CFO Interview: BioPharm Asia, Inc. - Michael Guo

• On 4:01 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, Michael Guo, CFO of BioPharm Asia, Inc., discusses the outlook for the sector and for investors.

MICHAEL GUO joined BioPharm Asia, Inc., as Chief Financial Officer in 2008. Prior to his leadership role at BioPharm Asia, Mr. Guo served as Finance Director of China for Power-One, Inc., as well as CFO of China for Magnetek, Inc. His prior experience also includes his time as Senior Finance Manager for CompaQ Technologies. Mr. Guo is a member of the Association of Certified Chartered Accountants (ACCA) and holds an MBA from the University of Minnesota. He has over 15 years of professional finance and accounting experience, including work at senior management staff levels with U.S. publicly listed companies.

TWST: Please begin with a brief overview of the evolution of BioPharm Asia.

Mr. Guo: BioPharm Asia (BFAR.OB) debuted as a publicly traded company on the U.S. stock market in May 2009 through a reverse merger with Domain Registration Corp., a Nevada corporation. The company changed its ticker symbol from DOMR to BFAR on Aug. 28, 2009. Currently, there are 50 million BFAR shares outstanding. BioPharm Asia is well diversified with operations in growing, manufacturing, wholesale distribution and retailing of pharmaceutical products, both Western and traditional Chinese. Its robust revenue growth - 22% year-over-year in the quarter ended June 30, 2009 - has been driven mainly by rising sales in our wholesale operations, though sales from new retail stores are starting to have an impact. Our operations are based primarily in Northeast China and are organized into the two divisions, "Pharmacy" and "Herb." In 2008 our revenue was roughly $20 million.

TWST: Would you describe some of the products in your pipeline?

Mr. Guo: We produce both Western medicine and traditional Chinese Eastern medicines. Our focus, however, is the development and distribution of our traditional Chinese medicine line. Our company is engaged in planting and processing our own herbs, which allows us to better ensure the highest quality of our traditional medicines. On our pharmaceutical side, we are heavily focused on logistics and distribution. On our wholesale side, we are a leading distributor of household medicines, chemical agents, antibiotics, biochemistry drugs and biological preparations to hospitals and drugstores throughout China.

TWST: Would you explain your customer base and who BioPharm Asia's direct competition is today?

Mr. Guo: Our current customer network includes 121 secondary and integrated hospitals, and 71 professional medical institutions dedicated to pulmonary and heart disease research. In other words, BFAR has the resources to supply chain stores nationwide, to produce high-margin, private-label products, and to continue expanding its profitable wholesale and manufacturing operations to fund its retail expansion. We also are heavily involved with community health care centers and rural clinics. Our direct competition comes primarily from state-operated companies and a few large retailer chains in China.

TWST: What would you say gives BioPharm Asia the advantage over its competition?

Mr. Guo: China as a whole, as you know, has gone through extreme reforms recently. The Land Reform Act of last year essentially allowed for the population of about 400 million rural farmers to sell their lands. This is unheard of in Chinese history, and by so doing, this inadvertently created a host of wealth among those farmers in non-metropolitan areas of China. So of course, as soon as these farmers and others that sold land benefited from these extreme cash infusions, they began migrating to metropolitan areas - i.e., what we call Tier 1, Tier 2 cities - such as Beijing, Shanghai, Guangzhou, Nanjing, etc. Now the Chinese government has a new hurdle: how to handle health care for these newly urban citizens. So earlier this year, the government announced a sweeping health care reform plan that aims to cover 90% of the population with basic medical insurance by 2011. A key element of this $124.5 billion initiative is an overhaul of prescription drug distribution. Up to now, drugs have been sold mainly by hospitals and retailing has been concentrated in major cities. The government is now expanding medical care and drug sales into smaller towns and the countryside. It has also created a list of 307 "basic medicines," both Western and traditional Chinese, that will be produced and sold under its supervision. More generally, the government is working to reduce drug costs by streamlining distribution, cutting out middlemen and rationalizing the retail drug business. This is bad news for some players, such as hospitals that have been relying on high-margin sales of basic drugs to beef up their revenues. Hospitals are widely expected to lose much of their drug business to other venues. The drive to lower drug costs also will put less-efficient pharmacies under stress. But for the strongest firms, this is a time of unprecedented opportunity. Chains with a solid foothold in rural and small community markets should do especially well - and BioPharm Asia is one of these. Companies that can absorb weaker retailers and gain larger shares of the retail market stand to profit handsomely as overall drug sales in China soar in coming years. China's rising prosperity and its aging population will combine to increase demand not only for prescription drugs but also for higher-margin products on the shelves of retail chains, including over-the-counter medicines, herbals and sundries.

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 .

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