8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): June 7, 2010

RENHUANG PHARMACEUTICALS, INC.

(Exact name of Registrant as Specified in its Charter)

Nevada	0-24512	88-1273503
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

No. 281, Taiping Road, Taiping District

Harbin, Heilongjiang Province, 150050

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code:  86-451-5762-0378

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. Results of Operations and Financial Condition

On June 7, 2010, Renhuang Pharmaceuticals, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the second quarter ended April 30, 2010. A copy of this press release is attached hereto as Exhibit 99.1.

The Company’s management team held a conference call on June 8, 2010 at 9:00 a.m. Eastern Time to review the aforementioned financial results. A replay of the conference call will be available from Tuesday June 8, 2010 at 10:00 a.m. Eastern Time through Tuesday June 22, 2010.  To access the replay, dial 800-642-1687. International callers should dial +1 706-645-9291.  The conference ID number for the call is 79282265.  A copy of the conference call transcript is attached hereto as Exhibit 99.2.

The information in this Item 2.02 of Form 8-K, including the accompanying exhibits, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.

In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company notes that certain statements set forth in this Current Report on Form 8-K provide other than historical information and are forward looking. The actual achievement of any forecasted results, or the unfolding of future economic or business developments in a way anticipated or projected by the Company, involve numerous risks and uncertainties that may cause the Company’s actual performance to be materially different from that stated or implied in the forward-looking statement.

Item 7.01 Regulation FD Disclosure.

The response to Item 2.02 is incorporated herein by reference to this Item 7.01.

The information in Item 7.01 of this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.

In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company notes that certain statements set forth in this Current Report on Form 8-K provide other than historical information and are forward looking. The actual achievement of any forecasted results, or the unfolding of future economic or business developments in a way anticipated or projected by the Company, involve numerous risks and uncertainties that may cause the Company’s actual performance to be materially different from that stated or implied in the forward-looking statement.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1*	Press Release dated June 7, 2010 announcing second quarter 2010 financial results
99.2*	Conference Call Transcript dated June 8, 2010

* Such Exhibit is being “furnished” (not filed) pursuant to Item 2.02 and Item 7.01 of the Current Report on Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	RENHUANG PHARMACEUTICALS, INC.
Date: June 9, 2010	By:	/s/ Shaoming Li
		Shaoming Li
		Chief Executive Officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1*	Press Release dated June 7, 2010 announcing first quarter 2010 financial results
99.2*	Conference Call Transcript dated June 8, 2010

* Such Exhibit is being “furnished” (not filed) pursuant to Item 2.02 and Item 7.01 of the Current Report on Form 8-K.

EX-99.1

FINAL

Company Contact:	CCG Investor Relations:
Renhuang Pharmaceuticals, Inc.	Ms. Lei Huang, Account Manager
Ms. Portia Tan, IR Contact	Phone: +1-646-833-3417 (New York)
Tel: 86-451-5392-5461	Email: lei.huang@ccgir.com
Email: ir@renhuang.com	Website: www.ccgirasia.com
	Mr. Crocker Coulson, President
	Phone: +1-646-213-1915 (New York)
	Email: crocker.coulson@ccgir.com

For Immediate Release

RenhuangReportsSecondQuarter2010Results

· Salesgrew39%whilenetincomerose63%year-over-year

· Management reiterates fiscal 2010 guidance

Harbin, China – June 7, 2010 – Renhuang Pharmaceuticals, Inc. (Pink Sheets: RHGP) (“Renhuang” or the “Company”), a developer, manufacturer and distributor of botanical products, bio-pharmaceuticals and traditional Chinese medicines (“TCM”), today announced its financial results for the second quarter ended April 30, 2010 and affirmed financial guidance for fiscal year 2010.

Second Quarter Fiscal 2010 Highlights and Recent Events

· Net sales grew 39.0% year-over-year to $12.1 million.

· Gross profit increased 44.5% to $6.2 million from $4.3 million in 2009 while gross margin increased to 51.4% from 49.4% a year ago

· Net income rose 63.0% to $3.4 million or $0.09 per diluted share, as compared to $2.1 million or $0.06 per diluted share in 2009

· New products, Banlangen Granules and Compound Honeysuckle Granules, accounted for nearly $3.7 million in sales in the quarter

· Appointed three new independent directors, strengthening corporate governance practices

“Renhuang continued to deliver robust growth in the second quarter of fiscal 2010 with strong increases in revenue and earnings,” said Mr. Shaoming Li, the Chairman and CEO of Renhuang. “We are pleased with the rapid market acceptance of our recently introduced products, Banlangen Granules and Compound Honeysuckle Granules, which were key drivers behind the sales growth and margin expansion to-date. Our operating leverage remained robust in the second quarter with a nearly 400 basis point operating margin increase year-over-year despite higher operating expenses.”

Second Quarter Fiscal 2010 Results

For the second quarter ended April 30, 2010, net sales were $12.1 million, up 39.0% from $8.7 million in the same quarter last year.  The sales increase was largely driven by strong growth in sales of the Company’s recently introduced products, Banlangen Granules and Compound Honeysuckle Granules, and an increase in the net average selling price (ASP) of other products. Banlangen Granules and Compound Honeysuckle Granules accounted for 27.2% of gross sales in the quarter, as compared to 20.2% in the first quarter of fiscal 2010.  Excluding Banlangen Granules and Compound Honeysuckle Granules, net ASP rose 5.1% year-over-year in the second quarter of fiscal 2010, which included lower average sales rebate.

Gross profit in the quarter increased 44.5% to $6.2 million, as compared to $4.3 million for the same period of 2009. Gross margin for the quarter ended April 30, 2010 increased to 51.4% from 49.4% in the comparable fiscal 2009 quarter. The year-over-year margin expansion was mainly due to lower sales rebates and higher average selling prices of several of the Company’s products.

Operating expenses for the second quarter of fiscal 2010 were $2.8 million, as compared to $2.2 million in the same period last year. Sales and marketing expenses rose to $1.3 million from $1.1 million. The spending increase reflected Renhuang’s ongoing distribution network expansion, including penetration into new rural markets, and direct-to-consumer TV advertising to promote product brand awareness. General and administrative expenses increased 63.0% to $1.0 million, primarily as a result of an increase in warrant expenses related to professional service contracts

Operating income in the fiscal 2010 quarter was $3.4 million, up 63.0% from $2.1 million in the 2009 quarter. Operating margin increased significantly year-over-year to 28.3% from 24.1%, with sales growth and gross margin expansion more than offsetting higher operating spend. The Company did not incur income tax expenses as its subsidiary registered in the PRC has been granted a tax holiday for fiscal 2010. For the second quarter ended April 30, 2010, net income grew 63.0% to $3.4 million, or $0.09 per diluted share, from $2.1 million, or $0.06 per diluted share, in the prior year period.

First Half Fiscal 2010 Results

Total revenue for the six month period ended April 30, 2010 was $29.2 million, an increase of 30.0% from $22.5 million for the first six months in fiscal 2009. Year-over-year growth was mainly due to the introduction of Banlangen Granules and Compound Honeysuckle Granules in late 2009, and an increase in ASP across the rest of the product portfolio.

Gross profit in the first half of fiscal 2010 rose 35.4% to $15.7 million, representing a gross margin of 53.7% as compared to 51.6% in the first half of fiscal 2009. Operating income grew 29.1% year-over-year to $10.8 million. In the first six months of fiscal 2010, net income was $10.8 million or $0.29 per diluted share, up from $8.4 million or $0.24 per diluted share in the first six months of fiscal 2009.

Financial Condition

As of April 30, 2010, Renhuang had $23.4 million in cash and cash equivalents. Working capital was $40.4 million with a current ratio of 17.4x, as compared to $32.0 million and 12.9x as of October 31, 2009. The Company had no debt on its balance sheet. At the end of the second quarter of 2010, shareholders’ equity was $61.1 million, as compared to $50.5 million at the end of fiscal 2009.

Cash flow from operating activities was $19.3 million for the six months ended April 30, 2010, as compared to $4.2 million during the same period in the prior year. The cash flow increase was primarily attributable to an increase in net income and a decrease in trade receivables that reflected a change in credit terms and more aggressive receive collection efforts year-over-year. Average days sales outstanding fell to 118 days in first half of fiscal 2010 from 186 in the first half of fiscal 2009.

Recent Events

In April 2010, Renhuang announced several major initiatives that further strengthened the Company’s corporate governance practices, including the appointment of three new independent directors to its board of directors.  With the addition of the independent board members, the Company also established a nominating and compensation committee. This represented a major step in the Company’s active efforts to meet the requirements to move to a senior exchange during the fiscal year.

Additionally in May 2010, Renhuang engaged the global leader in Sarbanes-Oxley Section 404 (“SOX 404”) compliance consulting, PricewaterhouseCoopers (“PWC”), to assist the Company in establishing and maintaining its SOX 404 compliance program. Renhuang’s management team remains committed to work with PWC to further strengthen the Company’s internal controls, corporate governance and risk management procedures.

During the second quarter of fiscal 2010, Renhuang entered into a purchase agreement to acquire two office floors for approximately $5.6 million cash. The new office space, intended to become the Company’s new headquarters, is already housing some of Renhuang’s offices for administrative and human resources functions. Of the total purchase price, $3.9 million was paid in April 2010 as a deposit with the remaining $1.7 million due by December 20, 2012.

Outlook – Affirming Fiscal 2010 Guidance

Renhuang is affirming its fiscal 2010 guidance for net sales in the range of $54.7-$55.6 million, which represents a 26% to 28% increase over reported revenues of $43.4 million in fiscal year 2009. The Company continues to expect fiscal 2010 net income, excluding any non-cash, non-operating gains and expenses (such as the change in fair market value of warrant liability), to be in the range of $18.6-$18.9 million, up 26% to 28% from net income of $14.8 million in fiscal year 2009.

Third quarter sales and net income are historically modestly lower as compared to those in the first two quarters due to seasonality of Renhuang’s product portfolio. Demand for the Company’s products often peak in the fourth quarter, which represents the start of the flu season.

In the second half of fiscal 2010, Renhuang continues to expect the commercial launch of its Qing Re Jie Du Oral Liquid, a TCM for the treatment of influenza and upper respiratory infections, and Badger Oil, a natural medicine for the treatment of burns. The new product introductions and continued market penetration of Renhuang’s current product portfolio are expected to drive revenue growth for the remainder of fiscal 2010. The Company anticipates gross margin to remain above 50% during second half of fiscal 2010. Operating expenses are expected to increase in the second half of the fiscal year, with higher sales and marketing expenses to support new product roll out and increased R&D expenses as the development pipeline advances and grows.

”Renhuang completed a very strong first half performance with significant momentum for the remainder of fiscal 2010,” added Mr. Li. “Increased market acceptance of our portfolio of natural products and introduction of new products are expected to continue the Company’s strong pace of growth in the coming quarters. In addition to focusing on organic growth, Renhuang continues to actively evaluate external growth opportunities, including the potential acquisition of complementary operations and overseas expansion.”

Conference Call

The Company will host a conference call at 9:00 a.m. ET on Tuesday, June 8, 2010 to discuss the second quarter 2010 results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-812-1464. International callers should dial +1 706- 902-4248. The conference ID number for the call is 79282265.

If you are unable to participate in the call at this time, a replay will be available from Tuesday, June 8, 2010 at 10:00 a.m. Eastern Time, through Tuesday, June 22, 2010. To access the replay, dial 800-642-1687. International callers should dial +1 706-645-9291. The conference ID number for the replay is 79282265.

ABOUT RENHUANG PHARMACEUTICALS, INC.

Renhuang Pharmaceuticals, Inc. is engaged in the research, development, manufacturing, and distribution of botanical products, bio-pharmaceutical products, and TCM, in the People's Republic of China. All of the Company's products are produced at its three GMP-certified production facilities in Ah City, Dongfanghong and Qingyang. The Company distributes its botanical anti-depression and nerve-regulation products, biopharmaceutical products, and botanical antibiotic and OTC TCMs through its network of over 3,000 distributors and over 70 sales centers across 24 provinces in China. Company Website: http://www.renhuang.com ..

Safe Harbor Statement

This press release contains certain statements that may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management’s beliefs, assumptions and expectations of the Company’s future operations and economic performance, taking into account the information currently available to management. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known 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. These forward-looking statements are based on current plans and expectations and are subject to a number of uncertainties including, but not limited to, the Company’s ability to achieve its financial guidance, ability to list its shares on a senior stock exchange, ability to manage expansion of its operations effectively, competition in the marketing and sales of its products, and other factors detailed in the Company’s annual report on Form 10-K and other filings with the Securities and Exchange Commission.  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. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein.

- Financial Tables Follow -

RENHUANG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	Three months ended April 30,						Six months ended April 30,
	2010			2009			2010			2009
	US$			US$			US$			US$
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Sales, net		12,092,506			8,702,878			29,225,120			22,472,875
Cost of goods sold		(5,877,856	)		(4,402,550	)		(13,530,494	)		(10,883,043	)
Gross profit		6,214,650			4,300,328			15,694,626			11,589,832
Operating and administrative expenses:
Sales and marketing		1,265,319			1,119,855			2,404,300			1,417,945
General and administrative		974,825			597,740			1,791,794			1,219,773
Research and development		570,557			494,202			722,921			605,980
Total operating expenses		2,810,701			2,211,797			4,919,015			3,243,698
Income from operations		3,403,949			2,088,531			10,775,611			8,346,134
Other income:
Interest income		15,699			10,022			27,166			19,150
Income from operations before income tax expenses		3,419,648			2,098,553			10,802,777			8,365,284
Income tax expenses		-			-			-			-
Net income		3,419,648			2,098,553			10,802,777			8,365,284
Earnings per common stock- Basic		0.09			0.06			0.29			0.24
Earnings per common stock - Diluted		0.09			0.06			0.29			0.24
Weighted average common stock outstanding
Basic		37,239,536			35,096,680			37,239,536			35,096,680
Diluted		37,917,140			35,096,680			37,724,214			35,096,680

RENHUANG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	April30, 2010		October 31, 2009
	(Unaudited)		(Audited)
ASSETS
Current assets:
Cash and cash equivalents		23,391,609		8,111,514
Trade receivables, net		14,900,545		23,203,410
Due from related parties		-		130,199
Inventory, net		2,934,928		3,024,016
Deposits		1,462,887		-
Prepayments		-		89,281
Other receivables, net		164,566		102,613
Total current assets		42,854,535		34,661,033
Property and equipment, net		2,164,720		2,352,163
Deposits		18,557,480		16,137,000
Total assets		63,576,735		53,150,196
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Current liabilities:
Accounts payable		279,063		369,329
Value added tax payable		498,090		1,186,642
Accrued employee benefits		1,339,371		1,136,267
Warranty liability		342,770		-
Total current liabilities		2,459,294		2,692,238
Shareholders’ equity
Preferred stock (no par value, 1,000,000 shares authorized; none issued and outstanding as of April 30, 2010 and October 31, 2009)		-		-
Common stock ($0.001 par value, 100,000,000 shares authorized; 37,239,536 issued and outstanding as of April 30, 2010 and October 31, 2009)		37,240		37,240
Additional paid-in capital		7,613,119		7,596,525
Common stock warrants		496,732		496,732
Reserves		3,372,697		3,372,697
Accumulated other comprehensive income		3,207,770		3,367,659
Retained earnings		46,389,883		35,587,105
Total shareholders’ equity		61,117,441		50,457,958
Total liabilities and shareholders’ equity		63,576,735		53,150,196

RENHUANG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the six months ended April 30,
	2010		2009
	US$		US$
	(Unaudited)		(Unaudited)
Cash flows from operating activities:
Net income		10,802,777		8,365,284
Adjustments to reconcile net income to operating activities:
Depreciation of property and equipment		181,076		177,224
Warrants issued for services		342,770		-
Share compensation		16,594		-
Changes in assets and liabilities:
Decrease (increase) in trade receivables		8,238,225		(4,458,764	)
Decrease (increase) in due from related parties		129,841		(448,118	)
Decrease in inventory, net		80,613		569,231
Decrease in prepayments		89,036		33,659
(Increase) decrease in other receivables, net		(62,244)		80,803
Decrease in accounts payable		(89,235)		(77,331)
Decrease in value added tax payable		(685,259)		(270,979	)
Increase in accrued employee benefits		206,296		216,565
Net cash provided by operating activities		19,250,490		4,187,574
Cash flows from investing activities:
Purchase of property and equipment		-		(16,212	)
Deposits for office properties		(3,928,614)		-
Net cash used in investing activities		(3,928,614)		(16,212	)
Effect of exchange rate changes on cash		(41,781)		6,215
Net increase in cash and cash equivalents		15,280,095		4,177,577
Cash and cash equivalents, beginning of year		8,111,514		9,747,693
Cash and cash equivalents, end of year		23,391,609		13,925,270
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes		-		-
Interest paid during the year		-		-

EX-99.2

	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Operator:

Hi. Good day, ladies and gentlemen. Welcome to the Renhuang Pharmaceuticals 2QF10 conference call. My name is Leticia, and I will be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today’s call Ms. Lei Huang. Please, proceed.

Lei Huang:

Thank you, Leticia. Good morning ladies and gentlemen, and good evening to those of you joining us from China. I am Lei Huang from CCG Investor Relations, the Company’s IR firm. I would like to welcome all of you to Renhuang Pharmaceutical’s 2QF10 earnings conference call. Yesterday after United States market close, the Company filed its Form 10Q with the SEC and issued its earnings press release.

Joining us from the Company today are Mr. Shaoming Li, Renhuang's Chairman and Chief Executive Officer; Ms. Yan Yi Chen, the Company’s Chief Financial Officer; and Mr. Guangtao Li, the Company’s Vice President. Also with us on today’s call is my CCG colleague, Ms. Jing Thomas, who will provide translation during the questions and answers session later on the call.

Before we start, I would like to remind our listeners that on this call, management’s prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the Company claims the protection of the Safe Harbor for Forward-Looking Statements that is contained in the Private Securities Litigation Reform Act of 1995.

 Actual results may differ from those discussed today, due to various risks, including but not limited to, such factors as unanticipated changes in product demand and market acceptance of the Company's products, the Company's ability to meet its financial guidance, competition in the marketing and sales of its products, the successful development of projects in its R&D pipeline and other information detailed from time to time in its filings and future filings with the United States Securities and Exchange Commission. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

1

	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

In addition, any projections as to the Company’s future performance represent management’s estimates as of today, June 8th, 2010.  Renhuang assumes no obligation to update these projections in the future as market conditions change.

With that, I will now turn the call over to Renhuang’s Chairman and CEO, Mr. Shaoming Li, who will provide some opening remarks in Chinese, which will be translated by Ms. Jing Thomas. Mr. Li? (speaking in foreign language)

Shaoming Li:

(speaking in foreign language)

Jing Thomas:

Thank you, Lei. I would like to start by thanking everyone for joining us on this call to discuss our 2QF10 financial results. I am pleased to report that Renhuang’s continued to deliver robust growth in the 2QF10 with revenue and net income increases of 39% and 63%, respectively.

Strong top and bottom line growth was mainly due to the quick market acceptance of our Balangan Granules and Compound Honeysuckle Granules, higher net average selling price across our product portfolio and the right sales and market strategy.

I will now turn over the call to Ms. Yan Yi Chen, our Chief Financial Officer, who will provide operational updates and discuss details of our financial results for the quarter of fiscal 2010. I sincerely thank you for your interest in Renhuang. Ms. Chen?

Yan Yi Chen:

Thank you, Mr. Li. I will begin with an operational review of 2QF10. Since the launch of our Banlangen Granules and Compound Honeysuckle Granules in the 4QF09, we have seen rapid market acceptance of these products. The strong sales growth momentum of the two products, which together represented 23% of our gross sales in the 1HF10, is helping to diversify our commercial portfolio and sales base.

While our Siberian Ginseng product series remained the largest sales contributor, it represented 44.4% of gross sales in the first six months of fiscal 2010, as compared to 54.1% of gross sales in the same period last year. We expect our product portfolio to further diversify with the launch of new products in the future, even as we continue to expand our Siberian Ginseng product portfolio to achieve our goal of becoming the number one global brand of natural anti-depressants and nerve regulation products and leading provider of botanical medicines.

2

	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Our line of Siberian Ginseng treatments for depression and nerve regulation continues to be a major success story. We raised the average price per pack of our Siberian Ginseng products by an average of 23.5% in the 1HF10, which led to a modest sales volume decrease year over year. This price increase followed the introduction of new dosage forms of the product, which contain less sugar and is more suitable for diabetic patients. We expect product demand to rebound as the market becomes fully-conditioned to the new price point and already saw evidence of such rebound since the end of the 2Q.

Focusing on our pipeline, we are on track to launch Qing Re Jie Du Oral Liquid this month. It is a traditional Chinese Medicine for influenza and upper respiratory infections, and we continue to expect the product to contribute sales of $1 million to $1.5 million in fiscal 2010. Additionally, we plan to commence sales of our new biopharmaceutical product, Badger Oil, in the 4Q. It is a natural medicine for the treatment of burns that leverages our advanced low cost extraction technology.

R&D remains a key area of focus and investment for the Company. We currently have three products in the active pipeline. First, our Lyophilized syringing powder has completed pilot testing and is awaiting to commence clinical trials. Second, we are developing therapeutic applications, such as treatment for insomnia, for our active pharmaceutical ingredient of Schisandra, a wild plant. As we announced in May, the State Intellectual Property Office of China completed a preliminary review of the patent application for our advanced proprietary Schisandra Total Lignin Extraction Method and the patent application has entered the comprehensive examination phase, typically a two-year process. Finally, we are in the initial development stage of a new natural Hepatitis B therapy.

We recently took major initiatives to strengthen our corporate governance practices, including the appointment of Mr. Sean Shao, Dr. Changxiong Sun and Mr. Bingchun Wu as Independent Directors to our Board of Directors. We also established an audit committee, a nominating committee and a compensation committee headed by Mr. Sun and Mr. Wu, respectively, and we have appointed Mr. Sean Shao the Chairman of the audit committee. We believe that the Company now meets the corporate governance requirements to list on a senior exchange.

In addition, we engaged PricewaterhouseCoopers, a global leader in Sarbanes-Oxley Section 404 compliance consulting to assist us in establishing and maintaining our SOX 404 compliance program. Our management team remains committed to work with PricewaterhouseCoopers to further strengthen the Company’s internal controls, corporate governance and risk management procedures.

3

	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Finally, in the 2Q, we entered into a purchase agreement to acquire two new office floors for approximately $5.6 million in cash. The new office space is already housing the Company’ administrative, HR and accounting functions and is intended to become Renhuang’s new headquarter. We have paid $3.9 million towards the total purchase price with the remaining $1.7 million due by December 2012. With the continued increase in real estate cost prices in China, we believe that it will be more cost effective and operationally efficient in the long run to own instead of lease our headquarter space.

With that, I will turn to a discussion on the 2Q financial results. Revenue for the 2QF10 increased 39% to $12.1 million from $8.7 million a year ago. Robust sales growth was largely attributable to increased demand for our botanical antibiotic products, price increases across our product portfolio, and strong contribution from our recently introduced products, Banlangen Granules and Compound Honeysuckle Granules. Excluding the two new products, the net average selling price across our product portfolio rose by 5.1% year over year, resulting from combination of price increases and lower sales rebates.

The higher net average selling prices and a favorable product mix positively impacted our gross profit and margin in the 2Q. Gross profit in the quarter soared 44.5% to $6.2 million, as compared to $4.3 million for the same period of 2009. Gross margin was 51.4%, up from 49.4% in the same period last year. Despite the anticipated inflationary pressures on cost of goods sold, we do not expect such increases to significantly impact our profitability in fiscal 2010.

Operating expenses were $2.8 million, as compared to $2.2 million in the same period last year. Operating margin increased significantly year over year to 28.1% from 24%, with sales growth and gross margin expansion more than offsetting higher operating spend.

Sales and marketing expenses rose to $1.3 million from $1.1 million, with the increase primarily stemming from our continued distribution network expansion efforts, including our focus to expand reach and access into the growing rural areas of China where new hospitals, health clinics and institutions are being established under the healthcare reform. Renhuang has established a Medical Reform Sales Department dedicated specifically to capture this tremendous growth opportunity in the coming years.

General and administrative expenses were up 63% to $1 million, primarily as a result of an increase in warrant expenses related to professional service contracts. R&D expenses increased 15.6% to $0.6 million, which we expect to continue to increase in the coming quarters as our pipeline projects make further advancements.

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Operating income was $3.4 million, or 28.3% of net sales, up 63% from $2.1 million, or 24.1% of net sales in the prior year quarter. Renhuang did not incur any income tax expense in the quarter as a result of a tax holiday for fiscal 2010. Our net income rose 63% to $3.4 million, or $0.09 per diluted share, as compared to $2.1 million, or $0.06 per diluted share, in the year ago period.

Turning to our balance sheet and cash flow statement, as of April 30th, 2010, Renhuang had $23.4 million in cash and cash equivalents. Working capital was $40.4 million with a current ratio of greater than 17.4x, as compared to $32 million and 12.9x as of October 31st, 2009. Shareholders’ equity stood at $61.1 million on April 30th, 2010, as compared to $50.5 million at the end of fiscal 2009.

In the 1H10, we generated net cash flow from operating activities of $19.3 million, as compared to $4.2 million in the year ago period. The cash flow increase was primarily due to an increase in net income and a decrease in trade receivables. Average days sales outstanding fell to 118 days in 1HF10 from 186 in the year ago period. Over the past year, we have tightened our credit terms to customers and improved our collection efforts, and expect to maintain the days sales outstanding around the current level during the rest of fiscal 2010.

We expect our capital expenditure requirements to be minimal in fiscal 2010, as we are operating in at least 60% of production capacity. The final pending payments for our purchase of patents and land use rights are in fiscal year 2011 and 2012, respectively.

We are confident in our ability to meet our financial guidance for fiscal year 2010. As such, we are reiterating our fiscal 2010 top- and bottom-line growth guidance of 26% to 28%, excluding any non-cash, non-operational gains or expenses. We continue to expect fiscal 2010 net sales of $54.7 million to $55.6 million and net income of $18.6 million to $18.9 million.

Our guidance accounts for the seasonality in our business, which is strongest in the 1Q and 4Q, and softer in the spring and summer season or 2Q and 3Q. Additionally, our guidance also reflects our plans to continue to expand our sales and distribution network to drive market share growth and to increase R&D spending on our pipeline projects.

In closing, I want to reiterate that we believe Renhuang is well positioned to capitalize on the enormous market opportunity in China with our all natural plant based products. Our organic growth will be driven by aggressive promotions, increased market penetration and focused R&D efforts.

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Additionally, we continue to explore strategic partnership and acquisition opportunities to further strengthen our market position. For example, our recent participation at the 107th China Import and Export Fair facilitated the introduction of Renhuang’s all-natural product portfolio to a large number of overseas distributors. Finally, we expect China’s Health Reform, when fully implemented, will greatly improve the rural population’s access to healthcare, and therefore increase the demand for our products.

I will now open the call to your questions. Operator, please start the Q&A session.

James Fuld, Bold Corporation:

Good morning. A couple of questions: your receivables are now 118 days. What do you think they will be by the end of the year?

Yan Yi Chen:

I can discuss that afterwards, if you want to ask the second question, please.

James Fuld:

I am sorry: your accounts receivable today, I believe you said were 118 days. I was curious, what you believe they will be by the end of the year? The days outstanding go down, up or remain the same?

Yan Yi Chen:

We are working on reducing the days, it should below 100 days.

James Fuld:

Your tax rate for this year is zero. What would it be in 2011 and 2012?

Yan Yi Chen:

In China, to apply to be granted of official tax of 0%, we have to apply annually, therefore we will continue to apply for this 0% tax rate next year. However, there is no guarantee we will be granted this tax rate, if it is not granted our tax rate would be 25%.

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

James Fuld:

I am sorry, I did not hear the last sentence.

Yan Yi Chen:

We will continue to apply for the 0% tax rate, but there is no guarantee there will be granted this tax rate. And there is more, if we are not granted with this tax rate, our tax rate will be around 25%.

James Fuld:

My understanding is you get two years at zero and three years at 50% of the normal rate, and after those five years it goes to 25%. Why would Renhuang be different?

Yan Yi Chen:

We are a State-Certified High-Tech Enterprise, and we were granted official tax rates of 0% and 50%, as the applications for these particular High-Tech Enterprises are required to apply every year, and to renew this tax rate every year, so it is not the same as other companies which could be under a different policy.

James Fuld:

Understood. You have deposits of US$18 million. Can you explain that to me, please?

Yan Yi Chen:

The deposit of US$18 million is for down payments for purchase of three patents, land-use rights and production facilities.

James Fuld:

And how much is the total payment?

Yan Yi Chen:

The total payment is something about US$35 million. So we still have the remainder US$17 million, but the payment is due to 2011 and 2012.

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

James Fuld:

So the payment is to 2011 and 2012?

Yan Yi Chen:

Correct.

James Fuld:

And it is to the manufacturing facility?

Yan Yi Chen:

Yes.

James Fuld:

And then you paid US$5.6 million for the office?

Yan Yi Chen:

We already paid US$3.9 million, so there is the balance of US$1.7 million to be paid by 2012 for the office floors.

James Fuld:

And when do you hope to do an acquisition?

Yan Yi Chen:

We continue interested in getting opportunities for acquisition, but at the moment we do not have any specific target.

James Fuld:

Thank you very much.

Goham Seiajkens, China Investor King:

Hi. When do you plan for uplifting to a major exchange?

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Yan Yi Chen:

We are planning to uplift to AMEX, and we are working with AMEX to complete this in this year.

Goham Seiajkens:

OK. And how do you want to achieve this? Is this by a reverse split, or by just meeting the listing requirements?

Yan Yi Chen:

It will be just by meeting the listing requirements.

Goham Seiajkens:

OK. Thank you. Another question I would have, do you think there is more dilution on the way this year, or it is under control?

Yan Yi Chen:

At the moment, all the dilution has been listed in the financial statement. Going forward, depending on acquisition opportunities that come along the way, there might be more dilution, but that is something that I cannot confirm at this stage.

Goham Seiajkens:

OK. Thank you. I have two questions left. My question would be: how do you see yourself, the Company, in five years from now?

Yan Yi Chen:

As our goal to be a global leading provider brand for anti-depressant and nervous regulation product, we will continue to work towards it with our products, currently these new products of Siberian Ginseng which with a single plant has proven properties in this area, we are continuing to working hard in terms of in our R&D to further develop and explore the opportunities.

We are also working very hard to fit the Medical Quality Standards for this product, once that is fit, we will be more [unintelligible] in the market. We are already like the market leaders of natural anti-depressants and nerve regulation products for a single-plant base product in China, and we will reach towards expanding this advantage, as well as developing [unintelligible] product to enhance our product portfolio.

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Goham Seiajkens:

OK. Thank you. My last question would be: 3Qs are always the weakest, you mentioned in your 10K of 1Q. What are the Company’s plans to make the 3Q a consistent quarter in line with the other quarters?

Yan Yi Chen:

We plan to introduce a new product, the Qing Re Jie Du Oral Liquid which with this we will be able to be as a successful product as we have achieved [unintelligible] in the 3Q, and we will continue also to [unintelligible] Siberian Ginseng to increase our sales of existing products.

Goham Seiajkens:

OK. Thank you. Those were all my questions. Thank you very much.

Boyd Hinds, Equinox Capital:

Hi. I have a few questions. You have announced that you have two new products that you are scheduling for launch here in the 2H10. Can you just discuss with us what your expectations are for revenues for these two products, and how much of that has already been built in your guidance?

Yan Yi Chen:

For our first product, which is the Qing Re Jie Du Oral Liquid, we budgeted, we see sales on that to the rest of 2010 fiscal year of around US$1 million to US$1.5 million. In terms of the Badger Oil, which is another product that we plan to introduce in the 4Q, we have not quite seen the exact time for launching therefore we cannot budget for the exact sales contribution from that product.

And in terms of our forecast guidance, we are actually basing on the sales of existing products, so we have not expected much of the revenue contribution from the new product launches.

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Boyd Hinds:

OK. Let me ask you some question about the existing products. You have got a big boost from new sales of your compound honeysuckle granules. Can you just discuss with us, once that segment has matured, what could we expect to see in terms of sales from that segment on an annual basis?

Yan Yi Chen:

We believe it is still a growing market, so it has not quite reached the maturing stage yet. At this moment I do not have a number to give you. I apologize.

Boyd Hinds:

Just so that I can make sure I got this right. You reported for the first six months of your fiscal year nearly US$3.3 million in revenue from just that segment.

Yan Yi Chen:

Yes.

Boyd Hinds:

Is it reasonable to expect that to follow a similar seasonality as your other lines of business?

Yan Yi Chen:

This is still a growing segment, actually. We expect sales to continue to grow in the 3Q.

Boyd Hinds:

OK. So, because you just entered that market we should see, it would not be unexpected to see at least a similar, I guess, a double from the current level? So, we could least expect to see US$3.5 million in sales for the 2H10 just from that segment alone?

Yan Yi Chen:

Currently the expectation will be that.

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Boyd Hinds:

OK. Let me just ask you a question about your current production capacity and utilization of that. You said that it is roughly 50%. Does any of that capacity include the Ah City facility that you discussed in terms of, you know, you have not fully completed the acquisition yet, but are you including any of that production capacity from that facility in your existing capacity?

Yan Yi Chen:

Actually, previously we have [unintelligible] that facility, now we are acquiring [unintelligible].

Boyd Hinds:

OK. So, is that a ‘yes, it is included’, or ‘no, it is not included’?

Yan Yi Chen:

Yes, it is.

Boyd Hinds:

It is included. OK. So, you have quite a bit of room to grow here. And what can we expect to see in terms of organic growth from your existing products? And how much of the growth in 2010 is going to come from just your existing product line?

Yan Yi Chen:

We are planning for a growth around 26% to 28% this year.

Boyd Hinds:

I am sorry. 20% to 28%?

Yan Yi Chen:

26% to 28%.

Boyd Hinds:

Is that for fiscal year 2010 or fiscal year 2011 as well?

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Yan Yi Chen:

This is for year 2010 at the moment.

Boyd Hinds:

OK. So, let just talk about organic growth for a little bit. What do you think is sustainable going forward from what will be obviously a higher base level in fiscal year 2011?

Yan Yi Chen:

We believe there will be a late growth of 26%.

Boyd Hinds:

I am sorry. If you are on speaker phone, it would be great if you could go into your handset. Sometimes it is difficult to hear your answer.

Yan Yi Chen:

Sorry. We expect minimum growth of 26% in 2011.

Boyd Hinds:

26% in fiscal year 2011?

Yan Yi Chen:

Yes.

Boyd Hinds:

OK. So, the question was revenue growth fiscal year 2011, that would be from your existing products. Can you give us some kind of forecast into fiscal year 2011?

Yan Yi Chen:

We expect a minimum growth of 26% to 29% in late 2011 fiscal growth.

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Boyd Hinds:

OK. Thank you very much. I appreciate your answers.

Goham Seiajkens, China Investor King:

I have another question. Are there plans to expand into foreign countries? For example, in Europe some Chinese medicines are sold very well on a variable basis. Are there plans in the future for Renhuang to expand into foreign countries?

Yan Yi Chen:

We continue looking for opportunities that happen in new marketplaces. At the moment we do not have anything in the short-term plans. We are still trying to catch more matured opportunity and growth arriving from the healthcare reform in China at the moment.

Goham Seiajkens:

OK. Thank you. That was my question.

Boyd Hines, Equinox Capital:

I just had a follow up. I think there was a statement that you made earlier, about acquisitions and possibly issuing more stock to be able to acquire a company. I would urge the Company to resist that. If your stock is still trading at levels it is at right now, which is less than 4x earnings, it makes no sense to issue stock at these levels, unless you can purchase that company at less than that multiple. I would like to have your comment on that, please.

Yan Yi Chen:

Yes, we are aware of that situation. We will consider any acquisition opportunity, this is a buying consideration that we have to have.

Boyd Hines:

OK. So, is the hope that any acquisitions you do are going to be accredited to earnings?

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	Conference Call Transcript
	2QF10 Results
	Renhuang Pharmaceuticals, Inc
	June 8th, 2010

Yan Yi Chen:

Yes. Definitely.

Boyd Hines:

OK. Thank you.

Operator:

At this time there are no further questions. I will turn it back over for any closing remarks.

Lei Huang:

Thank you, operator. On behalf of the entire Renhuang management team, I want to thank you for your interest in the Company and participation on this call. If you would like to contact or visit Renhuang in China, please let us know and we would be happy to facilitate.

Again, thank you for joining us on this call, and this concludes Renhuang 2QF10 earnings conference call.

Operator:

Thank you for participating in today’s conference call. You may now disconnect.

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