China Sky One Medical, Inc. (China Sky One Medical) has reported revenues of $26 million for the fourth quarter of 2008, compared with the revenues of $12.7 million in the year-ago quarter. It also reported a net income of $6.9 million, or $0.45 per diluted share, for the fourth quarter of 2008, compared with the net income of $4.1 million, or $0.25 per diluted share, in the year-ago quarter.

“We are happy to report another quarter of excellent results and a very strong year filled with many accomplishments. We achieved record financial performance in 2008 with significant increases in revenue and net income as we successfully executed our business strategy and made solid progress in establishing ourselves as a leading pharmaceutical company in China,” said Yan-Qing Liu, chairman and CEO of China Sky One Medical “As part of our strategy, we made a number of important strategic acquisitions that contributed to our growth and signed several distribution agreements for our top selling products. We also continued to build and enhance our brand awareness through a successful marketing and advertising campaign that helped to increase demand for our products.”

Fourth Quarter 2008 Results

China Sky One Medical’s total revenues increased 104% in the fourth quarter to $26 million. This was mainly a result of the company’s continued efforts to develop and enhance its sales distribution channels and to insure that its sales agents and products are visible by those making or influencing key purchasing decisions.

Gross profit in the fourth quarter of 2008 was $19.3 million, an increase of 95.2% on a year-over-year basis. Gross margin decreased to 74.4% of total revenues from 77.7% in the fourth quarter of 2007. The decrease was attributable to lower unit selling prices in 2008, by which the company aims to maintain the competitiveness in the PRC markets.

Operating expenses in the fourth quarter of 2008 were $10.4 million, up 110.0% from $4.9 million in the year-ago quarter. The increase was primarily the result of higher selling, general and administrative expenses associated with the company’s sales growth, and an increase in R&D spending during the quarter. Research and development expenses were $2.7 million in the fourth quarter, compared to $1.4 million in the fourth quarter of 2007.

Operating income was $8.9 million for the fourth quarter of 2008, representing an 80.4% increase from $4.9 million in the fourth quarter of 2007. Operating margin was 34.4%, compared to 38.9% in the fourth quarter of 2007.

Provision for income taxes was $2.1 million in the fourth quarter of 2008, compared to $0.9 million in the year-ago quarter.

Full Year 2008 Results

For the full year 2008, total revenues were $91.8 million, up 86.1%, compared with the total revenues of $49.3 million in the previous year. Product sales increased 137% year-over-year to $86.2 million, or 93.8% of total revenues, and contract sales decreased 56.5% year- over-year to $5.7 million, or 6.2% of total revenues, in 2008.

Gross profit for the full year 2008 was $69.4 million, an increase of 80.9% from $38.4 million in the previous year. Gross profit margin was 75.6% in 2008 compared to 77.8% in 2007.

Operating income was $35.7 million, up 91.6% from $18.6 million in 2007. Operating margin was 38.8%, up from 37.7% in 2007.

Net income for 2008 was $28.9 million, or $1.87 per diluted share, compared to net income of $15.3 million, or $1.15 per diluted share, in the previous year.

Financial Condition

As of December 31, 2008, China Sky One Medical had $40.3 million in cash and equivalents, approximately $58.0 million in working capital, and no debt. Stockholders’ equity at December 31, 2008, was $94.9 million, a 194.4% increase over the $32.2 million recorded at December 31, 2007. In 2008, the company raised approximately $23.5 million in net proceeds under a January 2008 private placement of equity.

China Sky One Medical generated $27.5 million in net cash flow from operating activities in 2008, up from $11.6 million in 2007.

2009 Outlook

“We are confident about the prospects for our business in 2009 and will continue to focus on increasing market share by both strengthening and further refining our successful sales and distribution network, building and enhancing our brand image, and making strategic acquisitions that continue to support our growth,” said Yan-Qing Liu, chairman and CEO of China Sky One Medical.

“In 2009, we expect full year revenue to increase by 40%, or approximately $37.0 million, to $128-$130 million, driven by growth in all of our product sales categories. We expect that net income will increase to $38-$39 million, resulting in net profit margin of approximately 30%. We expect 2009 gross margin to be approximately 74% due to higher raw material costs,” Yan-Qing Liu added.