INVESTOR INVESTOR PRESENTATION PRESENTATION Weibing Lu, CEO Michael Lan, CFO Rodman & Renshaw Annual China Investment Conference Rodman & Renshaw Annual China Investment Conference March 6 March 6-8, 2011 8, 2011
INVESTOR INVESTOR PRESENTATIONPRESENTATION
Weibing Lu, CEOMichael Lan, CFO
Rodman & Renshaw Annual China Investment ConferenceRodman & Renshaw Annual China Investment ConferenceMarch 6March 6--8, 20118, 2011
Safe Harbor StatementStatements in this presentation may be "forward-looking statements" within the meaning of federalsecurities laws. The matters discussed herein that are forward-looking statements are based on currentmanagement expectations that involve risks and uncertainties that may result in such expectations not beingrealized. Forward-looking statements involve risks and uncertainties that may cause actual results,performance or financial condition to be materially different from the expectations of future results,performance or financial condition expressed or implied in any forward-looking statements. Such risksinclude, but are not limited to, competition in the veterinary bio-pharmaceutical industry, declines indemand for the Company’s products, rising raw materials costs, changes to management or key personnel,risks associated with conducting business in China, the Company’s ability to expand into markets outside ofChina and other risks detailed in the Company’s filings with the Securities and Exchange Commission. Actualoutcomes and results may differ materially from what is expressed or forecasted in such forward-lookingstatements due to numerous potential risks and uncertainties. Forward-looking statements made during thispresentation speak only as of the date on which they are made, and we do not undertake any obligation toupdate any forward-looking statement to reflect events or circumstances after the date of this presentation.
Because forward-looking statements are subject to risks and uncertainties, we caution you not to placeundue reliance on any forward-looking statements. All written or oral forward-looking statements by theCompany or persons acting on its behalf are qualified by these cautionary statements.
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Skystar Share SnapshotSkystar Share SnapshotTICKER NASDAQ: SKBI
Stock Price (March 1, 2011) $7.50
52 Week Range $5.81 – $11.95
Shares Outstanding 7.10M
Market Cap $55.0M
P/E (LTM) 4.3X
Revenues: Q3’10 / 9 months 2010 $18.5M (unaudited) / $31.7M
EPS: Q3’10 / YTD 2010 $0.93 (unaudited) / $1.42
Fiscal 2010 Revenue Guidance $45.5 Million - $47.5 Million
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OverviewOverview•Headquartered in Xi’an, Shaanxi Province, Central China
•200+ Employees
•Engaged in the:•R&D,•Manufacture,•Sale; and•Distribution
of veterinary drugs and animal health products in China
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Overview cont’dOverview cont’d•Skystar is a proxy to China’s:Changing domestic consumption trends
Growing animal husbandry industry
•Skystar is the only US-listed pureplay in the China animal healthsector
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Focus on Five Major Product LinesFocus on Five Major Product Lines
•Skystar is a leading provider of veterinary medicinesand healthcare products in China serving regionalmicrofarms
•360 degree product suite for farmers consisting of: Veterinary vaccines,
Veterinary medicines,
Pro-biotic micro-organisms,
Animal feed additives; and
*Aquaculture (fish farming) treatments *manufacturing facility not online as of Q1’2011
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FacilitiesFacilities•Skystar’s facilities and processes areChina Good Manufacturing Practice(“GMP”) certified, approved by China’sMinistry of Agriculture (MOA) asconforming to strict GovernmentStandards
•5 year renewable licenses for 100+ drugs and formularies
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Product ListProduct List
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MetamizoleSodium Injection
AntondineInjection
DexamethasoneSodium Phosphate Injection
Enrofloxacin Injection
Compoumd Vitamin B Injection
Sulfamonomethoxine Sodium Injection
Sulfadiazine Sodium Injection
Kanamycin Sulfate Injection
Gentamycin Sulfate Injection
GentamycinMicronomicinSulfate Injection
Mequindox Injection
Vitamin C Injection
Vitamin B1 Injection
Lincomycin Hydrochloride Injection
Danofloxacin Mesylate Powder
Ofloxacin Injection Norfloxacin Nicotinate Injection
Ciprofloxacin Hydrochloride Injection
Pefloxacin Mesylate Granules
Praziquantel Tablets
Compound Sulfamethoxazole Tablets
OfloxacinTablets
Amoxicillin Soluble Powder
AvermectinPowder
DiclazurilPremix (0.2%)
Florfenicol Powder Compound Amoxicillin Powder
hiamphenicol Powder
Erythromycin Thiocyanate Soluble Powder
Apramycin Sulfate Soluble Powder
Neomycin Sulfate Soluble Powder
Colistin Sulfate Soluble Powder
Salinomycin Sodium Premix
Ciprofloxacin Hydrochloride Soluble Powder
SpectinomycinHydrochloride
Ofloxacin Soluble Powder
Baitouweng San Baotai Wuyou San
Chulijing Danjibao
Feizhucai Fuzheng Jiedu San
Gongying San Houyanjing San Huanglian Jiedu San
Jianji San Jianwei San Jingfang Baidu San
Mubin Xiaohuang San Qingfei Zhike San
Qingshu San Qingwen Baidu San
Quchong San Tongru San Xiaoji San Yimu Shenghua San Yujin San Zhili San Sulfamethoxydiazine Sodium Injection
Lomefloxacin Hydrochloride
Danofloxacin Mesylate Injection
Sulfathiazole Sodium Injection
Buzhong Yiqi San Fangji San Shenling Baishu
Qibu San Sulfaquinoxaline Sodium Soluble Powder (10%)
Fenbendazole Powder
Sulfachloropyrazin Sodium Soluble Powder
Huoxiang Zhengqi San
Cuiqing San Longdan Xiegan San
Maxing Shigan San
Qumai San Shengru San Xiaoshi Pingwei San Xiaochaihu San Yinqiao San Pefloxacin Mesylate Injection
Enrofloxacin Injection
Florfenicol Injection
Lomefloxacin Hydrochloride Injection
Berberine Sulfate Injection
Gentamycin Sulfate Injection
Promethazine Hydrochloride Injection
Bailong San Feizhu San Ivermectin Premix
Kitasamycin Premix Pefloxacin Mesylate Soluble Powder
Ciprofloxacin Lactate Soluble Powder
Norfloxacin Nicotinic Soluble Powder
Tylosin Tartrate Soluble Powder
Lincomycin Hydrochloride Soluble Powder
TilmicosinPremix
100+ Drugs Approved by MOA
+ additional approved formularies
Distribution and Customer BaseDistribution and Customer Base
1,894 distribution agents (+11% YoY)
715 direct customers (+21% YoY)
360 franchised stores with exclusivity agreements
Distribution to all 29 farming Provinces in China
(As of September 30, 2010)
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Market IndicatorsMarket Indicators•U.N. Food and Agriculture Organization noted that as of 2007,China has net meat imports of +$2.8 BN (UNFAO-STAT 2009)
•In 2009, the market scale of China’s Animal Vaccine industryreached 6.2 billion (RMB), up 15% year-on-year (Research in China 2010)
•In order to meet the changing dietary habits ane demands of itsdomestic consumers and visitors, China’s Government issupporting free markets combined with rapid development,alongside drug manufacturing regulation that is increasinglycloser to international GMP standards
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Ever Present OpportunityEver Present Opportunity•China is now the world’s largest producer of poultry, fish and livestock
(UN-FAO)
•New market opportunities include Company estimated $150 million (fish farming) aquaculture market
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International StandardsInternational Standards
•China’s MOA since 2004 has imposed strict GMP certification standards
•Currently only 1,300 manufacturers have made the grade down from 2,400
•In March of 2011, SFDA implemented stricter vaccine manufacturing standards and subsequently passed World Health Organization’s regulatory system assessment and is now in-line with international standards
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ProductsProductsSkystar’s compimentary product lines reflects a business model that addresses all keysegments of the animal farming industry and allows the Company to capture moremarket share
• Veterinary vaccines (10 products)
• Active and inactive vaccines to prevent sickness and disease in poultry and livestock
• Veterinary medicines (212 products)
• Probiotic micro-organisms (16 products)
• Animal Feed (10 products)
• Aquaculture products (coming soon)
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Q3 Revenues By OfferingQ3 Revenues By Offering
Veterinary Medicines
67.0%
Veterinary Vaccines
3.8%
Micro-Organisms
25.4%
Feed Additives
3.8%
Q3’10 Revenues - $18.5M
Q3 revenues increase 45% year over year251 products in Q3’10 up from 159 in 2009
40 product introductions in 2010
Veterinary Medicines
66.4%
Veterinary Vaccines
4.4%
Micro-Organisms
24.9%
Feed Additives
4.2%
Q3’09 Revenues - $12.8M
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Veterinary MedicationsVeterinary Medications
215 products• Improved utilization and product mix of
upgraded Huxian facility • Focus on higher margin products
Vet. Medications
Q3’2010 Q3’2009
Revenue % of Rev.
Gross Margin
Revenue % of Rev.
Gross Margin
Revenue $12.4M 67.0% 44.0% $8.5M 66.4% 40.0%
Q3 Total Rev. $18.5M $12.8M
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MicroMicro--organismorganism
16 products
• Added production capacity at Huxian plant online, June 2010
• ~70% gross margins
Micro-organism Q3’2010 Q3’2009
Revenue % of Rev.
Gross Margin
Revenue % of Rev.
Gross Margin
Revenue $4.7M 25.3% 74.7% $3.2M 24.9% 75.3%
Q3 Total Rev. $18.5M $12.8M
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Feed AdditivesFeed Additives
10 products
• Increase yield and improve health of livestock
Feed Additives Q3’2010 Q3’ 2009
Revenue % of Rev.
Gross Margin
Revenue % of Rev.
Gross Margin
Revenue $0.7M 4.0% 60.8% $0.5M 4.2% 61.9%
Q3 Total Rev. $18.5M $12.8M
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Veterinary VaccinesVeterinary Vaccines
10 products
• Completed installation, tooling and testing of equipment in updated Huxian facility in August, 2010
• Awaiting GMP certification and inspection date from MOA
• New vaccine production line to generate estimated $14M per year in the new facility once fully ramped
• New aquaculture vaccine line to launch in 2011; expected to contribute $8-$15M in annual revenue within 3-5 years of market, with exclusive marketing rights through 2020
Vet. Vaccines Q3’ 2010 Q3’ 2009
Revenue % of Rev. Gross Margin Revenue % of Rev. Gross Margin
Revenue $0.7M 4.1% 89.7% $0.5M 4.4% 92.0%
Q3 Total Rev. $18.5M $12.8M
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R&D Facility #1R&D Facility #1
Xi’an R&D Facilities
Over 25 researchers responsible for developing new medicines and vaccines in response to epidemics, pandemics and diseases
Veterinary Medicine and Microorganism Labs
One Quality Inspection Center19
Shanghai R&D Facilities
5 researchers from the Chinese Academy ofAgricultural Sciences
Responsible for evaluating and implementingmanufacturing and medical technology fromaround China and around the world
Responsible for evaluating and implementingshort-term and long-term planning for futuremedications and vaccines
R&D Facility #2R&D Facility #2
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Research AffiliationsResearch Affiliations
University research affiliations include:
• Shaanxi Microbial Research Institute
• Jiangsu Microbial Research Institute
• China Northwestern University
• China Northwest Agriculture and Forestry University
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Bringing Products to MarketBringing Products to Market
•Approved by Chinese Ministry of Agriculture for the manufacture and distribution of 100 types of veterinary drugs in various formularies including all compulsory vaccines such as hog cholera, hoof and mouth disease and bird flu vaccine
•Our R&D Labs uses both Traditional Chinese Medicine and Modern Western Approaches (i.e. antibiotics) to develop treatments such as the kits used to treat Swine High-Fever Syndrome (Blue-Ear Disease)
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Sales and Technical SupportSales and Technical Support
•Training and Technical support at trade shows, fairs and exhibitions
•Training for animal husbandry “experts” are provided at the local level
•Training seminars for local farmers in the usage of Skystar products
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Competitive LandscapeCompetitive Landscape•Largest competitors are State-owned Enterprises
•Government is supportive of a free market in this niche
•Majority of competitors only offer 1-2 product linesand broad “shotgun” approach to treatments
•High barriers of entry for international competitors
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Results:•Currently producing over 251 products in 2010 as compared to 195 in 2009•40 products be developed in 2010
Growth StrategyGrowth Strategy
New Product Introductions via:•R&D team tracking global veterinary developments and trends•Market feedback from franchise stores and customers
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Growth StrategyGrowth Strategy
Aquaculture (fish farming)
Acquired rights to produce aquaculture vaccine line through 2020
Estimates additional revenue of $8M-$15M annually in 3-5 years following full ramp up
Early mover in fast growing aquaculture industry
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Growth StrategyGrowth StrategyUpdated Huxian Manufacturing Facility
in Xi’an
•Micro-organism facility to add 49% to capacity, production commenced in June 2010
•Veterinary medication line manufacturing capacity increased
•Vaccine facility update completed in June, 2010; awaiting GMP certification notice from MOA.
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Growth StrategyGrowth Strategy
Acquisition Targets
Targeting highly accretive acquisitions
High growth areas/products that fit the company’s long term strategy
GMP facilities with complimentary products
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M&AM&A
Acquisitions
Completed Hubei target – acquired veterinary manufacturer through bankruptcy proceedings in August 2010, purchase price of roughly $3.5M
Deposit placed for Jiangsu based micro-organism manufacturing facility
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Historical Annual RevenueHistorical Annual Revenue
(millions)
$9.80
$15.10
$25.58
$33.80 $31.70
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
2006 2007 2008 2009 9M'2010
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LTM Quarterly Revenue (Unaudited)LTM Quarterly Revenue (Unaudited)
($millions)
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$10.90
$4.86
$8.30
$18.50
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
Q4'09 Q1'10 Q2'10 Q3'10
Historical Gross Profit / Gross MarginsHistorical Gross Profit / Gross MarginsRevenue ($millions)
$4.40 $8.34 $12.78 $17.30 $17.00
44.7%
55.4%49.9% 51.8% 54.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
2006 2007 2008 2009 9M'2010
Gross Profit % Gross Margin32
Adjusted Net Income GrowthAdjusted Net Income GrowthRevenue ($millions)
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2.38 4.20 6.70 9.70 6.50
24.30%27.90% 25.90%
28.80% 35.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2006 2007 2008 2009 Q3'2010
Adjusted Net Income Profit Margin
Annual Adjusted Net Income Annual Adjusted Net Income (Unaudited)(Unaudited)
12 Months Ended December 31
2009 2008 2007Net income (loss) $8,851,932 $5,596,183 ($1,956,976)
Non recurring non-cash charges:
Amortization of deferred financing - 101,815 879,212
Amortization of discount on debentures - 680,446 3,716,243
Amort of deferred compensation - 62,758 643,119
Inducement costs for debentures converted - 257,775 634,450
Inducement costs for warrants exercised - - 279,547
Change in fair value of warrants 349,332 - -
Income net of non-recurring non-cash items $6,644,513 $6,698,977 $4,195,595
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Q3’2010
Revenues Gross Profit GM %
Veterinary Medications $12,366,426 $5,415,588 44%
Micro-organism $4,700,623 $3,513,646 75%
Feed Additives $737,077 447,815 61%
Vaccines $765,621 $686,581 90%
Total $18,569,747 $10,063,610 54%
High Margin ProductsHigh Margin Products
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Select Balance Sheet DataSelect Balance Sheet Data
As of: Sept. 30, 2010 Sept. 30, 2009
Cash $2.0M $14.8M
Current Assets $41.4M $36.2M
Current Liabilities
$9.1M $3.8M
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Weibing Lu, Chairman and CEO• Founded Xian Tianxing Bio-Pharmaceutical Co., Ltd. (our operating company in China) in
1997 • BS from Wuhan University in 1985 and MBA from Xi'an Jiaotong University in 1999• Awarded Outstanding Entrepreneur of Xi'an Feed Industry in 2002 • Appointed as a Director of Xi'an Institute of Feed Industry
ManagementManagement
Michael Lan, Chief Financial Officer• 15 years of operational and accounting experience with a number of US public companies
including Silgan Containers, Gilead Sciences• Extensive consulting experience helping companies improve financial control, streamline
business operations and improve efficiency and productivity, with large and medium sized companies in the US
• Based in CA, U.S., bi-lingual with degrees from China and U.S. Universities• BA from Xiamen University, China, MA of Accounting from USC
Scott Cramer, Director Corporate Development and U.S. Representative• Former CEO and CFO of Cyber Group• Founder and President of Cramer & Rauchegger, Inc., specializing in retirement and estate
planning• Registered Representative - Series 7, 63, 65
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Organizational ChartOrganizational Chart
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Skystar Bio-Pharmaceutical Company
(NASDAQ:SKBI)[Parent Co. USA]
Skystar Bio-Pharmaceutical (Cayman) Holdings Co. Ltd.“Skystar Cayman”
[Intermediary Holding Co.]
Xian Tianxing Bio-Pharmaceutical Co. Limited“Xian Tianxing”
Sida Biotechnology (Xian) Co. Ltd.“Sida”
Fortunate Time International Ltd.“Fortunate Time”
Shanghai Siqiang Biotechnological Co., Ltd. “Shanghai Siqiang”
Skystar Biotechnology (Jingzhou) Co., Limited
“Skystar Jingzhou”
Skystar Bio-Pharmaceutical Inc.“Skystar California”
Skystar Biotechnology (Kunshan) Co., Limited “Skystar Kunshan”
[Kunshan, Jiangsu Province]
United States – Nevada
100% Ownership 100% Ownership
100% Ownership
Outside China
Inside China 100% Ownership
Wholly Foreign Owned Enterprise “WFOE”
100% Ownership
Variable Interest Entity “VIE”
Jingzhou, Hubei Province