Skystar Bio-Pharmaceutical Company
Skystar Bio-Pharmaceutical — Investor Presentation (November 2009)
40 slides from Skystar Bio-Pharmaceutical's investor presentation, Nov 20, 2009
Slide 1: Skystar Bio-Pharmaceutical Co., Ltd.
wT, IS SxustaR pad Bio-PHARMACEUTICAL CO.,LTD. ‘SKYST/ R. Scott Cramer, Director Bennet Tchaikovsky, CFO
Slide 2: Safe Harbor Statement
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
Slide 3: Company Overview
Company Overview Leading China-based producer and distributor of veterinary medicines, vaccines, microorganisms and feed additives > GMP production facilities and processes » Headquarters: Xi'an, Shaa » Over 200 employees > Only U.S. listed veterinary company in China
Slide 4: 2009 Recent Events
2009 Recent Events Completed public offering for 3.22M shares of common stock for gross proceeds of ~$21.0M in July 1=Y-Ye] n NASDAQ under the symbol “SKBI” in June Use of proceeds: Construction of new fa and development,
Slide 5: 2009 Recent Events
2009 Recent Events Improved revenues, gross margins and adjusted net income YTD Completed forward 2-for-1 stock split in November
Slide 6: Skystar Snapshot
Skystar Snapshot Prasoneis| Stock Price (Nov. 17, 2009) $11.50 52 Week Range $ 3.10 - $13.50 Shares Outstanding 6.96M Market Cap $80.04M P/E (TTM — Adjusted*) 6.54 YTD Revenues $22.84M YTD EPS / Adjusted EPS* $1.30 / $1.38 All figures reflect the effect of a forward 2-for-1 split of Skystar’s common
Slide 7: Why Invest in Skystar
Why Invest in Skystar > High growth bio-pharmaceutical portfolio company with extensive product lines covering all key segments of the animal farming industry » Proven track record of growing revenue, gross profit and adjusted net income » 2003 — 2008 CAGR of 84.39% in revenues; 84.36% in gross marg
Slide 8: Why Invest in Skystar
Why Invest in Skystar >» Compelling and growing market opportunity driven by China’s socio-economic trends » Aggressive growth strategy in place with fully funded expansion plans » Unparalleled sales and distribution network » Diverse customer base covers all 29 farm producing provinces in China » E
Slide 9: Growing Industry
Growing Industry Consolidation of family owned/operated farms and improved technology are driving demand and growth in the veterinary industry
Slide 10: Growing Industry
» Growing Industry China is the world’s largest producer of poultry and livestock Government supports rapid development of modernization GMP certification required by PRC government for all veterinary pharmaceutical and vaccine manufacturers Higher living standards spur demand for animal-based food
Slide 11: Products Lines Address Major Industry Segments
Products Lines Address Major Industry Segments [Product | Reverse) Grose Margin | 9 Months Endec 109 As a Percentage of Total Veterinary Medications $14,999,173 66% $6,060,403 51% Micro-organisms $5,815,280 25% $4,254,692 36% Feed Additives $ 1,003,628 4% $599,279 5% Veterinary Vaccines $ 1,026,018
Slide 12: Veterinary Medications
Veterinary Medications | Product |__Revenue | _Gross Margin _| ale mse Se i, As a Percentage of Total Veterinary Medications $ 14,999,173 66% $6,060,403 51% Total $ 22,844,099 100% $11,831,427 100% 140+ products » 26 new products introduced in 2009 » Focus on high margin products
Slide 13: Micro-organism
Micro-organism | Product | Revenue | Gross Margin _| 9 Months Ended Sept. 30, As a Percentage of Total 2009 Micro-organisms $5,815,280 25% $4,254,692 36% Total $ 22,844,099 100% $11,831,427 100% 16 products » In house production of microbial strain significantly reduced production costs in 2008 » Co
Slide 14: Feed Additives
Feed Additives pasta | etoom oon 9 Months Ended Sept. 30, As a Percentage of Total 2009 Feed Additives $ 1,003,628 4% $599,279 5% Total $22,844,099 100% $11,831,427 100% 10 products > Increase yield > Improve health of livestock
Slide 15: Veterinary Vaccines
Veterinary Vaccines | Product | Revenue | Gross Margin _| 9 Months Ended Sept. 30, As a Percentage of Total 2009 Veterinary Vaccines $1,026,018 5% $917,053 8% Total $ 22,844,099 100% $11,831,427 100% 10 products (active and inactive) » Constructing new production facility projected to increase produ
Slide 16: Effective R&D Capabilities
Effective R&D Capabilties Over 25 researchers responsible for developing new medicines and vaccines in response to epidemics, pandemics and diseases Two labs: Veterinary Medicine Lab and Microorganism Lab One Quality Inspection Center LE
Slide 17: Effective R&D Capabilities
Effective R&D Capa 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 plan
Slide 18: Bringing Products to Market
Bringing Products to Market Launched several products targeting porcine reproductive and respiratory syndrome (PRRS), aka Blue Ear Disease » April, 2007: launched Chinese Goldthread (Huanglian) Detoxification Powder ("CGDP") » July, 2007: launched First Aid Kit for Swine High Fever Syndrome » Cures
Slide 19: Customers and Distribution
Customers and Distribution 1,276 distribution agents 473 direct customers Distribution to all 29 farming provinces in China
Slide 20: Skystar's Competitive Advantages
Skystar’s Competitive Advantages Only U.S. listed veterinary supply company in China Majority of competitors only offer 1-2 product lines High barriers of entry for international competitors
Slide 21: Skystar's Competitive Advantages
Skystar’s Competitive Advantages Nationally recognized brandin Largest competitors are state-owned enterprises | Bec ——— .
Slide 22: Growth Strategy
Growth Strategy Introduce New Products 42 new products approved in 2009 Covers all four product lines ies to continue to add to portfolio and increase market share
Slide 23: Growth Strategy
Growth Strategy Expand Manufacturing Capabilities wo new fa s scheduled for completion in late 4Q09 is fully funded 1 $16.7M in revenue a n gross margin by 2!
Slide 24: Growth Strategy
Growth Strategy Bison SkusTan | Targeting highly accretive acquisitions
Slide 25: Annual Revenue Growth
Annual Revenue Growth $30.00 $25.58 ered $22.80 $20.00 $15.10 $15.00 $9.80 $10.00 $5.00 [ st 2006 2007 2008 9 Months 2009 Revenue ($MM) SkysTar =
Slide 26: YTD Revenue Growth
YTD Revenue Growth $25.00 $22.80 $20.00 $17.20 $15.00 $10.20 $10.00 $5.00 sooo + © Months. 9Months 9 Months 2007 2008 2008 |@Revenue (SMM) for the 9 Months Ended September 30 ImacetrEAL CD, Ea
Slide 27: Third Quarter Revenue Growth
Third Quarter Revenue Growth $14.00 $1278 $1200 $10.00 a $8.00 $6.00 isons) $4.00 $200 $0.00 + 3007 3008 3009 Revenue ($MM) For the 3 Months Ended September 30,
Slide 28: Annual Gross Margin Expansion
Annual Gross Margin Expansion $18.00 600% $16.00 = 518% | 500% $14.00 m4 $1278 $12.00 $180, 40.0% $10.00 $0.34 30.0% $8.00 3600 20.0% $4.40 3400 10.0% $200 * 0.0% 208 2007 2008 Months 2008 emeceossiarin tM) Gross Margin) SkusTar
Slide 29: YTD Gross Margin Expansion
YTD Gross Margin Expansion $16.00 871% 51.8% | coo $1400 $11.80 $12.00 00% $10.00 $8.90 on 30.0% sod $5.80 20.0% $4.00 10.0% $2.00 so.00 + | 0.0% 9 Months 9 Months 9 Months 2007 2008 2000 =EGi085 Margin (SMM) for the 9 Months Ended
Slide 30: Third Quarter Gross Margin Expansion
Third Quarter Gross Margin Expansion “ i eee ” $8.00 52.2% | oom $7.00 $6.67 $6.00 40.0% $5.19 $5.00 30.0% $4.00 $3.18 $3.00 20.0% $2.00 10.0% $1.00 sooo + | 0.0% 3007 3008 3a09 MEEGross Margin (GMM) —+-Gross Margin (%)
Slide 31: Annual Adjusted Net Income Growth
Annual Adjusted Net Income Growth 20.1% $8.00 Te $7.00 <4 $6.70 $664 25.0% $6.00 $5.00 $420 $4.00 15.0% $540 $238 32.00 $1.00 s+ 5.0% 2006 2007 2008 Months 2008 IMACeLTEAL.CD, 8 a
Slide 32: YTD Adjusted Net Income Growth
YTD Adjusted Net Income Growth $9.00 31.0% $8.00 es 29.1% 29.0% $7.00 side 27.0% $6.00 $5.20 25.0% $5.00 23.0% $4.00 21.0% Ay $2.88 200 19.0% $1.00 17.0% sooo | | 15.09% 8 Months 8 Months 9 Months 2007 2008 2008 [ SEE Net Income (SMM) => Profit Margin SkysTAR
Slide 33: Annual Adjusted Net Income
Annual Adjusted Net Income Net income (loss) Non recurring non-cash charges: Amortization of deferred financing Amortization of discount on debentures Amort of deferred compensation Inducement costs for debentures converted Inducement costs for warrants exercised (Change in fair value of warrants In
Slide 34: High Margin Products
High Margin Products Revenues | Gross Margin) GM % Veterinary $14,999,173] $6,060,403} 40% Medications “rt oon Micro-organism 5,815,280 4,254,692 73% Feed Additives 1,003,628 599,279 60% Vaccines 1,026,018 917,053 89% Total 59 $11,831,427 52% i .
Slide 35: Select Balance Sheet Data
Select Balance Sheet Data | acct | Sept. 30, 2009 June 30, 2009 Cash $14.8M $411,000 Current Assets $36.2M $17.6M Current Liabilities $3.8M $6.36M *
Slide 36: Weibing Lu - Chairman and CEO
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 o
Slide 37: Wei Wen - Director and Vice General Manager
Wei Wen - Director and Vice General Manager » Secretary of the Board and Vice GM since founding of the Company » Graduated from Xi’an University of Science and Industry in 1986 » Manager and Vice GM at the Sales Department of two companies before joining Skystar a
Slide 38: Bennet P. Tchaikovsky, CPA, Esq. - CFO
Bennet P. Tchaikovsky, CPA, Esq. - CFO » Part-time CFO China JoJo Drugstores, Inc. (OTCBB: CJJD.OB) » Former CFO of Innovative Card Technologies, Inc. (OTCBB: INVC) » Director of Ever-Glory International Group (NYSE AMEX: EVK) » Director of Sino Clean Energy Inc. (OTCBB: SCLX.OB) » Graduate of South
Slide 39: Erna Gao - VP Finance & Administration
Erna Gao - VP Finance & Administration » Served as our Chief Financial Officer from March 2004 through May 2008 » Former Chief Accountant at Dongda Petroleum Company » Graduated from Xi'an TB University with a degree in Accounting | Bec ee .
Slide 40: Scott Cramer, Director & US Spokesperson
Scott Cramer, Director & US Spokesperson » Former CEO, CFO of The Cyber Group » Founder and President of Cramer & Associates, a firm a specializing in retirement management, estate planning and investments » Registered Representative - Series 7, 63, 65 40
Skystar Bio-Pharmaceutical — Investor Presentation (November 2009) on 6ix