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Investor Presentation June 2014. Forward Looking Statement This presentation includes statements that are “forward-looking statements”. While management.

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Presentation on theme: "Investor Presentation June 2014. Forward Looking Statement This presentation includes statements that are “forward-looking statements”. While management."— Presentation transcript:

1 Investor Presentation June 2014

2 Forward Looking Statement This presentation includes statements that are “forward-looking statements”. While management has based any forward-looking statements contained in the presentation on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of Biostar’s control, that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth under the caption “Item 1A. Risk Factors” in Biostar’s most recent Form 10-K filing, as and to the extent revised and updated to date in its subsequent Form 10-Q filings. In addition, Biostar operates in a highly competitive and rapidly changing environment, and new risks may arise. Accordingly, you should not place any reliance on forward-looking statements as a prediction of actual results. Biostar disclaims any intention to, and undertakes no obligation to, update or revise any forward- looking statement.You are also urged to carefully review and consider the various disclosures in Biostar’s most recent Annual Report on Form 10-K, as well as other public filings with the SEC since the filing of Biostar’s Annual Report. 2

3 Introduction Biostar Pharmaceuticals, Inc. (Nasdaq: BSPM) is a China based developer, manufacturer and marketer of pharmaceutical and health supplement 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 plantation 3

4 Investment Considerations Unique vertically integrated business model - R&D, raw material plantation, processing, manufacturing, distribution and sales A history of strong profitable growth ------ Revenue: 2007-2011 CAGR of 55% Net Income: 2007 – 2011 CAGR of 54% Business remains strong despite the recent temporary setback due to industry-wide issues Large product portfolio and a strong pipeline of new products to drive continues growth -------- Currently produces and sells 22 products and 1 medical device Innovative product pipeline of eight products (OTC and prescription drugs) In 2011, acquired permits and approvals for 86 drugs and one health product In March 2013, acquired additional 13 drug approval numbers Xin Aoxing - leading market position, strong brand recognition throughout China ---- Targets hepatitis B virus (HBV) which affects more than 10% of China’s population Strong recognition: OTC drug approved by China’s State Food and Drug Administration (SFDA) Well positioned to take advantage of market opportunities such as: ------ China’s $124 billion healthcare reform plan New Rural Medical Care Cooperative Program Milestone: won a bid to supply hospitals In three provinces with Huangyangning Tablets 4

5 R&D Lab Lab, Processing, Warehouse and Drug Manufacturing Raw Material VerticallyIntegratedBusinessModel Offices in Xianyang Farm Two world- class production facilities Xianyang & Weinan Sales network covering 25 provinces Covers retail outlets, hospitals and pharmacies Raw material plantation 82 acres Two R&D Laboratories 5

6 Self-farming:Reduces Costs Quality &Controls 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 for harvest 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 or trade for other herbs: further reduce costs and control quality 6

7 Strong R&D Capabilities Two R&D laboratories (Xianyang & Weinan) 30 internal scientists & researchers Average 10 years of experience External R&D – Biostar sponsors and owns the Intellectual Property Shaanxi College of Traditional Chinese Medicine Shaanxi University of Science and Technology Northwest University - College of Life Science The Fourth Military Medical University Xianyang lab Weinan lab 7

8 World-class Production Facilities-Xianyang Xianyang facility Four Good Manufacturing Production (GMP) certified production lines producing ten products and one medical device Has annual production capacity of over $100 million Two new production lines are under construction and waiting for GMP certification: -Zushima spray line - estimated to generate approximately $10 million in revenues annually -Health products line - estimated to generate approximately $20 million in revenues annually 8

9 World-class Production Facilities-Weinan Weinan facility In October 2011, acquired Shaanxi Weinan Huaren Pharmaceuticals Five production lines One high-tech laboratory Currently produces ten drugs and one health product $2.1million in net sales for the first quarter of 2013 9

10 New Facility Established in the Gansu Province Gansu Facility January 10 th : Biostarestablishes new office in the Gansu Province of the People’s Republic of China. FOCUS: the sales of Biostar’s Hepatitis B products in Gansu, Qinghai and Tibet. Historically, the three provinces have shown a good consistent sales record primarily due to poor medical conditions and high incidences of Hepatitis B in the population from the three provinces. Due to China’s ongoing expansion of their national healthcare reform, it was logical for Biostar to set up a headquarter in Gansu to expand the company’s market share. 9

11 Significant Designation for Biostar’s China Subsidiary January 15 th : Biostar’s China operating subsidiary, Shaanxi Aoxing Pharmaceutical Co., Ltd., was designated as the Shaanxi Province Liver Disease Health Education Base. Shaanxi Aoxing Pharmaceutical has been awarded numerous honors of Shaanxi Pharmaceutical and Health Products Cooperation Association Director Unit The new title for the facility will now provide a new platform for promotion, research and development of Biostar’s Hepatitis B products. The reach and development of current and future products will not increase significantly. 9

12 New Partnership with Shaanxi University March 6 th : Partnered with the Research Institute of Pharmaceuticals at Shaanxi University of Chinese Medicine to develop a new liver cancer drug. Current cases of cancer on a global scale has been increasing drastically with China holding the larger percentage of the demographic o According to the World Health Organization (WHO), in 2012 on a global basis, there were 14 million new cancer cases and 8.2 million deaths; China accounted for 3.07 million of the new cases and 2.2 million of the deaths. o In 2012, China accounted for approximately 50% of the world’s liver cancer cases. 9

13 ADiversePortfolioofProducts-Xianyang Xin Aoxing CapsuleGanWangTaohuasanTianqi Dysmenorrhea CapsuleDanshen Granule 10 Category Name Treatment SFDA OTC Xin Aoxing Oleanolic Acid Capsule Acute and chronic hepatitis B ( “ HBV ” ) Approved Ganwang Compound Influenza Approved Tianqi Dysmenorrhea Capsule Menstrual swelling and cramping Approved Prescription Danshen Granule Alleviates blood stasis and angina Approved Taohuasan Pediatric Children respiratory tract infection Approved Health Product Yizi Capsules Aids fertility and fetal development Provincial level approved Tangning Capsules Type II diabetes Provincial level approved Shengjing Capsules Replenish kidney function Provincial level approved Aoxing Ointment Psoriasis, vitiligo and dermatitis Provincial level approved Aoxing Ganbaodai Hepatic and liver protection Provincial level approved Medical DeviceHernia Belt Hernia Provincial level approved

14 ADiverse Portfolioof Products-Weinan Common coldApproved Amantadine Hydrochloride inflammatory In April 2012, Biostar won a bid to supply hospitals In three provinces with Huangyangning Tablets Penetration of hospital prescription drug market marks important milestone for Biostar 11 Category Name Treatment SFDA OTCOTC Zhitong Tougu Plaster Cream Pain reliever Approved Compound Paracetamol and Prescription Fosfomycin Calcium Urinary tract infections Approved Huangyangning Tablets* Cardiovascular disease Approved Jiakangling Capsule Hyperthyroidism Approved Qianlietong Capsule Prostate disease Approved Wenweishu Capsules Chronic gastritis Approved Danshen Tablets Coronary heart disease Approved Piracetam Tablets Cerebrovascular disease Approved Erythromycin Estolate Coated Particles Anti-bacterial anti- Approved Health ProductHuaren Changweitong Capsule Gastrointestinal function Approved

15 Flagship Product–XinAoxing 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 ’ s population) are infected with HBV Has high effectiveness rate Solid Growth Over a 4-Year Period – High effectiveness rate in relieving HBV symptoms per People ’ s Hospital of Shaanxi Province) - (as Revenue Generated by Xin Aoxing ($ Million) Nationally branded product and easily accessible 60.5 53 – Sold at local pharmacies since 1998 37 Low cost/high margin 19 10 Highly affordable – In most cases covered by personal health insurance 20072008200920102011 12

16 InnovativeProductPipeline 13 Category Name Treatment Status OTC KunLingWan Irregular menses Finished clinical testing Zushima Aerosol pain suppressant Pending SFDA approval Prescription Azithromycin Tympanitis, pharyngitis, bronchitis Pending SFDA final testing Yinyangsuo Kidney disease Finished clinical testing Zhixuening Uterine Bleeding Finished clinical testing Xiao ’ aiping Tumors, esophagus cancer Finished clinical testing Zhenbao Wan Thrombus & coronary heart disease Finished clinical testing

17 LargeDistributionNetwork Beijing Factory locations in Xianyang and Weinan – Shaanxi province Weinan Xianyang Provinces – Biostar’s sales network coverage -Extensive sales network across China’s 25 provinces Approximately 13,000 rural medical sales outlets in Shaanxi Sales team of over 400 members - - 14

18 s & Marketing Straistribution Strateg Sales andDistributionStrategy RURAL Marketing: MASS Advertising: Widen Coverage Broaden Awareness Sales & Markteing Strategy Mass media advertising to increase brand awareness Continue to invest in new sales offices and sales- force Build closer relationship with pharmacies and doctors Increase penetration in 25 existing provincial markets Deepen penetration in rural markets by opening additional rural distribution centers Invest in village clinics and sales centers 15 Two-Dimensional Sales Strategy Distribution Strategy

19 16 1 About Biostar 2 Financial Highlights 3 Growth Opportunities

20 HistoricalFinancialPerformance * Net income and EPS for 2011 and 2012 was based on 27.9 million shares outstanding and it was affected by: a) lower selling prices to the Chinese government’s price control policy, and higher competition for Xin Aoxing b) higher advertising expenditures, c) $1.5 million higher general and administrative expenses mainly related to stock-based compensation and the acquisition of Shaanxi Weinan in late 2011, d) a $2.3 million increase in research and development expenses for acquiring a proprietary technology, and e) $1.8 million non-cash impairment loss on land use rights. 17

21 2012 &2011Revenue Breakdown Product byby 2012:$49.3Million2011:$92Million Xin AoxingXin Aoxing Taohuasan 0.9%0.9% 0.0%0.0% 8.6%8.6% Gan WangGan Wang 7.2%7.2% Tianqi 4.5%4.5% DanshenDanshen 7.1%7.1% ParacetamolParacetamol 65.8% 7.2%7.2% Health Products total 5.9%5.9% Shaanxi Weinan products Medical Device 18

22 2013 vs. 2012 Highlights In April 2012 – PRC government suspended sales of gel capsule products All China-based pharmaceutical companies that use gelatin capsules to manufacture drugs, were severely affected Many large pharmaceutical companies reported substantial losses for the April – July period Biostar was not immune to the industry-wide losses As a result… Sales and overall results for 2012 were similarly adversely affected 19 $ in millions (except in per shares)20132012 Net Sales$52.7$49.3 Gross Margins40%60.5% Operating Income (loss)$0.51$(21.80) Net Income (loss)$0.81$(20) EPS$.06$(2.09)

23 Moving Forward: In late July, Xianyang (SFDA) gave the “ green light ” approval to restart sales of gel capsule products Despite the temporary setback, business remains strong Business plan:Business plan:Continue to bring new products to market Expand geographic reach Broaden channels of distribution Reinvigorate sales of flagship gel capsule product Xin Aoxing Steps taken:Ramp up production: Employees are working overtime, a second shift was added Rebuild consumer confidence: aggressive advertising campaign was initiated, including medical journals and health magazines New sales business model: establishing a B2C call center – direct sales to customers 20

24 BalanceSheetHighlightsatat3/31/2013 21 HighlightsDecember 31, 2013December 31, 2012 Cash and cash equivalents$80,072$1,759,078 Total Current assets$35,985,502$41,974,131 Total Assets$67,564,444$70,475,300 Total current laibilities$4,791,505$12,702,552 Total stockholder's equity$62,772,939$57,772,748 Total liabilities and stockholder's equity$67,564,444$70,475,300

25 22 1 About Biostar 2 Financial Highlights 3 Growth Opportunities

26 Other Growth Opportunities China’s medicine and pharmaceutical industry is one of the fastest growing industries of the Chinese economy (according to Data Monitor & IMS Health) The world’s third largest prescription drug market Grown at over 16% annually (since 2000) Mentality of patients living in rural areas is changing 70% of China’s 1.3 billion people live in rural areas Number of patients seeking cures through “modern” medicines offered in hospitals and healthcare centers is rapidly increasing Highly fragmented market and government backed consolidation initiatives provide M&A opportunities 23

27 China’s Healthcare Reform China's $124 billion healthcare reform plan was launched in 2009. Two major guidelines of the plan are accessibility and affordability –––– The first phase completed by the end of 2011 increased accessibility The second phase to be completed by 2020 aims to increase affordability by making medicines and medical services affordable to everyone. Chinese government increased the number of medicines included in the National Reimbursement Drug list (fully or partially reimbursable) Private health insurance has become more affordable $5.6 billion investment over 3 years has facilitated the “New rural cooperative medical care program” – Investment on patient education and encouragement to use “modern” medicine Provides patients suffering form severe diseases with additional financial assistance Shaanxi, Sichuan, Chongqing, Gansu, Henan, Hubei, and Hunan comprised 30% of the $5.6 billion spending – – 24

28 Regulatory Compliances Quality Control Related – Good Manufacturing Practice ( “ GMP ” ) Certification, regulated by the State Foods and Drugs Administration ( “ SFDA ” ) – All Chinese pharmaceutical manufacturers must be GMP certified to produce medicines of any kind. Biostar received its first GMP certification in 2006 and received another verification 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 approval and licensing in China. Redwood Capital estimates that only 15% of new-to-market drug applications got approval by SFDA. Environmental regulations – Subject to environmental laws and regulations stipulated by national and local environment protection bureaus in China. Intellectual Property Rights and Patents – Biostar has filed for copyright protection for the various names and brands of products. 25

29 How to ContactUs Corporate website: Contact: Ally Gong Tel: +86-29-3368-6638 Email: office@aoxing-group.coml: 26

30 Biostar Nasdaq: BSPM Pharmaceuticals,Inc. Investor Presentation June 2014

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