WEB NEWS Comments & Business Outlook
Third Quarter 2016 Financial Results
Revenues of $6,563,944, a modest decline of 0.4% year-over-year from the revenues of $6,590,736 realized during the three months ended March 31, 2015.
The Company's net income in Q3 of fiscal year 2016 was $622,720, or $0.01 per share, compared to $777,976, or $0.01 per share, for the three months ended March 31, 2015.
Mr. Zhenjiang Yue, Chairman and CEO of Aoxing Pharma, said, "While fiscal third quarter is a relatively slow quarter due to Chinese New Year holidays, we do see a significant revenue growth for our products other than Zhongtong'an. We believe strong sales growth for our Zhongtong'an product will continue in the fiscal fourth quarter, and we are still trying to achieve our sales target for the fiscal year 2016 despite the slowdown in sales growth in the third quarter of fiscal year 2016. For our Tilidine tablets, we are now near the end of the preparation work. The Tilidine tablets from the API procurement and production to distribution are regulated and tracked by the relevant government agencies, and we have recently received the related documentation from the government. At this point, we expect Tilidine tablet production to start by the end of the fiscal year 2016."
Comments & Business Outlook
Second Quarter 2016 Financial Results
Revenue of $8,195,839, a 27% improvement on revenue of $6,430,701 recorded in the same quarter in fiscal 2015.
Net income in Q2 of fiscal year 2016 was $2,068,635, or $.03 per share, up 265% from the net income of $567,169, or $.01 per share, in the Q2 of fiscal year 2015. Gross margin for the three months ended December 31, 2015 was 79% compared to gross margin of 75% in the like year-ago quarter.
The Company's increase in second quarter revenue was primarily attributable to an increase in the number of customers for its lead pain management product, Zhongtong'an. Aoxing's 265% increase in net income was primarily the result of the Company's increased revenue, improved gross profit, and a 40% decrease in net interest expense due to a reduction in loan balances. Such earnings growth was realized despite higher R&D expenses during the recent quarter, which was mainly due to a large payment for a key raw material used in our R&D program.
Mr. Zhenjiang Yue, Chairman and CEO of Aoxing Pharma, said, "We are pleased by the continued growth of our Company, as our revenue for the first half of fiscal year 2016 increased by 54% to $16,940,661. Our Zhongtong'an product, which was recently included in the government essential drug procurement lists in four new provinces, has continued to accelerate our sales growth. We believe the growing market for Zhongtong'an, coupled with the introduction to market of our Tilidine HCL pain fighting tablets and capsules during the current quarter, should help our Company achieve its revenue target of $45 million in fiscal year 2016, along with continued earnings growth in fiscal year 2016 and beyond."
CFO Trail
Item 5.02 Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Contract Awards
JERSEY CITY, N.J. , Dec. 10, 2015 /PRNewswire / -- 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 that its Chinese subsidiary has been selected by the government of theCity of Shanghai to supply Zhongtongan, its flagship pain management product, to the health insurance system of Shanghai City. Aoxing Pharma will commence deliveries to Shanghai in the near future.
According to the 2015 Blue Book of Chinese Pharmaceutical Market Development issued by the research institute of the China Food and Drug Administration (CFDA), Zhongtongan was ranked 9th among pharmaceutical products used in China for the treatment of musculoskeletal system diseases, with a market share of 1.96%. Zhongtongan has been shown to be effective in managing pain due to osteoarthritis, oral ulcers and dental pain.
There are now over 130 million residents of China who are over 65 years of age. Among that population, mild to severe symptoms of osteoarthritis are common. The aging of the Chinese population has led to an increase in demand for pain management drugs effective in alleviating the symptoms of osteoarthritis, bone hyperplasia, and cervical vertebrae problems.
"We are delighted by the Shanghai government's decision to utilize our product in serving its population. We expect the sales of our products in Shanghai to grow by 35% in 2016 than that of the previous year. We also expect other local and provincial governments will follow the lead of Shanghai , and we intend to be active in pursuing these opportunities in our targeted markets in the coming months," commented Mr. Zhenjiang Yue , the Chairman and CEO of Aoxing Pharma.
Comments & Business Outlook
JERSEY CITY, N.J., Dec. 4, 2015 /PRNewswire / -- 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 the inauguration of its new Narcotic and Psychotropic Drug Research Center. Construction of the Center was funded by the Reform and Development Commission of Hebei Province in China along with Aoxing Pharma's Chinese subsidiary, with a total investment of US$2.15 million.
This state-of-the art Research Center occupies 2200m2 , and meets current GLP and GMP standards. The Center will provide facilities for narcotic and psychotropic drug research and development, including chemical synthesis, transdermal patch formulation, pilot manufacturing, quality review and analytical labs. The Center is outfitted with the latest technology, to offer an optimal research environment to the research scientists at Aoxing Pharma.
"We are delighted by the inauguration of the new R&D Center, and are honored to receive this powerful endorsement by the Chinese government," said Mr. Zhenjiang Yue, the Chairman and CEO of Aoxing Pharma. "The government contributed to the funding of this project in recognition of our company's strong commitment to the narcotic drug and psychiatric treatment business. Government endorsement of our efforts can also be seen in our recent receipt of authorization from the China FDA (CFDA) to initiate four drug programs, including Lorcaserin Hydrochloride tablets and Lorcaserin Hydrochloride API (active pharmaceutical ingredient), weight-reduction drugs for overweight and obese patients, as well as Caffeine tablets (for swallowing) and Caffeine buccal tablets (for dissolving in the mouth), for the management of mental fatigue and headache. With government approval and our new government-funded research facility, we are well positioned to quickly introduce such products into the Chinese pharmaceutical market."
CFO Trail
JERSEY CITY, N.J. , Dec. 4, 2015 /PRNewswire / -- 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 that Wilfred Chow has resigned from his position as the Company's Chief Financial Officer. Guoan Zhang , Aoxing Pharma's Senior Vice President for Finance, will assume the position of Chief Financial Officer.
Wilfred Chow , commenting on his resignation, stated: "My tenure as CFO for Aoxing Pharma has been one of the most rewarding periods of my professional life. I am proud to have assisted this extraordinary group of people in their drive to bring much-needed pharmaceutical products to China . However, my own personal and professional situations make this a good time to hand over the role of CFO to Mr. Zhang. I will continue to assist Aoxing Pharma as an advisor, and I look forward to continued participation in the growth of this very special company."
Zhenjiang Yue , Aoxing Pharma's Chief Executive Officer, commented: "We are grateful to Wilfred Chow for his contribution to our company through this year. We approach the end of 2015 with a dramatically improved balance sheet, and much of the credit for our current financial stability is due to Wilfred's dedicated efforts on our behalf. I look forward to continuing my relationship with Wilfred, as he serves as our advisor, and I wish him well in his future business ventures."
CFO Trail
Item 5.02 Departure of Directors or Certain Officers; Appointment of Certain Officers
Comments & Business Outlook
First Quarter 2016 Financial Results
Revenue was $8,744,822 for the first quarter vs. last years same quarter $4,565,081
The company's net income in Q1 fiscal 2016 was $1,348,433, or .02 per share, compared to a net loss of $2,405, or $(.00) per share, in like year-ago quarter.
The company's year-over-year increase in first quarter revenue was primarily attributable to a higher proportion of direct product sales made by Aoxing to its end customers, allowing for higher gross margins. Aoxing's Q1 revenue also improved as a result of procurement from four provincial governments of the company's lead TCM product, Zhongtongan. This procurement commenced as a result of Zhongtongan being included in the government essential drug procurement lists in these provinces.
Gross margin for the three months ended September 30, 2015 was 80% compared to gross margin of 70% in the like year-ago quarter.
Aoxing's improved bottom line performance in the first quarter of fiscal 2016 compared to the first quarter of the previous fiscal year was primarily the result of the company's increased revenue and improved gross profit, as well as a 22% decrease in net interest expense due to a reduction in loan balances. Q1 fiscal 2016 earnings, however, were impacted by a 96% rise in operating expenses primarily related to the company's development of new narcotic products and its drive to market its products directly to end users.
Mr. Zhenjiang Yue, Chairman and CEO of Aoxing Pharma, said, "We are proud to have achieved these strong first quarter results. Our Zhongtongan product, now included in the government essential drug procurement lists in four new provinces, has continued to accelerate our sales growth in Q1 2016. Our Tilidine HCL pain management tablets, scheduled for market introduction later this fiscal year, should add to this growth and produce substantial revenue by the end of fiscal 2016."
Mr. Yue added that Aoxing expects to receive clearance to market its Oxycodone/Acetaminophen Tablets and Capsules before the end of the current fiscal year, helping the company achieve fiscal 2016 revenue of at least $45 million.
In a measure to reduce company debt, on November 4, 2015, Aoxing reached an agreement with three of its creditors to convert $2.66 million in high interest bearing debt into 2,046,995 restricted shares of common stock at $1.30 per share.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
For the year ended June 30
2015
2014
SALES
$
25,481,199
$
12,739,371
COST OF SALES
5,688,863
6,925,697
GROSS PROFIT
19,792,336
5,813,674
OPERATING EXPENSES:
Research and development
337,067
569,699
General and administrative
2,753,535
3,613,657
Selling expenses
7,457,758
4,350,442
Depreciation and amortization
548,319
614,755
TOTAL OPERATING EXPENSES
11,096,679
9,148,553
INCOME/(LOSS) FROM OPERATIONS
8,695,657
(3,334,879
)
OTHER INCOME (EXPENSE):
Interest expense, net of interest income
(5,768,094
)
(5,194,786
)
Equity in loss of joint venture, net
(93,352
)
(104,715
)
Subsidy income
279,893
-
TOTAL OTHER EXPENSE
(5,581,553
)
(5,299,501
)
INCOME/(LOSS) BEFORE INCOME TAXES
3,114,104
(8,634,380
)
Income taxes/(benefits)
(2,704,369)
-
NET INCOME/(LOSS)
5,818,473
(8,634,380
)
Net income/(loss) attributable to non-controlling interest in subsidiaries
323,760
(418,697
)
NET INCOME/(LOSS) ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY
5,494,713
(8,215,683
)
OTHER COMPREHENSIVE INCOME :
Foreign currency translation adjustment
91,359
28,055
COMPREHENSIVE INCOME/(LOSS)
5,586,072
(8,187,628
)
Other comprehensive loss income attributable to non-controlling interest
4,568
1,403
COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO THE COMPANY
$
5,581,504
$
(8,189,031
)
BASIC AND DILUTED INCOME/(LOSS) PER COMMON SHARE
$
0.09
$
(0.16
)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
63,107,104
49,856,247
Management Discussion and Analysis
Revenue for the year ended June 30, 2015 was $25,481,199, representing a 100.0% increase from the revenue of $12,739,371 for the year ended June 30, 2014. The increase in revenue was primarily attributable to the changes in our marketing program. The Company’s previous sales process began with the sales manager who shipped the product to a third-party sales agent. The sales agent then sold the product to the customer. With the current sales process, the Company has gradually terminated the sales agent contracts and now sells the product directly to the customer. The sales price to direct customers is higher than the price to sales agencies, which has led to an increase in the average price of our products.
The Company realized net income of $5,818,473 for the fiscal year ended June 30, 2015. However, because the Company owns only 95% of Hebei Aoxing, 5% of that company’s net income was attributed to the minority interest. Therefore the net income for the fiscal year attributable to the shareholders of Aoxing Pharmaceutical was $5,494,713. In comparison, during the fiscal year ended June 30, 2014, the Company’s net loss was $8,634,380 and, after deducting loss attributable to the 5% minority interest in Hebei Aoxing, net loss attributable to shareholders of Aoxing Pharmaceutical was $8,215,683.
Deal Flow
Item 1.01 Entry into Material Definitive Agreement
The aggregate purchase price for the securities was $3,000,000. From the proceeds of the offering, Aoxing Pharmaceutical Company, Inc. has paid a fee of $180,000 to Rodman & Renshaw, a unit of H.C Wainwright & Co., LLC (“Wainwright”), which acted as the placement agent for the offering. Aoxing Pharmaceutical Company, Inc. has also reimbursed Wainwright for its out-of-pocket expenses, and has issued to Wainwright and its affiliates warrants to purchase 141,176 shares of common stock.
Each Warrant will permit the holder to purchase one share of common stock from Aoxing Pharmaceutical Company for a price of $1.74 per share. The Warrants will be exercisable from March 30, 2016 until March 30, 2021. The warrants issued to Wainwright and its affiliates are substantially identical to the Warrants, except that the termination date is September 24, 2020. Cashless exercise of either warrant is permitted only if there is no effective registration statement permitting resale of the common shares underlying the warrants.
We made the offering and sale of the shares and Warrants pursuant to a shelf registration statement on Form S-3 (Registration No. 333-205148) that was declared effective by the Securities and Exchange Commission on July 1, 2015, and a base prospectus dated as of the same date, as supplemented by a prospectus supplement filed with the Securities and Exchange Commission on September 28, 2015.
Deal Flow
AOXING PHARMACEUTICAL COMPANY, INC. 2,352,941 shares of common stock
Pursuant to this prospectus supplement and the accompanying prospectus, we are offering up to 4,258,823 shares of our common stock (which includes 1,905,882 shares issuable upon exercise of the Warrants), par value $0.001 per share, and common stock purchase warrants to purchase up to 1,905,882 shares of our common stock (the “Warrants”). The Warrants offered by means of this prospectus include warrants to purchase 1,764,706 shares, which have an initial exercise price of $1.74 per share and may be exercised at any time and from time to time on or after March 31, 2016 through and including March 31, 2021 (the “Public Warrants”). Each investor in the initial offering who purchases a share of the common stock offered hereby will receive a Public Warrant to purchase ¾ of a share of common stock. The Warrants also include placement agent warrants to purchase 141,176 shares of our common stock, which have an initial exercise price of $1.74 per share and may be exercised at any time and from time to time on or March 31, 2016 through September 30, 2020.
Per Share
Total
Public offering price of securities $ 1.275 $ 3,000,000
Placement agent fees (1)
$ 0.0765 $ 180,000
Proceeds, before expenses, to Aoxing Pharmaceutical Company, Inc.
$ 1.1985 $ 2,820,000
Deal Flow
Item 1.01 Entry into Material Definitive Agreement
Each Warrant will permit the holder to purchase one share of common stock from Aoxing Pharmaceutical Company for a price of $1.74 per share. The Warrants will be exercisable commencing six months after the closing date, and will expire five and one-half years after the closing date.
Aoxing Pharmaceutical Company is making the offering and sale of the shares and warrants pursuant to a shelf registration statement on Form S-3 (Registration No. 333-205148) that was declared effective by the Securities and Exchange Commission on July 1, 2015, and a base prospectus dated as of the same date, as supplemented by a prospectus supplement to be filed with the Securities and Exchange Commission on September 28, 2015.
Deal Flow
Title of each class of securities to be registered
Amount to
be registered
Proposed
maximum
offering price
per unit
Proposed
maximum
aggregate
offering
price(1)(2)
Amount
of
registration
fee(3)
Common Stock, $0.001 par value
Preferred Stock, $0.001 par value
Warrants
Debt Securities
Units
Total
$ 50,000,000
$ 5,810.00
Investor Alert
JERSEY CITY, NJ / ACCESSWIRE / April 3, 2015 / 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, has received notice from NYSE MKT (the "Exchange") that Aoxing Pharma has regained compliance with one of the NYSE MKT LLC's continued listing standards. Specifically, the Company has resolved the continued listing deficiency with respect to Section 1003(a)(iv) of the Company Guide referenced in the Exchange's letter dated October 25, 2013. The Company is no longer considered financially impaired by the Exchange.
NYSE MKT advised Aoxing Pharma that if its financial condition worsens, it could again fall below compliance with Section 1003(a)(iv), at which time NYSE MKT would examine the relationship between the two incidents of noncompliance and re-evaluate Aoxing Pharma's recovery from the first incident. In addition, NYSE MKT reminded Aoxing Pharma that it remains out of compliance with the following sections of the NYSE MKT Company Guide:
- Section 1003(a)(i) since it reported stockholders' equity of less than $2,000,000 at September 30, 2014 and has incurred losses from continuing operations and/or net losses in two of its three most recent fiscal years;
- Section 1003(a)(ii) since it reported stockholders' equity of less than $4,000,000 at December 31, 2014 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years; and
- Section 1003(a)(iii) since it reported stockholders' equity of less than $6,000,000 at December 31, 2014 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years.
Based on the plans of compliance submitted by the Company, the Exchange has granted the Company until April 27, 2015 to regain compliance with Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii).
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(Unaudited)
For the three months ended
For the six months ended
December 31,
December 31,
2014
2013
2014
2013
SALES
$ 6,430,701 $ 3,466,807 $ 10,955,783 $ 7,043,915
COST OF SALES
1,624,853 2,023,707 3,012,386 4,038,371
GROSS PROFIT
4,805,848 1,443,100 7,983,397 3,005,544
OPERATING EXPENSES:
Research and development expense
95,597 90,775 203,147 268,716
General and administrative expenses
821,008 617,903 1,332,495 1,447,953
Selling expenses
1,775,924 1,258,800 2,978,433 2,876,789
Depreciation and amortization
140,802 138,585 280,076 320,011
TOTAL OPERATING EXPENSES
2,833,331 2,106,063 4,794,151 4,913,469
PROFIT (LOSS) FROM OPERATIONS
1,972,517 (662,963 ) 3,189,246 (1,907,924 )
OTHER EXPENSE:
Interest expense, net of interest income
(1,628,120 ) (1,254,403 ) (2,821,280 ) (2,329,092 )
Equity in loss of joint venture, net
(22,018 ) (104 ) (47,989 ) (31,427 )
Subsidy income
279,573 - 279,573 -
TOTAL OTHER EXPENSE
(1,370,565 ) (1,254,506 ) (2,589,696 ) (2,360,519 )
PROFIT (LOSS) BEFORE INCOME TAXES
601,952 (1,917,469 ) 599,550 (4,268,443 )
Income tax expense
- - - -
NET PROFIT (LOSS)
601,952 (1,917,469 ) 599,550 (4,268,443 )
Net profit (loss) attributed to non-controlling interest in subsidiaries
34,784 (91,752 ) 40,251 (207,740 )
PROFIT (LOSS) ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY
567,168 (1,825,717 ) 559,299 (4,060,703 )
OTHER COMPREHENSIVE INCOME :
Foreign currency translation adjustment
7,900 11,526 21,708 32,395
COMPREHENSIVE PROFIT (LOSS)
575,068 (1,814,191 ) 581,007 (4,028,307 )
Other comprehensive income attributable to non-controlling interest
395 576 1,085 1,620
COMPREHENSIVE PROFIT (LOSS) ATTRIBUTABLE TO THE COMPANY
$ 574,673 $ (1,814,768 ) $ 579,922 $ (4,029,927 )
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
$ 0.01 $ (0.04 ) $ 0.01 $ (0.08 )
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
57,614,546 49,861,126 57,614,546 49,837,974
Management Discussion and Analysis
Revenues for the three months ended December 31, 2014 were $6,430,701, representing an 85% increase over the revenues of $3,466,807 realized during the three months ended December 31, 2013. Revenues for the six months ended December 31, 2014 were $10,955,783, representing a 56% increase over the revenues of $7,043,915 realized during the six months ended December 31, 2013. The increase in revenue was primarily attributable to the changes in our marketing program. The Company’s previous sales process began with the sales manager who shipped the product to a third-party sales agent. The sales agent then sold the product to the customer. With the current sales process, the Company has gradually terminated the sales agent contracts and now sells the product directly to the customer. The sales price to direct customers is higher than the price to sales agencies, which has led to an increase in average price of our products.
The Company realized a net profit of $ 601,952 for the three months ended December 31, 2014 and $599,550 for the six months ended December 31, 2014. The achievement of net profit in this quarter was due to the increase in revenue and gross profit as a result of the change in our distribution channels. We expect revenue and gross profit will further improve in the coming years.
Investor Alert
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard
·Section 1003(a)(ii) since it reported stockholders’ equity of less than $4,000,000 at September 30, 2013 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years ended June 30, 2013;
·Section 1003(a)(iii) since it reported stockholders’ equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended; and
·Section 1003(a)(iv) since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature.
Investor Alert
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard
Investor Alert
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard
·Section 1003(a)(ii) since it reported stockholders’ equity of less than $4,000,000 at September 30, 2013 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years ended June 30, 2013;
·Section 1003(a)(iii) since it reported stockholders’ equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended; and
·Section 1003(a)(iv) since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature.
On December 16, 2014, the Exchange notified the Registrant that the period during which it will be permitted to regain compliance with Section 1003(a)(iv) has been extended to December 31, 2014. The Registrant will be subject to periodic review by the Exchange Staff during the extension periods. Failure to make progress consistent with the plans or to regain compliance with the listing standards by the ends of the extension periods could result in the Registrant being delisted from the NYSE MKT LLC.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(Unaudited)
For the Three Months Ended
September 30,
2014
2013
SALES
$
4,565,081
$
3,577,108
COST OF SALES
1,387,534
2,014,663
GROSS PROFIT
3,177,547
1,562,445
OPERATING EXPENSES:
Research and development expense
107,550
177,941
General and administrative expenses
511,486
830,050
Selling expenses
1,202,509
1,617,989
Depreciation and amortization
139,276
181,426
TOTAL OPERATING EXPENSES
1,960,821
2,807,406
INCOME (LOSS) FROM OPERATIONS
1,216,726
(1,244,961)
OTHER EXPENSE:
Interest expense, net of interest income
(1,193,160)
(1,074,690)
Equity in loss of joint venture, net of tax
(25,971)
(31,323)
TOTAL OTHER EXPENSE
(1,219,131)
(1,106,013)
LOSS BEFORE INCOME TAX
(2,405
)
(2,350,974)
Income tax
-
-
NET LOSS
(2,405
)
(2,350,974)
Net income (loss) attributed to non-controlling interest in subsidiaries
5,467
(115,988)
LOSS ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY
(7,872
)
(2,234,986)
OTHER COMPREHENSIVE INCOME :
Foreign currency translation adjustment
13,809
20,870
COMPREHENSIVE PROFIT/(LOSS)
5,937
(2,214,116)
Other comprehensive income attributable to non-controlling interest
690
1,043
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
$
5,247
$
(2,215,159)
BASIC AND DILUTED LOSS PER COMMON SHARE
$
-
$
(0.04)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
53,098,267
49,814,822
Management Discussion and Analysis
Revenue for the three months ended September 30, 2014 was $4,565,081, representing a 28% increase over the revenue of $3,577,108 realized during the three months ended September 30, 2013. The increase in revenue was primarily attributable to the increase in sales price of our main product. The Company’s previous sales process begins with the sales manager who ships the product to a third-party sales agent. The sales agent then sells the product directly to the customer. With the current sales process, the Company has gradually terminated the sales agent contracts and now sells the product directly to the customer through a logistics company. The sales price to direct customers is higher than the price to sales agencies, which has led to an increase in average price of the products.
The Company realized a net loss of $2,405 for the three months ended September 30, 2014. Because the Company owns only 95% of Hebei Aoxing, 5% of Hebei Aoxing's income was attributed to the non-controlling interest. Therefore the net loss attributable to the shareholders of Aoxing Pharmaceutical for the three months ended September 30, 2014 was $7,872. In comparison, during the three months ended September 30, 2013, the net loss attributable to the Company’s shareholders was $2,234,986, after deducting income attributable to the 5% non-controlling interest in Hebei Aoxing.
Deal Flow
Purchaser
Relationship to Company
Shares
Guoan Zhang
Acting Chief Financial Officer
356,473
Yujia Yue
Niece of CEO
18,762
Yifa Yue
Son of CEO
406,504
The remainder of the purchasers are also employees of the Registrant, including several non-executive members of management.
Investor Alert
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard
●Section 1003(a)(ii) since it reported stockholders’ equity of less than $4,000,000 at September 30, 2013 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years ended June 30, 2013;
●Section 1003(a)(iii) since it reported stockholders’ equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended; and
●Section 1003(a)(iv) since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature.
The Registrant was afforded the opportunity to submit plans of compliance to the Exchange. Based on the plans of compliance submitted by the Registrant, the Exchange granted the Registrant an extension until April 27, 2015 to regain compliance with Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii). The Exchange also granted the Registrant an extension until September 21, 2014 to regain compliance with Section 1003(a)(iv).
Comments & Business Outlook
JERSEY CITY, NJ--(Marketwired - Sep 29, 2014) - 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 year ended June 30, 2014. Complete financial results can be found in the Annual Report on Form 10-K filed by Aoxing Pharma on September 29, 2014.
Financial Results:
Revenue for the year ended June 30, 2014 was $12,739,371, representing a 17.6% increase from the revenue of $10,829,839 for the year ended June 30, 2013. The increase in revenue was primarily attributable to the increase in sales price of our main product, Zhongtongan, whose sales represented 92% of our overall sales revenue during the 2014 fiscal year. We are now selling Zhongtongan directly, which yields a higher sales price than agency sales. This change contributed to the higher per unit sales price we realized during fiscal 2014.
Our cost of goods sold increased by 51.8% from fiscal 2013 to fiscal 2014, as a poor harvest led to increased raw material costs. As a result, our gross margin decreased from 57.9% in fiscal 2013 to 45.6% in fiscal 2014. Future prices for raw materials are difficult to predict. Nevertheless, we expect our cost of goods sold to be reduced in the future as we continue to reduce energy consumption and increase production capacity and efficiency.
We recorded a loss from operations of $3,334,879 for the year ended June 30, 2014, compared with loss from operations of $6,549,135 in fiscal 2013. The primary reasons for the improvement were:
During fiscal year 2013 we recorded an impairment loss on goodwill of $7,055,364 and an impairment loss on intangible assets of $616,947.
At the beginning of fiscal 2013 we incurred large expenditures for research and development and marketing, as we utilized the proceeds of a $10.2 million financing completed in September 2012. We have returned those expenses to a more sustainable level, with the result that research and development expenses fell by 62% from fiscal 2013 to fiscal 2014, and selling expenses fell by 41.6% from fiscal 2013 to fiscal 2014.
Our general and administrative expenses during the year ended June 30, 2014 were $3,613,657, an increase of 9.4% compared to the $3,303,824 incurred during the previous year. The increase resulted from bad debt expenses of $896,441 recorded during fiscal 2014.
Interest expense was $5,194,786 for fiscal year 2014, an increase of 73.9% compared to interest expense of $2,986,568 incurred in fiscal year 2013. The increase in interest expense is mainly due to the increase in average loan balances and higher interest rates for the long-term loans. In July 2014, we obtained a one year RMB30 million (approximately $4.9 million) loan from Postal Savings Bank of China, which replaced higher interest loans and will help reduce our interest expense going forward. Nevertheless, after adding the interest expense to our operating loss, we realized a net loss of $8,634,380 for the fiscal year ended June 30, 2014.
Our cash balance as of June 30, 2014 was $2,329,660, compared to $4,007,823 as of June 30, 2013. The loss that we incurred during fiscal 2014, coupled with the conversion of debts from long-term into short-term, caused our working capital deficit to increase during fiscal 2014. Our working capital deficit on June 30, 2014 was $23,294,188, which was $13,482,876 more than the working capital deficit on June 30, 2013. The primary reason for our working capital deficit is the fact that there are $25.9 million short-term debts owed to banks, related and unrelated parties. In accordance with banking customs in China, our bank loans have, throughout our history, been written on a short-term basis.
In July 2014, six of our creditors, including our CEO, agreed to convert $4.6 million debt to shares at a conversion rate of $0.39 per share. That conversion has alleviated that portion of our debt obligations and will reduce our interest expense.
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 continued to show in our business model."
Deal Flow
Item 3.02
Unregistered Sale of Equity Securities
On August 28, 2014 an agreement between the Registrant and six of its creditors became effective. The agreement provides that $4,626,289 in debt owed by the Registrant will be satisfied by the Registrant's issuance of a total of 11,862,278 shares of the Registrant's common stock. Three of the creditors are related parties of the Registrant, as indicated in the table below.
Creditor
Debt
Shares
Zhenjiang Yue(1)
$ 2,842,788 7,289,199
Yumin Yue(2)
$ 486,224 1,246,727
Guoan Zhang(3)
$ 324,149 831,152
Other Creditors
$ 973,128 2,495,200
TOTAL
$ 4,626,289 11,862,278
Investor Alert
JERSEY CITY, NJ--(Marketwired - Aug 6, 2014) - 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, previously announced that it had received notice from NYSE MKT LLC that, based upon the financial statements contained in Aoxing Pharma's Annual Report on Form 10-K for the year ended June 30, 2013 and its Quarterly Reports on Form 10-Q for the periods ended September 30, 2013 and December 31, 2013, Aoxing Pharma is not in compliance with the following sections of the NYSE MKT Company Guide:
Section 1003(a)(i) since it reported stockholders' equity of less than $2,000,000 at December 31, 2013 and has incurred losses from continuing operations and/or net losses in two of its three most recent fiscal years ended June 30, 2013;
Section 1003(a)(ii) since it reported stockholders' equity of less than $4,000,000 at September 30, 2013 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years ended June 30, 2013;
Section 1003(a)(iii) since it reported stockholders' equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended; and
Section 1003(a)(iv) since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature.
The Company was afforded the opportunity to submit plans of compliance to the Exchange. Based on the plans of compliance submitted by the Company, the Exchange granted the Company an extension until April 27, 2015 to regain compliance with Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii). The Exchange also granted the Company an extension until June 30, 2014 to regain compliance with Section 1003(a)(iv).
On August 4, 2014, the Exchange notified the Company that the period during which it will be permitted to regain compliance with Section 1003(a)(iv) has been extended to September 21, 2014. The Company will be subject to periodic review by the Exchange Staff during the extension periods. Failure to make progress consistent with the plans or to regain compliance with the listing standards by the ends of the extension periods could result in the Company being delisted from the NYSE MKT LLC.
Investor Alert
JERSEY CITY, NJ--(Marketwired - Jun 16, 2014) - 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, previously announced that it had received notice from NYSE MKT LLC that, based upon the financial statements contained in Aoxing Pharma's Annual Report on Form 10-K for the year ended June 30, 2013 and its Quarterly Reports on Form 10-Q for the periods ended September 30, 2013 and December 31, 2013, Aoxing Pharma is not in compliance with the following sections of the NYSE MKT Company Guide:
Section 1003(a)(i) since it reported stockholders' equity of less than $2,000,000 at December 31, 2013 and has incurred losses from continuing operations and/or net losses in two of its three most recent fiscal years ended June 30, 2013;
Section 1003(a)(ii) since it reported stockholders' equity of less than $4,000,000 at September 30, 2013 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years ended June 30, 2013;
Section 1003(a)(iii) since it reported stockholders' equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended; and
Section 1003(a)(iv) since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature.
The Company was afforded the opportunity to submit plans of compliance to the Exchange. Based on the plans of compliance submitted by the Company, the Exchange granted the Company an extension until April 27, 2015 to regain compliance with Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii). The Exchange also granted the Company an extension until May 30. 2014 to regain compliance with Section 1003(a)(iv).
On June 10, 2014, the Exchange notified the Company that the period during which it will be permitted to regain compliance with Section 1003(a)(iv) has been extended to June 30, 2014. The Company will be subject to periodic review by the Exchange Staff during the extension periods. Failure to make progress consistent with the plans or to regain compliance with the listing standards by the ends of the extension periods could result in the Company being delisted from the NYSE MKT LLC.
Comments & Business Outlook
JERSEY CITY, NJ--(Marketwired - May 14, 2014) - 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 three and nine month periods ended March 31, 2014. Complete financial results can be found in the Quarterly Report on Form 10-Q filed by Aoxing Pharma on May 14, 2014.
Financial Results:
Revenues for the three and nine months ended March 31, 2014 were $2,445,793 and $9,489,708, respectively, representing a 30% and a 22% increase over the revenues realized in the comparable periods 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 91% of sales during the quarter ended March 31, 2014.
Cost of sales for the three and nine months ended March 31, 2014 were $1,425,630 and $5,464,000, respectively, representing a 101% and a 78% increase over the cost of sales recorded in the comparable periods of fiscal year 2013. The increase in cost of sales resulted from a poor harvest at the end of 2013, which dramatically increased raw material prices. As a result of the increase in raw material prices, Aoxing Pharma's gross profits for the three and nine months ended March 31, 2014 fell by 20.7% and 18.3% from the comparable periods of fiscal 2013.
Despite the reduction in gross profit, Aoxing Pharma reduced its loss from operations during the three and nine month periods ended March 31, 2014. Loss from operations of $717,874 during the three months ended March 31, 2014 was only 31% of the loss from operations realized in the prior year's third quarter, and loss from operations of $2,625,798 during the nine months ended March 31, 2014 was only 58% of the loss from operations realized in the comparable period of fiscal 2013. The primary reason for the reduction in loss from operations was the elimination of a television advertising program carried out during fiscal 2013, with resulting reductions in selling expense of $2,103,722 and $1,541,806 during the three and nine month periods ending March 31, 2014.
Net interest expense increased by 71% to $3,524,563 for the nine months ended March 31, 2014, as the Company's short and long term debt increased by $9,142,080 from March 31, 2013 to March 31, 2014. After that deduction, the Company realized a net loss attributable to the shareholders of Aoxing Pharma of $1,822,137 and $5,882,840 for the three and nine months ended March 31, 2014, respectively, representing improvements of 30% and 2% compared to the same periods of fiscal 2013.
On March 31, 2014, Aoxing Pharma had $2.4 million in cash on hand and a working capital deficit of $23,911,146, which represented a deterioration of $14,099,835 from Aoxing Pharma's working capital position at June 30, 2013. The primary reasons for the increase in our working capital deficit were the net loss, which was funded by an increase in short-term bank loans, and the reclassification of $10.1 million in bank debt from long-term to current liabilities.
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, as they continue to fund the growth and development of our Company."
Investor Alert
JERSEY CITY, NJ--(
Marketwired - Mar 4, 2014) - 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, announced on October 30, 2013 that it had received notice from NYSE MKT LLC that, based upon the financial statements contained in Aoxing Pharma's Annual Report on Form 10-K for the year ended June 30, 2013,
Aoxing Pharma (a) is not in compliance with Section 1003(a)(iii) of the NYSE MKT Company Guide since it reported stockholders' equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended, and (b) is not in compliance with Section 1003(a)(iv) of the Company Guide since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature. Aoxing Pharma further announced on December 4, 2013 that it had received notice from NYSE MKT LLC that, based upon the financial statements contained in Aoxing Pharma's Quarterly Report on Form 10-Q for the period ended September 30, 2013,
Aoxing Pharma (a) is not in compliance with Section 1003(a)(ii) of the NYSE MKT Company Guide since it reported stockholders' equity of less than $4,000,000 at September 30, 2013 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years ended June 30, 2013.
Comments & Business Outlook
JERSEY CITY, NJ--(Marketwired - Feb 19, 2014) - Aoxing Pharmaceutical Company, Inc. (NYSE MKT : AXN ) ("Aoxing Pharma"), a specialty pharmaceutical company focusing on research, development, manufacturing, and distribution of narcotic, pain-management, andaddiction treatment pharmaceuticals, today announced its financial and operational results for the three and six month periods ended December 31, 2013. Complete financial results can be found in the Quarterly Report on Form 10-Q filed by Aoxing Pharma on February 19, 2014.
Financial Results:
Revenues for the three and six months ended December 31, 2013 were $3,466,807 and $7,043,915, respectively, representing a 5% and a 19% increase over the revenues realized in the comparable periods 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 90% of sales during the quarter ended December 31, 2013.
Despite the increase in revenue, gross profit fell by 27% during the quarter and 16% du
Aoxing Pharma completed a $10.2 million financing at the end of September 2012, which it utilized to fund sharp increases in research and development expenses and selling expenses. Entering the fall of 2013, Aoxing Pharma cut back on both categories of expenses, in order to stabilize its cash flows. For that reason, operating expenses during the three and six months ended December 31, 2013 were 51% and 16% lower, respectively, than operating expenses in the comparable periods of fiscal 2013. As a result, despite the reduction in gross profit, Aoxing Pharma's loss from operations was reduced by 72% during the quarter ended December 31, 2013 and 16% during the six months then ended.
Net interest expense increased by 84% to $2,329,092 in the six months ended December 31, 2013, due to the increase in bank loans at the end of 2012. The resulting net loss recorded for the three months ended December 31, 2013 was $1,917,469, whereas the Company's net loss for the three months ended December 31, 2012 was $3,135,661. The net loss of $4,268,443 for the six months ended December 31, 2013 exceeded the net loss of $3,584,176 recorded in the comparable period of the prior year.
On December 31, 2013, Aoxing Pharma had $3.9 million in cash on hand and a working capital deficit of $25,181,211. The working capital deficit was swelled during the current fiscal year by the reclassification of $10.1 million in loans payable from long-term to current.
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."
Investor Alert
JERSEY CITY, NJ--(Marketwired - Jan 15, 2014) - 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, announced on October 30, 2013 that it had received notice from NYSE MKT LLC that, based upon the financial statements contained in Aoxing Pharma's Annual Report on Form 10-K for the year ended June 30, 2013, Aoxing Pharma is not in compliance with Section 1003(a)(iii) of the NYSE MKT Company Guide since it reported stockholders' equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended. On December 4, 2013, Aoxing Pharma announced that it had received additional notice from NYSE MKT LLC that, based upon the financial statements contained in Aoxing Pharma's Quarterly Report on Form 10-Q for the period ended September 30, 2013, it is also not in compliance with Section 1003(a)(ii) of the Company Guide since it reported stockholders' equity of less than $4,000,000 at September 30, 2013 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years ended June 30, 2013.
The Company was afforded the opportunity to submit a plan of compliance to the Exchange. On November 25, 2013 the Company presented its plan of compliance with Section 1003(a)(iii) and on December 26, 2013 the Company presented supplemental material as its plan of compliance with Section 1003(a)(ii). On January 10, 2014 the Exchange notified the Company that it accepted the Company's plan of compliance with Section 1003(a)(ii) and Section 1003(a)(iii) and granted the Company an extension until April 27, 2015 to regain compliance with Sections 1003(a)(ii) and 1003(a)(iii). The Company will be subject to periodic review by the Exchange Staff during the extension period. Failure to make progress consistent with the plan or to regain compliance with Sections 1003(a)(ii) and (1003(a)(iii) by the end of the extension period could result in the Company being delisted from the NYSE MKT LLC.
The Company's plan of compliance with Sections 1003(a)(ii) and 1003(a)(iii) are supplemental to, and not in lieu of, the Company's plan of compliance with Section 1003(a)(iv) of the Company Guide, which Aoxing Pharma submitted to NYSE MKT LLC in response to its notice that Aoxing Pharma is not in compliance with Section 1003(a)(iv) of the Company Guide since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature. On December 3, 2013 the Exchange notified the Company that it accepted the Company's plan of compliance with Section 1003(a)(iv) and granted the Company an extension until March 1, 2014 to regain compliance with Section 1003(a)(iv). Failure to make progress consistent with the plan or to regain compliance with Section 1003(a)(iv) by March 1, 2014 could result in the Company being delisted from the NYSE MKT LLC, notwithstanding the Company's ongoing progress in achieving compliance with Sections 1003(a)(ii) and 1003(a)(iii).
Investor Alert
JERSEY CITY, NJ--(Marketwired - Dec 4, 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, announced on October 30, 2013 that it had received notice from NYSE MKT LLC that, based upon the financial statements contained in Aoxing Pharma's Annual Report on Form 10-K for the year ended June 30, 2013, Aoxing Pharma (a) is not in compliance with Section 1003(a)(iii) of the NYSE MKT Company Guide since it reported stockholders' equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended, and (b) is not in compliance with Section 1003(a)(iv) of the Company Guide since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature.
The Company was afforded the opportunity to submit plans of compliance to the Exchange. On November 8, 2013 the Company presented its plan of compliance with Section 1003(a)(iv). On December 3, 2013 the Exchange notified the Company that it accepted the Company's plan of compliance with Section 1003(a)(iv) and granted the Company an extension until March 1, 2014 to regain compliance with Section 1003(a)(iv). The Company will be subject to periodic review by the Exchange Staff during the extension period. Failure to make progress consistent with the plan or to regain compliance with Section 1003(a)(iv) by the end of the extension period could result in the Company being delisted from the NYSE MKT LLC.
On November 25, 2013 the Company presented its plan of compliance with Section 1003(a)(iii). However, on December 3, 2013 the Exchange notified the Company that its review of the Company's Form 10-Q for the quarter ended September 30, 2013 indicated that Aoxing Pharma is also not in compliance with Section 1003(a)(ii) of the Company Guide since it reported stockholders' equity of less than $4,000,000 at September 30, 2013 and has incurred losses from continuing operations and/or net losses in three of its four most recent fiscal years ended June 30, 2013. The notice advised that Aoxing Pharma is not required to submit an additional plan of compliance, but will be permitted to supplement the plan of compliance submitted on November 25, 2013 to address how it intends to regain compliance with Section 1003(a)(ii) by April 27, 2015. If the plan, as supplemented, is not accepted, Aoxing Pharma will be subject to delisting proceedings.
Management of Aoxing Pharma intends to supplement the plan of compliance submitted on November 25, 2013 on the stated schedule.
Comments & Business Outlook
First Quarter 2014 Financial Results
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.
Basic and Diluted Loss per Common Share was a loss ($0.04) vs last years loss of ($0.01).
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."
Investor Alert
JERSEY CITY, NJ--(Marketwired - Oct 30, 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 that it has received notice from NYSE MKT LLC that, based upon the financial statements contained in Aoxing Pharma's Annual Report on Form 10-K for the year ended June 30, 2013, Aoxing Pharma (a) is not in compliance with Section 1003(a)(iii) of the NYSE MKT Company Guide since it reported stockholders' equity of less than $6,000,000 at June 30, 2013 and has incurred losses from continuing operations and/or net losses in its five most recent fiscal years then ended, and (b) is not in compliance with Section 1003(a)(iv) of the Company Guide since it has sustained losses that are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the NYSE MKT, as to whether the Company will be able to continue operations and/or meet its obligations as they mature. The notice advised that, in order to maintain its listing, Aoxing Pharma must submit a plan of compliance by November 8, 2013 addressing how it intends to regain compliance with Section 1003(a)(iv) by November 29, 2013, and must submit a plan of compliance by November 25, 2013 addressing how it intends to regain compliance with Section 1003(a)(iii) by April 27, 2015. If Aoxing Pharma fails to submit both plans or if the plans are not accepted, Aoxing Pharma will be subject to delisting proceedings.
Management of Aoxing Pharma intends to submit both plans of compliance required by NYSE MKT on the stated schedule.
Comments & Business Outlook
Fourth Quarter 2013 Financial Results:
Revenue for the fourth quarter was 3,025,175 a 13% increase over last years quarter of 2,672,392.
Basic and diluted loss per common share was (0.22) vs. last years fourth quarter of (0.28).
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 has enabled us to improve our balance sheet."
Comments & Business Outlook
JERSEY CITY, N.J. , May 15, 2013 /PRNewswire / -- 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 three and nine month periods ended March 31, 2013. Complete financial results can be found in the Quarterly Report on Form 10-Q filed by Aoxing Pharma on May 15, 2013.
Financial Results:
Revenues for the three and nine months ended March 31, 2013 were $1,885,133 and $7,804,664, respectively, representing a 4% and a 43% increase over the revenues realized in the comparable periods of fiscal year 2012. 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 91% of sales during the quarter ended March 31, 2013.
Primarily as a result of these strategic expenses, Aoxing Pharma recorded losses from operations of $2,300,366 and $4,565,272for the three and nine month periods ended March 31, 2013, compared with losses from operations of $436,953 and $1,083,770during the same periods a year earlier. Net losses for the three months ended March 31, 2013 were $2,729,350, and $6,313,526 for the nine months ended March 31, 2013.
Zhenjiang Yue ,
Comments & Business Outlook
JERSEY CITY, N.J. , Feb. 15, 2013 /PRNewswire / -- 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 three and six month periods ended December 31, 2012. Complete financial results can be found in the Quarterly Report on Form 10-Q filed by Aoxing Pharma on February 14, 2013.
Financial Results:
Revenues for the three and six months ended December 31, 2012 were $3,314,768 and $5,919,531, respectively, representing a 56% and a 62% increase over the revenues realized in the comparable periods of fiscal year 2012. In both periods the increase in revenues led to a 60% increase in gross profit. 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 December 31, 2012.
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 second quarter of fiscal 2013 by two categories of targeted investment:
Research and development ("R&D") expenses were $1,090,104 during the three months ended December 31, 2012 and$1,219,659 during the six month period then ended, in both cases representing a several fold increase over R&D expense in fiscal 2012.
Selling expenses in the amount of $1,706,202 incurred during the three months ended December 31, 2012 and $2,314,873during the six months then ended were, in both cases, several fold higher than the selling expenses incurred during fiscal 2012. The increase in selling expenses was attributable to the addition of 90 employees to the sales staff, increases in travel expenses, and the expenses of an expanded advertising and marketing campaign. Recently, Aoxing Pharma signed advertising contracts totaling approximately $3.66 million with four different television stations, covering the period from January 2013 toDecember 2013.
Primarily as a result of these strategic expenses, Aoxing Pharma recorded losses from operations of $2,352,385 and $2,264,906 for the three and six month periods ended December 31, 2012, compared with losses from operations of $150,860 and $646,817 during the same periods a year earlier. Net losses for the three months ended December 31, 2012 were $3,135,661, and $3,584,176 for the six months ended December 31, 2012.
On December 31, 2012, Aoxing Pharma had $2.7 million in cash on hand and a working capital deficit of $1,409,215, which represented a significant improvement over its working capital deficit of $9,112,842 at June 30, 2012. The improvement occurred because Aoxing Pharma entered into a refinancing agreement with Beijing International Trust Co., Ltd., and replaced short-term loans of approximately $7.1 million with a two-year term loan of approximately $10.2 million.
Zhenjiang Yue ,
Comments & Business Outlook
JERSEY CITY, N.J., Jan. 28, 2013 /PRNewswire / -- 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 that its Chinese subsidiary has received from the State Food and Drug Administration of China ("SFDA") a license to produce the active pharmaceutical ingredient ("API") in Pholcodine. The company has commenced preparation for the government's Good Manufacturing Practices (GMP) inspection , which is the last regulatory hurdle before the company can take the product to market in China.
Mrs. Guirong Zhou , Vice President for R&D, commented: "Our receipt of this license is evidence of the quality of our research and development team. We currently have a number of other products that have completed clinical trials and are in the process of applying for the SFDA production license. Our success in obtaining a production license for the Pholcodine API bodes well for success in our future applications."
Investor Alert
On August 11, 2012, the Chief Executive Officer and Chief Financial Officer of the Registrant, pursuant to authority from the Board of Directors, concluded that the following financial statements should no longer be relied upon:
A
The authorized officers of the Company have discussed the matters disclosed in this filing with Paritz & Company, P.A., the independent registered public accounting firm that opined on the Company’s financial statements for the year ended June 30, 2011 and with BDO China Dahua CPA Co., Ltd., the independent registered public accounting firm engaged to opine on the Company’s financial statements for the year ended June 30, 2012.
CFO Trail
On July 1, 2012 Bob Yunjun Ai
resigned from his position as the Registrant’s Chief Financial Officer. On July 3, 2012, the Board of Directors for Aoxing Pharmaceutical Company
appointed Guoan Zhang to serve as
Interim Chief Financial Officer. Mr. Zhang has served as the Company’s Senior Vice President of Finance since June 2010. From November 1, 2010 through February 1, 2011, Guoan Zhang also served as interim Chief Financial Officer of the Company.
Comments & Business Outlook
Third Quarter 2012 Results
Sales for the quarter ended March 31, 2012 were $1,807,284, representing an 11% increase over the sales of $1,628,627 realized during the third quar ter of the last fiscal year.
For the quarter ended March 31, 2012, gross margin was 55.9%, significantly higher than the gross margin of 50.4% realized during the same period a year earlier.
During the quarter ended March 31, 2012, the Company recorded a full valuation allowance for its deferred tax asset balance related to China. The deferred tax assets are substantially related to loss carry forwards for the past 5 years under Chinese tax law. At the end of 2011, the local Food and Drug Administration implemented a Chinese medical reform program for certain essential medicines, which limits unit price. Over 50,000 state owned primary-level medical and health care institutions are using this basic drug program, and the selling price of the affected drugs decreased by 30%. In addition, on April 15, 2012, a famous Chinese TV program 'Weekly Quality Report' disclosed that certain pharmaceutical enterprises purchased capsule medication containing excessive amount of chromium, which is hazardous to human health. Immediately the State Food and Drug Administration ("SFDA") began a nation-wide drug safety investigation. This resulted in the SFDA deferring all new drug approvals. The negative impact of these events on the selling prices of our current products and the expected delays in approval of our two new medicines caused the Company to reassess the forecasted future taxable income that is the basis for recording the deferred tax asset. Because of that reassessment, the Company provided a full valuation allowance of $2,815,771 for the deferred tax assets from China as of March 31, 2012, which increased the net loss for the three and nine month periods ending March 31, 2012 by that amount. Therefore, the after-tax net loss attributable to the shareholders was $3,204,384 for the three months ended March 31, 2012 and $4,309,388 for the nine months ended March 31, 2012.
Recent Highlights and Updates
In the three months ended March 31, 2012, the Company's subsidiary in China, Hebei Aoxing, received three local government subsidies totaling RMB 2,230,000 (approximately $351,185). In the same period in 2011, there was no such income. These government subsidies have no restrictions and are for operating activities. Last month the Company completed its submission of the New Drug Application (NDA) of Tongjingshule (TJSL) for the indication of Primary Dysmenorrha ("PD"), or menstrual pain, in adult women. TJSL is a capsule form of selected herbal medicine. The market for healthcare products to address menstrual pain is estimated at $3 billion per year in China.
Zhenjiang Yue, our Chairman and CEO, commented, "The Chinese pharmaceutical market remained challenging during the quarter. I am pleased with Aoxing's operating results highlighted by continued growth in product sales and reduction of operating expenses."
Comments & Business Outlook
Revenues for the second quarter ended December 31, 2011 were $2,124,333, representing a 9.5% increase over the revenues of $1,940,539 realized during second quarter of the last fiscal year. In the recent quarter, foreign currency translation added 3.1% to sales growth. Sales of the Company's main product, Zhongtongan, increased significantly from the same period in 2010, mainly due to an increase in the number of hospital customers.
For the six months ended December 31, 2011, revenues were $3,654,401, a 0.7% decrease from revenues of $3,681,212 realized during the same period in 2010. Sales of Zhongtongan still increased modestly from the same period in 2010, but the increase was more than offset by the decline in sales of other products. Since the beginning of 2011, the Company has reduced promotional efforts on certain lower margin, non-proprietary products.
For the quarter ended December 31, 2011, gross margin was 60.3%, essentially unchanged from the gross margin of 60.0% realized during the same period a year earlier. For the six months ended December 31, 2011, gross margin was 58.8%, 2.3% higher than the gross margin of 56.5% for the same period a year earlier. Recent positive factors for gross margin include decreased sales of low margin products and an overall enhancement of manufacturing efficiency. Negative pressures mainly came from higher raw material costs.
General and administrative expenses were $764,568 during the quarter ended December 31, 2011, 49.4% lower than $1,510,140 incurred in the same period a year earlier. For the six months ended December 31, 2011, general and administrative expenses were $1,510,811, 37.5% lower than $2,419,196 incurred during the six months a year earlier. The main reason for the decrease was bad debt expense. Company's effort to reduce costs was another importance factor. Bad debt expenses of $457,352 were recorded for the three months ended December 31, 2010, but none for the same period a year later.
Recent Highlights and Updates
On December 5, 2011, the Company received a term loan of $3,124,902 from Shijiazhuang Construction Investment Group, disbursed through China Construction Bank. The note matures in one year and carries an annual interest rate of 15%. The Company has almost completed the analysis of the Phase III clinical trial of Tongjingshule (TJSL) and has been preparing the materials to file an NDA for the indication of Primary Dysmenorrha ("PD"), or menstrual pain, in adult women. The company intends to submit the application in the next few weeks. The Phase III trial was conducted under the protocol approved by the China SFDA. TJSL is a capsule form of selected herbal medicine. The market for healthcare products to address menstrual pain is estimated at $3 billion per year in China.
Zhenjiang Yue , our Chairman and CEO, commented, "The year 2011 was a challenging one for many pharmaceutical companies in China. I am pleased with our operating results in the latest quarter. Our overall sales increased despite reduced promotion on certain unprofitable products. We look forward to continued success in the years ahead."
Deal Flow
On December 5, 2011 agreement with Shijiazhuang Construction Investment Group Co. Ltd., a local government controlled investment firm (the “Lender”), and China Construction Bank (“CCB”). Under the terms of the financing agreement (the “Agreement”), the Lender directed CCB to provide to the Company a loan in the amount of RMB 20 million (approximately USD$3.2 million) for general working capital purposes. The 12-month loan carries an annual interest rate of 15%. In addition, the Company executed a certain pledge agreement (the “Pledge”) with the Lender pursuant to which the Company pledged certain approval, registered trademark and renewal certificates relating to Aoxing’s Zhong Tong An capsule, to secure its payment obligations under the Agreement. Parties to the Agreement and the Pledge made representations and warranties to the other customary in documents of this nature.
Liquidity Requirements
On June 30, 2011, we had cash of $2.77 million in our bank accounts. In April 2011, we obtained GMP certification for tincture and pill formulation facilities and have resumed production for some products that we were not able to manufacture before. For our next fiscal year, we anticipate our cash flow from operations to improve, due to more products available for sale. Presently, the Company does not anticipate large capital expenditure projects in the next 12 months. As a result, the Company will be able to operate at much lower cash burn rates, if needed, without major impact on its operations. The
Company does anticipate that its current cash position will be insufficient to support the Company's operations at current capacity for the next 12 month period and, therefore, will need to seek additional financing of its operations. The Company may also want to seek financing to fund expansion of our operations, extend our reach to broader markets, or to acquire additional entities. We may rely on bank borrowing as well as capital raises. We
are actively exploring various proposals and alternatives in order to secure sources of financing and improve our financial position. We may raise such additional capital through the issuance of our equity securities, which may result in significant dilution to our current investors. Other options considered include issuance of convertible debt, a new bridge loan, and arrangement to out-license intellectual property. We are also exploring potential strategic partnerships, which could provide a capital infusion to the Company.
Analyst Reports
Rodman and Renshaw on AXN 7/24/2011
Termination of Coverage
Effective immediately, we are terminating coverage on Aoxing Pharmaceutical Company. (AXN) to better allocate resources within our coverage universe. Our last rating on Aoxing Pharmaceutical was Market Outperform/Speculative Risk with a Target Price of $4.00. Investors should not rely on our previously published financial projections.
INVESTMENT THESIS
China Aoxing is a Chinese pharmaceutical company targeting the highly regulated Chinese pain and addiction therapy markets. Currently the company is developing and marketing a suite of Chinese Traditional Medicines (TCM) focusing on pain management. The portfolio was obtained through an acquisition in April 2008. The company recorded FY10 TCM sales of ~$6MM with a gross margin of 62%. We estimate TCM sales of $7MM, $14MM and $29MM in FY11, FY12 and FY13, respectively.
While TCM sales provide a stable revenue base for the company, we believe that the true value of China Aoxing lies in its emphasis on narcotic drugs for pain management. According to Chinese regulatory guidelines, a company wishing to participate in the narcotics market must obtain a license or permission for each process, including buying related ingredients, conducting R&D and clinical trials, selling active pharmaceutical ingredients (APIs) and finished products. The Chinese SFDA generally limits narcotics R&D licensed to 2-3 parties, and API production permits to 1-2 qualified applicants. China Aoxing owns and operates the largest and most modern narcotics R&D and manufacturing facilities in China, and the company obtained the necessary operating licenses to develop and commercialize narcotic drugs as well as to import the necessary API from abroad. We believe that the company’s infrastructure and regulatory licenses provide a unique opportunity to capture a significant share of the pain therapeutics market in China.
The company’s pipeline includes novel and established western narcotic drugs, such as codeine, oxycodone, tilidine. China Aoxing is also developing buprenorphine for addiction treatment. We would like to highlight that buprenorphine generates approximately $900MM in sales worldwide, and last year sales grew by 50%. Furthermore, the recent partnership with QRxPharma enables China Aoxing to develop and market MoxDuo series in China. Duo-Opioid platform technology is a combination of oxycodone and morphine that has shown excellent 12-hour pain control and low side effects in large Phase 3 trials.
Analyst Reports
Rodman and Renshaw on AXN 6/27/2011
Holders Convert Notes at 92% Premium to Market
Key Points
Six note holders, including Mr. Zhenjiang Yue, the CEO of Aoxing, reached an agreement to convert outstanding notes and accrued interest totaling ~$6.6MM into Aoxing’s common shares at $2.7, representing a 92% premium to the closing price on June 24, 2011.
Following the closing of this transaction, Aoxing’s debt obligation will have been practically resolved, with ~$3.3MM remaining in long-term debt.
We reiterate our Market Outperform rating with a 12-month target price of $4.
Note Holders Confident in Long Term Growth
This morning, Aoxing announced an agreement with six note holders, including Mr. Zhenjiang Yue, the CEO of Aoxing, to convert outstanding notes and accrued interest totaling ~$6.6MM into 2.4MM common shares at a price of $2.7, representing a 92% premium to the closing price of $1.4 on June 24, 2011. All notes had an annual interest rate of 10%, with one note due on March 26, 2012 and the others due on April 28, 2014. We believe this transaction reflects strong confidence in the company.
Current Debt Structure
After the note conversion, Aoxing will have $3.3MM as opposed to $8.1MM in long-term debt. The current portion of the long-term debt decreased from $3.1MM to $2.2MM. Accrued expenses and taxes payables, which include accrued interest, decreased from $3.0MM to $2.1MM. Of note, the company has access to an $8.4MM in short term bank loan, which is renewable annually.
Narcotic Pipeline Provides Large Upside
Axoing has stable revenue base generated from TCM sales, however, we believe the true value of Aoxing lies in its emphasis on narcotic drugs for pain management. The company has formed a product pipeline through strategic alliances with strong international players to develop and commercialize APIs and finished products in China, including established western drugs such as oxycodone, codeine phosphate, as well as drugs under the late stage development in the US such as MoxDuo series.
Valuation
We derive our valuation for Aoxing based on revenue multiple comparisons. We estimate revenue growth from $6MM in FY10 to $125MM in six years. We observe that companies with similar barriers to entry and growth opportunities are trading at approximately a 3.5X revenue multiple. By applying a 3.5X revenue multiple to our FY16 revenue estimates and discounting at an annual discount rate of 18%, we arrive at our 12-month target price of $4/share for Aoxing.Notice Regarding Privacy and Confidentiality:
Notable Share Transactions
JERSEY CITY, N.J., June 27, 2011 /PRNewswire / -- Aoxing Pharmaceutical Company, Inc. (NYSE Amex: AXN) ("Aoxing Pharma"), a specialty pharmaceutical company focusing on research, development, manufacturing and distribution of narcotic and pain-management products, announced that the Company and six note holders, including Chairman Mr. Zhenjiang Yue, have reached an agreement to convert certain outstanding notes and accrued interest thereon totaling 42,449,722.63 RMB(approximately USD$6,567,199) into 2,432,296 shares of the Company's common stock at $2.70 per share. On June 24, 2011, the closing price for the Company's securities as reported on the NYSE Amex was $1.40 per share.
The foreign currency exchange rate was based on the rate of 6.4639 RMB/USD, the middle price of foreign currency exchange rate published by the Bank of China on June 22, 2011. All notes had annual interest rate of 10%. One note was due on March 26, 2012, and the others on April 28, 2014. Upon closing of the debt conversion, the Company's obligations under the notes will be satisfied in full.
Mr. Zhenjiang Yue, Chairman and CEO of Aoxing Pharma, commented, "I am very confident in the future of Aoxing Pharma. The terms of this conversion transaction were reviewed and approved unanimously by our Board of Directors. I am delighted that these note holders were willing to convert the notes into common stock, along with me, and become long term Aoxing Pharma shareholders."
Liquidity Requirements
We continue to explore various alternatives in order to
secure sources of financing and improve our financial position. Among the possibilities being considered are new credit facilities, a new equity raise, arrangements to license intellectual property, and a sale of selected property rights. At the present time we have no commitment from any source for additional funds.
Analyst Reports
Rodman and Renshaw on AXN 2/22/2011
Licensor Finished Third Phase 3 Trial, Ready for Pre-NDA Meeting
Key Points:
Aoxing licensing partner, QRxPharma (ASX: QRX, Not Rated), finished a 142-patient pivotal study (Study 009) for MoxDuo® IR with statistically significant results With the completion of all three pivotal Phase 3 trials, QRxPharma scheduled a pre-NDA meeting with the FDA on March 22, 2011 The product candidate is a key addition to Aoxing’s differentiated burgeoning narcotics pipeline We reiterate our Market Outperform rating with a 12-month target price of $4/share on Aoxing
MoxDuo® IR Provided Superior Pain Reduction Following Total Knee Replacement (TKR) Surgery
MoxDuo® IR is an immediate-release form of morphine and oxycodone combination in a ratio of 3:2. To evaluate the efficacy and safety of MoxDuo® IR, the Study 009 – a double-blind, two-arm 142-patient study was designed to compare a flexible dose (6mg/4mg to 24mg/16mg) versus a fixed low dose (3mg/2mg) after an initial 6mg/4mg loading dose of MoxDuo® IR. Following TKR surgery, all patients received morphine IV for up to 24 hours. Patients were then randomized into one of two MoxDuo treatment regimens, with doses given once every 4-6 hours for up to 48 hours. Using the primary efficacy endpoint SPID48 (the sum of the changes in pain intensity from baseline over the 48 hour treatment period), data analysis indicated that patients in the flexible dose treatment group (12mg/8mg as the most common dose) achieved statistically superior pain reduction (p<0.02) compared to those receiving the lower dose. Side effects were similar to those observed in earlier MoxDuo studies.
Two Previous Pivotal Phase 3 Studies Supported MoxDuo® IR as A Superior Pain Therapy
QRxPharma concluded its initial 256-patient Phase 3 study (Study 007) in May 2008. The study was designed to test the efficacy and safety of MoxDuo® IR following bunionectomy surgery in four different dosage regiments in comparison to placebo. The primary efficacy analysis of SPID48 demonstrated a strong dose-response effect (p<0.001) in patients receiving MoxDuo® IR and a low rate of patient withdrawal. The study established a combination of 12mg morphine / 8mg oxycodone (12mg/8mg) as a preferred dose for optimal efficacy and tolerability and confirmed MoxDuo’s synergistic effects on pain relief with reduced dose and side effects.
QRxPharma completed its second 522-patient Phase 3 study (Study 008) in April 2010. The study was designed as a double-blind, randomized comparison following bunionectomy surgery among three fixed-dose treatments: MoxDuo® IR 12mg/8mg, and the individual components of morphine 12mg and oxycodone 8mg. As a primary endpoint, MoxDuo® IR demonstrated greater analgesic effects over the first 48 hours following surgery (SPID48) with statistically significant difference in comparison to the individual components of morphine 12mg (p=0.01) and oxycodone 8mg (p=0.01). As a secondary endpoint, the difference in pain intensity scores during the first 24 hours of treatment (SPID24), MoxDuo® IR also demonstrated significantly superior pain relief in comparison to the individual components. The enhanced tolerability of MoxDuo® IR was further validated in the Study 008.
Additional Phase 3 Trial Designed for the European Market
QRxPharma recently initiated a 375-patient Phase 3 trial (Study 022) in January 2011 to compare the tolerability and safety profile of MoxDuo® IR to equi-analgesic doses of individual components. Study 022 is a randomized, double-blind and fixed-dose comparison of MoxDuo® IR 12mg/8mg in comparison to 24mg morphine and 16mg oxycodone given once every 6 hours for up to 2 days. The dosing is expected to be completed in 2Q11. Results of this trial will form part of a Marketing Authorization Application (MAA) filing in Europe scheduled in 2H11.
Pre-NDA Meeting Expected to Provide Guidance of NDA submission of MoxDuo® IR
The pre-NDA meeting with the FDA is scheduled for March 22, 2011, where QRxPharma and the FDA will review the adequacy of the clinical program for NDA submission. With the successful completion of the Studies 007, 008 and 009, QRxPharma is expected to file an NDA for MoxDuo® IR in 1H11. Additional data could further reinforce the company’s filing in Europe and the US from the recently initiated Study 022.
Valuation
We derive our valuation for Aoxing based on revenue multiple comparisons. We estimate revenue growth from $6MM in FY10 to $125MM in six years. We observe that companies with similar barriers to entry and growth opportunities are trading at approximately a 3.5X revenue multiple. By applying a 3.5X revenue multiple to our FY16 revenue estimates and discounting at an annual discount rate of 18%, we arrive at our 12-month target price of $4 / share for Aoxing. Notice Regarding Privacy and Confidentiality:
Analyst Reports
Rodman and Renshaw on AXN 01/21/2011
Solid Progress, API Joint Venture Obtained All Administrative Licenses
Key Points
Aoxing Pharmaceutical received the foreign investment authorization certificate for the API joint venture between Aoxing and Macfarlan Smith
The company also received the business license of the naloxone API for its JV
Previously, Aoxing obtained the manufacturing license of the naloxone API from the SFDA
Holding all required administrative licenses, Aoxing has one last important step before final commercialization – the GMP certificate for the API
We reiterate our Market Outperform rating with a 12-month target price of $4/share
One Last Step Remaining Before Final Commercialization of Naloxone API
Since the announcement of the Joint Venture with Macfarlan Smith (subsidiary of Johnson Matthey, LON: JMAT, Not Rated) in April 2010, Aoxing has made solid progress to obtain all required three licenses from various government offices. Aoxing has one last important step remaining before final commercialization of naloxone API – GMP certification from the SFDA. The SFDA requires three batches of qualified API sample production from the facility. Given additional administrative process time, we estimate the GMP approval for naloxone in 2H11. This is the first among the eight APIs initially scheduled to be manufactured under the joint venture. Commercialization of additional APIs only requires the manufacturing license for the same formulation.
API is the Key for Narcotic Industry in China
China has limited supply of narcotic drugs. It is mainly due to the limited supply of related narcotic APIs. A substantial numbers of the narcotic APIs, including oxycodone and tilidine, are imported to the country. The joint venture involves the development of initially eight and potentially over 30 narcotic API products for the Chinese market. Access to the potential 30 narcotic APIs could change the dynamic of Chinese narcotic industry and expand the market size, therefore providing large upside opportunity for Aoxing.
Valuation
We derive our valuation for Aoxing based on revenue multiple comparisons. We estimate revenue growth from less than $6MM in FY10 to over $150MM in six years. We observe that companies with similar barriers to entry and growth opportunities are trading at approximately a 3.5X revenue multiple. By applying a 3.5X revenue multiple to our FY16 revenue estimates and discounting at an annual discount rate of 18%, we arrive at our 12-month target price of $4/share for Aoxing.Notice Regarding Privacy and Confidentiality:
Comments & Business Outlook
Revenues for fiscal year 2010 totaled $6.12 million, compared to $8.94 million for fiscal year 2009.
The reduction of revenue occurred because the Company consolidated its manufacturing facilities in the summer of 2009, requiring re-certification or the facilities by the Chinese government. For a large part of the year the Company produced only a limited number of products for which it had obtained recertification. The primary contributor to revenue was Zhongtongan, a proprietary and flagship dental pain product, contributing 73% of total product sales.
Net loss for fiscal year 2010 was $0.84 million, or $0.02 per share, 69% reduction than a net loss of $2.70 million or $0.06 per share in fiscal year 2009.
Zhenjiang Yue, Aoxing Pharma's founder, CEO and Chairman, said, "We have entered 2011 with exciting advances in our narcotic and pain management product franchise. We now have a clear path forward to commercialize our own pipeline products, as well as new product opportunities under the international joint venture and product collaborations with our strategic partners, including Johnson Matthey, QRxPharma and Phoenix PharmaLabs, in broader acute, chronic-pain and drug addiction therapeutics. As we focus on these priorities, we continue to manage our financial performance effectively throughout the organization. We effectively worked through the recertification process and have successfully listed on the NYSE Amex, setting us up to continuously build our global business presence in narcotics and CNS related therapeutics in the coming fiscal year 2011."
