JERSEY CITY, NJ--(Marketwired - Nov 14, 2013) - Aoxing Pharmaceutical Company, Inc. (NYSE MKT: AXN) ("Aoxing Pharma"), a specialty pharmaceutical company focusing on research, development, manufacturing, and distribution of narcotic, pain-management, and addiction treatment pharmaceuticals, today announced its financial and operational results for the quarter ended September 30, 2013. Complete financial results can be found in the Quarterly Report on Form 10-Q filed by Aoxing Pharma on November 14, 2013.
Revenues for the three months ended September 30, 2013 were $3,577,108, representing a 37% increase over the revenues realized in the comparable period of fiscal year 2013. The increase in revenue was mainly attributable to the increase in sales of our main product, Zhongtongan, which is now being marketed for gynecological and orthopaedic applications in addition to its core pediatric and stomotological market. Sales of Zhongtongan accounted for 93% of sales during the quarter ended September 30, 2013.
Despite the increase in revenue, gross profit fell by 1.8% during the quarter ended September 30, 2013. Recent shortages in certain raw materials caused a spike in the cost of goods sold. The Company expects raw material prices to subside in coming periods.
Aoxing Pharma completed a $10.2 million financing at the end of September 2012, which allowed it to make some crucial investments in the future of its business. Operating expenses, therefore, were swelled during the first quarter of fiscal 2014 by two categories of targeted investment:
- Research and development ("R&D") expenses were $177,941 during the three months ended September 30, 2013, representing a 37% increase over R&D expense in the first quarter of fiscal 2013.
- Selling expenses in the amount of $1,617,989 incurred during the three months ended September 30, 2013 were more than double the $608,671 in selling expenses incurred during the first quarter of fiscal 2012. The increase in selling expenses was attributable to the television advertising contracts totaling approximately $3.66 million that Aoxing Pharma signed in December 2012. Aoxing Pharma terminated the contracts at the end of September 2013, believing they had achieved the goal of increasing awareness of the Company's brand.
As a result of the reduced profit margin on its sales and increased operating expenses, Aoxing Pharma recorded a loss from operations of $1,244,961 for the three months ended September 30, 2013, compared with an operating profit of $87,478 recorded in the same period a year earlier. Interest expense increased by 109% to $1,074,690 in the quarter ended September 30, 2013, due to the increase in bank loans at the end of 2012. The resulting net loss recorded for the three months ended September 30, 2013 was $2,350,974, whereas the Company's net loss for the three months ended September 30, 2012 was $448,516.
On September 30, 2013, Aoxing Pharma had $1.5 million in cash on hand and a working capital deficit of $23,688,749. The working capital deficit was swelled during the recent quarter by the reclassification of $11.5 million in loans payable from long-term to current. Subsequent to the end of the quarter, SJZ Construction Investment Corporation agreed to extend the maturity of its $3.2 million loan to the Company from November 3, 2013 to November 11, 2014.
Zhenjiang Yue, our Chairman and CEO, commented, "The Chinese pharmaceutical market continues to be challenging. I am pleased with Aoxing Pharma's operating results, highlighted by continued growth in product sales, as well as by the faith that our lenders have shown in our business model, which allows us to continue to develop our business despite our negative working capital."
About Aoxing Pharmaceutical Company, Inc.
Aoxing Pharmaceutical Company, Inc. is a US incorporated specialty 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 State Food and Drug Administration (SFDA). Aoxing Pharma has a joint venture collaboration with Johnson Matthey Plc to produce and market narcotics and neurological drugs in China. For more information, please visit: www.aoxingpharma.com.
Safe Harbor Statement from Aoxing Pharmaceutical Company, Inc.
Certain statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. All forward-looking statements included herein are based upon information available to the Company as of the date hereof and, except as is expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. To the extent that any statements made here are not historical, these statements are essentially forward-looking. The Company uses words and phrases such as "guidance," "forecasted," "projects," "is expected," "remain confident," "will" and/or similar expressions to identify forward-looking statements in this press release. Undue reliance should not be placed on forward-looking information. The economic, competitive, governmental, technological and other risk factors identified in the Company's filings with the Securities and Exchange Commission, specifically, Item 1A, "Risk Factors," in the Form 10-K for the year ended June 30, 2013, may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.