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Wiekang Biotech Investor Presentation, June 2010

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Weikang Bio-Technology Group Co., Inc. is principally engaged in developing, manufacturing and distributing Traditional Chinese Medicine (TCM), and health and nutritional supplements in China, in …

Weikang Bio-Technology Group Co., Inc. is principally engaged in developing, manufacturing and distributing Traditional Chinese Medicine (TCM), and health and nutritional supplements in China, in compliance with requisite Chinese licenses and approvals. The Company is also expanding its business scope to develop, manufacture and distribute Chinese herbal extract products and GMP certified western prescription and OTC pharmaceuticals through its acquisition of Tianfang. For more information, please visit http://www.weikangbio.com


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  • 1. WEIKANG BIO-TECHNOLGY GROUP CO., INC Investor Presentation 2010 OTCBB: WKBT www.weikangbio.com
  • 2. 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
  • 3.
    • It has two subsidiaries:
    • Heilongjiang WeiKang
      • Chinese herbal-based health and
      • nutritional supplements and therapeutics
      • Brand name "Rongrun"
      • Founded in 2005
      • 210 employees
    • Guizhou TianFang
      • Develops, manufactures and distributes
      • Chinese herbal extract products and GMP
      • certified western drugs
      • 300 employees
      • Acquired 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 pharmaceuticals
        • Other health and nutritional products
    Company Overview
  • 4.
    • 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) * 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
  • 5.
    • 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
  • 6.
    • China’s pharmaceutical market is currently the 5 th largest in the world
      • Expected to grow to the 2 nd largest by 2020 and the largest by 2050
      • Medical expenditure ranks the 3 rd 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
  • 7. 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
  • 8.
    • 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
  • 9.
    • TianFang
    • Product portfolio of Western medicine and TCM
    • Eight products in the market
      • Seven SFDA approved drugs
    • Average gross margin 48.5%
    • Two SFDA approved product expected to be launched Q3 and Q4
    • WeiKang
    • Product portfolio of TCM
    • Seven SFDA approved nutrient medicines on the market
    • Seven SFDA approved product expected to be launched Q3 and Q4
    • Three drugs in pipeline
    • Average gross margin 66.1%
    High Margin Portfolio % Sales by subsidiaries (2009)
  • 10. TianFang’s Product Portfolio 39.76-43.55% 14.87%
    • Treats bacterial infections in the female reproductive system
    Tinidazole Vaginal Effervescent Tablet 46.25-49.03% 23.26%
    • Nourishes the liver and kidney
    • Strengthens muscles and bones
    Eucommia Ulmoides Oliv Granule Product Main Function % of 2009 Revenue Gross Margin Ferrous Fumarate Granule
    • Treats iron deficiency anemia
    24.24% 51.28-54.39% 7.85% 63.37% Bushen Qiangshen Tablet
    • Nourishes the liver and kidney
    • Enriches yin, strengthens yang
    • Enhances health and brain function
    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%
  • 11. WeiKang’s Product Portfolio 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 aging
    4.11% 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 properties
    4.63% 61.73% Rongrun Kidney Boost Tonic
    • Strengthen and promotes a healthy kidney
    4.06% 71.93%
  • 12. Strong Pipeline
    • 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
    Dofetilide
    • Used 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
  • 13.
    • 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
  • 14.
    • Distribution channels:
      • Clinical, through doctors and hospitals mostly prescription and OTC drugs
      • Retail pharmacies, mostly OTC drugs
      • Supermarkets, food and nutrition stores, mostly TCM based therapeutics
      • Third party sales outlets, such as rural medical centers
      • Conference sales and Internet orders
    • WaiKang plans to expand the distribution to 3 northeast provinces and to south and southwest provinces
    • Consolidate and share the channels for both WeiKang and TianFang products
    • Open bidding for new dealerships from potential distributors
    Sales and Distribution
  • 15.
    • 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
  • 16.
    • 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 Facilities Production capabilities
    • Capsule
    • Oral liquid
    • Granules
    • Gel and soft paste
    • Tablets
    • Powder
  • 17.
    • Dr. Zhengbin Xu, M.D head of R&D
      • Over 40 years of clinical and research experience in TCM
      • Published 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 compliant
      • Guizhou TianFang, GMP certified
    R&D Capabilities
  • 18.
    • 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
  • 19.
    • Yi Wang – CEO and Chairman, Founder  
    • Weikang CEO since 2002
    • Physician of over 30 years with extensive clinical experience and bio-medical research experience
    • Served as Director of Harbin Geriatric Hospital and Harbin Chinese Medical Hospital
    • MBA from Beijing University
    • Master in Medical Science, Harbin Medical University
    • Yanhua Liu – CFO
    • CFO of WeiKang since July, 2005 and a China CPA
    • 20 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
  • 20. $m Increasing Revenue
  • 21. $m Strong Gross Margin
  • 22. $m 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
  • 24. Attractive Valuation Company Ticker (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 Medical CSKI (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 Pharma CPHI (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
  • 25.
    • 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
  • 26.
    • Company:
    • Ren Hu
    • VP of Finance
    • Weikang Bio-Technology Group
    • Phone: (201) 887 0415
    • Email: arenhu@gmail.com
    Investor Relations: Elite IR John Marco Phone: (310) 819-2948 Email: john.marco@elite-ir.com Legal Counsel: The Crone Law Group Wayne Chiang 101 Montgomery Street Suite 1950, San Francisco, CA 94104 Phone: (415) 955-8900 Email: wchiang@cronelaw.com Auditor: Ahmed Mohidin, Partner Goldman Parks Kurland Mohidin, LLP 16133 Ventura Blvd. Suite 880 Encino, CA 91436 Phone: (818) 784-9000 Email: ahmed@gpkmllp.com Contact Information