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
2. Safe Harbor Statement
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.
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3. Company Overview
Weikang Bio-Technology Group is a leading developer,
Weikang Bio-Technology Group is a leading developer,
manufacturer and marketer of
manufacturer and marketer of
Traditional Chinese Medicine (TCM)
Traditional Chinese Medicine (TCM)
Western prescription and OTC pharmaceuticals
Western prescription and OTC pharmaceuticals
Other health and nutritional products
Other health and nutritional products
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 3
5. Investment Highlights
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
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6. Attractive Industry Dynamics
China’s pharmaceutical market is currently the 5th largest in the world
Expected to grow to the 2nd largest by 2020 and the largest by 2050
Medical expenditure ranks the 3rd 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
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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
The best doctor treats the problem before
The best doctor treats the problem before
the problem becomes the disease ~~
the problem becomes the disease
* factsanddetails.com, April 2010
** China’s Ministry of Health Old Chinese medical proverb
Old Chinese medical proverb
8. Weikang’s Target Market
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
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9. High Margin Portfolio
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%
WeiKang,
28.13%
Tiangfang,
71.87%
% Sales by subsidiaries (2009)
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10. TianFang’s Product Portfolio
% of 2009 Gross
Product Main Function
Revenue Margin
Ferrous Fumarate
Treats iron deficiency anemia 24.24% 51.28-54.39%
Granule
Eucommia
Nourishes the liver and kidney
Ulmoides Oliv 23.26% 46.25-49.03%
Strengthens muscles and bones
Granule
Tinidazole Vaginal
Effervescent Tablet Treats bacterial infections in the female
14.87% 39.76-43.55%
reproductive system
Nourishes the liver and kidney
Bushen Qiangshen
Enriches yin, strengthens yang 7.85% 63.37%
Tablet
Enhances health and brain function
Intended to treat duodenal ulcers, gastric
Ranitidine
ulcer, reflux esophagitis, Zollinger-Ellison
Hydrochloride 1.66% 11.24%
syndrome, and other symptoms with gastric
Capsules
acid overproduction
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11. WeiKang’s Product Portfolio
% of 2009 Gross
Product Main Function
Revenue Margin
Promotes the restoration of the natural
Rongrun Youth
balance of female hormones during 3.78% 66.55%
Keeping Capsules menopause
Reduces free radicals and oxidative stress
Rongrun Energy
Intended to reduce the risk of 3.75% 66.55%
Keeping Capsules cardiovascular disease
Reduces the onset of cardiovascular
Rongrun Vitamin Sugar disease and fatigue for diabetics 4.11% 64.43%
Capsules Promotes healthy aging
Lowers blood lipid levels in order to reduce
Rongrun Intestine the likelihood of brain and heart vessel
related diseases 3.84% 66.55%
Cleansing Capsules
Strengthens immune system
Reduces cholesterol level in arteries
Rongrun Artery
Promotes healthier heart and brain 3.95% 65.74%
Cleansing Capsules functions
Rongrun Royal Jelly Immuno-regulatory
4.63% 61.73%
Extract anti-cancer properties
Rongrun Kidney Boost
Strengthen and promotes a healthy kidney 4.06% 71.93%
Tonic
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12. Strong Pipeline
Ten drugs in various stages of approval from the SFDA
Top R&D projects include
Has anti-cancer properties and is used in the treatment of radiation
10-HDA sickness and angiocardiopathy
Received SFDA approval and expected to launch in 3Q 2010
ShuangBaoGu ( a Provides several health benefits including the prevention and treatment of
variety of mushroom cardiovascular disease
grown on a salty land) Production expected to begin by end of 2010
Used to treat atrial fibrillation (irregular heartbeats)
Dofetilide
Approved for clinical test
Develop therapeutic properties of glycyrrhize acid
Licorice Flavonoid Treated conditions and afflictions includes allergies, hepatitis,
Project 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 A herbal based medicine effective in treating depression
Antidepressant Has passed several stages of testing and ready for clinical trials
Capsules Estimated R&D expenditure $71,000
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13. Extensive Distribution Network
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
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14. Sales and Distribution
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
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15. Sales and Marketing Strategies
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
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16. Production Facilities
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 capabilities
Capsule Oral liquid
Granules Gel and soft paste
Tablets Powder
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17. R&D Capabilities
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
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18. Growth Strategy
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
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19. Experienced Management Team
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
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22. Increasing Net Income
$18 80.0%
$15.64
56.6%
$12 39.0% 40.0%
32.9% 38.1%
$7.30
$5.45
$6 $3.85 0.0%
-$0.45
$0 -40.0%
2007 2008 2009 3 months 2009 3 months 2010
-54.7%
-$6 -80.0%
$m
Net Income Profit Margin
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23. Balance Sheet Highlights
USD in millions Dec. 31 2009 Mar. 31 2010
Cash and Equivalents $11.4 $18.1
Current Assets 11.7 19.5
Current Liabilities 10.5 10.8
Long-Term Debt 0.0 0.0
Shareholder's Equity 23.4 31.1
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24. Attractive Valuation
Ticker Price Market Cap Revenues Net Income Y/Y Net Y/Y PE
Company
(Exch) (6/8/10) (mm) 2009 (mm) 2009 (mm) Income % revenue % (TTM)
Weikang Bio- WKBT
$2.79 $76.45 $47.4 $15.6 116.67% 270.31% 4.5
Technology (OTCBB)
Biostar BSPM
$3.23 $83.42 $53.3 $10.5 56.95% 57.24% 9.8
Pharmaceuticals (OTCBB)
Renhuang RHGP
$2.00 $74.47 $43.4 $14.8 43.69% 3.67% 4.7
Pharmaceutical (OTCBB)
American Oriental AOB
$2.72 $213.18 $296.1 $41.4 -13.39% 11.90% 5.1
Bioengineering (NYSE)
CSKI
China SkyOne Medical $11.33 $190.23 $130.1 $34.4 19.40% 41.72% 5.5
(NASDAQ)
Tianyin Pharmaceutical TPI
$2.67 $71.67 $42.8 $7.9 32.50% 28.18% 7.9
Company (AMEX)
CPHI
China Pharma $2.67 $115.58 $61.7 $20.3 13.46% 21.05% 5.6
(AMEX)
Simcere SCR
$8.13 $447.27 $270.9 $17.5 -65.89% 6.24% 22.0
Pharmaceuticals (NYSE)
Average 12.4% 24.3% 6.4
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25. Investment Summary
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
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26. Contact Information
Company: Investor Relations:
Ren Hu Elite IR
VP of Finance John Marco
Weikang Bio-Technology Group Phone: (310) 819-2948
Phone: (201) 887 0415 Email: john.marco@elite-ir.com
Email: arenhu@gmail.com
Legal Counsel: Auditor:
The Crone Law Group Ahmed Mohidin, Partner
Wayne Chiang Goldman Parks Kurland Mohidin, LLP
101 Montgomery Street 16133 Ventura Blvd.
Suite 1950, Suite 880
San Francisco, CA 94104 Encino, CA 91436
Phone: (415) 955-8900 Phone: (818) 784-9000
Email: wchiang@cronelaw.com Email: ahmed@gpkmllp.com
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