China Sky One Medical, Inc. (AMEX: CSY) released a very positive Q2 earnings report that also beat analysts’ expectations. Revenues increased 62% to $23.7 million, and net income tjumped 92% to $8.1 million or 50 cents per diluted share. Those results were higher than street estimates of $19.5 million and 37 cents per share.
In addition to the numbers, China Sky One took pains to point to a number of company accomplishments during the quarter. The company completed its acquisition of Heilongjiang Tianlong Pharmaceutical, Inc., which gives China Sky One a new manufacturing facility, plus a portfolio of 69 SFDA-approved drugs and more products in the pipeline. During Q2, the company also received SFDA approval for six new drugs and five new patch products.
In June, China Sky One also signed an agreement to acquire Peng Lai Jin Chuang Company for a total of $7.1 million. $4.6 million in the purchase price will be paid in stock, and the remaining $2.5 million will be paid in cash. Jin Chuang brings with it a portfolio of 20 approved drugs. In the analysts’ call, China Sky One said that Jin Chuang is a new company that is not yet in production mode. Production is expected to begin before the end of the year, and the acquisition should close in Q3.
The company also said that product sales increased 103% year-over-year to $21.9 million, or 92.2% of total revenues. The remainder of the revenues came from contract sales (for other manufacturers). Contract sales decreased 52.3% to $1.8 million. China Sky One has decided to phase out its contract sales business as it builds up its own product offerings.
At the end of the quarter, China Sky One had $42.5 million in cash, $44.9 million in working capital, and no debt.
After the quarter ended, on July 15, 2008, China Sky One Medical signed an agreement with Harbin Baolong Pharmaceutical Company under which Baolong will distribute China Sky One’s prescription drugs. Prescription drugs now account for 30% of the company’s total product line. The five-year agreement has an estimated value of approximately $9 million. Until now, Baolong has been distributing five of China Sky One’s drugs.
China Sky One continues to expect full-year 2008 gross revenue of about $82 million and net income of approximately $26 million, or $1.70 per share, fully diluted.
China Sky One is growing quickly, but its stock still sells at bargain prices. It has a P/E ratio of just 11 for the trailing 12-month period. Looking forward, Yahoo says the company is expected to make a profit of $2.46 in 2009, which gives the company a forward P/E of 5.7.
China Sky One’s shares moved up 3.6% after releasing its earnings report. The company gained 49 cents to close at $13.99.
