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BMP Sunstone CorporationBMP Sunstone CorporationJanuary 2009January 2009
Delivering Quality Health Care to China
Delivering Quality Health Care to China2
Safe Harbor Statement
This presentation contains “forward-looking statements” within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements convey our current expectations or forecasts of future events. All statements other than statements of historical fact included in this presentation are forward-looking statements. Forward-looking statements in this presentation include, among others, statements relating to: our business strategy, including our acquisition or proposed acquisition of complementary businesses or integration of acquired businesses; other potential product licensing opportunities; our ability to expand into product extensions or complementary products; the dates of future product launches; the successful completion of negotiations with pharmaceutical companies to complete clinical work, registration, marketing and distribution of drugs in China or purchase of third party product lines; any potential benefits to be realized by the completed acquisitions; any potential benefits of our research and development activity; our ability to leverage our marketing capabilities with any future distribution capabilities or to drive demand for distributed product or increase market share in the Chinese pharmaceutical marketing and distribution markets; the expansion of our sales force in future periods; our future financial and operating results; the market size in China in future periods for prescription and OTC drugs; our ability to leverage our existing infrastructure and expand into new therapeutic categories; and our ability to secure additional financing. The words “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “propose,” and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements involve known and unknown risks and uncertainties, and other factors that may cause our, our partners or our industry’s actual results, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. While we believe that we have a reasonable basis for each forward-looking statement contained in this presentation, we caution you that these statements are based on a combination of facts and factors currently known by us and projections of the future about which we cannot be certain. Many factors affect our ability to achieve our objectives, including, among others: difficulties in acquiring complementary businesses or in integrating acquired businesses; delays in product introduction and marketing or interruptions in supply; our inability to compete successfully against new and existing competitors; adverse economic, political or social conditions in China; our inability to attract and retain key personnel; our inability to effectively market our services or obtain and maintain arrangements with manufacturers and distributors; a slowdown in the Chinese economy; and other factors disclosed in our SEC filings, including the “Risk Factors” sections of such filings. Any of these factors may cause our actual results to differ materially from those implied by our forward-looking statements. As a result of these factors, the forward-looking statements in this presentation may prove to be inaccurate and such inaccuracy may be material. We undertake no obligation to update these forward-looking statements, even though our situation may change in the future.
Delivering Quality Health Care to China3
Investment Highlights
Chinese pharmaceutical market continues to grow at 15%+ per annum
Continued consolidation magnifies opportunities for first movers
Unique integrated business model, with proprietary Rx, strong OTC brands and extensive distribution capabilities
Complementary sales and marketing capabilities create leading franchises in targeted, underserved and high-growth therapeutic areas of pediatrics and women’s health
Strong revenue growth with multiple drivers and rapidly increasing profitability
Execution oriented management team with track record of success
Delivering Quality Health Care to China4
Sunstone Pharma
Fully Integrated Platform
Beijing Medpharm (BMP)
Product Development Exclusive Commercial Rights
Alliance-BMP/GP CorpRongheng PharmaWanwei Pharma
Distribution Arms
PHYSICIAN
Delivering Quality Health Care to China
Fully-integrated specialty pharmaceutical company focused on the commercialization of branded prescription and OTC products in China
5
Company Profile
Beijing Medpharm
■ Specialty pharmaceutical company in-licensing Rx products for China market
■ Complementary therapeutic focus
■ Exclusive commercial rights for 8 drugs with 4 launched
■ Coverage of >1,000 hospitals nationwide
■ Partnership with 8 foreign companies including Novartis
Sunstone Pharma
■ #1 specialty pharmaceutical in pediatrics & gynecology
■ National-leading OTC brands
■ Direct access to ~60% of China’s retail pharmacies
■ Endorsed by central government authorities
Distribution Arms
■ 3 of the top 4 pharmaceutical markets in China
■ Coverage of all tier I/II hospitals in these markets
■ Partnership with Alliance-Boots and GP Corp
■ Access to >1,000 regional distributors
Delivering Quality Health Care to China6
Sunstone was founded in 1996, and has a long track record of excellent financial results with strong revenue growth and increasing profitability
Has three well established brands across the women’s health and pediatric markets, including the leading pediatric brand GoodBaby
Processes national OTC sales coverage with its own salesforce complemented by a network of independent agents
Recently qualified as “High Tech” company by the State, resulting in a new tax rate: 15% (previously 25%)
Recently renewed State GMP Certification for its manufacturing facility
49% stake was acquired in 2007, and the remaining 51% stake was acquired in 2008
Sunstone Overview
Delivering Quality Health Care to China7
GoodBaby is the #2 branded pediatric cold medicine in China
Confort is a top 5 brand for vaginal infections in China
Nemei is a newly established brand launched to expand strong existing presence in women’s health
GoodBaby
(14 Products)
Nemei
(8 Products)Confort
(4 Products)
Sunstone Leading Brands
Delivering Quality Health Care to China8
Sales force: 300
Agents: 800
Pharmacies covered: ~120,000
(~60% of the national retailing network)
Sunstone OTC Channel Coverage
Delivering Quality Health Care to China9
Innovation + Strong Brand + Channel = Results
Sunstone Revenue and Net Income
(1) Includes Pro Forma results for the period January 1, 2008 through September 30, 2008. BMP consolidated results starting February 17, 2008. Excludes year to date amortization of $3.1 million related to the Sunstone acquisition.
$42.0
$53.2
$7.1
$35.9
$9.8$7.3
$0.0
$25.0
$50.0
$75.0
2006A 2007A 9 Months Ended 9/30/08
(US
$M
)
Revenue Net Income
Delivering Quality Health Care to China10
Continued growth of existing products through additional market gains, geographic expansion, and expanded sales and marketing efforts
Potential to leverage strong existing brands to launch line extensions and complementary products
GoodBaby and Confort product offerings expected to double in the next three to five years
Sunstone remains committed to internal innovation with a 45 person R&D effort
This effort has resulted in the approval and launch of 6 innovative new medicines
Internal R&D efforts are complemented by collaborations with leading institutions, including Beijing University, Tianjing Institute of Pharmaceutical Industry, and Shangdong Institute of Pharmaceutical Industry
Fragmented Chinese pharmaceutical market presents opportunities for both product and company acquisitions
Sunstone Growth Opportunities
Delivering Quality Health Care to China11
BMP – Gateway to the China Market
Specialty pharmaceutical business in-licensing premium Rx products for China market
Complementary sales and marketing prowess to support the high premium, high margin business model
Initial therapeutic focus on OB/GYN complements existing Sunstone franchise
Full package of tailored market-entry serviceProduct registration
Pre-market entry analysis
Oversight of clinical trials
Delivering Quality Health Care to China12
Proprietary Product Portfolio
Name Indication Partner Status Deal Signed
Anpo Pre-term Labor Mgmt Taiwan Biotech Marketed Jul-06
Ferriprox Iron Overload Apotex Marketed Oct-07
Galake Pain Lotus Marketed Jun-07
Propess Cervical Dilation Cytokine Marketed Aug-05
Clindesse Bacterial Vaginosis KV Pharma In Development Jul-07
Enablex Over Active bladder Novartis In Development Nov-07
Misopess Labor Induction Cytokine In Development Nov-06
Ondansetron Nausea (oncology related) Ethypharm In Development Jul-07
Fentora Pain Mgmt Cephalon In Development Dec-06
Myocet Breast Cancer Cephalon In Development Dec-06
Nuvigil Excessive Sleepiness Cephalon In Development Dec-06
Delivering Quality Health Care to China13
Product Launch TimelineO
bste
tric
s
Product
Propess
Anpo
Galake
Ondansetron
Clindesse
Ferriprox
Enablex
2006 2007 2008 2009 2010 2011 TBD Deal Term (1)
Gyn
ecol
ogy
Pedi
atric
sO
ther
s
5 Years
5 Years
10 Years
13 Years
5 Years
5 Years
10 Years
√
√
√
√
√√
√(1) All deal terms are renewable(2) New concentration of Propess requiring full SFDA approval will be launched in February 2009
Misopess 10 Years√
√ (2)
Delivering Quality Health Care to China14
BMP: A Significant Growth Engine
BMP Historical Revenue
$841.0
$3,092.0
$3,902.0
$182.0
$0.0
$1,000.0
$2,000.0
$3,000.0
$4,000.0
$5,000.0
2005 2006 2007 9 Months Ended9/30/08
(US
$000
's)
Delivering Quality Health Care to China15
Scalable Across Therapeutic Categories
BMP business can leverage existing infrastructure and expand into new therapeutic categories, creating exponential growth opportunities
New salesforces can be added to accommodate attractive product opportunities
Salespeople in China are relatively inexpensive, and generate positive contribution when sales exceed ¥500,000 per year (~$73,000)
OB (2 Products)
OB/GYN (3-4 Products)
OB/GYN (3 Products)
OB/GYN (2 Products)
GYN (2 - 3 Products)
Pediatrics (1 - 2 Products)
Pediatrics (1 Product)
Pediatrics (1 Product)
Oncology Supportive Care(2 - 3 Products)
Oncology Supportive Care
(2 Products)
0
50
100
150
200
2004-2007 (80 Sales Reps)
2008 (100 Sales Reps)
2009 (120 Sales Reps)
2010 (150 Sales Reps)
Mar
ket O
ppor
tuni
ty
Delivering Quality Health Care to China16
A National Distribution Network
Beijing: Wanwei Pharmaceutical
Shanghai: Rongheng Pharmaceutical
Guangzhou: Alliance -BMP - GP Corp
#4 pharmaceutical market in China
Coverage of all top-tier hospitals
Relationships with 120 distributors
~800 products
#2 pharmaceutical market in China
Coverage of all top-tier hospitals
Relationships with 30 distributors and 1,000 pharmacies
~450 products
#1 pharmaceutical market in China
#4 wholesaler in China in 2007
Relationships with 12,000 hospitals and pharmacies
>30,000 products
Partner Alliance Boots is a leading distributor and retailer in Europe
Comprehensive distribution capability enables BMP business platform and provides future growth opportunities for Sunstone
Delivering Quality Health Care to China17
Successful Acquisition Track Record
Acquisitions continue to provide significant growth opportunitiesCompany Date Amount ($M) Rationale
Zhangjiakou Shengda Pharmaceutical Co., Ltd. (50.0% Stake)
12/19/08 $2.9 • Oral pediatric products complement GoodBaby (Sunstone) product line
• Specializes in antibiotic research and development, primarily focused on penicillin and cephalosporin products
Shanghai Rongheng Pharmaceutical Co., Ltd. (63.3% Stake)
7/7/08 $1.6 • Expands distribution network in Shanghai, China’s largest and most affluent city
• Distributes ~500 products to ~140 top-tier hospitals
Sunstone Pharmaceutical Co., Ltd. (51.0% Stake)
2/18/08 $92.7 (~8M shares, $11.5 / share as of 9/28/07)
• 100% ownership increases strategic leverage and simplifies capital structure
Guangzhou Pharmaceuticals Corporation (10.0% Stake with Alliance Boots)
1/28/08 $15.0 • Access to key distribution facilities in southern China to complement existing distribution infrastructure
Sunstone Pharmaceutical Co., Ltd. (49.0% Stake)
10/31/07 $32.0 • Minimizes reliance on lower-margin distribution business
• Expands presence in retail pharmacies and hospital-focused sales force focused on pediatrics and women’s health
Beijing Wanwei Pharmaceutical Co., Ltd.
12/6/05 $1.8 • Adds distribution assets in Beijing to nationwide sales and marketing operations
Delivering Quality Health Care to China18
Future Growth Opportunities
Sunstone Pharma
■ Internally developed products
■ Leverage strong existing brands
■ Company/product acquisitions
Beijing Medpharm
■ Approvals from existing pipeline
■ Additional licensing deals in existing therapeutic areas
■ Additional licensing deals in new therapeutic areas
Revenue and profitability growth rates targeted of 25% for the next 3 years at least
China pharmaceutical market 15%+ annual growth rate+
High-growth pediatrics and women’s health markets
Delivering Quality Health Care to China19
Boa
rd o
fD
irect
ors
Name Position Experience
Fred Powell
David (Xiao Ying) Gao
Chief Financial Officer • CFO, Eximias, InnaPhase, Premier Research• CPA, KPMG
Chief Executive Officer, Director
• VP and GM for Motorola in China/Asia Pacific Region• Started Chinese business in 1989 (grew to $5.4bn in
sales in 2002)• Held senior positions in the Chinese Government• MBA from the Sloan School at MIT
Yanping Zhao Corporate Vice President
Martyn Greenacre
Albert Yeung
• Formerly Chairman, Europe, SmithKline Beecham• Board member of Acusphere, Cephalon, Curis,
and Life Mist Technologies• Formerly Senior Executive for MNPs including, GSK,
J&J, Xian-Janssen, and BMS• Member of the SFDA advisory board for OTC
products
Chairman of the Board
Director
Zhiqiang Han President & COO, Director
• Founder of Sunstone • Vice Chairman of the OTC Association in China
Experienced Management Team & BOD
• VP, Executive Director, & Chief Representative, Sino BioPharma
• VP, Chia Tai Pharmaceutical Group• Executive Director, Shandong Chia Tai Freda Pharma
Seni
orM
anag
emen
t
Note: Other board members include George Bickerstaff, Jack Ferraro, David Gao, Zhiqiang Han, Frank Hollendoner, John Stakes III, MD, and Zhijun Tong
Delivering Quality Health Care to China20
As of September 30, 2008, the Company had cash and cash equivalents of $3.8M and notes receivable* of $15.5M totaling $19.3M
On January 20th, the Company extended $10.65M of existing notes until July 1, 2011
* All notes receivables are guaranteed by established banks in China and have maturities of six months or less
Cash and Liquidity
Delivering Quality Health Care to China
$86.2
$133.5
$1.7 $0.2
$71.6
$7.2$1.3 ($3.4)($4.6)
($50.0)
($25.0)
$0.0
$25.0
$50.0
$75.0
$100.0
$125.0
$150.0
2006A 2007A 2008E
(US
$M)
Rev
enue
GAA
P N
.I..
Non
-GAA
P N
.I. 1
Rev
enu e
GAA
P N
.I..
Non
-GAA
P N
.I. 1
Rev
enu e
GAA
P N
.I..
Non
-GAA
P N
.I. 1
BMP Sunstone Revenue and Net Income
Notes: (1) Revenue assumes BMP, Sunstone and Rongheng are consolidated as of January 1, 2006.(2) Totals for 2008 represent mid point of guidance for consolidated results plus pro form for the period 2008-01-01 to 2008-02-17 for Sunstone and 2008-01-01 to 2008-07-04 for Rongheng.
Operating Results
21
Delivering Quality Health Care to China22
Reconciliation with GAAP Net Income
(US $M) 2006A 2007A 2008E
GAAP Net Income $0.2 ($4.6) ($3.4)
AdjustmentsAcquisition Amortization 0.2 0.3 4.1 Debt Discount Amortization 0.0 0.6 4.0 Stock Compensation 1.2 5.0 2.5
Total Adjustments 1.4 5.9 10.6
Non-GAAP Net Income $1.7 $1.3 $7.2
Delivering Quality Health Care to China23
$21.8 million $78.2 million
20082007Licensed Products,
9%
Distribution, 91%
Branded OTC, 57%
Licensed Products,
5%
Distribution, 38%
Segment Contribution – 9 Months
Delivering Quality Health Care to China24
(1) Q4 2007 excludes a $2 million upfront payment for Enablex license from Novartis
Costs and Expenses
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
1Q07 2Q07 3Q07 4Q07 (1) 1Q08 2Q08 3Q08
Gross MarginS&M G&A
Delivering Quality Health Care to China25
Our 2009 guidance for total revenue is in a range of $150 to $160 million
Represents 35% growth of revenue calculated at the low end of our guidance ranges for 2008 and 2009
Non-GAAP net income is projected to be between $10 and $13 million
Represents 65% growth of profitability for 2009 as compared to 2008 at the low end of our guidance ranges
Non-GAAP net income excludes stock based compensation, amortization related to acquisitions and other non-cash expenses
2009 GAAP net income is expected to be in the range of $3 to $6 million
FY2009 Guidance
Delivering Quality Health Care to China26
Investment Highlights
Chinese pharmaceutical market continues to grow at 15%+ per annum
Continued consolidation magnifies opportunities for first movers
Unique integrated business model, with proprietary Rx, strong OTC brands and extensive distribution capabilities
Complementary sales and marketing capabilities create leading franchises in targeted, underserved and high-growth therapeutic areas of pediatrics and women’s health
Strong revenue growth with multiple drivers and rapidly increasing profitability
Execution oriented management team with track record of success