Lotus Pharmaceuticals Announces Third Quarter Fiscal 2011 Financial Results

    BEIJING, Nov. 11, 2011 /PRNewswire-Asia-FirstCall/ -- Lotus Pharmaceuticals, Inc. (OTC Bulletin Board:LTUS.ob) ("Lotus" or the "Company"), a profitable developer, manufacturer and seller of medicine and drugs in the People's Republic of China ("PRC"), today announced its financial results for the quarter ended September 30, 2011. Summary financial data is provided below:

Third Quarter Financial Highlights

Revenues for the third quarter of fiscal year 2011 increased by 4.0% year-over-year to $19.0 million , up from $18.3 million in the third quarter of 2010

• Wholesale revenue was $15.3 million , or 80.2% of total revenues

• Retail revenues were $3.8 million , or 19.8% of total revenues

Gross margin for the third quarter was 17.4% based on gross profit of $3.3 million , compared with a 56.7% margin in the same period last year

Net income for the third quarter decreased 81.3% to $1.3 million , compared with $6.7 million for the third quarter of 2010

Earnings per diluted share were $0.04 for the quarter, compared with diluted EPS of $0.25 achieved in the same period a year ago

Chairman and Chief Executive Officer Mr. Zhongyi Liu stated, "As we focused our efforts on the construction of our headquarter facility in 2011, there were some major changes on the competitive landscape for our business, which put significant pressure on our gross margins. Retail sales continue to deliver solid results with 27.4% growth in revenue versus the same period in 2010, driven primarily by our Over-the-Counter division's continued growth. Construction of our Beijing facility continues to progress and the facility is near completion. We anticipate additional capacity for growth and significant efficiency improvements once we move into the new building by the end of the year."

Mr. Liu continued, "Lotus has a well-established nationwide sales and distribution network, and strong product development capabilities. With the completion of our new headquarters, we believe we are well positioned with respect to the ongoing consolidation of the Chinese pharmaceutical industry."

Third Quarter Results of Operations

Revenues

Revenues for the three months ended September 30, 2011 were $19.0 million as compared to $18.3 million for the three months ended September 30, 2010 . The increase of $0.7 million , or 4.0%, was primarily due to the continued expansion of our OTC sales division. Wholesale revenue stayed roughly flat year-over-year at $15.3 million, or 80.2% of total revenues. Retail revenues increased 27.4% year-over-year to $3.8 million , or 19.8% of total revenues.

Gross Profit

Gross profit for the three months ended September 30, 2011 were $3.3 million as compared to $10.4 million for the three months ended September 30, 2010 . Costs of sales for the three-month period were $15.7 million as compared to $7.9 million for the same period a year ago. The Company's gross margin was 17.4% and 56.7%, for the three months ended September 30, 2011 and 2010, respectively.

Income from Operations

Operating income for the three months ended September 30, 2011 amounted to $1.3 million as compared to $6.8 million for the three months ended September 30, 2010 . Operating expenses for the three-month period totaled $2.0 million as compared to $3.6 million for the same period in 2010. The decrease in operating expenses was primarily due to the decrease in selling expenses and G&A expenses, partially offsetting by the increase in R&D expenses.

Net Income

Net income for the three months ended September 30, 2011 was $1.3 million as compared to $6.7 million for the three months ended September 30, 2010 , due to the reasons set forth above. Earnings per diluted share were $0.04 for the quarter, compared with diluted EPS of $0.25 for the same period a year ago.

Liquidity and Capital Resources

As of September 30, 2011 , the Company's current assets were $7.6 million and current liabilities were $14.2 million . Cash and cash equivalents totaled $0.2 million as of September 30, 2011 . The Company's shareholders' equity at September 30, 2011 was $99.5 million . The Company generated $10.6 million in cash from operating activities for the nine months ended September 30, 2011 , compared to $19.0 million for the same period in 2010. The Company used $11.8 million in net cash for investing activities for the nine months ended September 30, 2011 , compared to $22.1 million for the same period in 2010.

Recent Business Highlights

• The Company continues to make progress in the construction of its headquarters building in Chaoyang District, Beijing , and the project is now near completion. The company expects to finish the construction and move into the facility by the end of the year. This state-of-the-art building will host the Company's GMP manufacturing facility, a storage warehouse, an R&D center, a sales and marketing center, and administrative offices, as well as employee apartments.

Business Outlook for 2011

2011 is a transitional year for Lotus Pharmaceuticals, as the Company focuses its efforts on completing its new headquarters and shifting its focus to the wholesale business in Beijing and the surrounding areas. After the completion of the headquarters, the Company expects the growth of revenue and profitability will resume, driven primarily by the wholesale business in Beijing.

Conference Call and Webcast

Management will host a conference call to discuss these financial results on Monday, November 14, 2011 at 10:00 a.m. EST ( 7:00 a.m. PST ).

To participate in the call, please dial (877) 941-4774, or (480) 629-9760 for international calls, approximately 10 minutes prior to the scheduled start time. A replay of the call will be available for two weeks from 1:00 p.m. EST on November 14, 2011 , until 11:59 p.m. EST on November 28, 2011 . The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 4487388.

About Lotus Pharmaceuticals, Inc. (www.lotuspharma.com)

    Lotus Pharmaceuticals, Inc. is a growing developer and producer of drugs and a licensed national seller of pharmaceutical items in the PRC. Lotus operates its business through its two controlled entities: Liang Fang Pharmaceutical, Ltd. and En Ze Jia Shi Pharmaceutical, Ltd.  Lotus’ current drug development is focused on the treatment of cerebro-cardiovascular disease, asthma, and diabetes.  Liang Fang sells drugs directly and indirectly through its national sales channels to hospitals, clinics and drugs stores in 30 provinces of the PRC.

Lotus Pharmaceuticals, Inc.

Xing Shen, Ph.D., VP of Corporate Development

Tel: (415) 690-7688

shen@lotuspharma.com