bmp sunstone corporation -...

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.


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


Sunstone Pharma

Fully Integrated Platform

Beijing Medpharm (BMP)

Product Development Exclusive Commercial Rights

Alliance-BMP/GP CorpRongheng PharmaWanwei Pharma

Distribution Arms

PHYSICIAN


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


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


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


Sales force: 300

Agents: 800

Pharmacies covered: ~120,000

(~60% of the national retailing network)

Sunstone OTC Channel Coverage


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


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


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


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


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)


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)


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)



Mar

ket O

ppor

tuni

ty


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


Coverage of all top-tier hospitals

Relationships with 30 distributors and 1,000 pharmacies

~450 products


#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


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


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


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


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


$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


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


$21.8 million $78.2 million

20082007Licensed Products,

9%

Distribution, 91%

Branded OTC, 57%

Licensed Products,

5%

Distribution, 38%

Segment Contribution – 9 Months


(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


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


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

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