AOB American Oriental Bioengineering, Inc.

-- Revenue Increased 62% to $70.6 Million in 3Q08 -- -- 3Q08 Net Income Increased 38% to $16.5 Million -- -- 3Q08 Diluted EPS $0.21 versus 3Q07 Diluted EPS $0.16 -- NEW YORK, Nov. 10 /Xinhua-PRNewswire-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE:AOB), a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter ("OTC") products in China, today announced financial results for the quarter ended September 30, 2008. Financial Results Revenue in the third quarter of 2008 increased 62% year over year to $70.6 million from $43.5 million, reflecting a continued increase in demand for the Company's OTC and prescription pharmaceutical products. Revenue from pharmaceutical products increased 75% to $62.1 million from $35.5 million in the third quarter of 2007. Revenue from OTC pharmaceutical products increased 91% to $37.8 million from $19.8 million in the prior year's third quarter, reflecting continued recognition of the Company's new products supported by effective marketing campaigns. Sales generated by CCXA and Boke, which were not subsidiaries in the third quarter of 2007, were major contributors to the increase in OTC sales and generated a combined $17.1 million of revenue during the third quarter of 2008. Strong sales of the Jinji series and Jinji Yimucao products also contributed to the increase in OTC revenue during the third quarter of 2008. Prescription pharmaceutical products generated $24.3 million in revenue during the third quarter of 2008, a 55% year over year increase. Prescription pharmaceutical sales increasingly reflect contributions from the Company's diversifying product portfolio, including recently launched CCXA prescription products, as well as from existing products. Expanding rural market coverage also drove prescription pharmaceutical revenue performance during the third quarter of 2008. Nutraceutical product revenue increased approximately 6% to $8.5 million in the third quarter of 2008 from $8.0 million in the prior year's period, and decreased as a percentage of total revenue to approximately 12% versus 18% in the comparable period. The increase in Nutraceutical revenue was mainly attributed to the increase in sales of peptide tablets and peptide powder. The Company continues to focus on selling and marketing higher growth pharmaceutical products. Gross profit in the third quarter of 2008 increased 54% to $47.2 million from $30.7 million in the third quarter of 2007. Gross margin was approximately 66.9%, compared to 70.5% in the prior year's period, reflecting the integration of CCXA and a shift in product mix. For the third quarter of 2008, operating expenses increased 52% to $25.3 million from $16.7 million in the comparable period of 2007. The increase in operating expenses was primarily due to increases in sales and marketing expenses, as well as additional depreciation and amortization costs due to the Boke and CCXA acquisitions. Income from operations in the third quarter of 2008 increased 56% to $21.8 million from $14.0 million in the third quarter of 2007, while operating margin was 31%, compared to 32% in the third quarter of the prior year. Net income for the third quarter of 2008 increased 38% to $16.5 million, or $0.21 per diluted share, compared to $11.9 million, or $0.16 per diluted share, in the prior year's period. Diluted share count in the third quarter of 2008 was 85.4 million, compared to 75.3 million in the third quarter of 2007. Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "We are very pleased with our financial performance in the third quarter of 2008, which demonstrates continued growth across all of our product categories. We are also extremely well-capitalized versus competitors, with over $220 million of cash and operating cash flow up 80% year over year. Lastly, our third quarter results support our confidence in our brand strength, expansion into rural markets, and unique positioning as a leading consolidator in China's healthcare space." Mr. Liu concluded, "Today we are increasing our full year 2008 revenue expectation to at least $250 million, up from prior guidance of $245 million. We are reiterating our full year 2008 net income expectation of $62 million, which excludes convertible note interest expense for the second half of 2008, and also excludes any contributions from Nuo Hua and GHK acquisitions. These recently closed acquisitions should create several exciting opportunities for our Company including enhanced distribution reach in strategic areas like hospital pharmacies, new product development and expertise bringing new products to market in the future." Conference Call The Company will hold a conference call at 8:00 am ET on November 10, 2008 to discuss its fiscal third quarter 2008 results. Listeners may access the call by dialing 1-866-578-5801 or 1-617-213-8058 for international callers, access code: 73013671. A webcast will also be available through AOBO's website at http://www.bioaobo.com/ . A replay of the call will be available through November 17, 2008. Listeners may access the replay by dialing 1-888- 286-8010 or 1-617-801-6888 for international callers, access code: 59642931. About American Oriental Bioengineering Inc. American Oriental Bioengineering Inc. is a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter products in China. Statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. The economic, competitive, governmental, technological and other factors identified in the Company's filings with the Securities and Exchange Commission, including the Form 10-Q for the quarter ended September 30, 2008, may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS SEPTEMBER 30, DECEMBER 31, 2008 2007 UNAUDITED CURRENT ASSETS Cash and cash equivalents $219,727,043 $166,410,075 Accounts receivable, net of reserve of $224,333 and $302,270 at September 30, 2008 and December 31, 2007, respectively 24,556,175 16,494,619 Inventories, net 17,251,005 12,264,536 Advances to suppliers 1,467,388 4,309,352 Notes receivable 589,725 2,259,616 Refundable deposit 6,386,418 -- Deferred tax assets 529,813 -- Other current assets 615,765 5,134,118 Total Current Assets 271,123,332 206,872,316 LONG-TERM ASSETS Plant and equipment, net 70,082,061 48,496,760 Land use rights, net 63,883,307 46,310,240 Deposit for long-term assets 23,565,407 -- Construction-in-progress 446,203 755,614 Other intangible assets, net 24,968,293 26,972,166 Goodwill 22,566,768 22,566,768 Investments in and advances to equity investments 21,479,515 242,551 Deferred tax assets 1,344,484 1,498,481 Unamortized financing cost 4,448,056 -- Total Long-Term Assets 232,784,094 146,842,580 TOTAL ASSETS $503,907,426 $353,714,896 AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY SEPTEMBER 30, DECEMBER 31, 2008 2007 UNAUDITED CURRENT LIABILITIES Accounts payable $4,788,336 $3,436,352 Other payables and accrued expenses 12,679,625 7,786,157 Taxes payable 4,485,151 2,843,719 Short-term bank loans 6,710,332 6,289,222 Current portion of long-term bank loans 2,966,016 2,374,565 Other liabilities 2,263,080 3,621,030 Deferred tax liabilities 680,544 109,733 Total Current Liabilities 34,573,084 26,460,778 LONG-TERM LIABILITIES Long-term bank loans, net of current portion 818,058 1,263,483 Long-term notes payable 297,390 286,365 Deferred tax liabilities 16,390,430 12,621,180 Convertible Note 115,000,000 -- Total Long-Term Liabilities 132,505,878 14,171,028 TOTAL LIABILITIES 167,078,962 40,631,806 COMMITMENTS SHAREHOLDERS' EQUITY Preferred stock, $0.001 par value; 2,000,000 shares authorized; 1,000,000 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively 1,000 1,000 Common stock, $0.001 par value; 150,000,000 shares authorized; 78,249,264 and 77,991,935 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively 78,249 77,992 Common stock to be issued 279,332 1,611,333 Prepaid forward repurchase contract (29,998,616) -- Additional paid-in capital 195,500,513 193,007,987 Retained earnings (the restricted portion of retained earnings is $15,910,685 at September 30, 2008 and December 31, 2007, respectively) 141,882,532 102,117,792 Accumulated other comprehensive income 29,085,454 16,266,986 Total Shareholders' Equity 336,828,464 313,083,090 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $503,907,426 $353,714,896 AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2008 2007 2008 2007 REVENUES $70,593,949 $43,514,049 $168,372,552 $103,062,573 COST OF GOODS SOLD 23,402,407 12,833,252 54,808,490 31,048,916 GROSS PROFIT 47,191,542 30,680,797 113,564,062 72,013,657 Selling and marketing 9,938,877 5,644,776 22,656,477 12,210,509 Advertising 9,913,728 6,934,160 21,760,300 16,150,754 General and administrative 4,467,638 3,742,364 13,633,595 9,234,426 Depreciation and amortization 1,024,436 377,856 3,012,107 1,054,128 Total operating expenses 25,344,679 16,699,156 61,062,479 38,649,817 INCOME FROM OPERATIONS 21,846,863 13,981,641 52,501,583 33,363,840 EQUITY IN EARNINGS (LOSS) FROM UNCONSOLIDATED ENTITIES 49,417 3,953 (591,650) 14,848 INTEREST INCOME (EXPENSE), NET (1,143,013) 360,365 (1,156,782) 375,604 OTHER INCOME (EXPENSE), NET 91,986 (16,144) (264,515) 118,436 INCOME BEFORE INCOME TAXES 20,845,253 14,329,815 50,488,636 33,872,728 INCOME TAXES 4,362,334 2,386,189 10,723,896 5,846,543 NET INCOME 16,482,919 11,943,626 39,764,740 28,026,185 OTHER COMPREHENSIVE INCOME Foreign currency translation gain, net of tax 729,272 1,992,992 12,818,468 4,884,314 TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX 729,272 1,992,992 12,818,468 4,884,314 COMPREHENSIVE INCOME $17,212,191 $13,936,618 52,583,208 $32,910,499 NET INCOME PER SHARE BASIC $0.22 $0.16 0.52 $0.41 DILUTED $0.21 $0.16 0.50 $0.40 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING BASIC 75,101,869 74,379,650 77,164,602 68,012,018 DILUTED 85,417,621 75,331,015 80,553,647 69,234,193 DATASOURCE: American Oriental Bioengineering Inc. CONTACT: Lily Li, Chief Financial Officer, +86-10-5982-2038; In the United States: Ashley M. Ammon of Integrated Corporate Relations, Inc., +1- 203-682-8208 Web Site: http://www.bioaobo.com/

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