CEO Interview: China Sky One Medical, Inc. - Yan-Qing Liu and Stanley Hao

• On 1:21 pm EST, Monday November 2, 2009

67 WALL STREET, New York - November 2, 2009 - The Wall Street Transcript has just published its Pharmaceuticals Report offering a timely review of the sector to serious investors and industry executives. This 76-page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Small-Cap Specialty Pharma - Patent Expiration - Pending Health Care Reform - Cultivating And Expanding R&D Pipelines - Chinese Drug Manufacturers - Brisk M&A Activity - Indian Pharma VS. U.S. Pharma - Competition From Generics - FDA Approval Process - Clinical Research Outsourcing Market - Stem Cell-Based Technology - Cancer Radiation Therapy - Expansion Into Asian Markets - Traditional Chinese Medicine VS. Western Medicine In Chinese Pharma

Companies include: Aeolus Pharmaceuticals (AOLS.OB); Nutra Pharma (NPHC.OB); Quick-Med Technologies (QMDT.OB); Abbott Labs (ABT); Alexza Pharmaceuticals (ALXA); AmexDrug Corporation (AXRX.OB); Aurobindo Pharma (AUROBINDOP.BO); BioClinica (BIOC); BioPharm Asia (BFAR.OB); Biocon (BIOCON.BO); Cephalon (CEPH); China Sky One Medical, Inc. (CSKI); Claris Lifesciences (CLARICH.BO); Cortex Pharmaceuticals (COR); Daiichi Sankyo (DSKYF.PK); Dr.Reddy's (RDY); Elan (Elan); Eli Lilly (LLY); Forest (FRX); GeoPharma (GORX); Glaxo (GSK); Glenmark (GLENMARK.BO); Johnson & Johnson (JNJ); Lupin (LUPINSL.BO); Mannatech (MTEX); Matrix Laboratories (ATRIXLAB.BO); Medical Nutrition (MDNU); Merck KGaA (MKGAY.PK); Mylan (MYL); NeoStem (NBS); Novartis (NVS); Pfizer (PFE); Piramal Healthcare (PIRAMALHE.BO); Provectus Pharmaceuticals (PVCT.OB); Ranbaxy (RANBAXY.BO); Salix Pharmaceuticals (SLXP); Shire (SHPGY); Telik (TELK); Winston Pharmaceuticals (WPHM.OB).

In the following brief excerpt from the 76-page report, Yan-Qing Liu, CEO of China Sky One Medical, Inc., and Stanley Hao, CFO of the same, discuss the outlook for the sector and for investors.

YAN-QING LIU, Founder, Chairman and CEO of China Sky One Medical, Inc., is Chief Executive Officer, President and Director of Harbin Tian Di Ren Medical Science and Technology Company (TDR); he also serves as General Manager of CSKI's Harbin Bio-Engineering subsidiary. Mr. Liu graduated from the Prophylactic Department of Harbin Medicine University, where he obtained his bachelor's degree. In 2005 he studied at Tsing Hua University and earned an executive master's of business. Before establishing his own company, he gained eight years of experience as a reporter at Family Health Newspaper, and he has over 10 years of experience in drug marketing, research and development of new drugs, and enterprise management. Mr. Liu has been instrumental in establishing TDR's sales program and sales network covering the PRC.

STANLEY HAO is the Chief Financial Officer of China Sky One Medical, Inc., a position he's held since November 2008. Mr. Hao was also recently appointed board secretary of CSKI in June 2008. From January 2006 through June 2008, Mr. Hao served as the President's Assistant and Financial Officer for Sumitomo Group Canadian Branch, an integrated trading company. Prior to this, Mr. Hao served as Marketing Executive and Canadian Market Analyst for MGM Mirage, an entertainment company that owns and operates casino properties. From September 1997 to September 2004, Mr. Hao was Chief Executive Officer and Co-founder of SunnyZone Consulting Co. Ltd., a financial consulting company. Mr. Hao holds bachelor's degrees in economics and arts from Beijing University Union and an MBA from the University of Phoenix.

TWST: Let's begin with a brief historical sketch of China Sky One Medical and a summary of the things the company is doing at the present time.

Mr. Hao: China Sky One Medical, Inc. (CSKI), is located in Harbin, which is in the northeast of China. The company specializes in the manufacture of traditional Chinese medicines (TCMs), Western medicines and bioengineered products, which include biological drugs and testing kits used to detect and treat a variety of diseases. We are one of the few Chinese pharmaceutical companies in China with an extensive national distribution network, a diverse product portfolio based on our proprietary intellectual property, a state-of-the-art Research and Development center with a pipeline of new products and an experienced management team with deep industry knowledge. The company reported revenues of $57 million in the first half of 2009, an increase of 57.6% versus the same period last year. Net income for the first six months of 2009 reached $16.7 million, or $1.01 per diluted share, compared to $12.0 million, or $0.78 per diluted share, for the same period of 2008.China Sky One Medical has four subsidiaries. Three of them are engaged in manufacturing traditional Chinese medicines and one, Harbin First Bioengineering, is engaged in the manufacture of bioengineered products. The company upgraded to the American Stock Exchange in May 2008 and then upgraded to the NASDAQ Global Market in September 2008. This provided a much more liquid market for our stock.

TWST: What are the government regulations that cover China Sky's products?

Mr. Hao: The Chinese government has championed medical reform, and not long ago it issued the first version of the the National Basic Medicine Catalogue. Within the 307 pharmaceutical products, we have seven products not often seen among Chinese pharmaceutical manufacturers. Chinese medical reform will benefit the pharmaceutical industry in general as Chinese citizens spend more on pharmaceuticals and health care, which will receive a higher percentage of reimbursements from either local or the federal China government. In addition, it is expected that more retail pharmacies will be covered in more rural areas of China as a result of the reform, and that retail pharmacies' distribution channels will be extended. Similar to what we have done with distributors in metropolitan areas, we have now initiated collaboration with sales agents who are specialized in rural markets in China. We plan to focus on this market going forward. The basic medicine catalogue, it includes very basic products that treat common diseases. However, it won't be very meaningful to the revenue growth of a company by having many products included in this list. The key is that a company should have very good and proprietary products that are able to sustain consumers' interests and generate growing sales. In addition, the distribution channels and marketing strategies are crucial.

TWST: Last month the company announced plans to distribute its patches in Canada. Will there be future moves into international markets?

Mr. Hao: This question has been asked by a lot of our U.S. shareholders. Sales overseas for China Sky One Medical's products have been lower than domestic sales. Exports accounted for less than 10% of 2008 revenues. In order to have more of a presence in North America so that our U.S. shareholders may have a better understanding of our products, we will have to put more effort into the North American market. We have exported 40,000 units of our pain relief patch through our Canadian distributor. Shortly after, during a roadshow in Los Angeles in the middle of September, we signed another distribution agreement with a distributor in Los Angeles for our Slim Patch product. So, yes, the answer is that it is positive that we plan to promote more sales overseas, although we all have a clear vision that the growth in the near future is still located in China. However, we plan to continue opening up overseas markets so that our products can be circulated in the United States and in European countries. We are currently applying for the CE certification to access European markets.

TWST: What would you reasonably expect CSKI to look like in about three years?

Mr. Liu: In the external-use TCM drug market, we expect China Sky One to be ranked among the top three players in China over the next three years. In terms of our diagnostic testing kits and biological products, we expect to become one of the leading manufactures in China.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 76-page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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