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Sinovac Reports Unaudited Full Year 2008 and Fourth Quarter Financial Results

April 9, 2009

BEIJING, April 9 /PRNewswire-Asia/ — Sinovac Biotech Ltd. (NYSE Amex:
SVA), a leading developer and provider of vaccines in China, today announced
the Company’s unaudited financial results for the three and twelve month
periods ended December 31, 2008.

    Full Year 2008 Financial Highlights
    -- Record full year 2008 sales increasing 39% year-over-year to $46.5
       million
    -- Sold 6.93 million doses of Healive(R) in 2008, up from 5.12 million in
       2007
    -- Record full year net income growing of 5% to $8.01 million
    -- Full year EPS is $0.19
    -- Cash and cash equivalents increased 93% to $32.9 million, compared to
       the beginning of 2008, due to an increase in operation profits,
       improved accounts receivable collection and raising capital.

    Business Highlights
    -- In 2008, Sinovac initiated the development program of a vaccine against
       enterovirus 71 (EV 71), which causes hand, foot and mouth disease.
       Development is progressing on schedule and good achievements have been
       made to date.  Sinovac expects to file clinical trial application with
       China SFDA in 2009.
    -- Recognizing the sizeable market opportunity for animal vaccines,
       Tangshan Yian, Sinovac's wholly owned subsidiary, is focusing on the
       animal vaccine business to help drive growth.  In January 2009, the
       Company obtained approval from China's Ministry of Agriculture to
       conduct field trials of internally developed inactivated animal rabies
       vaccine.  Sinovac expects the field trials to take approximately nine
       months to complete and to launch the vaccine in China's veterinary
       market in 2010.
    -- Sinovac completed the pre-clinical trial for the Japanese encephalitis
       vaccine in 2008 and filed the clinical trial application with SFDA in
       January of 2009.
    -- In an effort to enhance the competitiveness and improve efficiency of
       the sales force, Sinovac increased headcount and modified the marketing
       and sales organizational structure.
    -- Sinovac continues to focus on expanding its product export
       opportunities by moving forward on product registration outside of
       China.  In late 2008, Sinovac entered into exclusive distribution
       agreements for Healive in Nepal and India, and for Anflu in the
       Philippines.  The local distribution partners in Nepal and Philippines
       filed applications with local authorities in 2008.  The registration
       process for Anflu in Mexico and Healive in Ukraine are progressing on
       schedule.  Sinovac sold 11,000 doses of Healive to the Mongolian market
       in 2009 and is currently negotiating a long-term distribution agreement.
    -- In March 2009, Sinovac received GMP certification for its new filling
       and packaging production facility, increasing the Company's annual
       production capacity to 20 million doses, with the potential for 40
       million doses
    -- In October 2008, the Company established a wholly-owned subsidiary,
       Sinovac Biotech (Hong Kong) Ltd, which is focused on registering and
       distributing commercialized vaccines and those under development in
       Hong Kong and then will be responsible for product exports.  The
       subsidiary will also help to facilitate opportunities for R&D
       collaboration in Hong Kong.
    -- Sinovac has made progress in completing the clinical application to
       import and commercialize LG Life Sciences' hepatitis B vaccine,
       Euvax-B(TM), pursuant to the previously disclosed exclusive
       distribution agreement.  Sinovac expects to obtain approval from the
       SFDA to conduct clinical trials for Euvax-B in China in 2009.

Mr. Weidong Yin, Chairman, President and CEO, commented, “We are pleased
with our results for the quarter and the year, with full year 2008 sales up
39%, in line with our expectations. The sales of our vaccines continue to
grow as awareness of the benefits of inoculations for hepatitis A and seasonal
influenza increases across China. As reported in February 2009, the State Food
and Drug Administration (SFDA) completed a site inspection of Sinovac in
conjunction with the production capacity buildup program for Panflu, with the
intention to protect China’s residents if an outbreak of human bird flu should
occur. In March, we received GMP certification at our filling and packaging
production facility, which increased our annual production capacity to 20
million doses and provided the potential to double capacity to 40 million
doses. This capacity expansion provides Sinovac with a solid foundation for
supporting the government stockpiling program for Panflu and increasing the
sales quantities for our commercialized vaccines, as well as providing for the
future launch of products in our vaccine development pipeline. Although we are
feeling the effect of the financial crisis, the healthcare industry is not
very sensitive to the economic cycle. Sinovac has accumulated resources of
technological expertise, operation management experiences, and investment
capability, which positions the Company well to execute our sales growth
strategy in 2009 and achieve our full year sales increase of 20% over 2008
levels.

“EV 71 causing foot, hand, mouth disease is a significant health concern
among children across Asia, as the viral illness has reportedly infected more
than 500,000 children in China last year. Our research and development team
has made significant progress in advancing the pre-clinical studies. We are
aiming to develop the world’s first EV 71 vaccine and have recently presented
its findings at the Chinese New Vaccines Reporting Conference. We are on
track to file the clinical trial application with the SFDA in 2009 in order to
commence human dosing. The Company holds the development rights to this
first-of-its-kind vaccine and intends to submit the patent application for
this vaccine in China in 2009. We anticipate that this vaccine should become a
flagship product given the severity of recent hand, foot and mouth disease
outbreak in China and other countries. As the developer of a vaccine against
hand, foot and mouth disease, Sinovac is well positioned to address this
global unmet medical need as cases continue to be reported in China and
neighboring countries. Sinovac is proud to take a leadership position, as we
did with Panflu, to benefit China and the world by developing and
manufacturing high quality, novel vaccines,” concluded Mr. Yin.

Twelve Months Ended December 31, 2008

For the twelve months ended December 31, 2008, sales reached $46.5 million,
compared to $33.5 million for the full year 2007, representing 39% growth.

During the twelve months ended December 31, 2008, Sinovac sold 6.93
million doses of Healive, compared to 5.12 million doses for the same period
in 2007. Sinovac sold 1.56 million doses of Anflu during the full year 2008,
compared to 1.59 million doses for the same period of the prior year. The
Company sold 255,000 doses of Bilive during the 2008 period, compared to
15,684 doses in the prior year period. For the first twelve months of 2008,
Healive, Anflu, and Bilive as a percentage of sales represented 88%, 9% and 3%,
respectively.

Gross profit for twelve months ended December 31, 2008 was $36.6 million,
with a gross margin of 79%, compared to $27.0 million, or 81%, for the same
period of 2007.

Total operating expenses for the twelve months ended December 31, 2008
were $21 million, compared to $13.6 million for the same period 2007. Selling,
general and administrative expenses for the twelve months ended December 31,
2008
were $17.5 million, compared to $12.0 million in the same period of 2007.
SG&A expenses as a percentage of sales represented 37.6% in the 2008 period,
compared to 35.7% in the same period of last year.

Net expenditures on research and development expenses for the twelve
months ended December 31, 2008 were $2.8 million, compared to $965,000 in the
same period of 2007. The increase in R&D expense for 2008 was partly
attributable to the expenses for the development of its vaccines against avian
flu, EV 71 and animal rabies.

Operating income was $15.6 million for the twelve months ended December 31,
2008
, compared to $13.5 million in the same period of 2007. The
year-over-year increase in operating income reflected increased sales of
hepatitis A and hepatitis A&B vaccine in 2008.

Net income for the twelve months ended December 31, 2008 included $702,000
of interest and financing expenses, $3.0 million of income taxes expense,
$291,000 of interest and other income and $4.2 million of minority interest.
Net income for the same period of 2007 included $478,000 of interest and
financing expenses, $2.0 million of income taxes, $191,000 of interest and
other income and $3.6 million of minority interest. Net income for the twelve
months ended December 31, 2008 was $8.0 million, or $0.19 per diluted share,
compared to $7.7 million, or $0.19 per diluted share, in the same period of
2007.

In March 2009, Sinovac Beijing was granted High and New Technology
Enterprises (HNTE) status by the Chinese government. HNTEs are entitled to the
preferential income tax rate of 15%, compared to the unified income tax rate
of 25%, retroactively to January 1, 2008. Sinovac Beijing will benefit from
the lower tax rate for a three-year period, covering 2008, 2009 and 2010.

Retroactively applying the HNTE tax rate of 15% for the full year ended
December 31, 2008 resulted in a $2.1 million decrease in the provision of the
current income tax with a corresponding reduction in the income tax liability
and a $1.1 million increase in deferred income tax expense with an offset to
deferred income tax assets. The rate change was recorded in the period that
changes occurred.

Three Months Ended December 31, 2008

For the fourth quarter 2008, sales were $12.4 million, compared to $9.2
million
in the fourth quarter 2007. The year-over-year increase in sales
reflected Sinovac’s strategy to continue to devote significant resources to
marketing Healive to the private pay market in China, as compared to the
market created by government purchasing initiatives under the Expanded
Immunization Program that may include the lower priced, live hepatitis A
vaccine produced by state owned entities.

During the fourth quarter of 2008, Sinovac sold 1.62 million doses of
Healive, compared to 1.14 million doses for the same period of 2007. Sinovac
sold 1.05 million doses of Anflu during the fourth quarter of 2008, compared
to 0.52 million doses for the same period of the prior year. During the
fourth quarter of 2008, Sinovac sold 21,000 doses of Bilive, compared to nil
doses in the prior year period. For the fourth quarter of 2008, Healive,
Anflu, and Bilive as a percentage of sales represented 78.8%, 1.5% and 19.7%,
respectively.

Gross profit for fourth quarter 2008 was $7.7 million, with a gross margin
of 63%, compared to $6.3 million, and a gross margin of 68%, for the same
period of 2007.

Total operating expenses for the fourth quarter of 2008 were $4.6 million,
compared to $3.0 million in the same period 2007. Selling, general and
administrative expenses for the fourth quarter of 2008 were $4.1 million,
compared to $2.5 million in the same period of 2007. SG&A expenses as a
percentage of sales represented 33% in the fourth quarter of 2008, compared to
27% in the same period in the prior year. The increase in SG&A in the fourth
quarter of 2008 was in line with the increased business activity in 2008. In
particular, payroll and bonus, higher consulting fees, travel and other
expenses drove the year-over-year increase.

Net expenditures on research and development expenses for the fourth
quarter of 2008 were $359,000, compared to $354,000 in the same period of 2007.
The R&D expenses in the quarter are mainly incurred for the advancement of its
vaccine candidates in the pre-clinical development pipeline, including
Sinovac’s vaccine against EV 71 and its human rabies candidate.

Operating income was $3.1 million for the fourth quarter of 2008, compared
to $3.3 million in the same period of 2007. The year-over-year variance in
operating income reflected relatively moderate higher expense in the fourth
quarter.

Net income for the fourth quarter of 2008 included $284,000 in income tax
recovery, $327,000 interest and other income and $1.4 million of minority
interest. Net income for the same period of 2007 included $184,000 of
interest and financing expenses, $42,000 of income taxes expense, $111,000
other expenses and $965,000 of minority interest. Net income for the fourth
quarter of 2008 was $2.4 million, or $0.06 per diluted share, compared to $2.0
million
, or $0.05 per diluted share, in the same period of 2007.

As of December 31, 2008, Sinovac’s cash and cash equivalents totaled $32.9
million
, compared to $20.5 million as of September 30, 2008. The 60.4%
increase in cash and cash equivalents compared to the third quarter of 2008
was primarily attributable to improved accounts receivables collection.

Recent Developments

Following the completion of a large scale, post-approval marketing study,
the safety and immunogenicity of Sinovac’s seasonal influenza vaccine, Anflu,
was analyzed and reviewed by 18 provincial and municipal CDC entities at the
Summary Conference of Phase IV Clinical Research held in October 2008. The
experts from the China CDC and provincial CDCs presented findings that confirm
that Anflu has a good safety and immunogenicity profile. CDC experts also
stated that the safety and immunogenicity profile of Anflu are equivalent to
the imported flu vaccines used as control vaccines in the trial

Sinovac continues to focus on expanding its product export opportunities
by moving forward on product registration outside of China. Sinovac has
entered into exclusive distribution agreements for Healive in Nepal and India,
and for Anflu in the Philippines. Distribution partners in Nepal and
Philippines filed applications with local authorities in 2008. The
registrations for Anflu in Mexico and Healive in Ukraine are progressing on
schedule. These local distribution partners are well positioned to help
expand the global reach of Sinovac’s vaccines by commercializing Sinovac’s
products outside of China. In January 2009, Sinovac responded to the emerging
hepatitis A epidemic situation in Mongolia by selling 11,000 doses of Healive
to the Mongolian market through the Company’s agent in China. Sinovac has
received positive market feedback in the region and is evaluating
opportunities to enter a long-term distribution agreement for the Mongolian
market.

Related to the Phase II clinical trial for the pandemic split influenza
vaccine, the on-site activities, including inoculation, blood collection and
safety inspection, were completed in October 2008. The testing of HI
(hemagglutination inhibition) antibody in subjects’ serum has also been
completed. Sinovac has received the serum antibody testing report from NICPBP
(National Institute for the Control of Pharmaceutical and Biological Products).
The unblended result shows the vaccine has good safety and immunogenicity
profile. Sinovac is currently conducting the detailed analysis and preparing
the summary report.

In January 2009, the Company’s wholly owned subsidiary, Tangshan Yian
Biological Engineering Co., Ltd, obtained approval from China’s Ministry of
Agriculture to conduct field trials of its internally developed inactivated
animal rabies vaccine, enabling the Company to enter the veterinary vaccine
market in China with a high quality domestically-produced vaccine. Sinovac
anticipates that the field trials will take approximately nine months to
complete and that the vaccine will be launched in China’s veterinary market in
2010.

As reported by media sources in February 2009, the State Food and Drug
Administration (SFDA) completed a site inspection of Sinovac in conjunction of
the government stockpiling program for Panflu, the pandemic influenza vaccine
for which Sinovac holds manufacturing rights, to protect China’s residents if
an outbreak of human bird flu should occur. The production of the H5N1
vaccine for stockpiling is progressing on schedule.

In March 2009, Sinovac received GMP certification from the SFDA for its
new filling and packaging production facility. With the receipt of the GMP
certification, Sinovac’s annual production capacity increased to 20 million
doses, and has the potential to double to 40 million doses. This production
milestone ensures that Sinovac can fully meet increasing market demand and
potential production increases for currently commercialized products, such as
Healive, Bilive and Anflu. The filling and packaging production plant also has
the capabilities to fill and package Panflu, in support of the government
stockpiling program, as well as products currently in Sinovac’s development
pipeline upon future launch following regulatory approval.

In 2008, Sinovac initiated the development program of a vaccine against EV
71. Development is progressing on schedule and good achievements have been
made to date. The findings from the pre-clinical studies for the EV 71
vaccine were recently presented at the Chinese New Vaccines Reporting
Conference. Sinovac is on track to file a clinical trial application with
China SFDA in the third quarter of 2009. The Company holds the development
rights to this first-of-its-kind vaccine and intends to submit the patent
application for this vaccine in China in 2009. According to the March 27,
2009
report issued by China’s Ministry of Public Health, there were 41846
cases of hand, foot, and mouth disease were reported in China from January 1,
2009
through mid-day on March 26, 2009, among which 94 of which were severe
cases. The reported cases are mainly from young children under 5 years old
(93.96% of total reported cases). Among the confirmed cased after testing in
laboratory, 75% of the cases are caused by EV71. Additionally, hand, food and
mouth disease incidence has been reported in both developed countries and
developing countries in the past, indicating that it is a worldwide disease.
Given the current severity of the hand, foot and mouth disease outbreak in
China and other countries, Sinovac expects this new vaccine to become another
flagship product in the future.

Sinovac is processing the clinical application to import and commercialize
LG Life Sciences’ hepatitis B vaccine, Euvax-B(TM), pursuant to the previously
disclosed exclusive distribution agreement. Sinovac expects to obtain
approval from the SFDA to conduct clinical trials in China in 2009 and intends
leverage its established sales and marketing organization to distribute Euvax-
B in China.

2009 Guidance

For the full year 2009, the Company expects sales of $55 million to $60
million
, an increase of about 20% over 2008 sales. The 2009 sales growth rate
assumes that (1) Healive will continue to generate a significant portion of
Sinovac’s sales revenue. Sinovac expects to maintain its leading position in
the private market, while also actively exploring the opportunity to penetrate
the public market without adjusting the selling price; (2) Sinovac will focus
on driving growth of Bilive in the private market; and (3) Sinovac will
increase sales of Anflu as the Company continues to raise awareness of the
benefits of receiving the flu vaccination.

Conference Call Details

The Company will host a conference call on Thursday, April 9, 2009 at 9:00
a.m. ET
(9 p.m. China Standard Time) to review the Company’s fourth quarter
financial results for the period ended December 31, 2008 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 12:00 p.m. ET on April 9, 2009 until April 23, 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
319008. 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 April 9,
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
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 a universal pandemic influenza vaccine and Japanese
encephalitis vaccine. Its wholly-owned subsidiary, Tangshan Yian is currently
conducting field trials for the first domestically-developed inactivated
animal rabies vaccines. 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.


    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:
     Stephanie Carrington/Amy Glynn
     The Ruth Group
     Tel:   +1-646-536-7017/7023
     Email: scarrington@theruthgroup.com
            aglynn@theruthgroup.com

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

SOURCE Sinovac Biotech Ltd.


Source: newswire



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