Sinovac Reports Unaudited Second Half of 2018 Financial Results and Files 2018 Annual Report on Form 20-F

  • Date: 2019-04-29
  • Pageview: 30990
 

BEIJING--(BUSINESS WIRE)--Apr 29, 2019--Sinovac Biotech Ltd. (NASDAQ: SVA) (“Sinovac” or the “Company”), a leading provider of biopharmaceutical products in China, has filed its 2018 annual report on Form 20-F with the U.S. Securities and Exchange Commission for the year ended December 31, 2018. The Company also reported its unaudited financial results for the second half of the year ended December 31, 2018.

Second Half of 2018 Financial Highlights

  • Sales for the second half of 2018 were $107.2 million, which remains the same compared to $107.4 million in the prior year period. Revenue generated by Hepatitis A vaccine increased by $12.0 million compared to same period in 2017, which was offset by $13.6 million decrease in the Company’s influenza vaccine. In second half of 2018, nil revenue generated by the Company’s influenza vaccine in the flu season 2018-2019 caused by the suspension of influenza vaccine production and destruction of inventory in April 2018 as a result of the disruptive actions of the minority shareholder of our subsidiary, Sinovac Biotech Co., Ltd.
  • Net income attributable to common shareholders was $7.7 million, or $0.11 per basic and diluted share, compared to net income attributable to common shareholders of $15.0 million, or $0.26 per basic and diluted share, in the prior year period.
 

Full Year 2018 Financial Highlights

  • Sales in 2018 were $229.7 million, an increase of 31.7% from $174.3 million in 2017. Sales increased primarily due to revenue generated by the Company’s EV71 vaccine.
  • Net income attributable to common shareholders was $21.8 million, or $0.34 per basic and diluted share in 2018, compared to net income attributable to common shareholders of $25.8 million, or $0.45 per basic and diluted share in 2017.

Business Highlights

Marketing and Sales

The overall vaccine market in China grew in 2018 despite serious impacts from the Changchun vaccine scandal. In addition, although there was no seasonal flu vaccine supply in 2018 due to the production suspension, total sales of the Company’s regular products increased by 31.7% year over year.

Research and Development

Varicella – Human clinical studies have been completed. The new drug application (NDA) was filed with the National Medical Products Administration (NMPA, previously known as the China State Food and Drug Administration) in November 2017. The clinical site inspection was completed in 2018. The technical review on the registration dossier was also conducted in 2018 and supplementary documents were issued and responded to during the year.

Sabin Inactivated Polio Vaccine (sIPV) – The Company has completed phase III clinical studies, which found that the immune responses against the three types of poliovirus in the studied sIPV were not inferior to those achieved with the control IPV and demonstrated a good safety profile. A sequential study of inoculation with bivalent oral polio vaccine (bOPV) was completed in 2018. In January 2019, the NDA was submitted to the NMPA. The consistency study on three consecutive lots is expected to start in 2019.

23 Valent Pneumococcal Polysaccharide Vaccine – The Company filed an NDA in June 2017. The clinical trial site inspection has been completed, and a registration dossier is being reviewed by the NMPA. The technical review on the registration dossier was conducted in 2018 and supplementary documents were issued and responded to during the year.

Quadrivalent Influenza Vaccine (QIV) – Phase III trial has been completed. The preliminary results of the trial show that the vaccine is safe and immunogenic. The NDA has been filed, and the application is under review by the NMPA.

Unaudited Financial Results for Second Half of 2018

Summary of sales and gross profit

                 
(In $000 except percentage data)   2018 2H   % of Sales   2017 2H   % of Sales
Hepatitis A – Healive   26,567   24.8%   14,542   13.5%
Hepatitis A&B – Bilive   662   0.6%   5,502   5.2%
Hepatitis vaccines subtotal   27,229   25.4%   20,044   18.7%
Influenza vaccine   (35)   0.0%   13,550   12.6%
Enterovirus 71 vaccine   78,424   73.2%   72,533   67.5%
Mumps vaccine   1,542   1.4%   1,311   1.2%
Total sales   107,160   100.0%   107,438   100.0%
Cost of sales   11,386   10.6%   12,505   11.6%
Gross profit   95,774   89.4%   94,933   88.4%
                 

Sales for the second half of 2018 were $107.2 million, which remains the same compared to $107.4 million in the prior year period. Revenue generated by Hepatitis A vaccine increased by $12.0 million compared to same period in 2017, which was offset by $13.6 million decrease in the Company’s influenza vaccine. In second half of 2018, nil revenue generated by the Company’s influenza vaccine in the flu season 2018-2019 caused by the suspension of influenza vaccine production and destruction of inventory in April 2018 as a result of the disruptive actions of the minority shareholder of our subsidiary, Sinovac Biotech Co., Ltd.

Gross profit was $95.8 million compared to gross profit of $94.9 million in the prior year period. Gross margin was 89.4% compared to 88.4% in the prior year period. Gross profit in the second half of 2018 increased slightly due to a change in sales mix, with a greater proportion of sales generated by the Company’s higher-margin EV71 vaccine.

Selling, general and administrative expenses in the second half of 2018 were $69.2 million compared to $50.6 million in the same period of 2017. The increase was mainly due to higher professional and consulting fees associated with ongoing litigation.

R&D expenses in the second half of 2018 were $11.8 million compared to $11.7 million in the same period of 2017.

Net income in the second half of 2018 was $13.5 million compared to $20.9 million in the prior year period.

Net income attributable to common shareholders was $7.7 million, or $0.11 per basic and diluted share, compared to net income attributable to common shareholders of $15.0 million, or $0.26 per basic and diluted share, in the prior year period.

Non-GAAP adjusted EBITDA was $20.6 million in the second half of 2018 compared to $35.4 million in the prior year period. Non-GAAP net income in the second half of 2018 was $15.9 million compared to $20.2 million in the prior year period. Non-GAAP diluted earnings per share in the second half of 2018 were $0.13 compared to $0.25 per share in the prior year period. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

Financial Results for the Twelve Months Ended December 31, 2018

Summary of sales and gross profit

                 
(In $000 except percentage data)   2018   % of Sales   2017   % of Sales
Hepatitis A – Healive   52,420   22.8%   27,421   15.7%
Hepatitis A&B – Bilive   11,006   4.8%   10,430   6.0%
Hepatitis vaccines subtotal   63,426   27.6%   37,851   21.7%
Influenza vaccine   2,028   0.9%   13,544   7.7%
Enterovirus 71 vaccine   162,537   70.8%   121,284   69.6%
Mumps vaccine   1,659   0.7%   1,667   1.0%
Total sales   229,650   100.0%   174,346   100.0%
Cost of sales   24,723   10.8%   20,240   11.6%
Gross profit   204,927   89.2%   154,106   88.4%
                 

Sales in 2018 were $229.7 million, an increase of 31.7% from $174.3 million in 2017. Sales increased primarily due to revenue generated by the Company’s EV71 and hepatitis vaccines.

Gross profit in 2018 was $204.9 million, an increase of 33.0% from $154.1 million in 2017. Gross margin was 89.2% compared to 88.4% in 2017. Gross profit in 2018 also increased primarily due to higher sales generated by the Company’s EV71 vaccine.

Selling, general and administrative expenses in 2018 were $137.0 million compared to $87.4 million in 2017. The Company’s selling, general and administrative expenses increased with the higher level of sales activity. The Company incurred $11.4 million in professional and consulting fees associated with ongoing litigation.

R&D expenses in 2018 were $21.9 million compared to $20.5 million in 2017. R&D expenses were mainly incurred by the development of varicella vaccine and sIPV.

Net income was $36.1 million in 2018 compared to net income of $36.7 million in 2017.

Net income attributable to common shareholders was $21.8 million, or $0.34 per basic and diluted share in 2017, compared to net income attributable to common shareholders of $25.8 million, or $0.45 per basic and diluted share in 2017.

Non-GAAP adjusted EBITDA was $54.8 million in 2018 compared to $51.3 million in 2017. Non-GAAP net income in 2018 was $39.9 million compared to net income of $36.4 million in 2017. Non-GAAP diluted earnings per share in 2018 were $0.38 compared to diluted earnings per share of $0.44 in 2017. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

As of December 31, 2018, cash and cash equivalents and restricted cash totaled $158.2 million compared to $116.0 million as of December 31, 2017. In 2018, net cash provided by operating activities was $7.9 million. Net cash used in investing activities was $25.3 million, which was primarily due to the purchase of short-term investments. Net cash provided by financing activities was $64.2 million, including loan proceeds of $18.9 million and loan repayment of $43.9 million. As of December 31, 2018, the Company had $3.3 million of bank loans due within one year. The Company expects that its current cash position will be able to support its operations for at least the next 12 months.

About Sinovac

Sinovac Biotech Ltd. is a China-based biopharmaceutical Company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases. Sinovac's product portfolio includes vaccines against enterovirus71, or EV71, hepatitis A and B, seasonal influenza, H5N1 pandemic influenza (avian flu), H1N1 influenza (swine flu), and mumps. Healive, the hepatitis A vaccine manufactured by the Company has passed the assessment under WHO Prequalification procedures in 2017. The EV71 vaccine, an innovative vaccine developed by Sinovac against hand foot and mouth disease caused by EV71, was commercialized in China in 2016. In 2009, Sinovac was the first company worldwide to receive approval for its H1N1 influenza vaccine, which it has supplied to the Chinese Government's vaccination campaign and stockpiling program. The Company is also the only supplier of the H5N1 pandemic influenza vaccine to the government stockpiling program. The Company is developing a number of new products including a Sabin-strain inactivated polio vaccine, pneumococcal polysaccharides vaccine, pneumococcal conjugate vaccine and varicella vaccine. Sinovac primarily sells its vaccines in China, while also exploring growth opportunities in international markets. The Company has exported select vaccines to over 10 countries in Asia and South America. For more information please see the Company’s website at www.sinovacbio.com.

Safe Harbor Statement

This press release contains “forward-looking statements” within the meaning of the United States federal securities laws. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that might cause such a difference include our inability to compete successfully in the competitive and rapidly changing marketplace in which we operate, failure to retain key employees, cancellation or delay of projects, failure to satisfy regulatory and other requirements, disapproval or delay in approval of new products by regulatory bodies, disruptions to our operations, the results of any pending litigation, potential litigation relating to our shareholder rights plan, any halt in trading of the Company’s securities, and adverse general economic conditions in China, the United States and elsewhere. These risks and other factors include those listed under “Risk Factors” and elsewhere in our Annual Report on Form 20-F as filed with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company assumes no obligation to update the forward-looking information contained in this release.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Sinovac uses the following non-GAAP financial measures: non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS. For more information on these non-GAAP financial measures, please refer to the table captioned “Reconciliations of non-GAAP Measures to the Nearest Comparable GAAP Measures” in this results announcement.

Sinovac believes that non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS help identify underlying trends in its business that could otherwise be distorted by the effect of certain income or expenses that Sinovac includes net income and diluted EPS. Sinovac believes that non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS provide useful information about its core operating results, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. Non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS should not be considered in isolation or construed as an alternative to income from operations, net income, diluted EPS, or any other measure of performance or as an indicator of Sinovac’s operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.

Non-GAAP adjusted EBITDA  represents net income and excludes interest and financing expenses, interest income, net other income (expenses) and income tax benefit (expenses), and certain non-cash expenses, consisting of share-based compensation expenses, amortization and depreciation that Sinovac does not believe are reflective of the core operating performance during the periods presented.

 

Non-GAAP net income  represents net income before share-based compensation expenses, and foreign exchange gain or loss.

Non-GAAP diluted EPS represents non-GAAP net income attributable to common shareholders divided by the weighted average number of shares outstanding during the periods on a diluted basis, including accounting for the effect of the assumed conversion of options. 

             
SINOVAC BIOTECH LTD.            
Consolidated Balance sheets            
As of December 31, 2018 and December 31, 2017            
(Expressed in thousands of U.S. Dollars)            
             
      December 31, 2018     December 31, 2017
Current assets            
             
Cash and cash equivalents   $ 158,170   $ 114,415
Short-term investment     18,908     -
Restricted cash     -     1,549
Accounts receivable - net     74,464     66,205
Income tax receivable     2,999     -
Inventories     25,091     19,618
Prepaid expenses and deposits     4,543     2,101
Total current assets     284,175     203,888
             
Property, plant and equipment - net     70,920     76,430
Prepaid land lease payments     8,304     9,028
Long-term inventories     90     -
Long-term prepaid expenses to a related party     23     25
Prepayment for acquisition of equipment     470     528
Deferred tax assets     5,798     9,320
Total assets     369,780     299,219
             
Current liabilities            
Short-term bank loans     3,321     18,152
Accounts payable and accrued liabilities     49,991     59,418
Income tax payable     -     8,862
Deferred revenue     2,907     4,073
Deferred government grants     1,986     2,038
Total current liabilities     58,205     92,543
             
Deferred government grants     5,961     4,474
Long-term bank loans     3,890     14,849
Deferred revenue     90     -
Loan from a non-controlling shareholder     6,705     7,070
Other non-current liabilities     3,001     3,143
Total long-term liabilities     19,647     29,536
             
Total liabilities     77,852     122,079
             
Commitments and contingencies            
             
Equity            
Preferred stock     -     -
Common stock     71     57
Additional paid-in capital     204,998     115,339
Accumulated other comprehensive income (loss)     (2,099)     7,075
Statutory surplus reserves     26,643     19,549
Accumulated earnings     23,820     9,132
Total shareholders' equity     253,433     151,152
             
Non-controlling interests     38,495     25,988
Total equity     291,928     177,140
Total liabilities and equity   $ 369,780   $ 299,219
             
                         
SINOVAC BIOTECH LTD.
Consolidated Statements of Comprehensive Income
For the six months and twelve months ended December 31, 2018 and 2017
(Expressed in thousands of U.S. Dollars, except for numbers of shares and per share data)
                         
      Six months ended December 31   Twelve months ended December 31
      2018     2017     2018     2017
      (Unaudited) (Unaudited)          
Sales   $ 107,160   $ 107,438   $ 229,650   $ 174,346
Cost of sales     11,386     12,505     24,723     20,240
Gross profit     95,774     94,933     204,927     154,106
                         
Selling, general and administrative expenses     69,177     50,646     137,003     87,365
Provision (recovery) for doubtful accounts     (1,756)     407     820     934
Research and development expenses     11,836     11,710     21,910     20,489
Loss on disposal and impairment of property, plant and equipment     57     29     75     42
Government grants recognized in income     (150)     (137)     (197)     (141)
Total operating expenses     79,164     62,655     159,611     108,689
Operating income     16,610     32,278     45,316     45,417
                         
Interest and financing expenses     (420)     (747)     (1,070)     (1,569)
Interest income     1,089     719     2,016     1,183
Other income (expenses)     175     (91)     321     13
Income before income taxes     17,454     32,159     46,583     45,044
Income tax expense     (3,912)     (11,299)     (10,472)     (8,339)
Net Income     13,542     20,860     36,111     36,705
Less: Income attributable to non-controlling interests     (5,845)     (5,906)     (14,329)     (10,898)
Net income attributable to shareholders of Sinovac     7,697     14,954     21,782     25,807
                         
Net income     13,542     20,860     36,111     36,705
Other comprehensive income (loss), net of tax of nil                  
Foreign currency translation adjustments     (5,569)     4,581     (10,996)     8,098
Comprehensive income     7,973     25,441     25,115     44,803
Less: comprehensive income attributable to non-controlling interests     (4,741)     (6,752)     (12,507)     (12,089)
Comprehensive income attributable to shareholders of Sinovac   $ 3,232   $ 18,689     12,608   $ 32,714
                         
Earnings per share                        
Basic net income per share     0.11     0.26     0.34     0.45
Diluted net income per share     0.11     0.26     0.34     0.45
                         
Weighted average number of shares of common stock outstanding                
Basic     70,993,470     57,052,268     64,727,146     57,033,816
Diluted     71,257,734     57,250,279     64,977,554     57,101,191
                         
                   
SINOVAC BIOTECH LTD.    
Consolidated Statements of Cash Flows    
For the six and twelve months ended December 31, 2018 and 2017
(Expressed in thousands of U.S. Dollars)    
    Six months ended  

Twelve months ended

    December 31   December 31
    2018   2017   2018     2017
    (Unaudited)   (Unaudited)          
Cash flows provided by operating activities                  
Net income   13,542   20,860   36,111     36,705
Adjustments to reconcile net income to net cash provided by operating activities:                  
- Deferred income taxes   4,609   (2,743)   3,146     (4,921)
- Share-based compensation   1,474   495   4,305     979
- Inventory provision   53   957   2,529     1,231
- Provision (recovery) for doubtful accounts   (1,756)   407   820     934
- Loss on disposal and impairment of property, plant and equipment   57   29   75     42
- Depreciation of property, plant and equipment and amortization of licenses   2,398   2,515   4,887     4,638
- Amortization of prepaid land lease payments   120   126   249     243
- Government grants recognized in income   (150)   (137)   (197)     (141)
                   
Changes in:                  
- Accounts receivable   26,196   17,223   (13,082)     (13,482)
- Inventories   (3,992)   (1,933)   (9,412)     (5,531)
- Income tax payable   (6,410)   9,237   (11,844)     4,948
- Prepaid expenses and deposits   (2,188)   (1,062)   (2,613)     (622)
- Deferred revenue   3,014   3,460   (892)     987

- Accounts payable and accrued liabilities

  (16,149)   7,934   (6,167)     33,416

- Other non-current liabilities

  28   330   28     330
                   
Net cash provided by operating activities   20,846   57,698   7,943     59,756
                   
Cash flows provided by (used in) financing activities                  
- Proceeds from bank loans   5,498   17,465   18,898     28,636
- Repayments of bank loans   (20,095)   (20,760)   (43,886)     (38,708)
- Proceeds from issuance of common stock, net of share issuance costs   83,673   1,229   85,304     1,264
- Proceeds from shares subscribed   64   428   64     428
- Government grants received   2,995   2,506   3,800     2,598
- Loan from a non-controlling shareholder   -   4,440   -     4,440
                   
Net cash provided by (used in) financing activities   72,135   5,308   64,180     (1,342)
                   
Cash flows used in investing activities                  
- Purchase of short-term investments   (19,670)   -   (19,670)     -
- Proceeds from disposal of equipment   22   19   22     19
- Acquisition of property, plant and equipment   (2,754)   (5,147)   (5,613)     (11,915)
                   
Net cash used in investing activities   (22,402)   (5,128)   (25,261)     (11,896)
                   
Effect of exchange rate changes on cash and cash equivalents and restricted cash   (519)   3,107   (4,656)     4,005
                   
Increase in cash and cash equivalents and restricted cash   70,060   60,985   42,206     50,523
                   
Cash and cash equivalents and restricted cash, beginning of period   88,110   54,979   115,964     65,441
                   
Cash and cash equivalents and restricted cash, end of period   158,170   115,964   158,170   $ 115,964
                   
                 
SINOVAC BIOTECH LTD.
Reconciliations of Non-GAAP measures to the nearest comparable GAAP measures
For the six and twelve months ended December 31, 2018 and 2017
(Expressed in thousands of U.S. Dollars, except for numbers of shares and per share data)
                 
    Six months ended December 31   Twelve months ended December 31
    2018   2017   2018   2017
    (Unaudited) (Unaudited)   (Unaudited)   (Unaudited)
Net income   13,542   20,860   36,111   36,705
Adjustments:                
Share-based compensation   1,474   495   4,305   979
Depreciation and amortization   2,518   2,641   5,136   4,881
Interest and financing expenses, net of interest income   (669)   28   (946)   386
Net other (income) expense   (175)   91   (321)   (13)
Income tax expense   3,912   11,299   10,472   8,339
Non-GAAP adjusted EBITDA   20,602   35,414   54,757   51,277
                 
Net income   13,542   20,860   36,111   36,705
Add: Foreign exchange (gain) loss   853   (1,188)   (559)   (1,323)
Add: Share-based compensation   1,474   495   4,305   979
Non-GAAP net income   15,869   20,167   39,857   36,361
                 
Net Income attributable to shareholders of Sinovac   7,697   14,954   21,782   25,807
Add: Non-GAAP adjustments to net income   1,345   (693)   2,764   (344)

Non-GAAP net income attributable to shareholders of Sinovac
for computing non-GAAP diluted earnings (loss) per share

  9,042   14,261   24,546   25,463
                 
Weighted average number of shares on a diluted basis   71,257,734   57,250,279   64,977,554   57,101,191
Diluted earnings per share   0.11   0.26   0.34   0.45
Add: Non-GAAP adjustments to net income per share   0.02   (0.01)   0.04   (0.01)
Non-GAAP Diluted earnings per share   0.13   0.25   0.38   0.44
                 

 

Contacts

Sinovac Biotech Ltd.
Helen Yang
Tel: +86-10-8279-9871
Fax: +86-10-6296-6910
Email: ir@sinovac.com

ICR Inc.
Bill Zima
U.S: 1-646-308-1707
Email: william.zima@icrinc.com

 

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