KUNMING, China, Aug. 14 /PRNewswire-Asia-FirstCall/ -- China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Amex Equities: KUN) ('China Shenghuo' or the 'Company'), which is engaged in the research, development, manufacture, and marketing of pharmaceutical, nutritional supplement and cosmetic products in the People's Republic of China ('PRC'), today reported unaudited financial results for the second quarter ended June 30, 2009.

    Second Quarter 2009 Financial Highlights
    -- Total revenues decreased 5.37% year-over-year to $8.13 million
    -- Gross margin rose to 70.55% from 65.22% in the same period of 2008
    -- Net cash provided by operations was $981,447 compared with negative
       cash flow of $ 556,090 for the six months ended June 30, 2009 and 2008,
       respectively.

Mr. Gui Hua Lan, Chief Executive Officer of China Shenghuo, commented, 'Despite the revenues for the second quarter of 2009 decreasing 5.37% compared to the revenues for the same period in 2008, revenues increased 20.08% when compared to the revenues for the first quarter of 2009. Our flagship Xuesaitong Soft Capsule and the innovative 12 Ways cosmetics products continued to produce meaningful growth in a difficult market environment.'

Second Quarter 2009 Financial Results

Revenues for the second quarter of 2009 decreased 5.37% to $8.13 million compared to $8.59 million for the same period in 2008. The decrease in revenues was primarily due to the decrease of $0.4 million in the sales of other brands' non-prescription pharmaceuticals, and approximately $0.03 million decrease in the sales of cosmetic products and export of our products, respectively.

Gross profit for the second quarter of 2009 increased 2.36% to $5.74 million over $5.6 million for the same period in 2008. Gross margin for the three months ended June 30, 2009 was 70.55%, compared with 65.22% for the same period in 2008. The increase in gross margin percentage was primarily due to the above-mentioned reduction of the sales of non-prescription pharmaceuticals of other brands.

Selling expenses for the second quarter of 2009 were $6.22 million compared with $4.04 million for the same period of 2008. The primary reason for the increase in selling expenses was the change in our marketing policy. Our main product has been sold to patients through hospitals, which customer relationships were cultivated by sales representatives. However, we believe it is in our long term interest to grow our operations through the over-the-counter ('OTC') market, which we anticipate will produce higher profit margins, and have decided to begin developing the OTC market in 2009. Although we are focusing our operations on the OTC market, we have adopted a policy to absorb a significantly higher percentage of costs incurred by our sales representatives than in the past in order to foster their cooperation in developing the OTC market. The costs to be borne by us are being accrued in selling expenses.

Previously, the Company advanced selling expenses to the sales representatives to develop the market. Starting in 2009, due to the new policy, the Company accrues a fixed amount of selling expenses to the sales representatives for each sale. The Company reimburses the sales representatives their selling and marketing expenses when they submit the appropriate documentation to be reimbursed and their sales are collected. The accrued sales expenses are due within six months.

General and administrative expenses increased 15.00% to $3.12 million in the second quarter of 2009 compared with $2.71 million for the same period in 2008, primarily due to the increase of expense related to our status as a public company with its securities traded on a U.S. national exchange.

Loss from operations for the second quarter of 2009 was $3.61 million compared with operating loss of $1.22 million for the same period of 2008.

Net loss for the second quarter of 2009 was $3.78 million, or $ (0.19) per basic and diluted share. This compares to a net loss of $1.54 million, or $(0.08) per basic and diluted share for the same period of 2008.

Balance Sheet

As of June 30, 2009, the Company's total cash and cash equivalents amounted to $0.7 million as compared with $1.6 million as of December 31, 2008. Total shareholders' equity amounted to $0.7 million as of June 30, 2009.

Drugs Pipeline

China Shenghuo has a number of drugs currently in phase II clinical trials with the State Food and Drug Administration (SFDA) for prescription use. The Company's drug portfolio development strategy mainly focuses on three major markets -- cardio- and cerebro-vascular diseases, peptic ulcer diseases and general health products. Below is the list of drugs and their anticipated SFDA approval timetable:

    Drugs Name                   Intended Use                  Anticipated
                                                              Approval Year
    Levofloxacin Hydrochloride
     Soft Capsule                Antibiotic applications           2009
    Brufen Soft Capsule          Fever and headache                2009
                                  caused by influenza, colds
                                  and acute pharyngitis
    Dencichine Hemostat          Anti-hemorrhagic applications     2011
    Wei Dingkang Soft Capsule    Peptic ulcer                      2011

Business Update

Mr. Lan concluded, 'Strong product-development capabilities, existing product pipelines and those products entering into clinical-research stages are helping to generate meaningful year-over-year top-line growth as we continue our efforts on expanding market share in the vast cardio- and cerebro-vascular market.