Biostar Pharmaceuticals, Inc. Nasdaq: BSPM Investor Presentation Aug 2014 Forward Looking Statement Statements contained in this presentation not relating to historical facts are forward-looking statements that are intended to fall within the safe harbor rule under the Private Securities Litigation Reform Act of 1995. All forward-looking statements included herein are based upon information available to the Company as of the date hereof, and the Company assumes no obligation to update any such forward-looking statements. As a result, readers and potential investors should not place undue reliance on these forward-looking statements. To the extent that any statements made here are not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates” and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by these forward-looking statements. Such risk factors include, without limitation, our ability to properly execute our business model, to attract and retain management and operational personnel, potential volatility in future earnings, fluctuations in the Company’s operating results, governmental decisions and regulation, and existing and future competition that the Company is facing. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual events to differ from the forward-looking statements. More information about some of these risks and uncertainties maybe found in the Company’s filings with the Securities and Exchange Commission under the caption "Risk Factors“ in such filings. Information regarding market and industry statistics contained in this presentation is included based on information available to us that we believe is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings or economic analysis. We have not reviewed or included data from all sources and cannot assure investors of the accuracy or completeness of any such data included in this presentation. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenues and market acceptance of products and services. 2 Introduction Biostar Pharmaceuticals, Inc. (Nasdaq: BSPM) is a Chinese based developer, manufacturer and marketer of pharmaceutical and health supplement products for a variety of diseases and conditions •Strong R&D capabilities (two high-tech laboratories) •Two world-class production facilities •Diverse portfolio of products •Extensive and efficient distribution network in 28 provinces •82 acres of raw material & herb plantations •Future strategic development 3 Investment Considerations • Unique vertically integrated business model - R&D, raw material plantation, processing, manufacturing, distribution and sales • Large product portfolio and a strong pipeline of new products to continue to drive growth - • Currently produces and sells 30 products and 1 medical device Innovative product pipeline with a wide variety of OTC and prescription drugs In 2011, acquired permits and approvals for 86 drugs and one health product In March 2013, acquired additional 13 drug approval license numbers Xin Aoxing - leading market position, strong brand recognition throughout China - Targets hepatitis B virus (HBV) which affects more than 10% of China’s population - Strong recognition: OTC drug approved by China’s State Food and Drug Administration (SFDA) • Well positioned to take advantage of market opportunities such as: - China’s $124 billion healthcare reform plan - New Rural Medical Care Cooperative Program - Milestones: won a bid to supply hospitals In 1 province with Huangyangning Tablets, 2 provinces with Wenweishu Capsules, 8 provinces with Hyperthyroidism Capsules 4 1 About Biostar 2 Financial Highlights 3 Growth Opportunities 5 Vertically Integrated Business Model Raw Material Farm Raw materials and 82 acres of plantation Lab, Processing, Warehouse and Offices in Xianyang Two R&D Laboratories Two worldclass production Facilities: Xianyang & Weinan R&D Lab R&D Lab Sales network covering 28 provinces Drug Manufacturing Drug Manufacturing Covers retail outlets, hospitals, pharmacies and Clinics 6 Self-farming: Reduces Costs & Controls Quality In 2008 acquired 82 acres in Tsinling Mountains Planted and growing 13 herbs including: •Salvia miltiorrhiza •Pricklyash peel •Eucommia bark •Gingko •Honeysuckle •Shizandra berry •Scutellaeria baicalensis georgi •Milk veteh •Radix codonopsitis To control quality and reduce cost of raw materials In 2010 - all raw materials were purchased from suppliers; planted herbs were harvested gradually and the use of this is increasing In 2011 - Salvia miltiorrhiza is being used as raw material From 2012-2014 - Additional herbs to harvest and be ready for use Goal - increase production and fulfill all needs for raw materials or trade for other herbs: further reduce costs and control quality 7 Strong R&D Capabilities Two R&D laboratories (Xianyang & Weinan) •30 scientists & researchers •Average 10 years of experience External R&D – Biostar sponsors and owns the Intellectual Property Xianyang lab •Shaanxi College of Traditional Chinese Medicine •Shaanxi University of Science and Technology •Life Science College of Northwest University •The Fourth Military Medical University Weinan lab 8 World-class Production Facilities - Xianyang Xianyang facility •4 Good Manufacturing Production (GMP) certified production lines producing 10 products and 1 medical device •When fully launched, the company anticipates annual production capacity over $100 million •Two new production lines are under construction and waiting for GMP certification: -Zushima production line -When fully launched, the company anticipates to generate approximately $30 million -in revenues annually -Health products line - When fully launched, the company anticipates to generate approximately $10 million in revenues annually 9 World-class Production Facilities in Weinan Weinan facility •Acquired Shaanxi Weinan Huaren Pharmaceuticals In October 2011 •Five production lines •One high-tech laboratory •Currently, produces 20 drugs and one healthcare product •$3.0 million in net sales for the first quarter of 2014 10 Significant Designation for Biostar’s China Subsidiaries ●In January 2014, Biostar's operating subsidiary, Shaanxi Aoxing Pharmaceutical Co.,Ltd, was designated as the experimental base of the Liver Disease Health Education in Shaanxi province. ●Shaanxi Aoxing Pharmaceutical has been awarded numerous honors of Shaanxi Pharmaceutical and Health Products Cooperation Association Director Unit. ●The company believes that the above-referenced awards and experimental status will provide a new platform for product promotion, research and development of Biostar Hepatites B products. ●More efforts will be directed towards the search and development of both current and future products. 11 New Partnership with Universities in Shaanxi • A new liver cancer drug was developed in March 2014 by the company and its partner—the Research Institute of Pharmaceuticals at Shaanxi University of Chinese Medicine. • Current cases of cancer on a global scale have been increasing drastically with China holding the larger percentage of the demographic According to the World Health Organization (WHO), in 2012 on a global basis, there were 14 million new cancer cases and 8.2 million deaths; China accounted for 3.07 million of the new cases and 2.2 million of the deaths. In 2012, China accounted for approximately 50% of the world’s liver cancer cases. • Signed letter of intent in May 2014 with Northwest University to cooperate and develop a new Myocardial ischemia medication 12 A Diverse Portfolio of Products - Xianyang Category Name Treatment Aoxing #1 Oleanolic Acid Capsule OTC Prescription Health Product Medical Device Xin Aoxing Capsule SFDA Acute and chronic hepatitis B (“HBV”) Approved Ganwang Compound Influenza Ap proved Tianqi Dysmenorrhea Capsule Menstrual swelling and cramping Approved Danshen Granule Alleviates blood stasis and angina Approved Taohuasan Pediatric Children respiratory tract infection Approved Yizi Capsules Aids fertility and fetal development Provincial level approved Tangning Capsules Type II diabetes Provincial level approved Shengjing Capsules Replenish kidney function Provincial level approved Aoxing Ointment Psoriasis, vitiligo and dermatitis Provincial level approved Aoxing Ganbaodai Hepatic and liver protection Provincial level approved Hernia Belt Hernia Provincial level approved GanWang Taohuasan Tianqi Dysmenorrhea Capsule Danshen Granule 13 A Diverse Portfolio of Products- Weinan Category OTC Name Zhitong TouGu Ointment Anfengwan Compound tablets Deafness Tongqiao Pills Wenweishu Capsules Chuzhang Zehaifu Tablets Treatment Analgesic Cold Deafness Chronic gastritis Cataract Prescription Fosfomycin Calcium Capsules Huangyangning tablets Hyperthyroidism Capsules Qianlietong Capsules compound Danshen tablets Piracetam Tablets Erythromycin Estolate Granules Jingang Tablets Aspirin Enteric-coated Tablets Liganlong Capsules Longdan Xiegan Pills Yanlixiao Capsules Danxiang Rhinitis Tablets Azithromycin Dispersible Tablets urinary tract infection CHD hyperthyroidism prostatic hypertrophy CHD cerebrovascular disease antisepsis and anti-inflammation enchance kidney cerebrovascular disease chronic hepatitis purge pathogenic fire, clear heat anti-inflammation Allergic rhinitis, sinusitis anti-inflammation Healthcare Huaren Changweitong Capsules enhance stomach function • • SFDA Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Biostar has been the supplier of hospitals in 10 provinces, providing Huangyangning Tablets, Wenweishu Capsules and Hyperthyroidism Capsules since April 2012. The penetration of hospital prescription drug has a milestone significance to Biostar. 14 Competitive Advantages Four nationally approved medications: Zhitong Tougu Plaster , Hyperthyroidism Capsules , Qianlietong Capsules , Yinyangsuo Tablets Two exclusive nationally approved medicines: Zhitong Tougu Plaster , Amoxicillin Enteric-coated Tablets Awaiting approval for army licensed drugs, exclusive production: Zushima Analgesic Spray OTC medicine updated from the local standards to national standards: Xin Aoxing Oleanolic Acid Two national patents Zhitong Tougu Plaster,Aoxing Ganbao 15 Flagship Product –New Aoxing • OTC drug for the treatment of HBV – Approved by SFDA – Recognized by China Consumer Association • Targets a highly contagious disease –More than 130 million people (10% of China’s population) are infected with HBV • Has high effectiveness rate – High effectiveness rate in relieving HBV symptoms - (as per People's Hospital of Shaanxi Province) • Nationally branded product and easily accessible – Sold at local pharmacies since 1998 • Low cost/high margin • Highly affordable – In most cases covered by personal health insurance 16 Innovative Product Pipeline Category Name Zushima Treatment Statute Aerosol pain suppressant Provided for the PRC military, OTC Pending PLA approval Yinyangsuo Tablets Tonifying kidney National new drug, SFDA approved Working on the paperwork Prescription Oleanolic Acid Injection Liver cancer ,Liver cirrhosis Applied for project approval Drug Danshensu Yibingzhi Myocardial ischemia In the 12th 5-year plan database National class-one chemical drug 17 Large Sales Network Beijing Weinan Xianyang •Across 28 provinces •More than 13,000 in Shaanxi rural Factories in Xianyang and Weinan in Shaanxi Province Biostar sales network coverage area •Sales team with 400+ employees 18 Current Bid Distribution Heilongjiang Liaoning Beijing Hebei Henan •Bidding for medicines across 10 provinces •Selling in nearly 30 hospitals •Planning on a hospital sales Shanghai Chongqing Zhejiang Huangyangning Tablets bidding zone Wenweishu Capsules bidding zone Jiangxi Guangxi Hyperthyroidism Capsules bidding zone team with 200 members. 19 1 About Biostar 2 Financial Highlights 3 Growth Opportunities 20 Historical Financial Performance 21 Looking Forward In late July 2012, Xianyang SFDA gave the“green light” of approval to restart sales of gel capsule products. Despite the temporary setback, business remains strong. Business Plan: Steps taken: •Continue introducing new products. •Expand the market. •Broaden channels of distribution. •Restart the sales of star product Xin Aoxing. Re-establish customer confidence: Started aggressive advertising campaign in medical journals and health magazines. New Business Model:Established a B2C call center for direct sales to customers; Established a hospital sales team consisting of approximate 200 sales representatives 22 Balance Sheet Highlights As of 31/12/2013 Highlights Cash and Cash Equivalents 31/12/2013 31/12/2012 $80,072 $1,759,078 Total Current Assets $35,985,502 $41,974,131 Total Assets $67,564,444 $70,475,300 $4,791,505 $12,702,552 $62,772,939 $57,772,748 $67,564,444 $70,475,300 Total Current Liabilities Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity 23 1 About Biostar 2 Financial Highlights 3 Growth Opportunities 24 Other Growth Opportunities China’s medicine and pharmaceutical industry is one of the fastest growing industries in the Chinese economy (According to Data Monitor & IMS Health) • The world’s third largest prescription drug market • Grown at over 16% annually (since 2000) • Profits ranked 5th highest in China Mentality of patients living in rural areas is changing • 70% of China’s 1.3 billion rural population. • Number of patients seeking cures through Modern medicines offered in hospitals and healthcare centers is rapidly increasing Highly fragmented market and government backed consolidation initiatives provide M&A opportunities 25 China’s Healthcare Reform • China's $124 billion healthcare reform plan was launched in 2009. Two major guidelines of the plan are accessibility and affordability – The first phase completed by the end of 2011 increased accessibility – The second phase to be completed by 2020 aims to increase affordability by making medicines and medical services affordable to everyone. • Chinese government increased the number of medicines included in the National Reimbursement Drug list (fully or partially reimbursable) • Private health insurance has become more affordable • $5.6 billion investment over 3 years has facilitated the “New rural cooperative medical care program” – Investment on patient education and encouragement to use “modern”medicine – Provides patients suffering from severe diseases with additional financial assistance – Shaanxi, Sichuan, Chongqing, Gansu, Henan, Hubei, and Hunan comprised 30% of the $5.6 billion spending 26 Future Strategic Development Biostar’s Strategies: •3 strategic moves: based on medication, strength, simultaneous development •3 innovations: management innovation, operations innovation, technological innovations •4 accelerating processes: internet marketing, information modernization, industrial diversification, service standardization •1 strategic goal: build up a pharmaceutical mainstay company 27 N Cina Implementation of Development Strategies •Seek to acquire smaller, similarly situated pharmaceutical companies and pharmaceutical distribution companies, utilized to achieve economies of scale and optimize the scale of production and sales •Development of technological resources, supplying pipeline for 1-2 new products a year •Every 2 years create a new leading product, with targeted sales over RMB 100 Million •Diversified industrial development strategy pattern implementation of drug development, medicine cultivation, drug production, drug, pharmaceutical chain store sales •Build a pharmaceutical company, create economies of scale, improve yield per share, return to investors 28 How to Contact Us Corporate website: www.biostarpharmaceuticals.com Contact: Ally Gong Tel: +86-29-3368-6638 Email: office@aoxing-group.com 29 Biostar Pharmaceuticals, Inc. Nasdaq: BSPM Investor Presentation Aug 2014