Kun Run Biotechnology Reports Fourth Quarter and Fiscal Year 2009 Financial Results

BEIJING, March 30 /PRNewswire-Asia-FirstCall/ -- Kun Run Biotechnology, Inc. (the "Company" or "Kun Run") (OTC Bulletin Board: KURU), a leading bio-pharmaceutical company in China that focuses on manufacturing and sales of peptides and peptide-based drugs, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.

    Fourth Quarter 2009 Financial Highlights
    -- Revenues decreased 19% from the fourth quarter of 2008 to quarterly
       revenue of $3.1 million
    -- Gross profit was $2.1 million, compared to $2.7 million in the fourth
       quarter of 2008
    -- Operating income was $1.6 million, an increase of 116% from $0.7
       million in the fourth quarter of 2008
    -- Net income decreased 45%, compared to $2.5 million in the fourth
       quarter of 2008, or $0.06 per basic and fully diluted share.

    Fiscal Year 2009 Financial Highlights
    -- Revenues increased 14% from 2008 to annual revenue of $13.2 million
    -- Gross profit was $9.3 million, compared to $8.2 million in 2008
    -- Operating income was $7.6 million, an increase of 60% from $4.8 million
       in 2008
    -- Net income increased 9%, compared to $6.0 million in 2008, or $0.26 per
       basic and fully diluted share.

Fourth Quarter 2009 Financial Results

Net revenue was $3.1 million for the quarter ended December 31, 2009, down 19% from $3.8 million in the fourth quarter of 2008. The special demand for our TP-5 products during the 2008 Beijing Olympic Games are included in the fourth quarter 2008 results. For the three months ended December 31, 2009, the sales of TP-5 products were $1.0 million, accounting for 34% of total sales compared to $2.2 million, or 56% in the same period of 2008. Thymosin Alpha 1 for injection continued as our best selling product, contributing $1.3 million in revenue (42% of total sales) for the three months ended December 31, 2009, representing a 26% increase from the same period of 2008. Meanwhile, DDAVP generated $453,932 or 15% of total sales for the three months ended December 31, 2009, an increase of 28% from $355,829 for the same period in 2008.

Gross profit for the quarter was $2.1 million, a 21% decrease from $2.7 million in the fourth quarter of 2008. Gross margin was 68% in the fourth quarter of 2009.

Operating expenses in the fourth quarter of 2009 were $0.5 million, down 75% from $1.9 million in the fourth quarter of 2009. This decrease was primarily due to fourth quarter 2008 included a Make Good Provision expense not incurred in 2009. The Make Good Provision is related to an agreement that was entered into to secure the Company's commitment to achieve 2008 Guaranteed After-Tax Net Income.

Operating income was $1.6 million, or 52% of revenue, an increase of 116% from $0.7 million, or 20% of revenue, in the fourth quarter of 2008.

Net income was $1.4 million, or $0.06 per share (basic and diluted), compared to a net income of $2.5 million, or $0.10 per share (basic and diluted), in the fourth quarter of 2008.

Fiscal Year Ended December 31, 2009 Results

Net revenue was $13.2 million in the year ended December 31, 2009, up 14% from $11.6 million in 2008. This increase was mainly attributable to the increase in sales of our Thymosin Alpha 1 for injection and DDAVP products. For the year ended December 31, 2009, the sales of TP-5 products were $5.7 million, accounting for 43% of total sales, compared to $6.2 million, or 53% in 2008. Thymosin Alpha 1 for injection, our best selling product, contributed $4.8 million in revenue (36% of total sales) for the year ended December 31, 2009, representing a 48% increase from the same period of 2008. Additionally, DDAVP generated $1.6 million, or 13% of total sales for 2009, an increase of 45% from $1.1 million for the same period in 2008.

Gross profit for the year was $9.3 million, a 13% increase from $8.2 million in 2008. Gross profit margin was 70%, which was slightly lower compared to the same period in 2008.

Operating income was $7.6 million, or 58% of revenue, an increase of 60% from $4.8 million, or 41% of revenue, in 2008. Net income was $6.5 million or $0.26 per basic and fully diluted share, up 9% from $6.0 million, or $0.24 per fully diluted share in 2008.

Financial Condition

As of December 31, 2009, the Company had $0.8 million in cash and cash equivalents. Kun Run generated $7.0 million in cash flow from operations in 2009, compared to $5.8 in 2008. Shareholders' equity stood at $25.1 million, with a debt to equity ratio of 0.46 at the end of December 31, 2009.

Mr. Ye Xiaoqun, Chief Executive Officer of Kun Run Biotechnology stated, "we are pleased with our 2009 results, and with the coming launch of new drugs are excited about the opportunity for Kun Run in 2010.

                            Kun Run Biotechnology, Inc.
          Consolidated Statements of Income and Comprehensive Income
                              (Stated in US Dollars)

                                                  Year ended December 31,
                                                    2009            2008

    Sales revenue                               $13,235,756     $11,622,503

    Cost of sales                                 3,980,328       3,410,891

    Gross profit                                  9,255,428       8,211,612

    Operating expenses
        Administrative expenses                     907,804       1,184,864
        Research and developments expenses          336,730         271,476
        Selling expenses                            387,536         687,949
        Unusual charge - make good provision             --       1,300,000

                                                  1,632,070       3,444,289

    Income from operations                        7,623,358       4,767,323
        Interest income                             178,830          50,438
        Other income                                353,851         222,927
        Government subsidy income                   129,217          31,003
        (Loss)/gain on disposal of property,
         plant and equipment                           (183)      2,416,110
        Net finance costs                          (602,796)       (545,995)

    Income before income taxes and
     noncontrolling interest                      7,682,277       6,941,806
    Income taxes                                 (1,130,854)       (907,439)

    Net income before noncontrolling interest     6,551,423       6,034,367
    Net income attributable to noncontrolling       (57,664)        (64,658)
     interest

    Net income attributable to Kun Run
      Biotechnology, Inc. common stockholders    $6,493,759      $5,969,709

    Net income before noncontrolling interests   $6,551,423      $6,034,367
    Other comprehensive income
      Foreign currency translation adjustments        6,210         860,075

    Comprehensive income                          6,557,633       6,894,442
    Comprehensive income attributable to
     noncontrolling interest                        (57,701)        (65,780)

    Comprehensive income attributable to
     Kun Run Biotechnology, Inc. common
     stockholders                                $6,499,932      $6,828,662

    Earnings per share attributable to
     Kun Run Biotechnology, Inc. common
     stockholders: basic and diluted                  $0.26           $0.24

    Weighted average number of shares
      Outstanding: basic and diluted             25,000,000      24,467,808



                              Kun Run Biotechnology, Inc.
                              Consolidated Balance Sheets
                                 (Stated in US Dollars)

                                                        As of December 31,
                                                       2009          2008
    ASSETS
        Current assets
            Cash and cash equivalents                $810,809      $433,599
            Trade receivables, net                  4,284,515     4,732,750
            Bills receivable                          360,360       117,360
            Other receivables, prepayments and
             deposits                               2,338,971       985,683
            Receivables from disposal of properties        --     2,061,793
            Inventories                             2,248,420       689,415
            Amounts due from related companies      4,656,801     5,595,307
            Deferred taxes                                 --         8,362

        Total current assets                       14,699,876    14,624,269
        Intangible assets                              86,551       111,004
        Property, plant and equipment, net         10,098,529     9,685,374
        Land use rights                             3,704,660     3,775,540
        Deposit for acquisition of property,
         plant and equipment                          418,594       445,691
        Deposit paid to a related company for
         acquisition of an intangible asset         7,921,800            --

    TOTAL ASSETS                                  $36,930,010   $28,641,878


                                                         As of December 31,
                                                         2009          2008
    LIABILITIES AND EQUITY

    LIABILITIES
        Current liabilities
            Trade payables                              $452,139      $966,937
            Other payables and accrued expenses        3,961,125     1,672,500
            Dividend payable to Zhonghe's
             former/existing noncontrolling
             stockholders                                  7,209         7,209
            Income tax payable                           815,435       655,019
            Amounts due to a related company                  --           936
            Secured borrowings                         6,051,375            --

        Total current liabilities                     11,287,283     3,302,601
        Deferred taxes                                    17,215         8,255
        Secured long-term borrowings                     330,075     6,528,150

    TOTAL LIABILITIES                                 11,634,573     9,839,006

    COMMITMENTS AND CONTINGENCIES

    STOCKHOLDERS' EQUITY
        Preferred stock: par value of $0.001 per
         share, authorized 10,000,000 shares in
         2009 and 2008; none issued and outstanding           --            --
        Common stock: par value $0.001 per share
            Authorized 100,000,000 shares in 2009
             and 2008; issued and outstanding
             25,000,000 shares in 2009 and 2008           25,000        25,000
            Additional paid-in capital                 8,903,965     8,969,033
            Statutory and other reserves               3,743,028     2,820,850
            Accumulated other comprehensive income     1,607,518     1,601,345
            Retained earnings                         10,789,080     5,217,499

    TOTAL KUN RUN BIOTECHNOLOGY, INC.
      STOCKHOLDERS' EQUITY                            25,068,591    18,633,727

    NONCONTROLLING INTEREST                              226,846       169,145

    TOTAL EQUITY                                      25,295,437    18,802,872

    TOTAL LIABILITIES AND EQUITY                     $36,930,010   $28,641,878

SOURCE Kun Run Biotechnology, Inc.