Net Income Increased 119.3% to Approximately $3.9 Million with EPS of $0.17

Gross Margins Improved 1630-Basis Points to 73.5% over Q2 2008

XIANYANG, China, Aug. 14 /PRNewswire-Asia-FirstCall/ -- Biostar Pharmaceuticals, Inc. (BULLETIN BOARD: BSPM) ("Biostar" or "the Company"), a Xianyang-based developer, manufacturer and supplier of pharmaceutical products and medical nutrients addressing a variety of diseases and conditions, today announced fiscal results for its second quarter ended June 30, 2009.

   SUMMARY FINANCIALS     Second Quarter 2009 Results                             Q2 2009        Q2 2008          CHANGE   Net Sales             $13.2 million  $9.4 million        +40.6%   Gross Profit           $9.7 million  $5.4 million        +80.5%   Net Income             $3.9 million  $1.8 million       +119.3%   EPS (Fully Diluted)           $0.16         $0.08         +100%      Six Month 2009 Results                             1H 2009        1H 2008          CHANGE   Net Sales             $20.7 million  $16.2 million       +27.5%   Gross Profit          $14.5 million   $9.6 million       +51.9%   Net Income             $5.7 million   $3.6 million       +58.8%   EPS (Fully Diluted)           $0.24          $0.15         +60%     Second Quarter 2009 Financial Results  

Revenue for the second quarter of 2009 increased 40.6% to approximately $13.2 million compared to approximately $9.4 million for the second quarter of 2008. The increase in revenues resulted from Biostar's enhanced marketing and sales efforts which increased sales of its Xin Aoxing Oleanolic Acid Capsule ("Xin Aoxing Capsule") and Tianqi Dysmenorrhea Capsules ("Tainqi Capsule"). Xin Aoxing Capsule, one of Biostar's flagship OTC products which treats symptoms common to hepatitis B patients, contributed approximately 67.5% to total revenues for the quarter, and increased $4.1 million, or 84.1% to $8.9 million, compared to the second quarter of 2008. The increase was primarily due to market penetration in two additional provinces through local wholesalers. Revenues generated by another core OTC product, Tianqi Capsule, which treats dysmenorrhea and bloating for women, increased 25.3% to approximately $1.4 million from the second quarter of 2008. The increase in sales of Tianqi Capsule was mainly due to the continued implementation of the "new rural cooperative medical supply network plan" which markets directly to consumers in China's rural area through retail pharmacies.

Cost of goods sold for the three months ended June 30, 2009 was approximately $3.5 million or 26.5% of revenue as compared to approximately $4.0 million or 42.8% of revenue for the three months ended June 30, 2008.

The Company yielded gross profits of $9.7 million and gross margins of 73.5%, compared to $5.4 million of gross profits and a gross margin of 57.2% during the second quarter of fiscal 2008. Gross profits grew by 80.5% on a year-over-year basis. The increase in gross profit was a result of increased revenue in Xin Aoxing Capsule and Tainqi Capsule and a decrease in raw material prices of Xin Aoxing Capsule and Danshen Granule. The Sichuan province, the main region where herbs are cultivated for raw materials used in manufacturing several of Biostar's OTC medicines, has resumed production after recovering from the earthquake. During the second quarter of 2009, gross margin of three products is over 50%, Xin Aoxing Capsule (84%), Tianqi Capsule (64%) and Taohuasan Pediatrics Medicine (65%).

Operating expenses for the three months ended June 30, 2009 were approximately $4.3 million, up 26.6% from $3.4 million in the same period of 2008. The increase was primarily a result of Biostar's expanded marketing efforts, including increased costs for TV advertising, promotion, and commission associated with an expanded sales force.

Operating income for the second quarter of 2009 totaled approximately $5.5 million, a 170.8% increase from the approximately $2.0 million reported for the second quarter of 2008. Operating margins were 41.3% and 21.4% for the second quarter of 2009 and 2008, respectively. The increase in the operating margin was primarily due to increased revenues and decrease in cost of good sold.

For the second quarter of 2009, net income was approximately $3.9 million, a 119.3% increase, compared to approximately $1.8 million for the second quarter of 2008. Diluted earnings per share were $0.16 compared to $0.08 for the second quarter of 2009 and 2008 respectively, based up on 23.7 million and 23.2 million shares. The increase in net income during the second quarter of 2009 was a result of increased revenues and improved profitability.

The Company had an effective tax rate of 26.1% and 12.3%, for the second quarter of 2009 and 2008, respectively. The increase was primarily due to the expiration of the 50% income tax reduction on December 31, 2008.

"We are very pleased to report strong revenue and net income growth and further improvement in our gross margins which benefited from the success of our overall marketing strategy and solid sales increases, especially in Xin Aoxing Capsule. We anticipate that our strategy will increase sales and that allocating incremental dollars to our marketing budget will improve our brand while allowing us to successfully penetrate new target markets which eventually translate into both strong top and bottom-line growth," commented Mr. Ronghua Wang, Chairman and Chief Executive Officer of Biostar. "The Chinese government recently announced a new health care reform plan and will invest $123 billion between 2009 and 2011 with a stated goal of covering 90% of the urban and rural residents with basic medical insurance. With continued marketing efforts, an expanding product portfolio and strong demand for our hepatitis-B product, we are ideally positioned to capitalize on the long-term secular growth occurring in our industry."

Six Month Results

For the six months ended June 30, 2009, revenues increased approximately 27.5% to $20.7 million compared to the same period in 2008. Gross profit was approximately $14.5 million for the first six months of 2009, representing an increase of 51.9% from the first six months of 2008. Gross margins were 70.2% for the first six months of 2009 compared to 58.9% for the same period in 2008.

Income from operations was $7.8 million for the first six months of 2009, representing an increase of 87.9% over the first six months of 2008. Operating margins were 37.6% for the first six months of 2009 compared to 25.5% for the first six months of 2008.