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May 2010May 2010Investor PresentationInvestor Presentation
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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any
statements set forth in this presentation that are not historical facts may be forward-
looking statements that involve risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements. Such factors include, but
are not limited to, the Company’s ability to market existing and new products, ability to
access capital for expansion, and changes from anticipated levels of sales, future national
or regional economic and competitive conditions, changes in relationships with customers,
dependence on our flagship product’s profits and other factors detailed from time to time
in the Company's filings with the United States Securities and Exchange Commission and
other regulatory authorities. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future
events or otherwise. This presentation was developed by the Company, is intended solely
for informational purposes and is not to be construed as an offer to sell or the solicitation
of an offer to buy the Company’s stock. This presentation is based upon information
available to the public, as well as other information from sources which management
believes to be reliable, but is not guaranteed by CHBT as being accurate nor does it
purport to be complete. Opinions expressed herein are those of management as of the
date of publication and are subject to change without notice.
Safe Harbor StatementSafe Harbor Statement
3
Investment HighlightsInvestment Highlights
The leading manufacturer of naturally occurring probiotics Strong revenue and profit growth with high margins
Revenue growth 35% CAGR ‘06-’09
9M-’10 Revenue $56M and Net income $19M
Guidance for 50% top line growth in FY2010
Proven high gross margin
Proprietary technology creates sustainable, competitive advantages
Strong brand name with significant franchise value
Rising demand for China’s probiotic products driven by increasing consumption of dairy products and rapid growth in the animal feed market
Established large-scale production capacity and quality control to penetrate bulk additives market
4
What are Probiotics? What are Probiotics?
Historical Context
Pasteur announced certain bacteria are necessary for
human health
Metchnikoff received 1908 Nobel Prize for work linking
the immune system and intestinal bacteria
Benefits of Probiotics
Improves health of G.I. tract
Stimulates immune system
Helps break down nutrients properly
Reduces creation of toxins
Reduces symptoms of lactose intolerance
Decreases prevalence of allergies in susceptible
individuals
Reduces some risks associated with certain cancers
Nutritional Products
Pharma-ceuticals
Animal Feed
Additives
Dairy Products
Shining Probiotics
Food Additives
* Sample: Bifido Bacteria, one kind of probioticSource: www.usprobiotics.org
“Live microorganisms which when administered in adequate amounts confer a health benefit on the host
… can play an important role in immunological, digestive and respiratory functions and could have a
significant effect in alleviating infectious disease in children.” – WHO.
5
China-Biotics Overview China-Biotics Overview
Founded in 1999 and headquartered in Shanghai, with about 500 employees
Grew to become the largest domestic probiotics supplier in China
Shining is one of the most recognized brands in Shanghai
Launched commercial production in the new 150 ton manufacturing facility in Feb. 2010 to target bulk market
Proprietary technology powered by over 30 R&D staff with advanced academic degrees
Over 100 retail outlets in 13 cities
Over 30 signed bulk additive customers
Strong Organic Revenue Growth
CAGR=35%
44%
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Mr. Jinan Song, Founder, Chairman and CEO
Founder and CEO since 1999
Bachelor’s degree in Polymers; Masters degree in politics and economics
Mr. Travis Cai, Chief Financial Officer
Over 10 years of financial management experience in financial institutions and US listed companies MS from Stern School of Business at New York University and BS from Tsinghua University
Ms. Eva Yan, Chief Administration Officer
Management team member since 1999 with participation in formulating corporate development plans Implementing internal control procedures and business negotiations Master’s degree in Economic Law from Capital University of Economics and Business
Dr. Tom Gu, Vice President
Former director of the United States Federation for Culture Collections Standing member of the Expert Committee of the Shanghai Zhangjiang Bio-Pharmaceutical Base Ph.D. in molecular medicine from University of Arizona and BS in biochemistry from Jilin University
Key Management Key Management
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Strong R&D CapabilityStrong R&D Capability
Probiotics R&D Center
Research Areas: Advanced bacteria culturing and protection, genetically engineered drugs, drug delivery solutions
Over 30 members with Masters degrees or Ph.D.s
Close R&D partnerships with China’s top research programs in dairy science and technology at the Northeast Agricultural University
Dr. Kai Ma, Director of R&D - Ph.D. in Microbiology from the Institute of Microbiology of the
Chinese Academy of Sciences and a member of the “863” and “973” national strategic projects
for developing technology
Intellectual Property
4 approved patents and 8 pending
The largest domestic Enterprise Bacteria Center with over 500 types of bacteria strains
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Global Probiotics Market Global Probiotics Market
World Market by 2014 - $31 Billion
13.53.5
5.2
9
Europe
Asia
USA
Others
Source: Marketsandmarkets, nutraingredients-
usa.com DataMonitor, FoodNavigator.com,
ap-foodtechnology.com and Mgmt
estimate
New markets are experiencing faster growth
Probiotic supplement sales in North America and Eastern Europe are currently reporting a growth rate of 25%.
Digestive health is ‘mainstream’
In 2008, nearly 59.9 million Americans complained of heartburn, and this figure is expected to rise to almost 73 million by 2013, amounting to nearly a quarter of the population.
Global animal feed additives mkt is expected to reach US$15.4 B by 2010
Probiotics have been demonstrated to have an equivalent efficacy to synthetic antimicrobial growth promoters (AGP), which were banned completely in Europe since January 2006.
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Chinese Market Chinese Market
Chinese affluence drives demand for health food
Demand for health food in China expected to reach $9.7 Billion by 2010
(Source: Pacific Bridge Medical)
Demand for Bulk Additive Probiotics increasing significantly
Chinese Bureau of Statistics forecasts tenfold increase in domestic
dairy consumption between 2007-2015
Estimated $58 Billion animal feed market in China
Favorable Government Policies on both food safety and antibiotics safety Requires Good Manufacturing Practice (GMP) and a step-by-step Hazard Analysis
Critical Control Point (HACCP) quality control system
Over-prescription of antibiotics in China
Gov’t is encouraging probiotics supplements to combat antibiotics abuse
China has limited probiotics production capacity
Current demand relies on imports from European manufacturers
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Segment Analysis Segment Analysis
0
1000
2000
3000
4000
5000
6000
7000
DairyProducts
AnimalFeed
NutritionalProducts
Other
CY 2006
CY 2010
Year Dairy Products
Animal Feed
Nutritional Products Other Totals (mt)
2006 2,000 1,000 100 300 3,400
2010 Est. 6,500 2,500 600 1,000 10,600
Chinese Probiotic Usage and Growth (Metric Tons)
Source: Domestic Probiotics Market Analysis and Forecast Report
by Beijing Leadership Management Consulting Co. Limited
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Products in Retail Business Products in Retail Business
Shining Essence
Shining Signal
Shining Golden Shield
Shining EnergyFacilitates brain cell development
and increases alertness
Calms digestive system, enhances G.I. health and
protects / strengthens liver function
Reduces high blood pressure, high blood sugar
levels and hyperlipidemia
Enhances the body’s immune system
Sample Products Functions
Total 41 products with 11 active products in market
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Jilin
JiangsuShanghai
Zhejiang
Fujian
Retail Expansion StrategyRetail Expansion Strategy
Develop and introduce new products to the marketplace
Build more directly operated stores in major cities
Strengthen distribution network
Expand capacity of retail product facility 30% more in 2H 2010
Continue to improve brand name and recognition
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Products in Bulk Business Products in Bulk Business
Additives for Dairy Product Essential to yogurt-based drinks
CAGR of 31% for yogurt segment growth from ’05 to ’10 in China
(estimated by McKinsey Research) Commonly added to infant formula milk powder
Improves digestion
Animal feeds $58 Billion per year animal feed market in China
Large global market
Other Products Pharmaceuticals
Nutritional products
Other food additives
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Bulk Additive StrategyBulk Additive Strategy
Focus on dairy and animal feed industries, with
extension to nutritional and pharmaceutical products
Provide customized solutions and comprehensive
support, i.e. Co-develop new yogurt formulas
Leverage our proprietary fermentation technology to
offer low-cost, high-quality bulk powder
Extend business to international markets
Phase II capacity expansion: to increase total
capacity to 300 MT per year in Qingpu in 2011
Potential strategic investments in both China and
overseas markets
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Expanded Customer Base(Bulk Additives)Expanded Customer Base(Bulk Additives)
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New Industry-Leading FacilityNew Industry-Leading Facility
The largest probiotics production plant in China
Ability to supply to both domestic and international
markets
Phase I = 150 MT per year of production capacity
Phase II = scalable to 300 MT per year
Large scalability to lower production cost and achieve
high gross margin
Commenced commercial production in Feb. 2010
MT = metric tons
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Strong FinancialsStrong Financials
*Adjustment to exclude gain/loss related to the
change in fair value of convertible notes
CAGR=35.3% 44% CAGR=26.4% 68%
Strong Organic Revenue Growth Proven Earning Growth
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Income Statement Income Statement
For Fiscal Years Ended March 31
16.9*
21.8
70%
FY2009
10.9
14.9
71%Gross profit %
Operating income
Adj. Net income 14.2*
* gain or loss related to the change in fair value of convertible notes is not included
54.2 30.6Net sales 42.3
71%
18.3
FY2007($ in Million) FY20089M FY099M FY10
38.755.9
16.124.5
11.3* 19.0*
71%71%
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Balance SheetBalance Sheet
Cash and cash equivalents 70,824
Total assets 120,804
Total liabilities 55,408
Stockholder’s equity 65,396
Current assets 87,370
Current ratio 2.7
Current liabilities 32,336
79,979 41,897
26,992
93,792 44,580
3.0 2.0
26,896 20,670
49,396 20,670
44,395 23,910
64,310151,079
183,372
222,692
5.0
36,567
69,431
153,261
Dec. 31, March 31, ($ in thousands)
2009 2009 2008 2007
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Investment HighlightsInvestment Highlights
The leading manufacturer of naturally occurring probiotics Strong revenue and profit growth with high margins
Revenue growth 35% CAGR ‘06-’09
9M-’10 Revenue $56M and Net income $19M
Guidance for 50% top line growth in FY2010
Proven high gross margin
Proprietary technology creates sustainable, competitive advantages
Strong brand name with significant franchise value
Rising demand for China’s probiotic products driven by increasing consumption of dairy products and rapid growth in the animal feed market
Established large-scale production capacity and quality control to penetrate bulk additives market
21
Appendix: Reconciliation of Non-GAAP Financial DataAppendix: Reconciliation of Non-GAAP Financial Data
Three Months Ended December 31,
2009 2008
Adjusted Net income Net Income Net Income
Adjusted Amount $7,811,082 $4,260,887
Adjustments
Non-cash gains (losses) from change in fair value of conv
ertible notes2,668,000 1,408,000
Amount per consolidated statement of operations 10,479,082 5,668,887 Nine Months Ended December 31,
2009 2008
Adjusted Net income Net Income Net Income
Adjusted Amount $19,011,765 $11,304,757
Adjustments
Non-cash gains (losses) from change in fair value of
convertible notes
(6,248,000) 2,073,000
Amount per consolidated statement of operations 12,763,765 13,377,757
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April 2010April 2010Thank YouThank You
China-Biotics Inc.
Travis Cai, Chief Financial Officer [email protected]
Grayling
Kevin Theiss (646) 284-9409 [email protected]