Sinovac Reports Unaudited Second Quarter 2009 Financial Results

  • Author: sinovac
  • Date: 2009-08-19
  • Source: sinovac
  • Pageview: 8085

Sinovac Reports Unaudited Second Quarter 2009 Financial Results
- Conference call scheduled Wednesday, August 19, 2009 at 8:00 a.m. ET -
- Reaffirmation of 2009 sales projection to be $55 million to $60 million -
- H1N1 vaccine may drive additional growth -

[19-August-2009]
 

BEIJING, Aug. 19 /PRNewswire-Asia/ -- Sinovac Biotech Ltd. (NYSE Amex: SVA), a leading developer and provider of vaccines in China, announced today its unaudited financial results for the three-month and six- month periods ended June 30, 2009.

    Financial Highlights

-- Sales for the quarter increased 21% to $20.0 million
-- Sales for the six-month period increased 5% to $26.6 million
-- Operating income for the quarter rose 52% to $10.7 million
-- Operating income for the six-month period increased 11% to $11.3 million.
-- Net income attributable to the shareholders increased 74% to $5.8 million in the second
quarter, with diluted EPS of $0.14
-- Cash and cash equivalents at June 30, 2009 was $46.7million.

   Business Highlights
-- In June, Sinovac received the first order in China to supply its pandemic influenza A (H1N1) vaccine to the Beijing government. The initial order consisted of vaccines for 2 million people; delivery is expected by the end of September with additional orders expected to commence in October.

-- In July, Sinovac began the clinical trial of its H1N1 influenza vaccine, enrolling 1,614 volunteers, including 101 elders, 706 adults, 404 juveniles and 403 children. The trial began on July 21, 2009 and all of the volunteers received their first shot of the vaccine through July 25, 2009. During the three-day observation period, none of the volunteers experienced a severe adverse reaction.  Between August 12 and 15, 2009, the volunteers received the second shot of the vaccine. Preliminary tests on the H1N1 influenza vaccine have indicated that the vaccine is safe and reliable in humans.

Mr. Weidong Yin, Chairman, President and CEO of Sinovac, commented, "We are very pleased with our second quarter results, with sales up 21% and net income up 74%. Our revenue growth in the quarter was partly driven by increased sales of our inactivated hepatitis A vaccine, Healive(R), to the public market, as we worked to fulfill the previously announced purchase order from China's Ministry of Public Health (MOH). Sinovac fulfilled and recorded 89% of the original order for $12.8 million worth of doses in the second quarter of 2009. Going forward, we will continue to focus on increasing our penetration of both the private and public markets.

"Since the onset of the global outbreak of the H1N1 influenza virus, Sinovac has earned a great deal of recognition from local and national governments and health agencies for our efforts to help prevent and control the spread of this virus. As China's only approved manufacturer of a pandemic influenza (H5N1) vaccine, we had the fully integrated human vaccine development expertise and manufacturing capability necessary to quickly produce a vaccine for H1N1. In June, Sinovac was the first company in China to receive an order for the H1N1 influenza vaccine; we expect to deliver the initial order of vaccines for 2 million people to the Beijing government by the end of September 2009. Administration of the second dose of H1N1 vaccine to volunteers began on August 12, 2009 and has been completed. The clinical data unblinding conference was held in Beijing on the afternoon of August 17, 2009. The analysis of the clinical trial results showed that the H1N1 vaccine developed by Sinovac induces good immunogenicity and has good safety profile after one dose. Sinovac plans to complete the summary report as soon as possible and fully evaluate the safety and immunogenicity of the H1N1 vaccine. We plan to apply for the Production License for H1N1 vaccine in compliance with SFDA's regulations. We are very proud to be able to make such a significant contribution in helping to slow the spread of this epidemic in China.

Mr. Yin continued, "We remain very excited about our growth prospects for 2009 and beyond. In addition to the H1N1 vaccine, we have a robust pipeline of other investigational vaccines, including enterovirus 71 (EV 71), pneumococcal conjugated vaccine, and Japanese encephalitis. Overall, our objective for the next three to five years is to have one or two product candidates per year entering into clinical trials beginning in 2010 and one or two products launched into the market per year commencing in 2012. In addition to our organic growth strategy, we have the financial flexibility to selectively pursue acquisition candidates that will help to expand our product pipeline, due to $47 million of cash and cash equivalents on our balance sheet. Previously, we projected revenues of $55 million to $60 million for the full year 2009. Based largely on expected demand for our H1N1 vaccine, we believe that our 2009 revenues will exceed expectations. However, due to uncertainty on the timing of future orders, we are not able to further quantify our expectations.

Market Overview

The market for Sinovac's principal product, Healive, has been developed with the PRC government greatly expanding publicly funded inoculations. As a result, the share of the market generated by public sales is expected to increase in the next few years, and private market sales are expected to decrease as a percentage of overall sales. Although the gross margin on public sales is lower than on private sales, Sinovac expects to realize offsetting cost savings and efficiencies.

In the current year, Sinovac expects to generate significant revenues from the sale of H1N1 vaccine, but this is expected to be a short-term initiative that will extend through to the end of the influenza season in the spring of 2010. These sales are not expected to be recurring, but demonstrate the Company's ability to develop, manufacture and distribute vaccines on short notice.

In future periods, the Company is seeking to expand its sales by adding new product lines, including the sale of animal vaccines by its subsidiary Tangshan Yian.

Financial Review for Three Months Ended June 30, 2009

During the second quarter of 2009, sales were $20.2 million, up 21.2 percent from $16.5 million in the second quarter of 2008. Sinovac continues to devote significant resources to marketing Healive to China's private market and an increase in demand for Healive in the public market is expected as well.

    During the second quarter of 2009, Sinovac's unit dose sales were:



   Three months ended June 30     2009         2008
                              (000 doses)  (000 doses)

   Healive                        3,263       2, 720
   Bilive                           315          176


Sales of Healive in the quarter were largely driven by fulfillment of the previously announced MOH purchase order as part of its vaccination campaign. Sales of the hepatitis A vaccine to the public market accounted for 60% of total sales in the quarter. Sales of Bilive increased significantly during the quarter and the Company expects it to become a complementary product to Healive in the private market, whereas Healive is expected to increasingly penetrate the public market.

Gross profit for the second quarter 2009 was $16.3 million, with a gross margin of 81%, compared to $13.9 million and a gross margin of 84%, for the same period of 2008. The gross margin was adversely impacted by the lower selling price on the 2 million doses of hepatitis A vaccine sold to MOH. The gross margin for the second quarter of 2009 increased from the gross margin of 78% reported in the first quarter of 2009 due to efficiencies resulting from expanded production volume.

Total operating expenses for the second quarter of 2009 were $5.6 million, compared to $6.9 million in the comparative period in 2008. Selling, general and administrative expenses for the second quarter of 2009 were $4.9 million, compared to $6.0 million in the same period of 2008. SG&A expenses, as a percentage of second quarter 2009 sales, decreased to 24%, down from 37% during the prior year. The lower selling expenses resulted from the higher proportion of Healive sold to the government.

Net research and development expenses for the second quarter 2009 were $550,000, compared to $668,000 in the same period of 2008. R&D expenses in the second quarter of 2009 were mainly related to the EV 71 vaccine, pneumococcal conjugated vaccine, and universal pandemic influenza vaccine.

Second quarter 2009 operating income was $10.7 million, compared to operating income of $7.0 million in the prior year. Net income for the second quarter of 2009 included $126,000 in net interest and financing expenses and $2.1 million in income tax expenses. Net income for the same period of 2008 included $541,000 of net interest expense and $1.6 million of income tax expense. Net income for second quarter of 2009 was $5.8 million, or $0.14 per diluted share, up 75% compared to net income of $3.3 million, or $0.08 per diluted share, in the same period of 2008.

As of June 30, 2009, Sinovac's cash and cash equivalents totaled $46.7 million, compared to $32.9 million as of December 31, 2008. The increase in cash and cash equivalents primarily reflects an commercial bank loan obtained in the second quarter.

Financial Review for Six-Months Ended June 30, 2009

During the six-months ended June 30, 2009, sales were $26.6 million, up 4.7 percent from $25.4 million for the same period in 2008. Sinovac recorded a strong second quarter, which greatly improved the company's performance for the year to date.



   During the first six-months of 2009, Sinovac's unit dose sales were:

   Six months ended June 30       2009         2008
                              (000 doses)  (000 doses)

   Healive                        4,034        4,220
   Bilive                           491          207
   Anflu                            136           23


Gross profit for the six-month period was $21.4 million, with a gross margin of 80%, compared to $21.7 million and a gross margin of 86%, for the prior year period. The gross margin was adversely affected by the lower selling price of the 2 million doses of hepatitis A vaccine sold to MOH in the second quarter of 2009. Total operating expenses for the first six months of 2009 were $10.0 million, compared to $11.6 million in the comparative period in 2008.

Selling, general and administrative expenses for the first six months of 2009 were $8.4 million, compared to $9.6 million in the prior year period. SG&A expenses as a percentage of sales decreased to 32 percent, down from 38 percent in the comparative period. Net research and development expenses for the first six-months of 2009 were $1.3 million, compared to $1.6 million in the prior year period.

Operating income for the six-months ended June 30, 2009 was $11.3 million, compared to an operating income of $10.2 million in the prior year period. Net income for the first six months of 2009 included $159,000 in net interest and financing expenses and $2.6 million in income tax expenses. Net income for the same period of 2008 included $653,000 of net interest expense and $2.3 million of income tax expense. Net income for the first six months of 2009 was $5.8 million, or $0.14 per diluted share, compared to net income of $4.9 million, or $0.12 per diluted share, in the same period of 2008.

Conference Call Details

The Company will host a conference call on Wednesday, August 19, 2009 at 8:00 a.m. ET (8:00 p.m. China Standard Time) to review the Company's second quarter financial results for the period ended June 30, 2009 and provide an update on recent corporate developments. To access the conference call, please dial 1-877-407-4018 (USA) or 1-201-689-8471 (international). A replay of the call will be available from 11:00 a.m. ET on August 19, 2009 until September 2, 2009. To access the replay, please dial 1-877-660-6853 (USA) or 1-201-612-7415 (international) and reference the account number 3055 and the access code 330444. A live audio webcast of the call will also be available from the Investors section on the corporate web site at http://www.sinovac.com . A webcast replay can be accessed on the corporate website beginning August 19, 2009 and the replay will remain available for 30 days.

About Sinovac

Sinovac Biotech Ltd. is a China-based biopharmaceutical company that focuses on the research, development, manufacture and commercialization of vaccines that protect against human infectious diseases. Sinovac's vaccine products include Healive(R) (hepatitis A), Bilive(R) (combined hepatitis A and B), Anflu(R) (influenza), Panflu(TM) (pandemic influenza (H5N1) has already been approved for government stockpiling) and an H1N1 vaccine. Sinovac is developing vaccines for enterovirus 71, universal pandemic influenza, Japanese encephalitis vaccine, and human rabies vaccine. Its wholly owned subsidiary, Tangshan Yian, is conducting field trials for independently developed inactivated animal rabies vaccines.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by words or phrases such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this press release contain forward-looking statements. Statements that are not historical facts, including statements about Sinovac's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Sinovac does not undertake any obligation to update any forward-looking statement, except as required under applicable law.



                            SINOVAC BIOTECH LTD.
         Consolidated Statements of Income and Comprehensive Income
          Three Months and Six Months Ended June 30, 2009 and 2008
                                (Unaudited)
                        (Expressed in U.S. Dollars)

                              Three months ended         Six months ended
                                     30-Jun                    30-Jun
                               2009         2008         2009         2008

   Sales                  $20,018,327  $16,521,429  $26,584,426  $25,383,430
   Cost of sales            3,762,786    2,613,939    5,210,556    3,661,805
   Gross profit            16,255,541   13,907,490   21,373,870   21,721,625
   Selling, general and
    administrative
    expenses                4,860,279    6,038,650    8,407,902    9,616,536
   Research and
    development expenses      549,734      667,508    1,309,175    1,596,844


   Depreciation of
    property, plant and
    equipment  and
    amortization of
    licenses and permits      167,004      169,484      331,873      347,713
   Total operating
    expenses                5,577,017    6,875,642   10,048,950   11,561,093
   Operating income        10,678,524    7,031,848   11,324,920   10,160,532
   Interest and financing
    expenses                 -199,113     -399,854     -325,313     -557,561
   Interest income and
    other income
    (expenses)                 73,020     -141,491      166,151      -95,141
   Income before income
    taxes and non-
    controlling interest   10,552,431    6,490,503   11,165,758    9,507,830
   Income taxes recovery
    (expense)
      - Current            -1,471,543   -2,579,104   -1,795,917   -3,224,439
      - Deferred             -690,556      970,614     -847,950      897,433
   Net income for the
    period                  8,390,332    4,882,013    8,521,891    7,180,824
   Net income
    attributable to non-
    controlling interest   -2,581,676   -1,545,764   -2,688,556   -2,284,619
   Net income
    attributable to the
    stockholders           $5,808,656   $3,336,249   $5,833,335   $4,896,205
   Net income for the
    period                 $8,390,332   $4,882,013   $8,521,891   $7,180,824
   Other comprehensive
    income
   Foreign currency
    translation
    adjustment                -38,279      960,676       26,620    2,243,204
   Comprehensive income     8,352,053    5,842,689    8,548,511    9,424,028
   Comprehensive income
    attributable to non-
    controlling interest    2,583,246    1,551,187    2,695,811    2,299,930
   Comprehensive income
    attributable to
    stockholders           $5,768,807   $4,291,502   $5,852,700   $7,124,098
   Earnings per share -
    basic and diluted            0.14         0.08         0.14         0.12
   Weighted average
    number of shares
    of common stock
    outstanding
      - Basic              42,427,503   42,851,228   42,653,223   41,983,709
      - Diluted            42,431,249   43,210,296   42,653,223   42,351,756



                            SINOVAC BIOTECH LTD.
                        Consolidated Balance Sheets
                                (Unaudited)
                        (Expressed in U.S. Dollars)

                                                   June 30,      December 31,
                                                      2009              2008
   ASSETS
   Current assets
     Cash and cash equivalents                 $46,704,452       $32,894,102
     Accounts receivable - net                  31,740,850        19,486,596
     Inventories                                 9,654,400         6,486,351
     Income tax refundable                         521,484           348,018
     Prepaid expenses and deposits                 678,673           933,297
     Deferred tax assets                           448,965         1,189,831
   Due from related party                        1,460,963                --

   Total current assets                         91,209,787        61,338,195

   Property, plant and equipment                21,244,659        19,262,099
   Long term inventories                         2,919,129           942,514
   Deferred tax asset                              545,102           569,937
   Licenses and permits                            893,146         1,090,477
                                              $116,811,823       $83,203,222
   Total assets

   LIABILITIES AND STOCKHOLDERS' EQUITY

   Current liabilities
     Loans payable                             $24,105,891        $8,024,277
     Accounts payable and accrued
      liabilities                               11,708,409        11,909,037
     Due to related parties                         46,971            46,971
   Dividends payable to non-controlling
    shareholder of Sinovac Beijing                 115,835           115,677
     Deferred research grants                    1,011,842         1,182,703
   Total current liabilities                    36,988,948        21,278,665
   Deferred  government grants                   2,749,228         2,836,994
   Loan payable                                  2,191,445         2,188,439
   Deferred revenue-H5N1                         9,642,356                --
   Long-term debt                               14,583,029         5,025,433
   Total liabilities                            51,571,977        26,304,098
   Commitments and contingencies
   STOCKHOLDERS' EQUITY
   Preferred stock                                      --                --
   Common stock                                     42,424            42,894
   Additional paid in capital                   41,422,187        41,629,506
   Accumulated other comprehensive income        4,162,591         4,143,225
   Dedicated reserves                            5,549,684         5,549,684
   Retained earnings (Accumulated deficit)       4,181,800        -1,651,534
   Total stockholders' equity                   55,358,686        49,713,775
   Non-controlling interest                      9,881,160         7,185,349
   Total equity                                 65,239,846        56,899,124
   Total liabilities and equity               $116,811,823       $83,203,222



                            SINOVAC BIOTECH LTD.
                   Consolidated Statements of Cash Flows
          Three Months and Six Months Ended June 30, 2009 and 2008
                                (Unaudited)
                        (Expressed in U.S. Dollars)

                                Three Months ended       Six Months ended
                                       June 30                June 30
                                    2009      2008         2009      2008
   Cash flows from (used in)
    operating activities
     Net Income for the
      period                   $8,390,332 $4,882,013  $8,521,891 $7,180,824
     Adjustments to
      reconcile net income to
      net cash used by
      operating activities:
     - deferred income taxes      690,556   -970,614     847,950   -897,433
     - Loss (income) on
       disposal fixed assets        2,434         --      -7,349         --
     - stock-based compensation    61,540     16,635     128,043     33,271
     - provision for doubtful
       debts                    1,443,986    932,113   2,312,924  1,559,918
     - depreciation of
       property, plant and
       equipment, and
       amortization of
       licenses                   431,753    388,460     864,107    780,563
     - research and
       development
       expenditures
       qualified for
       government
       grant                      -70,374   -126,829    -128,685   -130,848
    Change in other assets
     and liabilities
     - accounts receivable     12,080,553 -9,218,834  14,543,552 13,369,079
     - inventories             -2,803,876   -865,187  -5,135,639 -2,314,630
   - income tax refundable        712,224         --    -173,028         --
     - prepaid expenses and
       deposits                   224,922   -403,304     255,826    -84,290
   - advance from
     stockpiling program        9,644,568         --   9,644,568         --
     - accounts payable and
       accrued liabilities      1,487,986  3,668,617  -1,283,789  4,142,407
   Net cash provided by
    (used in) operating
    activities                  8,135,498 -1,696,930   1,303,267 -3,099,297
   Cash flows from (used in)
    financing activities
     Loan proceeds             16,074,281         --  16,074,281         --
     Loan repayment                    --         --          --         --
     Proceeds from issuance
      of common stock                  --      1,966          --  9,815,265
     Repurchase of common
      shares                      -16,189         --    -335,832         --
   Loan to non-controlling
    shareholder of Sinovac
    Beijing                            --         --  -1,460,600         --
     Proceeds from shares
      subscribed                       --     39,295          --     39,295
      Dividends paid to non-
      controlling shareholder
       of Sinovac Beijing              --         --          -- -2,947,877
     Government grant
      received                         --     70,695          --     70,695
   Net cash provided by
    financing activities     &nbs p; 16,058,092    111,956  14,277,849  6,977,378

   Cash flows from (used in)
    investing activities
     Restricted cash                   --    935,765          --   -434,921
   Acquisition of property,
    plant and equipment          -750,509 -1,229,151  -1,762,001 -2,236,575
   Net cash used in
    investing activities         -750,509   -293,386  -1,762,001 -2,671,496

   Exchange effect on cash
    and equivalents               -47,508    119,919      -8,765    542,189
   Increase (decrease) in
    cash and cash equivalents  23,395,573 -1,758,441  13,810,350  1,748,774

   Cash and cash
    equivalents, beginning of
    period                     23,308,879 20,578,712  32,894,102 17,071,497

   Cash and cash
    equivalents, end of
    period                    $46,704,452$18,820,271 $46,704,452$18,820,271
   Cash paid for interest,
    net of interest
    capitalized                  $206,866   $133,612    $330,268   $306,005
   Cash paid for income
    taxes                        $759,318   $871,557  $1,968,944 $1,309,963



   For more information, please contact:

   Helen G. Yang
   Sinovac Biotech Ltd.
   Tel:   +86-10-8289-0088 x9871
   Fax:   +86-10-6296-6910
   Email: info@sinovac.com

   Investors:
   Amy Glynn/Sara Pellegrino
   The Ruth Group
   Tel:   +1-646-536-7023/7002
   Email: aglynn@theruthgroup.com
          spellegrino@theruthgroup.com

   Media
   Janine McCargo
   The Ruth Group
   Tel:   +1-656-536-7033
   Email: jmccargo@theruthgroup.com

SOURCE Sinovac Biotech Ltd.
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