75.9% for the fiscal year 2016 and relatively flat compared to 77.7% for the fiscal 2015. Lower gross margin was mainly the result of product mix shift as we try to increase sales of products in addition to Zhongtong'an.

Research and development ("R&D") expenses were $3,143,233 for the year ended on June 30, 2016, representing a significant increase from the $337,067 expended in fiscal 2015. Our R&D expenses fluctuate significantly from period to period, reflecting the progress and timing of our various drug development projects. The larger expense this year was mainly due to large payments for clinical trials and a large payment for a key raw material used in our R&D program.

Our general and administrative expenses consist primarily of employee compensation and benefits payable to management and to our finance and administrative staff, professional and legal fees, and bad debt expenses. In the year ended June 30, 2016, our general and administrative expenses were $3,066,634, an increase of 11.4% compared to the $2,753,534 incurred during the previous year. The increase in general and administrative expense was mainly due to professional fees as a result of the registered direct offering of securities during September 2015.

Selling expense for the year ended June 30, 2016 was $11,613,220, which was 55.7% higher than the selling expense of $7,457,758 for the year ended June 30, 2015. Sales and marketing efforts to introduce new products, including our new Tilidine tablets, are the main reasons for higher selling expenses.

Income from Operations was $6,228,051 for the year ended June 30, 2016, a decline of 28.4% from $8,695,658 for the fiscal year 2015. The decline was mainly due to higher selling expenses and R&D expenses.

Net interest expense was $3,456,638 for fiscal 2016, a decrease of 40.1% compared to interest expense of $5,768,094 incurred in fiscal 2015. The decrease of net interest expense was mainly due to lower debt during the period as a result of our equity financing in September, 2015 and the conversion of $2.66 million in debt to equity in November, 2015.

The Company realized net income of $2,243,580 for the fiscal year ended June 30, 2016. However, because the Company owns only 95% of Hebei Aoxing, 5% of that company's net income was attributed to the non-controlling interest. Therefore the net income for the fiscal year attributable to the shareholders of Aoxing Pharmaceutical was $2,061,224. In comparison, during the fiscal year ended June 30, 2015, the Company's net income was $5,818,473 and, after deducting loss attributable to the 5% minority interest in Hebei Aoxing, net loss attributable to shareholders of Aoxing Pharmaceutical was $5,494,713.

Our cash balance as of June 30, 2016 was $6,912,100, compared to $5,371,545 as of June 30, 2015. Cash used in operations during the year ended June 30, 2016 was $534,989, while  net cash of $3,025,739 was provided by operations during the year ended June 30, 2015. Cash flow from operations in fiscal 2016 was negatively impacted by higher accounts receivable balances at year-end, which was mainly due to the development of new customers and changes in the government's procurement policy for the pharmaceutical industry. We expect that during fiscal 2017  cash flow from operations should be positively impacted by the collection of account receivables.

Mr. Zhenjiang Yue, Chairman and CEO of Aoxing Pharma, said, "While the growth of our Zhongtong'an product didn't meet our expectations for the past year, we believe the fundamental demand is still very strong and we expect the growth rate to improve this year. We're very happy to see the progress made byproducts other than Zhongtong'an. For our Tilidine tablets, we started production in June, 2016 and expect sales to ramp up during fiscal 2017."

About the Company

Aoxing Pharmaceutical Company, Inc. is a U.S. incorporated pharmaceutical company with its operations in China, specializing in research, development, manufacturing and distribution of a variety of narcotics and pain-management products. Headquartered in Shijiazhuang City, outside Beijing, Aoxing Pharma has the largest and most advanced manufacturing facility in China for highly regulated narcotic medicines. Its facility is one of the few GMP facilities licensed for the manufacture of narcotic medicines by the China Food and Drug Administration ("CFDA"). For more information, please visit: www.aoxingpharma.com.

Safe Harbor Statement. This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and so these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume any duty to update these forward-looking statements.

Contact:
Aoxing Pharmaceutical Company:
646-367-1747
investor.relations@aoxingpharma.com

SOURCE: Aoxing Pharmaceutical Company, Inc.