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Sinovac Reports Unaudited Second Quarter 2009 Financial Results
Date:8/19/2009

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 $46.7 million.

    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       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

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SOURCE Sinovac Biotech Ltd.
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