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  • 1. Investor PresentationJanuary 2012Biostar Pharmaceuticals, Inc.Nasdaq: BSPM
  • 2. Forward-Looking StatementThis presentation includes statements that are “forward-looking statements.” Whilemanagement has based any forward-looking statements contained in thepresentation on its current expectations, the information on which such expectationswere based may change. These forward-looking statements rely on a number ofassumptions concerning future events and are subject to a number of risks,uncertainties, and other factors, many of which are outside of Biostar’s control, thatcould cause actual results to materially differ from such statements. Such risks,uncertainties, and other factors include, but are not necessarily limited to, those setforth under the caption “Item 1A. Risk Factors” in Biostar’s most recent Form 10-Kfiling, as and to the extent revised and updated to date in its subsequent Form 10-Qfilings. In addition, Biostar operates in a highly competitive and rapidly changingenvironment, and new risks may arise. Accordingly, you should not place any relianceon forward-looking statements as a prediction of actual results. Biostar disclaims anyintention to, and undertakes no obligation to, update or revise any forward-lookingstatement. You are also urged to carefully review and consider the variousdisclosures in Biostar’s most recent Annual Report on Form 10-K, as well as otherpublic filings with the SEC since the filing of Biostar’s Annual Report.2
  • 3. IntroductionBiostar Pharmaceuticals, Inc. (Nasdaq: BSPM) is a China baseddeveloper, manufacturer and marketer of pharmaceutical and healthsupplement products for a variety of diseases and conditions• Strong R&D capabilities (two high-tech laboratories)• Two world-class production facilities• Diverse portfolio of products• Extensive and efficient distribution network in 25 provinces• 82 acres raw material & herbs plantation3
  • 4. 4Investment Considerations• Unique vertically integrated business model- R&D, raw material plantation, processing, manufacturing, distribution and sales• A history of strong profitable growth- Revenue: 2007-2010 CAGR of 71%.- Net Income: 2007 – 2010 CAGR of 62%- On track to achieve its 2011 guidance: 20%-25% top line growth• Large product portfolio and a strong pipeline of new products to drive growth- Currently produces and sells 21 products and one medical device- Innovative product pipeline of seven products (OTC and prescription drugs)- Recently acquired permits and approvals for 86 drugs and one health product• Xin Aoxing - leading market position, strong brand recognition throughout China- Biostar’s main product, Xin Aoxing targets hepatitis B virus (HBV) which affects more than10% of China’s population- Strong recognition: OTC drug approved by China’s State Food and Drug Administration (SFDA)- Over $53 million in sales in 2010: CAGR of 74% for the period 2007-2010• Well positioned to take advantage of market opportunities such as:- China’s $124 billion healthcare reform plan which promotes accessibility and affordability- New Rural Medical Care Cooperative Program launched in 2008, as more patients seek curesthrough medicines offered in hospitals and healthcare centers
  • 5. 51 About Biostar2 Financial Highlights3 Growth Opportunities
  • 6. Vertically Integrated Business ModelLab, Processing, Warehouse andOffices in XianyangRaw MaterialFarmDrugManufacturingR&D Lab6Rawmaterialplantation82 acresTwo R&DLaboratoriesTwo world-classproductionfacilitiesXianyang &WeinanSalesnetworkcovering 25provincesCovers retailoutlets,hospitalsandpharmacies
  • 7. Self-farming: Reduces Costs & Controls Quality• In 2008 acquired 82 acres in Qinling Mountains• Planted and growing 13 herbs including:– Salvia miltiorrhiza– Pricklyash peel– Eucommia bark– Gingko– Honeysuckle– Shizandra berry– Scutellaeria baicalensis georgi– Milk veteh– Radix codonopsitis• To control quality and reduce cost of raw materials– In 2010 - all raw materials were purchased from suppliers; planted herbs were not yet ready forharvest and use yet– In 2011 - Salvia miltiorrhiza is ready and being used as raw material– In 2012 - Additional herbs to harvest and be ready for use– Goal - increase production and fulfill all its needs for raw material: further reduce costs andcontrol quality7
  • 8. Strong R&D Capabilities• Two R&D laboratories (Xianyang &Weinan)– 30 internal scientists & researchers– Average 10 years of experience• External R&D – Biostar sponsorsand owns the Intellectual Property– Shaanxi College of Traditional ChineseMedicine– Shaanxi University of Science andTechnology– Northwest University - College of LifeScience8Xianyang labWeinan lab
  • 9. World-class Production Facilities - XianyangXianyang facility• Four Good Manufacturing Production(GMP) certified production linesproducing ten products and onemedical device• Has annual production capacity ofover $100 million• Two new production lines are underconstruction and waiting for GMPcertification:– Zushima spray line - estimated togenerate approximately $10 million inrevenues annually– Health products line - estimated togenerate approximately $20 million inrevenues annually9
  • 10. World-class Production Facilities - WeinanWeinan facility• In October 2011, acquiredShaanxi Weinan HuarenPharmaceuticals• Five production lines• One high-tech laboratory• Currently produces ten drugsand one health product• Additional products to beadded in 201210
  • 11. 67.5%5.6%6.7%7.3%4.5%8.4%XinAoxingTaohuasanGanWangTianqiDanshenHealthProducts totalA Diverse Portfolio of Products - XianyangCategory Name Treatment SFDAOTCXin Aoxing Oleanolic Acid Capsule Acute and chronic hepatitis B (“HBV”) ApprovedGanwang Compound Influenza ApprovedTianqi Dysmenorrhea Capsule Menstrual swelling and cramping ApprovedPrescriptionDanshen Granule Alleviates blood stasis and angina ApprovedTaohuasan Pediatric Children respiratory tract infection ApprovedHealth ProductYizi Capsules Aids fertility and fetal development Provincial level approvedTangning Capsules Type II diabetes Provincial level approvedShengjing Capsules Replenish kidney function Provincial level approvedAoxing Ointment Psoriasis, vitiligo and dermatitis Provincial level approvedAoxing Ganbaodai Hepatic and liver protection Provincial level approvedMedical Device Hernia Belt Hernia Provincial level approved9M 2011 Revenue BreakdownXin Aoxing Capsule11
  • 12. A Diverse Portfolio of Products - WeinanCategory Name Treatment SFDAOTCZhitong Tougu Plaster Cream Pain reliever ApprovedCompound Paracetamol andAmantadine HydrochlorideCommon cold ApprovedPrescriptionFosfomycin Calcium Urinary tract infections ApprovedHuangyangning Tablets Cardiovascular disease ApprovedJiakangling Capsule Hyperthyroidism ApprovedQianlietong Capsule Prostate disease ApprovedWenweishu Capsules Chronic gastritis ApprovedDanshen Tablets Coronary heart disease ApprovedPiracetam Tablets Cerebrovascular disease ApprovedErythromycin Estolate Coated ParticlesAnti-bacterial anti-inflammatoryApprovedHealth Product Huaren Changweitong Capsule Gastrointestinal function Approved12
  • 13. Flagship Product – Xin Aoxing• OTC drug for the treatment of HBV– Approved by SFDA– Recognized by China Consumer Association• Targets a highly contagions disease– More than 130 million people (10% of China’spopulation) are infected with HBV• Has high effectiveness rate– 93% effectiveness rate in relieving HBV symptoms -(as per People’s Hospital of Shaanxi Province)• Nationally branded product and easily accessible– Sold at local pharmacies since 1998• Low cost/high margin– Up to 80% gross margin product• Highly affordable– $970/year retail price, in most cases covered bypersonal health insuranceXin Aoxing Capsule10193753452007 2008 2009 2010 9M11Revenue Generated by Xin Aoxing ($ Million)Solid Growth Over a 4-Year Period13
  • 14. Innovative Product PipelineCategory Name Treatment StatusOTCKunLingWan Irregular menses Finished clinical testingZushima Aerosol pain suppressant Pending SFDA approvalPrescriptionAzithromycin Tympanitis, pharyngitis, bronchitis Pending SFDA final testingYinyangsuo Kidney disease Finished clinical testingZhixuening Uterine Bleeding Finished clinical testingXiao’aiping Tumors, esophagus cancer Finished clinical testingZhenbao Wan Thrombus & coronary heart disease Finished clinical testing14
  • 15. Large Distribution Network- Extensive sales network acrossChina’s 25 provinces- Over 11,800 rural medical salesoutlets in Shaanxi- Sales team of over 300 members15SGOCOHQBeijingBeijingXianyangWeinanFactory locations inXianyang and Weinan –Shaanxi provinceProvinces – Biostar’ssales networkcoverage
  • 16. Sales and Distribution StrategyDistribution StrategyTwo-DimensionalSales StrategySales & Marketing StrategyMASS Advertising:BroadenAwarenessRURAL Marketing:WidenCoverage• Mass media advertising forOTC drugs (eg. Xin Aoxing)to increase brandawareness• Continue to invest in newsales offices and sales-force• Build closer relationshipwith pharmacies anddoctors• Increase penetration in25 existing provincialmarkets• Deepen penetration inrural markets by openingadditional ruraldistribution centers• Invest in village clinicsand sales centers16
  • 17. 171 About Biostar2 Financial Highlights3 Growth Opportunities
  • 18. Solid Financial Performance16.034.053.080.051.966.02007 2008 2009 2010 9M10 9M11Revenue ($ Million)1120396038.646.62007 2008 2009 2010 9M10 9M11Gross Profit ($ Million)47111711.3 11.32007 2008 2009 2010 9M10 9M11Net Income ($ Million)0.19 0.220.320.630.41 0.412007 2008 2009 2010 9M10 9M11Earnings per Share ($ )18
  • 19. 73% 72%83%86% 85% 84%2007 2008 2009 2010 9M10 9M11Gross MarginCost and Gross Margin5.214.1 14.320.113.319.42007 2008 2009 2010 9M10 9M11Cost of Total Sales ($ Million)67%59%*73% 75% 74% 71%2007 2008 2009 2010 9M10 9M11Gross Margin192.85.36.37.75.37.12007 2008 2009 2010 9M10 9M11Cost of Sales ($ Million)Xin Aoxing Product All Biostar Products
  • 20. Healthy Cash Inflow From Operation1,310 2,0935,67412,84111,84812/31/2007 12/31/2008 12/31/2009 12/31/2010 9/30/2011Net Cash Provided by Operating Activities ($ Thousand)2,286 758*8,57813,21124,00712/31/2007 12/31/2008 12/31/2009 12/31/2010 9/30/2011Cash& Cash Equivalents ($ Thousand)20
  • 21. Capital Structure as of 9/30/1121Common Stock: 100,000,000 shares authorized• 28,196,627 shares of common stock issuedWarrants: total of 587,353 exercisable as follows:• 500,000 warrants were issued in connection with the November 2, 2009 private placement• Exercisable at $3 per share – expiry date November 1, 2014• Redemption price - $0.01/share (if common stock price equals to or exceeds $4.5 on eachtrading day for twenty (20) consecutive trading days ending on the trading day prior toNovember 1, 2014.• 55,000 warrants exercisable at $2 per share – expiry date May 31, 2013• 32,353 warrants exercisable bat $2.74 per share – expiry date June 30, 2014Stock Options: outstanding 1,086,667 options• 846,667 options exercisable at $2.60 - expiry date October 21, 2014• 100,000 options exercisable at $4.45 - expiry date December 29, 2013• 50,000 options exercisable at $2.80 - expiry date October 26, 2015• 70,000 options exercisable at $1.97 - expiry date April 6, 2016• 20,000 options exercisable at $2.60 - expiry date April 6, 2014
  • 22. 221 About Biostar2 Financial Highlights3 Growth Opportunities
  • 23. Growth StrategyVertically integratedmodel :- Controls productquality and cost /increases businessefficiency- Conducts marketresearch toimprove newproductintroductions &market penetrationIncrease rawmaterial plantproductivity to:- Improves qualitycontrol of rawmaterials- Reduces costs/increases margins- Plants herbs forown use and resaleto third partiesEnhance R&Dcapability to:- Self developunique leading OTCand prescriptionproducts- Owns intellectualpropertyInvest in marketingand sales force to:- Further penetrateexisting markets- Expand into newmarkets- Grow rural retaildistribution by30%+ per yearDevelop online sales& educational portalto:- Focus on patienteducation- Encourage lifelongusage of medicalproductsPursue additionalM&A opportunities23
  • 24. Market Opportunities – Xin AoxingIncrease market penetration in China(according to US CDC & World Health Organization)• One third of 350 million HBV patients globally, reside inChina• 10% of China’s 1.3 billion population is affected by HBV;70% of patients live in rural areas, representing a target of91 million patients• Biostar 2010 sales in rural areas represented only 18% ofits total salesExpand distribution in other Asian countries(according to the Asian Liver Center at Stanford University)• Asians have the highest rate of HBV infection of all ethnicgroupsCompetitive / affordable pricing to fuel growthHigh Hepatitis Prevalence in ChinaAmple Opportunities in Other Asian CountriesManufacturer Type Treatment Cost Side EffectsBiostar OTC $81.2/box, 400 pills NoneGandezhi Prescription $110 / box, 360 pills Yes24
  • 25. 2011 Priorities25Grow top lineIncrease rural penetrationExpand marketing efforts and sales force• 20-25% top line growth in 2011• 2010 revenue of $80 million: 9 month 2011 revenue of $66 million• Expand sales and marketing team to 400 members• Over 300 sales people as of October 2011• Shaanxi province• Targeting 13,000 rural medical sales outlets• Reached more than 11,800 clinics at the end of October 2011• Expand/deepen penetration and increase market share in all other provinces
  • 26. 5086347901,0381,2452006 2007 2008 2009 2010China Pharmaceutical Market Size (RMBBillion)Other Market Opportunities26• Grown at over 16% annually (since 2000)• Reached $184 billion in 2010• To grow by another $50 billion in 2011• To become the world’s third largestprescription drug market in 2011Mentality of patients living in rural areas ischanging• 70% of China’s 1.3 billion people live in ruralareas• Number of patients seeking cures through“modern” medicines offered in hospitals andhealthcare centers is rapidly increasingChina’s medicine and pharmaceutical industry is one of the fastest growing industries of theChinese economy (according to Data Monitor & IMS Health)Highly fragmented market and government backed consolidation initiatives provide M&Aopportunities
  • 27. China’s Healthcare Reform• Chinas $124 billion healthcare reform plan was launched in 2009. Two majorguidelines of the plan are accessibility and affordability– The first phase to be completed by the end of 2011 aims to increase accessibility– The second phase to be completed by 2020 aims to increase affordability bymaking medicines and medical services affordable to everyone.• Chinese government increased the number of medicines included in the NationalReimbursement Drug list (fully or partially reimbursable)• Private health insurance has become more affordable27• $5.6 billion investment over 3 years has facilitated the“New rural cooperative medical care program”– Investment on patient education and encouragementto use “modern” medicine– Provides patients suffering form severe diseases withadditional financial assistance– Shaanxi, Sichuan, Chongqing, Gansu, Henan, Hubei,and Hunan comprised 30% of the $5.6 billion spending
  • 28. Regulatory Compliances• Quality Control Related– Good Manufacturing Practice (“GMP”) Certification, regulated by the State Foods and DrugsAdministration (“SFDA”) – All Chinese pharmaceutical manufacturers must be GMP certified to producemedicines of any kind. Biostar received its first GMP certification in 2006 and received anotherverification in 2011 for a period of five years.• New drug approval and licensing– SFDA and China Traditional Medicine Administration Bureau regulate the process of new drug approvaland licensing in China. Redwood Capital estimates that only 15% of new-to-market drug applications gotapproval by SFDA.• Environmental regulations– Subject to environmental laws and regulations stipulated by national and local environment protectionbureaus in China.• Intellectual Property Rights and Patents– Biostar has filed for copyright protection for the various names and brands of products.28
  • 29. Corporate website:www.biostarpharmaceuticals.comContact:Zack Pan, CFOBiostar PharmaceuticalsT: 405-996-8829E: zpan@aoxing-group.comLena CatiThe Equity GroupT: 212 836-9611E: lcati@equityny.com29How to Contact Us
  • 30. Investor PresentationJanuary 2012Biostar Pharmaceuticals, Inc.Nasdaq: BSPM