HARBIN, China, Nov. 10 /Xinhua-PRNewswire-FirstCall/ -- China Sky One Medical, Inc. ("China Sky One Medical" or "the Company") (Nasdaq: CSKI), a leading fully integrated pharmaceutical company producing over-the-counter drugs in the People's Republic of China ("PRC"), today announced record financial results for the third quarter ended September 30, 2008.

    Third Quarter 2008 Highlights:

    -- Total revenues increased 77.1% to $29.7 million
    -- Gross profit increased 70.5% to $22.3 million; gross margin fell
       slightly to 75.2%
    -- Operating income increased 78.3% to $11.8 million; operating margin
       improved to 39.5% from 39.3%
    -- Net income increased 82.6% to $9.9 million, or $0.60 per diluted share
    -- Completed acquisition of Peng Lai Jin Chuang Company
    -- Passed first phase of examinations for Conformite Europeenne (CE)
       certification
    -- Developed 37 new drugs currently in clinical trials, including 12
       administered by injection
    -- Developed a propyl gallate injection for treatment of coronary heart
       disease and related diseases; and a nasal spray for the treatment of
       rheumatic disease
    -- Signed a distribution agreement with Harbin Baolong Pharmaceutical
       Company
    -- Began trading on the NASDAQ Global Market under the symbol "CSKI"

"We continued to experience strong growth in product sales in the third quarter of 2008 due to robust organic growth and initial contributions of our recent acquisitions and we are very pleased with our record results," said Mr. Yan-Qing Liu, Chairman, CEO and President of China Sky One Medical, Inc. "Broken down by category, sales of weight loss products, which include our top-selling Sumei Slim Patch, continued trending up in the third quarter, accounting for 27% of revenues. Sales of products from newly acquired Heilongjiang Tianlong Pharmaceutical, Inc. made up 18% of revenues. That was followed by sales of ointments, which made up 13% of revenues in the quarter, and sales of plaster products such as our Pain Relief Patch, which made up 11% of revenues. Our top-selling branded products in the third quarter were our Sumei Slim Patch, and our Compound Camphor Ointment."

"Our continued strong sales momentum during the quarter coincided with a number of significant accomplishments, including the listing of our common shares on the NASDAQ Global Market under the symbol "CSKI," said Mr. Yan-Qing Liu. "Also, we completed the acquisition of Peng Lai Jin Chuang Company, a newly established pharmaceutical company with Good Manufacturing Practice Certification (GMP) approval issued by the country's State Food and Drug Administration (SFDA), and entered into a distribution agreement with Harbin Baolong Pharmaceutical Company for our prescription drugs," he added.

During the quarter, the China Sky One Medical developed 37 new drugs that are currently in clinical trials, including twelve administered by injection. The Company also developed a propyl gallate injection for the treatment of acute cerebral infarction, coronary heart disease, thrombosis, dysmenorrheal and nephropathy; and a nasal spray for the treatment and prevention of rheumatic disease, which it expects to launch in the fourth quarter of 2008.

On September 5, 2008, the Company completed the acquisition of Peng Lai Jin Chuang Company ("Jin Chuang"), a newly established pharmaceutical company, for approximately $7.1 million, consisting of about $2.5 million in cash and $4.6 million of China Sky One Medical's common stock (381,606 shares). The Jin Chuang acquisition includes rights to a portfolio of 20 approved drugs that are taken orally, an important addition to the Company's existing portfolio. Production at Jin Chuang, which commenced manufacturing on October 14, is progressing smoothly and according to the Company's schedule.

Third Quarter 2008 Results

Total revenue for the third quarter of 2008 increased 77.1% to $29.7 million from $16.8 million in the third quarter of 2007. This was primarily driven by the Company's strong sales distribution channel, a successful marketing and advertising campaign that was launched in the second quarter, and revenue generated from the products of Heilongjiang Tianlong Pharmaceutical, Inc., ("Tianlong") which it acquired in April, 2008. Product sales in the third quarter increased 127% year-over-year to $28.2 million, accounting for 94.8% of total revenues. Contract sales decreased 65% to $1.5 million and accounted for 5.2% of revenues during the quarter. In 2008, the Company began to discontinue contract sales as part of its strategy in order to focus on developing its portfolio of proprietary products.

Gross profit in the third quarter of 2008 was $22.3 million, an increase of 70% over the same period a year ago. Gross margin was 75.2% of total revenues, a slight decrease compared to gross margin of 78.1% for the third quarter of 2007. The sequential decrease is attributable to higher Research & Development costs tied to clinical trials for the Company's products and expenses related to preparations for the Company's acquisition of Jin Chuang.

Operating expenses in the third quarter of 2008 were $10.6 million, up 62.5% from $6.5 million in the third quarter of 2007. This increase was less than the increase in sales, and was primarily a result of higher selling, general and administrative expenses associated with marketing the Company's products, and the acquisitions of Tianlong and Jin Chuang. Research and development expenses were $2.7 million in the third quarter, compared to $1.4 million in the third quarter of 2007. The increased expense was primarily due to additional clinical trials and the developing of patents. Operating expenses were 35.6% of total revenues in the third quarter of 2008, down from 38.8% in the third quarter of 2007, due to efficiencies as the Company grows in scale.

Operating income was $11.8 million, up by 78.3% compared to $6.6 million in the third quarter of 2007. Operating margin was 39.5%, compared to 39.3% in the third quarter of 2007. Provision for income taxes was $2.6 million in the third quarter of 2008, compared to $1.1 million in the same quarter of the previous year.

Net income for the third quarter of 2008 increased 82.6% to $9.9 million, or $0.60 per diluted share, compared to $5.4 million, or $0.44 per diluted share, in the third quarter of 2007. Diluted weighted average shares increased to 16,492,414 from 12,502,332 in the third quarter of 2007 due to common stock associated with the Company's private placement in February 2008, the Tianlong and Jin Chuang acquisitions, and the conversion of warrants.

Nine Month Results

For the nine months ended September 30, 2008, revenues increased to $65.9 million, up 80% from $36.6 million in the corresponding period of 2007. Gross profit increased 76% to $50.1 million in the nine months ended September 30, 2008, versus $28.5 million in the same period a year ago. Gross margin was 76.1% in the nine months ended September 30, 2008, compared to 77.9% during the nine months ended September 30, 2007. Operating income in the nine months ended September 30, 2008, grew 95.6% to $26.7 million compared to $13.7 million in the nine months ended September 30, 2007. Net income for the first nine months of 2008 was $21.9 million or $1.39 per diluted share, up from $11.2 million, or $0.90 per diluted share in the nine months ended September 30, 2007.

Financial Condition

As of September 30, 2008, China Sky One had $50.9 million in cash and equivalents, approximately $53 million in working capital, and no debt. Stockholders' equity at September 30, 2008 was $85.9 million, a 166.4% increase over $32.2 million recorded at December 31, 2007. The Company generated $26.7 million in net cash flow from operating activities in the nine months ended September 30, 2008, up from $10.2 million in the same quarter of 2007.

Recent Events

On October 14, 2008, China Sky One Medical announced that it started production at Jin Chuang, a newly established pharmaceutical company that it acquired on September 5, 2008. Jin Chuang's products include Chinese health remedies such as Oyster Shell Calcium tablets for the treatment of osteoporosis, and Naftoipidil Dispersible tablets for the treatment of benign prostatic hyperplasia. The acquisition was completed on September 5, 2008, and is expected to contribute $3-$5 million in sales in fiscal 2008, and $0.95- $1.55 million in net profit.

On October 22, 2008, China Sky One Medical announced that its wholly-owned subsidiary, Harbin First Bio-Engineering Co. Ltd., received $800,000 in tax savings from the Heilongjiang Binxi Economic Zone on August 4, 2008, as the result of an agreement it entered into in 2005, when the Company decided to invest in Harbin First Bio-Engineering Co. Ltd. The Company said it would invest this refund back into its business to further improve operations and execute its growth strategy, which includes strengthening its distribution channel and developing exciting new drugs.

On October 23, 2008, China Sky One Medical signed an agreement with Shaanxi Xintai Pharmaceutical Company to distribute the Company's Asthma Patch product, which is intended for the treatment of asthma and bronchitis. The distribution agreement with Shaanxi Xintai initially runs over three years. China Sky One Medical expects it will generate sales of approximately $5 million in 2009, and believes it will increase sales of its Asthma Patch by 50% each year. China Sky One Medical and Shaanxi collaborated on the distribution of the Company's Slim Patch products early this year.

On October 28, 2008, China Sky One Medical reached a purchase agreement for a proprietary breast drug from Harbin Medical University for approximately $1.46 million. The Company collaborated with Harbin Medical University to develop the drug, which is intended to treat lobular hyperplasia in women, a type of mastitis that may lead to breast cancer. First phase clinical trials have been completed, and the drug has been shown to be 100% effective, with an 89% curability rate. Following the completion of additional clinical trials, the Company expects to obtain production approval for the drug from the SFDA in two to three years after the purchase is complete.

On October 30, 2008, the China Sky One Medical announced that it obtained production approval from the SFDA in China for two of its newly developed drugs, sodium ferulate by injection and doxofylline by injection. Sodium ferulate by injection is intended for the treatment of cardiovascular disease. Doxofylline by injection is intended for the treatment of asthma and bronchitis.

Business Outlook

"Despite the recent turmoil in the global economy, China Sky One continues to experience very strong demand for our pharmaceutical products. We have a rich pipeline of new products that are in the process of seeking SFDA approval, including external use TCM products, drugs for injection, diagnostic kits and biological pharmaceutical products. In addition, our very strong balance sheet and cash flows provide the flexibility to pursue additional acquisitions that can further strengthen our market position," said Mr. Yan-Qing Liu. "As a result of the synergies we will realize from our strategic acquisitions, and by focusing on developing high-quality products and expanding our sales and marketing efforts globally, we expect to see a significant increase in our top- and bottom-line performance in 2009 and beyond."

As a result of both strong organic growth and the recent acquisitions, the Company recently raised its full-year 2008 revenue guidance to $88-$90 million, and full year 2008 guidance for net income to $27-$28 million. China Sky One Medical expects 2008 gross margin to be approximately 77%, but expects that gross margin will improve once production capacity at its newly acquired facilities reaches normalized levels.

Conference Call

The Company will conduct a conference call at 8:00 a.m. Eastern Time on Monday, November 10, 2008, to discuss the third quarter 2008 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (866) 573-1052 International callers should dial (702) 696-4500. The Conference ID for this call is 72520119. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Monday, November 10, 2008 at 12 p.m. Eastern Time. To access the replay, dial (800) 642-1687, international callers dial (706) 645-9291, conference ID 72520119.

About China Sky One Medical, Inc.

China Sky One Medical, Inc., a Nevada corporation, is a holding company. The Company engages in the manufacturing, marketing and distribution of pharmaceutical, medicinal and diagnostic products. Through its wholly-owned subsidiaries, Harbin Tian Di Ren Medical Science and Technology Company ("TDR") and Harbin First Bio-Engineering Company Limited ("First"), the Company manufactures and distributes over-the-counter pharmaceutical products, which make up its major revenue source. For more information, visit http://www.skyonemedical.com .

Safe Harbor Statement

Certain of the statements made in the press release constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward- looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Additional statements that are necessarily forward looking in nature also include, without limitation, statements relating to our research and development activities, expected revenues or sales margins, results of recent acquisitions and our ability to increase sales and expand our presence in the global market place, and risks or uncertainties relating to PRC socioeconomic issues. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. The Company cannot provide any assurance that it will be able to establish listing of its securities on any national or regional securities exchange or market system. Actual results could differ materially from the expectations reflected in such forward- looking statements as a result of a variety of factors, including the inability of the company to meet listing standards of an exchange, risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners both in China and throughout the world and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

-- FINANCIAL TABLES FOLLOW --

China Sky One Medical, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations


                            Three Months Ended          Nine Months Ended
                               September 30,              September 30,
                                2008          2007          2008        2007
                         (Unaudited)   (Unaudited)   (Unaudited) (Unaudited)

    Revenues             $29,699,282   $16,770,570   $65,861,304 $36,594,933
    Cost of Goods Sold     7,366,059     3,669,012    15,748,801   8,104,355
    Gross Profit          22,333,223    13,101,558    50,112,503  28,490,578

    Operating Expenses
      Selling, general
       and administrative  7,596,953     5,100,408    18,140,807  12,798,383
      Depreciation and
       amortization          308,023        55,565       523,375     276,507
      Research and
       development         2,677,142     1,355,784     4,719,554   1,751,624
           Total
            operating
            expenses      10,582,118     6,511,757    23,383,736  14,826,514

    Other Income (Expense)
      Other income           810,733         2,282       838,242      14,309
      Interest expense        (1,494)           --      (135,136)    (16,494)
           Total other
            income
            (expense)        809,239         2,282       703,106      (2,185)

    Net Income Before
     Provision for
     Income Tax           12,560,344     6,592,083    27,431,873  13,661,879

    Provision for Income
     Taxes
      Current              2,616,909     1,145,812     5,512,860   2,433,964

    Net Income            $9,943,435    $5,446,271   $21,919,013 $11,227,915

    Basic Earnings Per
     Share                     $0.64         $0.45         $1.50       $0.93

    Basic Weighted
     Average Shares
     Outstanding          15,464,084    12,110,201    14,657,059  12,077,491

    Diluted Earnings Per
     Share                     $0.60         $0.44         $1.39       $0.90

    Diluted Weighted
     Average Shares
     Outstanding          16,492,414    12,502,332    15,745,542  12,468,186

    The Components of
     Other Comprehensive
     Income
      Net Income          $9,943,435    $5,446,271   $21,919,013 $11,227,915
      Foreign currency
       translation
       adjustment          1,788,369       288,267     7,152,503     874,804

    Comprehensive Income $11,731,804    $5,734,538   $29,071,516 $12,102,719



China Sky One Medical, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets


    ASSETS
                                      September 30, 2008   December 31, 2007
                                              (Unaudited)
    Current Assets
         Cash and cash equivalents          $ 50,948,530     $     9,190,870
         Accounts receivable                   9,288,941          10,867,106
         Other receivables                            --              40,200
         Inventories                           1,803,429             371,672
         Prepaid expenses                         28,470              17,707
              Total current assets            62,069,370          20,487,555

    Property and equipment, net               17,752,876           6,861,432
    Land Deposit                               8,003,205           8,003,205

    Intangible assets, net                     7,181,577           1,933,014

                                            $ 95,007,028     $    37,285,206

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
         Accounts payable and accrued
          expenses                          $  4,246,767     $     2,845,308
         Wages payable                           640,019             381,482
         Welfare payable                         177,574             221,911
         Taxes payable                         4,042,230           1,567,188

         Deferred revenues                            --              24,504
              Total current liabilities        9,106,590           5,040,393

    Stockholders' Equity
         Preferred stock ($0.001 par value,
          5,000,000 shares authorized,
          none issued and outstanding)                --                  --
         Common stock ($0.001 par value,
          20,000,000 shares authorized,
          15,884,939 and 12,228,363 issued
          and outstanding, respectively)          15,885              12,228
         Additional paid-in capital           34,153,060           9,572,608
         Accumulated other
          comprehensive income                 9,424,346           2,271,843
         Retained earnings                    42,307,147          20,388,134
              Total stockholders' equity       85,900,438          32,244,813

                                            $ 95,007,028     $    37,285,206



China Sky One Medical, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

                                               Nine Months Ended September 30,
                                                    2008              2007
                                                (Unaudited)       (Unaudited)
    Cash flows from operating activities
      Net Income                               $21,919,013       $11,227,915
      Adjustments to reconcile net cash
       provided by operating activities
        Depreciation and amortization              523,375           355,811
        Share-based compensation expense            30,351           225,351
      Net change in assets and liabilities
        Accounts receivables and other
         receivables                             1,618,365        (4,562,183)
        Inventories                             (1,431,757)         (695,618)
        Prepaid expenses and other                 (10,763)           84,714
        Accounts payable and accrued
         liabilities                             1,375,209         2,229,397
        Advances by customers                           --           (67,541)
        Wages payable                              258,537           119,678
        Welfare payable                            (44,337)           54,232
        Taxes payable                            2,475,042         1,238,456
        Deferred revenue                           (24,504)               --
    Net cash provided by operating
     activities                                 26,688,531        10,210,212

    Cash flows from investing activities
      Purchases of fixed assets                   (784,137)         (280,168)
      Land deposit                                      --        (7,780,234)
      Increase in construction in progress              --        (2,056,063)
      Purchases of subsidiaries                (10,917,280)               --
      Purchase of intangible assets                 (7,139)          (54,095)
    Net cash used in investing activities      (11,708,556)      (10,170,560)

    Cash flows from financing activities
      Sale of common stock for cash, net
       of offering costs                        23,487,963                --
      Proceeds from warrants conversion          1,044,169           116,256
      Proceeds from short-term loan                     --          (511,672)
    Net cash provided by (used in)
     financing activities                       24,532,132          (395,416)

    Effect of exchange rate                      2,245,553           751,585

    Net increase (decrease) in cash             41,757,660           395,821

    Cash and cash equivalents at
     beginning of period                         9,190,870         6,586,800

    Cash and cash equivalents at end of
     period                                    $50,948,530        $6,982,621

    Supplemental disclosure of cash flow
     information
      Interest paid                               $135,136            $5,940
      Taxes paid                                $5,512,860               $--



    For more information, please contact:

    Company Contact:
     China Sky One Medical, Inc.
     Mr. Yu-bo Hao, Board Secretary
     Tel:   +86-451-5399-4069
     Email: china_sky_one@yahoo.cn

    Investor Relations Contact:
     CCG Investor Relations
     Mr. Crocker Coulson, President
     Tel:   +1-646-213-1915
     Email: crocker.coulson@ccgir.com
     Web site: http://www.ccgirasia.com

SOURCE China Sky One Medical, Inc.