Tianyin Pharmaceuticals Co (NYSE AMEX:TPI)

This morning we coded Tianyin Pharmaceuticals (NYSE Amex:TPI) as a GeoSpecial. Our readers may be aware that we have been tracking the Company for some time. Our largest hang up had been with potential dilution from "in-the-money" warrants. Although the Company's fiscal 2010 net income June guidance of $11.3 million represents a 43.0% increase from the fiscal 2009 raw net income number of $7.9 million, the increase in shares poses some uncertainty regarding the near term EPS growth scenario. (Extra outstanding shares is dependent on share price and application of the treasury stock method). We are unsure of the final share count that will be used  for 2010 year end numbers. Tianyin reported $0.32 EPS for its 2009 fiscal year.

Having said that, this morning Tianyin issued fiscal 2011 net income guidance of $19.6 million which implies EPS of $0.56 ($0.50 fully taxed). Couple this with an overall positive outlook and the TPI story begins to gain strength:

• With approximately 39 products and a solid pipeline of 17 pharmaceutical products pending SFDA approval, Tianyin may be able to achieve consistent long term growth. It is important to note that the Company's product pipeline has been strong for some time and reflects the management team's vision.
• We are very impressed with the rapid pace of SFDA approvals TPI has achieved. The Company has received 12 new approvals over the past 12 months. This bodes well for quick pipeline revenue generation and market penetration of its product pipeline.
• The Company is aggressively targeting the macrolide antibiotics market where it sees significant opportunity.
• Tianyin has the financial means to consider acquisitions that may give upside to guidance. They have $15 million in cash, $12 million in cash flow and the potential for $25 million from warrants that are currently in the money.
• TPI has an extensive distribution channel with full province coverage, giving new products quick and broad market penetration.
• With recent fund raising proceeds, the Company increased its capacity approximately 300% for solid dosage forms and can support annual revenues in excess of $100 million.
• Bullish Management commentary:

"Management believes that our emphasis on further commercializing and broadening our product line coupled with the expansion of our production facility and capacity, enhanced sales and marketing efforts should continue to yield significant increases in revenue in 2010 and beyond. Additionally, we believe that our growth and overall market coverage could be further improved by certain strategic acquisitions or licensing opportunities. In addition, we believe the Pharmaceutical Industry could benefit from the expanded social reform which is part of the recently announced government stimulus plan.

Our forecasts do not include any potential future acquisitions or joint venture agreements. The company is currently evaluating several acquisition opportunities, including companies with complementary product portfolios, and those which would accelerate the macrolide antibiotic business growth strategy."

"It's important for our shareholders to understand the management's vision for building a successful pharmaceutical company through both organic growth and accretive acquisitions."

While short-term investors may still approach TPI with trepidation, astute long term investors may be begin to notice the opportunity, especially given the Company's overall strong fundamental story. The stock is selling at trailing P/E of 13 and forward P/E of 8.