Biostar Pharmaceuticals, Inc. (OTCBB:
BSPM)
has completed a private placement that raised $3.6 million in new
capital. Biostar will use the proceeds to complete its new raw
materials processing facility. By taking its raw material production in
house, Biostar will lower costs and ensure its product quality. Biostar
plans to sell excess raw materials to other pharmaceutical companies in
the Shaanxi province.
For their $3.6 million, investors
received 2,060,000 shares of Series B convertible preferred stock,
which are comprised of the right to convert 1-for-1 into Biostar common
and warrants to purchase 500,000 additional shares. The warrants are
exercisable for a period of five years at an exercise price of $3.00
and include a call provision. Biostar is currently trading at a price
of $2.40. Disregarding the additional value of the warrants, the
investors paid just $1.75 for their shares, a 27% discount.
Biostar has approximately 26.1 million shares outstanding on a diluted basis after the transactions.
The
company is facing Make Good provisions from an earlier financing that
calls for income from operations of $15.9 million for 2009 and $21.1
million for 2010. It expects the raw material processing facility will
help meet those goals.
Biostar's lead product is Xin Ao Xing
Oleanolic Acid Capsule, a TCM product that is sold over-the-counter for
chronic hepatitis B.
Earlier this week, Biostar announced it has
expanded its rural supply network to 3,512 sales outlets as of
September 30, 2009. These locations contributed approximately $7.4
million in revenues year-to-date – about $2,000 per location. The
company expects to meet its goal of launching 5,000 rural sales outlets
by the end of 2009 and wants to have 10,000 outlets by 2011 in 6
provinces, including Shaanxi, Gansu, Henan, Hebei, Liaoning, and
Shandong.
These rural outlets are small pharmacies with an
average of 600 square feet in a rural village that supply residents
with commonly used drugs. Biostar provides free training to the staff
of the sales outlets and currently supplies 5 drugs to each location,
including Danshen Granules, a drug which addresses coronary heart
disease, myocardditis and angina pectoris and is listed in the
Essential Drug List.
Biostar's goal is to build the largest
regional pharmaceutical supply network in its targeted rural areas,
providing patients with the most efficient and affordable comprehensive
pharmaceutical services.
