Aoxing Pharmaceuticals Co (OTC BB:CAXGD)

Aoxing Pharmaceutical Company, Inc. is furnishing a copy of the Company’s investor presentation at the Rodman & Renshaw Investor Conference held in Shanghai, PRC, on March 7, 2011.

On February 1, 2011, the Board of Directors for Aoxing Pharmaceutical Company appointed Bob Yunjun Ai to serve as Chief Financial Officer.  Information regarding Mr. Ai follows:

Bob Yunjun Ai brings to the Company education and employment experience in both biology and finance.  From 2001 until 2011 Mr. Ai was employed in the finance sector, specializing in healthcare investment.  Most recently, from 2007 to 2011 Mr. Ai was a Principal in Merlin Nexus, a private equity firm that invests in life sciences companies, where his responsibilities included analysis and evaluation of investment decisions.  From 2006 to 2007 Mr. Ai served as Vice President for Wall Street Access, a broker-dealer, where he was responsible for industry research.  From 2004 to 2005 Mr. Ai was employed as Senior Equity Analyst by Bennett Lawrence, an asset management firm.  From 2001 to 2004 Mr. Ai was employed as an Analyst by Merlin Biomed, also an asset management firm.  Prior to entering the finance sector, Mr. Ai was engaged for seven years as a research associate and post-doctoral research scholar at the University of Pennsylvania.  Mr. Ai was awarded an MBA by Penn State University in 2001 and a PhD in Molecular and Cell Biology by Penn State University in 1992.  He is 47 years old.

On November 1, 2010, Hui (David) Shao resigned from his position as Chief Financial Officer for Aoxing Pharmaceutical Company, Inc. On the same day, the Board of Directors appointed Guoan Zhang to serve as interim Chief Financial Officer.

Revenues for the year ended June 30, 2010 were $6,115,774. This represented a 32% decline from the revenues of $8,941,907 that we realized during the fiscal year ended June 30, 2009. The decrease in revenue occurred because we relocated and consolidated our manufacturing facilities in the summer of 2009. This necessitated GMP re-certification by the Chinese government for each of our products before we could re-commence production. For a large part of the year, therefore, we produced only the limited number of products for which we had obtained recertification. The primary revenue contributors were Zhongtongan, Shuanghuanlian capsules and Naloxone Hydrochloride injectable, representing 73%, 9% and 6% of the total sales for the year ended June 30, 2010. In addition we were selling other prescription and over-the-counter drugs approved by the China SFDA.

Established in 2002, CAXG was a private company until it went public via a reverse merger transaction in 2006.

The company was essentially in the research and development stage until its fiscal 2007 year, when it commenced marketing activities.

Industry Trends:

"China entered the “Single Convention on Narcotic Drugs, 1961” in 1985, which resulted in the gradual loosening of government policy toward the control of analgesic supplies. Before 2000, the average consumption of analgesics in China was less than 1% of the consumption in industrialized countries. There were only six varieties of analgesics available in production. By 2005, Chinese government had approved the production of 11 varieties of analgesics. In the near future, patients in China will find 30 varieties and over 80 specifications of different types of analgesics. Since 1993, the annual growth rate of analgesic sales in China has been, on average, 35%. If the drug consumption per capita in China reaches the level of industrialized countries, the market size will exceed $50 billion."

The company has rapidly started generating revenues from its product portfolio albeit still small in absolute numbers.

Despite the increases in revenues the company is still losing money and is facing some financial challenges:

"For the six months ended December 31, 2007, the Company generated net losses of $1,780,496. The Company’s current liabilities exceeded its current assets by $15,077,549. In addition, the Company is in default on $7,177,774 of loans from a bank."

"Our auditors have the opinion, based on these factors, that the uncertainties caused by these conditions raise substantial doubt about our ability to continue as a going concern."

The company is addressing these challenges:

"Hebei Aoxing expects to be able to service its debt to the Bank of China and its other debt obligations from refinancing and with cash flow from operations, assuming that it is successful in initiating production and sales of additional products during the next few months. This will free our cash reserves to be used to fund our growth. Our ability to achieve financial stability, however, will depend on the success of our marketing efforts, which cannot be predicted at this time. Therefore, we continue to actively seek investment capital, and expect to issue more equity securities for this purpose in the coming months."

"We continue to actively seek investment capital, and expect to issue more equity securities for this in the coming months"

"The Company is exploring various alternatives to improve their financial position and secure other sources of financing. Such possibilities include a new credit facility, new equity raise, new arrangements to license intellectual property and the sale of selected property rights."

( Source 2008 December 10-QSB )

GEO Note:

The company just entered into an agreement to potentially acquire a profitable firm with $9 million in revenues and 127 products. No details were given on the magnitude of profits so we are unsure of the financial effect on caxg. 10 million shares will be issued for this transaction.

(Press: March 12, 2008)

GEO conclusion:

Although the market opportunity seems attractive, the GEO Team feels it is a little too early for an investment in CAXG. We would prefer to if see the firm resolves some of its financial obstacles. We are also concerned of the potential dilutive effects of their financing initiatives.

I