WEIKANG BIO-WEIKANG BIO-TECHNOLGY GROUP CO., TECHNOLGY GROUP CO.,
INCINCInvestor Investor Presentation 2010Presentation 2010
OTCBB: WKBTOTCBB: WKBT
www.weikangbio.comwww.weikangbio.com
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In accordance with the 1995 Securities Litigation Reform Act of the "exemption"
meaning, this statement documents contain "forward-looking statements". This
statement related to understand and unknown risks, uncertainties and other
factors will cause the company’s statement not match by the results, in which
including sales and regional economic conditions and competitive conditions,
customer relation Changes, access to capital, the difficulty of promoting new
products, existing products market conditions, customers for the existing and new
product awareness and other factors. Relevantly, the company believed that the
results is reasonable in this forward-looking statements , but can not guarantee
that the forecast entirely correct. There is no duty that company to update the
forward-looking information contained in this statements.
Safe Harbor Statement
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It has two subsidiaries:Heilongjiang WeiKang
Chinese herbal-based health and nutritional supplements and therapeutics
Brand name "Rongrun" Founded in 2005210 employees
Guizhou TianFang Develops, manufactures and distributes
Chinese herbal extract products and GMP certified western drugs
300 employeesAcquired in 2008, founded in 1998
Weikang Bio-Technology Group is a leading developer, manufacturer and marketer of
Traditional Chinese Medicine (TCM)Western prescription and OTC pharmaceuticalsOther health and nutritional products
Weikang Bio-Technology Group is a leading developer, manufacturer and marketer of
Traditional Chinese Medicine (TCM)Western prescription and OTC pharmaceuticalsOther health and nutritional products
Company Overview
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$7.30
$15.64
$3.85
$5.45
2008 2009 3 months 2009 3 months 2010*
OTCBB: WKBT
Price (as of 6/3/2010) - $3.25
Shares outstanding - 27.4 M
Market capitalization - $88.9 M
TTM revenue - $51.3 million
TTM net income* - $17.2 million
TTM fully diluted EPS* - $0.66
Insider ownership 88%
Revenue (m)
Net Income (m)
$12.85
$47.48
$10.11$13.96
2008 2009 3 months 2009 3 months 2010
* Proforma – excluding non-cash expense of $912,000
41.5% y/y increase
38.1% y/y increase
270% y/y increase
115% y/y increase
Financial Snapshot
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Rapid revenue and net income growth
Expanding portfolio of high margin, original SFDA approved products
Strong R&D capability and investment ensure a strong pipeline - targeting launching 2-3 new products a year
GMP-certified manufacturing lines scalable up to $107 million in annual production
Acquisition strategy enhances growth opportunity
Managed by pharmaceutical industry experts
Attractive valuation
Investment Highlights
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China’s pharmaceutical market is currently the 5th largest in the world
Expected to grow to the 2nd largest by 2020 and the largest by 2050
Medical expenditure ranks the 3rd after food and education*
Government stimulus package expands New Rural Cooperative Medical System
Investing USD $124 billion (2009-2011) with earmarks to improve insurance coverage
Building 30,000 township hospitals and 700,000 village clinics with estimated annual increase in supply purchase of 42% from these over the next 5 years
Fragmented industry, dominated by local enterprises, creates opportunity for consolidation
Approximately 70% of the market supply is provided by small, local pharmaceutical companies**
*DOH Survey, 12/2/2004**Economy Watch
Attractive Industry Dynamics
Preventative Healthcare
Preventative medicine is the primary source of medical care for 700 million rural Chinese who cannot afford adequate healthcare*
Patients generally have to pay 50% - 60% of healthcare expense out-of-pocket
Out-of-pocket healthcare expenditures increased from 25% in 1990 to 58% in 2006**
Middle class consumers risk spending all of life savings on medical expenses
Private health insurance uncommon
Preventative care will remain important as universal coverage to be implemented in 2011 will only cover basic medical services
* factsanddetails.com, April 2010** China’s Ministry of Health
The best doctor treats the problem before the problem becomes the disease ~
Old Chinese medical proverb
The best doctor treats the problem before the problem becomes the disease ~
Old Chinese medical proverb
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Consumers 60 years old and above
Approximately 170 million Chinese over 60 years old
Aging population regularly takes supplements to improve health condition
Population with regular / chronic health problems
70% of the population estimated to have some degree of health problems
Increasing health problems associated with modern industrial life including diseases related to stress and obesity
Consumers interested in preventative health care
Weikang’s Target Market
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TianFangProduct portfolio of Western medicine and TCMEight products in the market
Seven SFDA approved drugs Average gross margin 48.5%Two SFDA approved product expected to be launched Q3 and Q4
WeiKangProduct portfolio of TCMSeven SFDA approved nutrient medicines on the marketSeven SFDA approved product expected to be launched Q3 and Q4 Three drugs in pipeline Average gross margin 66.1%
High Margin Portfolio
Tiangfang, 71.87%
WeiKang, 28.13%
% Sales by subsidiaries (2009)
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Product Main Function% of 2009 Revenue
Gross Margin
Ferrous Fumarate Granule
Treats iron deficiency anemia 24.24% 51.28-54.39%
Eucommia
Ulmoides Oliv Granule
Nourishes the liver and kidney
Strengthens muscles and bones23.26% 46.25-49.03%
Tinidazole Vaginal Effervescent Tablet Treats bacterial infections in the female
reproductive system 14.87% 39.76-43.55%
Bushen Qiangshen Tablet
Nourishes the liver and kidney
Enriches yin, strengthens yang
Enhances health and brain function
7.85% 63.37%
Ranitidine Hydrochloride Capsules
Intended to treat duodenal ulcers, gastric ulcer, reflux esophagitis, Zollinger-Ellison syndrome, and other symptoms with gastric acid overproduction
1.66% 11.24%
TianFang’s Product Portfolio
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Product Main Function% of 2009 Revenue
Gross Margin
Rongrun Youth Keeping Capsules
Promotes the restoration of the natural balance of female hormones during menopause
3.78% 66.55%
Rongrun Energy Keeping Capsules
Reduces free radicals and oxidative stress
Intended to reduce the risk of cardiovascular disease
3.75% 66.55%
Rongrun Vitamin Sugar Capsules
Reduces the onset of cardiovascular disease and fatigue for diabetics
Promotes healthy aging4.11% 64.43%
Rongrun Intestine Cleansing Capsules
Lowers blood lipid levels in order to reduce the likelihood of brain and heart vessel related diseases
Strengthens immune system
3.84% 66.55%
Rongrun Artery Cleansing Capsules
Reduces cholesterol level in arteries
Promotes healthier heart and brain functions
3.95% 65.74%
Rongrun Royal Jelly Extract
Immuno-regulatory
anti-cancer properties4.63% 61.73%
Rongrun Kidney Boost Tonic
Strengthen and promotes a healthy kidney 4.06% 71.93%
WeiKang’s Product Portfolio
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Ten drugs in various stages of approval from the SFDA
Top R&D projects include
10-HDA
Has anti-cancer properties and is used in the treatment of radiation sickness and angiocardiopathy
Received SFDA approval and expected to launch in 3Q 2010
ShuangBaoGu ( a variety of mushroom
grown on a salty land)
Provides several health benefits including the prevention and treatment of cardiovascular disease
Production expected to begin by end of 2010
DofetilideUsed to treat atrial fibrillation (irregular heartbeats)Approved for clinical test
Licorice Flavonoid Project
Develop therapeutic properties of glycyrrhize acid Treated conditions and afflictions includes allergies, hepatitis,
inflammation and swelling, including peptic ulcers hypertension, excessive potassium in the body, skin conditions, viral infections, tumor formation and cancer, specifically breast cancer, weight loss
KangYuan Antidepressant
Capsules
A herbal based medicine effective in treating depression Has passed several stages of testing and ready for clinical trials Estimated R&D expenditure $71,000
Strong Pipeline
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Total sales network covers almost the whole country via two modes of distribution: exclusive distributors and wholesale drug trading firms
WeiKang’s products are sold in five provinces and Beijing through six distributors
TianFang’s products are sold nationwide through over 60 dedicated sales agents, based in 33 cities
Integrating TianFang’s distribution channels and logistics with WeiKang to achieve synergy and economies of scale
Plans to build a national logistic chain system for medicine distribution by 2012
Extensive Distribution Network
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Distribution channels: Clinical, through doctors and hospitals mostly prescription and OTC drugsRetail pharmacies, mostly OTC drugsSupermarkets, food and nutrition stores, mostly TCM based therapeutics Third party sales outlets, such as rural medical centersConference sales and Internet orders
WaiKang plans to expand the distribution to 3 northeast provinces and to south and southwest provincesConsolidate and share the channels for both WeiKang and TianFang productsOpen bidding for new dealerships from potential distributors
Sales and Distribution
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Direct mail pamphlets to seniors
Includes consultation information
Emails to younger and busy urban residents
Provides information on company products and web based ordering platform
Free delivery services in northern cities during winter season
Strong brand name advertising for TianFang OTC drugs
Partnership with wholesalers
Regular promotions
Product information forums
Incentive schemes
Plans for future acquisitions that can
expand sales channels
Sales and Marketing Strategies
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WeiKang has six production lines
TianFang has three production lines
Highest quality equipment with national GMP certification
Unique technology synthesizes raw materials
Ensures quality and effectiveness of therapeutics
Helps reduce costs and enhance gross margins
Scalable production lines
Up to USD $107 million of potential annual production capacity
WeiKang & Tianfang production rate at 35% & 50% of total capacity, respectively
Production capabilities
Capsule Oral liquid
Granules Gel and soft paste
Tablets Powder
Production Facilities
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Dr. Zhengbin Xu, M.D head of R&D Over 40 years of clinical and research experience in TCMPublished 56 articles in international and domestic journals
Professional affiliations with The China Medicine Research Institute Heilongjiang Chinese Medicine Co., Ltd.The Chinese Medical Association
R&D team composed of 16 industry experts Received 4 national awards
Advanced R&D done in collaboration with Northeastern Forestry University and Tianjin University Two drug testing facilities
Shuangcheng, 246 Sq Meters, GMP compliantGuizhou TianFang, GMP certified
R&D Capabilities
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Organic
Committed to R&D of new products and improving existing product portfolio to secure and expand market share
Diversify vertically into growing herbal and other raw materials to secure supply and lower cost
Increase spending for advertising and continue building brand
Acquisition
Target companies that broaden product portfolio and expands distribution network
TianFang acquisition expanded distribution network nationwide
Expand and improve product portfolio with TCM, WM, therapeutics and nutraceuticals
Growth Strategy
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Yi Wang – CEO and Chairman, Founder Weikang CEO since 2002 Physician of over 30 years with extensive clinical experience and bio-medical research experienceServed as Director of Harbin Geriatric Hospital and Harbin Chinese Medical HospitalMBA from Beijing UniversityMaster in Medical Science, Harbin Medical University
Yanhua Liu – CFOCFO of WeiKang since July, 2005 and a China CPA20 years of experience of Finance and Accounting Bachelor in Finance, Heilongjiang Agricultural and Mechanical College
Zhengbin Xu – Chief Technology Officer
CTO of Weikang since July 2007 40 years of clinical and research experience on Traditional Chinese Medicine and Nutrition Publish 56 research papers on international and domestic journals Graduate of Northwest University of China.Vice President of China Medical Association.
Bing Wei - Chief Marketing Director
Joined in Weikang in 2005 Bachelor’s degree from Harbin Commerce University
Experienced Management Team
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$m
$0.82
$12.85
$47.48
$10.11
$13.96
2007 2008 2009 3 months 2009 3 months 2010
Increasing Revenue
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$m
$0.43
$8.27
$25.84
$5.65$8.32
59.6%54.4% 55.9%64.3%
52.6%
$0
$10
$20
$30
2007 2008 2009 3 months 2009 3 months 2010
0%
40%
80%
Gross Profit Gross Margin
Strong Gross Margin
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$m
$7.30
$15.64
$3.85$5.45
-$0.45
56.6%
39.0%
-54.7%
32.9% 38.1%
-$6
$0
$6
$12
$18
2007 2008 2009 3 months 2009 3 months 2010
-80.0%
-40.0%
0.0%
40.0%
80.0%
Net Income Profit Margin
Increasing Net Income
23
USD in millions Dec. 31 2009 Mar. 31 2010
Cash and Equivalents $11.4 $18.1
11.7 19.5
Current Liabilities 10.5 10.8
Long-Term Debt 0.0 0.0
Shareholder's Equity 23.4 31.1
Current Assets
Balance Sheet Highlights
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CompanyTicker
(Exch)Price
(6/8/10)Market Cap
(mm)Revenues
2009 (mm)
Net Income
2009 (mm) Y/Y Net
Income %Y/Y
revenue %PE
(TTM)
Weikang Bio-Technology
WKBT(OTCBB)
$2.79 $76.45 $47.4 $15.6 116.67% 270.31% 4.5
Biostar Pharmaceuticals
BSPM
(OTCBB)$3.23 $83.42 $53.3 $10.5 56.95% 57.24% 9.8
Renhuang Pharmaceutical
RHGP
(OTCBB)$2.00 $74.47 $43.4 $14.8 43.69% 3.67% 4.7
American Oriental Bioengineering
AOB
(NYSE)$2.72 $213.18 $296.1 $41.4 -13.39% 11.90% 5.1
China SkyOne MedicalCSKI
(NASDAQ)$11.33 $190.23 $130.1 $34.4 19.40% 41.72% 5.5
Tianyin Pharmaceutical Company
TPI
(AMEX)$2.67 $71.67 $42.8 $7.9 32.50% 28.18% 7.9
China PharmaCPHI
(AMEX)$2.67 $115.58 $61.7 $20.3 13.46% 21.05% 5.6
Simcere Pharmaceuticals
SCR
(NYSE)$8.13 $447.27 $270.9 $17.5 -65.89% 6.24% 22.0
Average 12.4% 24.3% 6.4
Attractive Valuation
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Attractive industry dynamics supports long-term growth
Strong R&D capability ensures high margin pipelines
Competitive advantage with solid portfolio of proprietary SFDA approved therapeutics
Expanding multi-channel distribution network to increase market penetration
Established quality brand name
Fragmented industry creates opportunities for acquisitions
Investment Summary
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Company:Ren Hu VP of FinanceWeikang Bio-Technology GroupPhone: (201) 887 0415Email: [email protected]
Investor Relations:Elite IRJohn MarcoPhone: (310) 819-2948Email: [email protected]
Legal Counsel:The Crone Law GroupWayne Chiang101 Montgomery StreetSuite 1950, San Francisco, CA 94104Phone: (415) 955-8900Email: [email protected]
Auditor:Ahmed Mohidin, PartnerGoldman Parks Kurland Mohidin, LLP16133 Ventura Blvd.Suite 880Encino, CA 91436Phone: (818) 784-9000Email: [email protected]
Contact Information
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