Weibing Lu, CEO Michael Lan, CFO

Transcription

1 INVESTOR PRESENTATION Weibing Lu, CEO Michael Lan, CFO Rodman & Renshaw Annual China Investment Conference March 6-8, 2011

2 Safe Harbor Statement Statements in this presentation may be "forward-looking statements" within the meaning of federal securities laws. The matters discussed herein that are forward-looking statements are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. Forward-looking statements involve risks and uncertainties that may cause actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition expressed or implied in any forward-looking statements. Such risks include, but are not limited to, competition in the veterinary bio-pharmaceutical industry, declines in demand for the Company s products, rising raw materials costs, changes to management or key personnel, risks associated with conducting business in China, the Company s ability to expand into markets outside of China and other risks detailed in the Company s filings with the Securities and Exchange Commission. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous potential risks and uncertainties. Forward-looking statements made during this presentation speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this presentation. Because forward-looking statements are subject to risks and uncertainties, we caution you not to place undue reliance on any forward-looking statements. All written or oral forward-looking statements by the Company or persons acting on its behalf are qualified by these cautionary statements. 2

3 Skystar Share Snapshot TICKER NASDAQ: SKBI Stock Price (March 1, 2011) $ Week Range $5.81 $11.95 Shares Outstanding 7.10M Market Cap $55.0M P/E (LTM) 4.3X Revenues: Q3 10 / 9 months 2010 $18.5M (unaudited) / $31.7M EPS: Q3 10 / YTD 2010 $0.93 (unaudited) / $1.42 Fiscal 2010 Revenue Guidance $45.5 Million - $47.5 Million 3

4 Overview Headquartered in Xi an, Shaanxi Province, Central China 200+ Employees Engaged in the: R&D, Manufacture, Sale; and Distribution of veterinary drugs and animal health products in China 4

5 Overview cont d Skystar is a proxy to China s: Changing domestic consumption trends Growing animal husbandry industry Skystar is the only US-listed pure play in the China animal health sector 5

6 Focus on Five Major Product Lines Skystar is a leading provider of veterinary medicines and healthcare products in China serving regional microfarms 360 degree product suite for farmers consisting of: Veterinary vaccines, Veterinary medicines, Pro-biotic micro-organisms, Animal feed additives; and *Aquaculture (fish farming) treatments *manufacturing facility not online as of Q

7 Facilities Skystar s facilities and processes are China Good Manufacturing Practice ( GMP ) certified, approved by China s Ministry of Agriculture (MOA) as conforming to strict Government Standards 5 year renewable licenses for 100+ drugs and formularies 7

8 Product List 100+ Drugs Approved by MOA Metamizole Sodium Mequindox Antondine Vitamin C Dexamethasone Sodium Phosphate Vitamin B1 Enrofloxacin Lincomycin Hydrochloride Compoumd Vitamin B Danofloxacin Mesylate Powder Sulfamonomethoxin e Sodium Ofloxacin Sulfadiazine Sodium Norfloxacin Nicotinate Kanamycin Sulfate Ciprofloxacin Hydrochloride Gentamycin Sulfate Pefloxacin Mesylate Granules Gentamycin Micronomicin Sulfate Praziquantel Tablets Compound Sulfamethoxazole Tablets Ofloxacin Tablets Amoxicillin Soluble Powder Avermectin Powder Diclazuril Premix (0.2%) Florfenicol Powder Compound Amoxicillin Powder hiamphenicol Powder Erythromycin Thiocyanate Soluble Powder Apramycin Sulfate Soluble Powder Neomycin Sulfate Soluble Powder Colistin Sulfate Soluble Powder Salinomycin Sodium Premix Ciprofloxacin Hydrochloride Soluble Powder Spectinomycin Hydrochloride Ofloxacin Soluble Powder Baitouweng San Baotai Wuyou San Chulijing Danjibao Feizhucai Fuzheng Jiedu San Gongying San Houyanjing San Huanglian Jiedu San Jianji San Jianwei San Jingfang Baidu San Mubin Xiaohuang San Qingfei Zhike San Qingshu San Qingwen Baidu San Quchong San Tongru San Xiaoji San Yimu Shenghua San Yujin San Zhili San Sulfamethoxydiazine Sodium Lomefloxacin Hydrochloride Danofloxacin Mesylate Sulfathiazole Sodium Buzhong Yiqi San Fangji San Shenling Baishu Qibu San Sulfaquinoxaline Sodium Soluble Powder (10%) Fenbendazole Powder Sulfachloropyrazin Sodium Soluble Powder Huoxiang Zhengqi San Cuiqing San Longdan Xiegan San Maxing Shigan San Qumai San Shengru San Xiaoshi Pingwei San Xiaochaihu San Yinqiao San Pefloxacin Mesylate Enrofloxacin Florfenicol Ciprofloxacin Lactate Soluble Powder Lomefloxacin Hydrochloride Norfloxacin Nicotinic Soluble Powder Berberine Sulfate Tylosin Tartrate Soluble Powder Gentamycin Sulfate Lincomycin Hydrochloride Soluble Powder Promethazine Hydrochloride Tilmicosin Premix Bailong San Feizhu San Ivermectin Premix Kitasamycin Premix + additional approved formularies Pefloxacin Mesylate Soluble Powder 8

9 Distribution and Customer Base 1,894 distribution agents (+11% YoY) 715 direct customers (+21% YoY) 360 franchised stores with exclusivity agreements Distribution to all 29 farming Provinces in China (As of September 30, 2010) 9

10 Market Indicators U.N. Food and Agriculture Organization noted that as of 2007, China has net meat imports of +$2.8 BN (UNFAO-STAT 2009) In 2009, the market scale of China s Animal Vaccine industry reached 6.2 billion (RMB), up 15% year-on-year (Research in China 2010) In order to meet the changing dietary habits ane demands of its domestic consumers and visitors, China s Government is supporting free markets combined with rapid development, alongside drug manufacturing regulation that is increasingly closer to international GMP standards 10

11 Ever Present Opportunity China is now the world s largest producer of poultry, fish and livestock (UN-FAO) New market opportunities include Company estimated $150 million (fish farming) aquaculture market 11

12 International Standards China s MOA since 2004 has imposed strict GMP certification standards Currently only 1,300 manufacturers have made the grade down from 2,400 In March of 2011, SFDA implemented stricter vaccine manufacturing standards and subsequently passed World Health Organization s regulatory system assessment and is now in-line with international standards 12

13 Products Skystar s compimentary product lines reflects a business model that addresses all key segments of the animal farming industry and allows the Company to capture more market share Veterinary vaccines (10 products) Active and inactive vaccines to prevent sickness and disease in poultry and livestock Veterinary medicines (212 products) Probiotic micro-organisms (16 products) Animal Feed (10 products) Aquaculture products (coming soon) 13

14 Q3 Revenues By Offering Q3 10 Revenues - $18.5M Q3 09 Revenues - $12.8M Veterinary Medicines 67.0% Veterinary Vaccines 3.8% Veterinary Medicines 66.4% Veterinary Vaccines 4.4% Micro- Organisms 25.4% Micro- Organisms 24.9% Feed Additives 3.8% Feed Additives 4.2% Q3 revenues increase 45% year over year 251 products in Q3 10 up from 159 in product introductions in

15 Veterinary Medications Vet. Medications Revenue Q Q % of Rev. Gross Margin Revenue % of Rev. Gross Margin Revenue $12.4M 67.0% 44.0% $8.5M 66.4% 40.0% Q3 Total Rev. $18.5M $12.8M 215 products Improved utilization and product mix of upgraded Huxian facility Focus on higher margin products 15

16 Micro-organismorganism Micro-organism Q Q products Revenue % of Rev. Added production capacity at Huxian plant online, June 2010 ~70% gross margins Gross Margin Revenue % of Rev. Gross Margin Revenue $4.7M 25.3% 74.7% $3.2M 24.9% 75.3% Q3 Total Rev. $18.5M $12.8M 16

17 Feed Additives Feed Additives Q Q Revenue 10 products Increase yield and improve health of livestock % of Rev. Gross Margin Revenue % of Rev. Gross Margin Revenue $0.7M 4.0% 60.8% $0.5M 4.2% 61.9% Q3 Total Rev. $18.5M $12.8M 17

18 Veterinary Vaccines Vet. Vaccines Q Q products Revenue % of Rev. Gross Margin Revenue % of Rev. Gross Margin Revenue $0.7M 4.1% 89.7% $0.5M 4.4% 92.0% Q3 Total Rev. $18.5M $12.8M Completed installation, tooling and testing of equipment in updated Huxian facility in August, 2010 Awaiting GMP certification and inspection date from MOA New vaccine production line to generate estimated $14M per year in the new facility once fully ramped New aquaculture vaccine line to launch in 2011; expected to contribute $8-$15M in annual revenue within 3-5 years of market, with exclusive marketing rights through

19 R&D Facility #1 Xi an R&D Facilities Over 25 researchers responsible for developing new medicines and vaccines in response to epidemics, pandemics and diseases Veterinary Medicine and Microorganism Labs One Quality Inspection Center 19

20 R&D Facility #2 Shanghai R&D Facilities 5 researchers from the Chinese Academy of Agricultural Sciences Responsible for evaluating and implementing manufacturing and medical technology from around China and around the world Responsible for evaluating and implementing short-term and long-term planning for future medications and vaccines 20

21 Research Affiliations University research affiliations include: Shaanxi Microbial Research Institute Jiangsu Microbial Research Institute China Northwestern University China Northwest Agriculture and Forestry University 21

22 Bringing Products to Market Approved by Chinese Ministry of Agriculture for the manufacture and distribution of 100 types of veterinary drugs in various formularies including all compulsory vaccines such as hog cholera, hoof and mouth disease and bird flu vaccine Our R&D Labs uses both Traditional Chinese Medicine and Modern Western Approaches (i.e. antibiotics) to develop treatments such as the kits used to treat Swine High-Fever Syndrome (Blue-Ear Disease) 22

23 Sales and Technical Support Training and Technical support at trade shows, fairs and exhibitions Training for animal husbandry experts are provided at the local level Training seminars for local farmers in the usage of Skystar products 23

24 Competitive Landscape Largest competitors are State-owned Enterprises Government is supportive of a free market in this niche Majority of competitors only offer 1-2 product lines and broad shotgun approach to treatments High barriers of entry for international competitors 24

25 Growth Strategy New Product Introductions via: R&D team tracking global veterinary developments and trends Market feedback from franchise stores and customers Results: Currently producing over 251 products in 2010 as compared to 195 in products be developed in

26 Growth Strategy Aquaculture (fish farming) Acquired rights to produce aquaculture vaccine line through 2020 Estimates additional revenue of $8M-$15M annually in 3-5 years following full ramp up Early mover in fast growing aquaculture industry 26

27 Growth Strategy Updated Huxian Manufacturing Facility in Xi an Micro-organism facility to add 49% to capacity, production commenced in June 2010 Veterinary medication line manufacturing capacity increased Vaccine facility update completed in June, 2010; awaiting GMP certification notice from MOA. 27

28 Growth Strategy Acquisition Targets Targeting highly accretive acquisitions GMP facilities with complimentary products High growth areas/products that fit the company s long term strategy 28

29 M&A Acquisitions Completed Hubei target acquired veterinary manufacturer through bankruptcy proceedings in August 2010, purchase price of roughly $3.5M Deposit placed for Jiangsu based micro-organism manufacturing facility 29

30 Historical Annual Revenue $40.0 $35.0 $30.0 $25.0 $25.58 $33.80 $31.70 $20.0 $15.0 $10.0 $5.0 $9.80 $15.10 $0.0 (millions) M'

31 LTM Quarterly Revenue (Unaudited) $20.0 $18.0 $16.0 $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 ($millions) $18.50 $10.90 $8.30 $4.86 Q4'09 Q1'10 Q2'10 Q3'10 31

32 Historical Gross Profit / Gross Margins Revenue ($millions) $20.0 $ % 51.8% 54.0% $ % $ % $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 $4.40 $8.34 $12.78 $17.30 $ M' % 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Gross Profit % Gross Margin 32

33 Adjusted Net Income Growth Revenue ($millions) % % % % 27.90% 25.90% 28.80% 35.0% 30.0% % Q3' % 0.0% Adjusted Net Income Profit Margin 33

34 Annual Adjusted Net Income (Unaudited) 12 Months Ended December Net income (loss) $8,851,932 $5,596,183 ($1,956,976) Non recurring non-cash charges: Amortization of deferred financing - 101, ,212 Amortization of discount on debentures - 680,446 3,716,243 Amort of deferred compensation - 62, ,119 Inducement costs for debentures converted Inducement costs for warrants exercised - 257, , ,547 Change in fair value of warrants 349, Income net of non-recurring noncash items $6,644,513 $6,698,977 $4,195,595 34

35 High Margin Products Veterinary Medications Q Revenues Gross Profit GM % $12,366,426 $5,415,588 44% Micro-organism $4,700,623 $3,513,646 75% Feed Additives $737, ,815 61% Vaccines $765,621 $686,581 90% Total $18,569,747 $10,063,610 54% 35

36 Select Balance Sheet Data As of: Sept. 30, 2010 Sept. 30, 2009 Cash $2.0M $14.8M Current Assets $41.4M $36.2M Current Liabilities $9.1M $3.8M 36

37 Management Weibing Lu, Chairman and CEO Founded Xian Tianxing Bio-Pharmaceutical Co., Ltd. (our operating company in China) in 1997 BS from Wuhan University in 1985 and MBA from Xi'an Jiaotong University in 1999 Awarded Outstanding Entrepreneur of Xi'an Feed Industry in 2002 Appointed as a Director of Xi'an Institute of Feed Industry Michael Lan, Chief Financial Officer 15 years of operational and accounting experience with a number of US public companies including Silgan Containers, Gilead Sciences Extensive consulting experience helping companies improve financial control, streamline business operations and improve efficiency and productivity, with large and medium sized companies in the US Based in CA, U.S., bi-lingual with degrees from China and U.S. Universities BA from Xiamen University, China, MA of Accounting from USC Scott Cramer, Director Corporate Development and U.S. Representative Former CEO and CFO of Cyber Group Founder and President of Cramer & Rauchegger, Inc., specializing in retirement and estate planning Registered Representative - Series 7, 63, 65 37

38 Thank-You 38

39 Organizational Chart Skystar Bio-Pharmaceutical Company United States Nevada (NASDAQ:SKBI) [Parent Co. USA] 100% Ownership 100% Ownership Skystar Bio-Pharmaceutical Inc. Skystar California Skystar Bio-Pharmaceutical (Cayman) Holdings Co. Ltd. Skystar Cayman [Intermediary Holding Co.] Outside China Inside China 100% Ownership Fortunate Time International Ltd. Fortunate Time 100% Ownership Sida Biotechnology (Xian) Co. Ltd. Sida 100% Ownership Xian Tianxing Bio-Pharmaceutical Co. Limited Xian Tianxing Wholly Foreign Owned Enterprise WFOE Variable Interest Entity VIE Skystar Biotechnology (Jingzhou) Co., Limited Skystar Jingzhou Jingzhou, Hubei Province Skystar Biotechnology (Kunshan) Co., Limited Skystar Kunshan [Kunshan, Jiangsu Province] Shanghai Siqiang Biotechnological Co., Ltd. Shanghai Siqiang 39