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Sinovac Reports Record Second Quarter 2008 Unaudited Financial Results
Date:8/13/2008

-- Conference Call on Wednesday, August 13, 2008 at 9:00 a.m. ET --

BEIJING, Aug. 13 /Xinhua-PRNewswire/ -- Sinovac Biotech Ltd. (Amex: SVA), a leading developer and provider of vaccines in China, today announced the Company's financial results for the six and three-month periods ended June 30, 2008.

Second Quarter Highlights

-- Sales increased 73% year-over-year to $16.5 million

-- Sold 2.72 million doses of Healive(R), up 55%, and 180,000 doses of

Bilive(R) based on increased demand following the May 12th earthquake

in Sichuan Province.

-- Gross profit grew 69% year-over-year to $13.9 million, with 84% gross

margin

-- Operating income rose 50% year-over-year to $7.0 million

-- Net income increased to $3.3 million with diluted EPS of $0.08

Year to Date Highlights

-- Sales increased 88% to $25.4 million

-- Operating income rose 66% year-over-year to $10.2 million

-- Net income increased to $4.9 million with diluted EPS of $0.12

Mr. Weidong Yin, Chairman, President and CEO, commented, "We are pleased to announce our record performance for this quarter, which can be attributed to Healive sales that exceeded market expectation. The devastating May 2008 earthquake in the Sichuan province resulted in health challenges presented by the destruction of clean water and sanitation infrastructure. In the face of this tragedy, we are proud to have been able to meet the increased demand for the hepatitis A vaccine after Sinovac was selected by Ministry of Health and provincial governments as the sole supplier of hepatitis A vaccine to the region. This illustrates the government's trust in the quality of our vaccines and our capability to provide comprehensive marketing and sales service and support to the local CDC and demonstrates that we have the production capacity and reliable delivery channel to fulfill urgent demand on a timely basis. We believe the experienc -- 87,869 -- 87,869

- depreciation of

property, plant and

equipment, and

amortization of

licenses 388,460 357,051 780,563 720,191

- research and

development expenditures

qualified for government

grant (126,829) (374,825) (130,848) (367,411)

- minority interests 1,545,764 1,268,621 2,284,619 1,578,536

Change in other assets

and liabilities

- accounts receivable (9,218,834)(3,904,173) (13,369,079)(5,717,338)

- inventories (865,187)(1,539,537) (2,314,630)(2,075,824)

- prepaid expenses and

deposits (403,304) (374,308) (84,290) (660,379)

- accounts payable and

accrued liabilities 3,668,617 1,081,130 4,142,407 (93,796)

Net cash provided by

operating activities (1,696,930) 2,306 (3,099,297)(2,046,050)

Cash flows from (used in)

financing activities

Loan repayment -- -- -- (517,471)

Proceeds from issuance

of common stock 1,966 52,975 9,815,265 165,631

Payment to release

shares in escrow -- -- -- 400,000

Proceeds from shares

subscribed 39,295 15,720 39,295 15,720

Dividends paid to

minority interest

shareholder

in Sinovac Beijing -- -- (2,947,877) (827,229)

Government grant

received 70,695 2,962,522 70,695 2,962,522

Due to related parties -- (386,977) -- --

Net cash provided by

financing activities 119,956 2,644,240 6,977,378 2,199,173

Cash flows from (used in)

investing activities

Restricted cash 935,765 3,386 (434,921) 22,726

Acquisition of property,

plant and equipment (1,229,151) (379,392) (2,236,575) (257,280)

Net cash used in

investing activities (293,386) (376,006) (2,671,496) (234,554)

Exchange effect on cash

and equivalents 119,919 99,013 542,189 155,557

Increase (decrease) in

cash and cash

equivalents (1,758,441)(2,369,553) 1,748,774 33,537

Cash and cash

equivalents,

beginning of period 20,578,712 6,912,816 17,071,497 9,248,832

Cash and cash

equivalents,

end of period $18,820,271 $9,282,369 $18,820,271 $9,282,369

Cash paid for

interest, net

of interest

capitalized $133,612 $71,816 $306,005 $159,818

Cash paid for income

taxes $871,557 $416,330 $1,309,963 $517,674

Supplemental schedule of

non-cash activities:

Acquisition of property,

plant and equipment

Included in accounts

payable and accrued

liabilities $ -- $ -- $546,514 $74,718

For more information, please contact:

Contact Information: Investors/Media:

Helen G. Yang Stephanie Carrington/Janine McCargo

Sinovac Biotech Ltd. The Ruth Group

Tel: +86-10-8289-0088 x871 Tel: +1-646-536-7017/7033

Fax: +86-10-6296-6910 Email: scarrington@theruthgroup.com

Email: info@sinovac.com jmccargo@theruthgroup.com

e served as a valuable opportunity for Sinovac to demonstrate its ability to meet the public's needs as we continue to cultivate the public market for our hepatitis A vaccine."

Three Months Ended June 30, 2008

For the second quarter 2008, sales increased 73% to $16.5 million, compared to $9.5 million in the second quarter 2007. The growth was driven by higher sales of Healive(R) and Bilive(R) following the May 12th earthquake. Government orders after the earthquake generated about $4.6 million, which are not expected to recur in future periods. Sales and other amounts, which are reported here in US dollars, were also affected by the strengthening of the Chinese RMB against the US dollar in the last year.

During the second quarter of 2008, Sinovac sold 2.72 million doses of Healive(R), up from 1.75 million doses for the same period of 2007. Higher sales in the second quarter 2008 resulted from Healive promotion campaign targeting the private market and the increased demand following the May 12th earthquake. During the second quarter of 2008, Sinovac sold 180,000 doses of Bilive(R) compared to sales returns of 13,000 doses in the comparative period.

Gross profit for second quarter 2008 was $13.9 million, with a gross margin of 84.0%, compared to $8.2 million and 86.5%, respectively, for the same period of 2007.

Total operating expenses for the second quarter 2008 increased to $6.9 million, compared to $3.6 million in the same period 2007. Selling, general and administrative expenses for second quarter of 2008 were $6.0 million, compared to $3.5 million in the same period of 2007. The year-over-year increase in SG&A expenses was in line with the increased sales. SG&A expenses as a percentage represented 36.5% of revenues in the second quarter of 2008, compared to 36.3% in the same period in the prior year.

Gross expenditures on research and development expenses for the second quarter of 2008 were $794,000 compared to $322,000 in the same period of 2007. R&D expenses net of government grants were $667,000 for the second quarter of 2008, compared to ($53,000) in the same period of 2007. The R&D expenses recognized as a reduction to government grants were $127,000 in the second quarter of 2008, compared to $375,000 in the same period of 2007. The R&D expenses were mainly incurred for the Japanese encephalitis vaccine program and pandemic influenza immunogenic persistence research of Panflu.

Operating income was $7.0 million for the second quarter of 2008, compared to $4.7 million in the same period of 2007. The year-over-year increase in operating income reflected the significant increase in vaccine sales and the moderately higher R&D expenses.

Net income for the second quarter of 2008 also included $400,000 of interest and financing expenses, $1.6 million of income taxes, $141,000 other expense and $1.5 million of minority interest. Net income for the same period of 2007 included $93,000 of interest and financing expenses, $832,000 of income taxes, $197,000 interest and other income and $1.3 million of minority interest.

Net income for the second quarter of 2008 was $3.3 million, or $0.08 per diluted share, compared to $2.7 million, or $0.07 per diluted share, in the same period of 2007.

On July 8, 2008, the Chinese government issued detailed implementation guidelines with regards to the criteria and approval process for High and New Technology Enterprises (HNTE). HNTEs will be entitled to the preferential income tax rate of 15% compared to the unified income tax rate of 25% effective January 1, 2008. Prior to 2008, Sinovac Beijing was subject to the preferential income tax rate of 15% as a HNTE. Given that application process has not yet commenced and whether Sinovac will eventually be approved for HNTE status is uncertain, Sinovac Beijing has elected to account for its current and deferred income tax utilizing the enacted statutory tax rate of 25% as the applicable enterprises income tax rate for 2008.

In the event that Sinovac Beijing reconfirms its HNTE status in accordance with the HNTE rules, a 15% corporate income tax rate would be retroactive to January 1, 2008. Assuming HNTE is received; the impact on the results of operations for the six months ended June 30, 2008 would include a $1,289,776 decrease in the provision of the current income tax with a corresponding reduction in the income tax liability and a $868,076 increase in deferred income tax expense with an offset to deferred income tax assets. The effect change of rate will be recorded in the period that changes occur.

As of June 30, 2008, Sinovac's cash and cash equivalents totaled $18.8 million, compared to $17.1 million as of December 31, 2007.

Research and Development

Before we obtained the production license of the whole viron pandemic influenza vaccine, Panflu, granted by SFDA, we also commenced the development of a split formulation of pandemic influenza vaccine.

In June 2008, Sinovac initiated volunteer enrollment in its Phase II trial of the split pandemic influenza vaccine. The randomized and double-blind trial is expected to enroll 210 adolescents, between the ages of 12 to 17, who will receive doses of 10ug, 15ug or 30ug, and 140 children, between the ages of 3 to 11, who will receive doses of 10ug or 15ug. Volunteers will be followed for two months with safety and immunogenicity data collected for the assessment of the vaccine. We are still on track to announce preliminary results from this study in early 2009.

Conference Call Details

The Company will host a conference call on Wednesday, August 13, 2008 at 9:00 a.m. ET (9:00 p.m. Beijing time). 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 12:00 p.m. ET on August 13 until August 27, 2008, at midnight. 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 293426. 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 13, 2008 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 commercialized vaccines include Healive(R) (hepatitis A), Bilive(R) (combined hepatitis A and B), Anflu(R) (influenza) and Panflu(TM) (H5N1). Sinovac is currently developing universal pandemic influenza vaccine and Japanese encephalitis vaccine. Additional information about Sinovac is available on its website, http://www.sinovac.com . To be added to our distribution list, please email: info@sinovac.com.

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, 2008 and 2007

(Unaudited)

(Expressed in U.S. Dollars)

Three months ended June 30 Six months ended June 30

2008 2007 2008 2007

Sales 16,521,429 9,538,169 25,383,430 $13,511,221

Cost of sales -

(exclusive

of depreciation of

land-use rights and

amortization of

licenses and

permits of $102,742

(2007 - $94,165) for

three months and

$202,575(2007-186,893)

for six months 2,613,939 1,290,154 3,661,805 1,931,604

Gross profit 13,907,490 8,248,015 21,721,625 11,579,617

Selling, general and

administrative

expenses 6,038,650 3,454,382 9,616,536 4,722,926

Research and

development expenses

- net of $126,829

(2007 - $374,825)

for three months and

$130,848 (2007 -

$367,411) for six

months in government

research grants 667,508 (53,345) 1,596,844 390,399

Depreciation of

property, plant

and equipment

and amortization

of licenses

and permits 169,484 159,303 347,713 328,344

Total operating

expense 6,875,642 3,560,340 11,561,093 5,441,669

Operating income 7,031,848 4,687,675 10,160,532 6,137,949

Interest and financing

expenses (399,854) (93,012) (557,561) (179,068)

Interest income and

other income

(expenses) (141,491) 196,626 (95,141) 260,650

Income before income

taxes and minority

interest 6,490,503 4,791,289 9,507,830 6,219,530

Income taxes recovery

(expense)

- Current (2,579,104) (765,725) (3,224,439) (1,055,944)

- Deferred 970,614 (66,336) 897,433 (118,071)

Income before minority

interest 4,882,013 3,959,228 7,180,824 5,045,515

Minority interest

share of earnings 1,545,764 1,268,621 2,284,619 1,578,536

Net income 3,336,249 2,690,607 4,896,205 3,466,979

Other comprehensive

income

Foreign currency

translation adjustment 956,180 155,503 2,243,204 289,632

Comprehensive income $4,292,429 $2,975,174 $7,139,409 $3,931,136

Earnings per share

- basic $0.08 $0.07 $0.12 $0.09

- diluted $0.08 $0.07 $0.12 $0.09

Weighted average

number of shares

of common stock

outstanding

- Basic 42,851,228 38,745,171 41,983,709 38,734,577

- Diluted 43,210,296 39,046,811 42,351,756 39,012,980

SINOVAC BIOTECH LTD.

Consolidated Balance Sheets

(Unaudited)

(Expressed in U.S. Dollars)

June 30, 2008 December 31, 2007

ASSETS

Current assets

Cash and cash equivalents $ 18,820,271 $ 17,071,497

Accounts receivable - net 29,931,302 16,983,892

Inventories 6,369,339 3,745,957

Prepaid expenses and deposits 969,449 800,840

Deferred tax assets 1,180,199 579,703

Total current assets 57,270,560 39,181,889

Restricted cash 448,532 846

Property, plant and equipment 18,811,886 15,879,391

Long-term prepaid expenses and

deposits 282,767 298,731

Deferred tax asset 989,990 693,053

Licenses and permits 1,285,732 1,394,052

Total assets $ 79,089,467 $ 57,447,962

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Loans payable $ 7,276,114 $ 6,836,110

Accounts payable and accrued

liabilities 13,929,071 9,522,818

Due to related parties 46,971 46,971

Dividends payable to minority

interest shareholder

of Sinovac Beijing 115,380 3,000,458

Deferred research grants 1,060,782 1,038,396

Total current liabilities 22,428,318 20,447,754

Deferred government grants 2,910,446 2,734,444

Loan payable 1,455,223 1,367,222

Long - term debt 4,365,669 4,101,666

Total liabilities 26,793,987 24,546,420

Minority interest 5,264,385 2,897,687

Commitments and contingencies

STOCKHOLDERS' EQUITY

Preferred stock -- --

Authorized 50,000,000 shares at par

value of $0.001 each

Issued and outstanding: nil

Common stock 42,854 40,305

Authorized: 100,000,000 shares at

par value of $0.001 each

Issued and outstanding: 42,853,528

(2007 - 40,305,028 )

Subscriptions received 39,295 9,170

Additional paid in capital 41,965,154 32,109,997

Accumulated other comprehensive income 4,199,660 1,956,456

Dedicated reserves 2,999,396 2,999,396

Accumulated deficit (2,215,264) (7,111,469)

Total stockholders' equity 47,031,095 30,003,855

Total liabilities and stockholders'

equity $ 79,089,467 $ 57,447,962

SINOVAC BIOTECH LTD.

Consolidated Statements of Cash Flows

Three Months and Six Months Ended June 30, 2008 and 2007

(Unaudited)

(Expressed in U.S. Dollars)

Three Months Ended June 30 Six Months Ended June 30

2008 2007 2008 2007

Cash flows from (used in)

operating activities

Net Income for the

period $3,336,249 $2,690,607 $4,896,205 $3,466,979

Adjustments to

reconcile net income to

net cash used by

operating activities:

- deferred income taxes (970,614) 66,336 (897,433) 118,071

- loss on disposal of

equipment -- 3,957 -- 3,957

- stock-based compensation 16,635 69,276 33,271 138,551

- provision for doubtful

debts 932,113 570,302 1,559,918 754,544

- inventory provision
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SOURCE Sinovac Biotech Ltd.
Copyright©2008 PR Newswire.
All rights reserved

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