China Biologic Products Reports Financial Results For The First Quarter Of 2015

BEIJING, May 6, 2015 /PRNewswire/ -- China Biologic Products, Inc. (NASDAQ: CBPO, "China Biologic" or the "Company"), a leading fully integrated plasma-based biopharmaceutical company in China, today announced its unaudited financial results for the first quarter of 2015.

First Quarter 2015 Financial Highlights

• Total sales in the first quarter of 2015 increased by 25.0% to $70.4 million from $56.3 million in the same quarter of 2014.
• Gross profit increased by 18.9% to $45.9 million from $38.6 million in the same quarter of 2014. Gross margin decreased by 330 basis points to 65.2% in the first quarter of 2015 from 68.5% in the first quarter of 2014.
• Income from operations increased by 23.9% to $34.7 million from $28.0 million in the same quarter of 2014. Operating margin decreased slightly to 49.3% in the first quarter of 2015 from 49.7% in the same quarter of 2014.
• Net income attributable to the Company increased by 26.8% to $23.2 million from $18.3 million in the same quarter of 2014. Fully diluted net income per share was $0.87 in the first quarter of 2015 as compared to $0.69 in the same quarter of 2014.
• Non-GAAP adjusted net income attributable to the Company was $25.0 million, representing a 30.9% increase from $19.1 million in the same quarter of 2014. Non-GAAP adjusted net income per share was $0.94, compared to $0.73 in the same quarter of 2014.

Mr. David (Xiaoying) Gao, Chairman and Chief Executive Officer of China Biologic, commented, "We are pleased to report strong financial results for the first quarter of 2015, with sales, net income and plasma collection all achieving double-digit growth. Incremental revenue growth and net margin improvement were largely attributable to increased sales of IVIG and placenta polypeptide products. We continue to succeed in increasing the sales of IVIG products in tier-one cities by utilizing pre-reserved plasma pastes for IVIG production. During the reporting quarter, our Guizhou facility experienced a greater than 50% sales increase over the prior year now that our GMP upgrade is complete and production has fully resumed. Additionally, the remodeled, expanded production capacity for our placenta polypeptide products resulted in increased sales volume and reduced selling expenses through the utilization of internal resources for promotional efforts. Also during the reporting quarter, we significantly improved plasma utilization efficiency, demonstrated by a 63% increase in sales revenue from our human coagulation factor VIII and initiated commercial sales of first batches of human prothrombin complex concentrate."

Mr. Gao continued, "Operationally, we continue to make good strides to strengthen our long-term growth potential. We were excited to announce that our Guizhou Taibang facility recently received a special approval from CFDA to purchase up to approximately 143 tonnes of source plasma and plasma pastes from a local plasma manufacturer. With the CFDA's special approval, this plasma purchase presents a unique growth opportunity for China Biologic over the next two years. The additional supply of source plasma and plasma pastes, which represents over 20% of our overall current annual collection volume, will enable us to significantly improve the production utilization rate of our Guizhou production facility and better meet the growing demand for plasma products, including IVIG in tier-one cities in China. To comply with government regulations and better ensure quality control, we'll prioritize usage of such purchased raw materials during the remainder of 2015 and reserve certain amount of plasma collected from our own plasma stations for future production. Given the long production cycle, we currently expect that the finished products made from such purchased raw materials will begin to be delivered to the market later this year, contributing to our top line performance in the relevant period. Going forward, we expect that our earnings in 2016 and 2017 will also benefit as more pre-reserved raw materials collected at a lower cost in 2015 are put into production."

"Finally, we are pleased that earlier this week the Chinese National Development and Reform Commission announced removing the retail price ceilings for all drug products except for anesthetics and category I antipsychotics. The long-awaited deregulation move will come into effect on June 1, 2015. Although it is still early to speculate implementation details and timeline for different regions or to assess the impact of the price ceiling removal on our plasma products, we believe this deregulation move should be a favorable policy development for our industry and business in the long term." Mr. Gao concluded.

First Quarter 2015 Financial Performance

Total sales in the first quarter of 2015 were $70.4 million, an increase of 25.0% from $56.3 million in the same quarter of 2014. The increase was primarily attributable to the sales increases in major plasma-based products and placenta polypeptide.

During the first quarter of 2015, human albumin products and IVIG products remained the largest two sales contributors. The average price for both products increased slightly during the reporting quarter, as a result of the combined effect of the reduced value added tax and the Company's sales effort to increase market share in tier-one cities and new markets.

• As a percentage of total sales, human albumin product revenue was 38.2% in the first quarter of 2015 as compared to 42.3% in the same quarter of 2014. The sales volume of human albumin products increased by 13.0% in the reporting quarter.
• As a percentage of total sales, IVIG revenue was 46.7% in the first quarter of 2015 as compared to 36.5% in the same quarter of 2014. The sales volume of IVIG products increased by 57.0% in the reporting quarter, mainly due to increased sales through distributors in tier-one cities and new markets supported by the increased production volumes by utilizing pre-reserved plasma paste for IVIG raw materials.

Cost of sales increased by 38.4% to $24.5 million in the first quarter of 2015 from $17.7 million in the same quarter of 2014. As a percentage of total sales, cost of sales was 34.8%, as compared to 31.5% in the same quarter of 2014. The increase in cost of sales was mainly due to increased sales activities and increased plasma collection costs.

Gross profit increased by 18.9% to $45.9 million in the first quarter of 2015 from $38.6 million in the same quarter of 2014. Gross margin was 65.2% and 68.5% for the three months ended March 31, 2015 and 2014, respectively.

Total operating expenses in the first quarter of 2015 increased by 4.7% to $11.1 million from $10.6 million in the same quarter of 2014, due to a combined effect of decreased selling expenses and an increase in research and development expenses and general and administrative expenses. As a percentage of total sales, total operating expenses decreased to 15.8% in the first quarter of 2015 from 18.8% in the same quarter of 2014.

Selling expenses in the first quarter of 2015 decreased by 13.0% to $2.0 million from $2.3 million in the same quarter of 2014. As a percentage of total sales, selling expenses were 2.8%, down from 4.1% in the same quarter of 2014. The decrease was primarily due to the decreased per-unit selling expense of placenta polypeptide during the quarter.

General and administrative expenses in the first quarter of 2015 increased by 9.7% to $7.9 million from $7.2 million in the same quarter of 2014. As a percentage of total sales, general and administrative expenses were 11.2% and 12.8% in the first quarter of 2015 and 2014, respectively. The increase in general and administrative expenses was mainly due to the increase in share-based compensation expenses.

Research and development expenses in the first quarter of 2015 were $1.3 million, representing an increase of 18.2% from $1.1 million in the same quarter of 2014. As a percentage of total sales, research and development expenses for the three months ended March 31, 2015 and 2014 were 1.9% and 1.9%, respectively. The increase in research and development expenses was primarily due to the expenditure paid for certain clinical trial programs and raw materials consumption for certain pipeline products.

Income from operations for the three months ended March 31, 2015 was $34.7 million, an increase of 23.9% from $28.0 million in the same period of 2014. Operating margin was 49.3% in the reporting quarter as compared to 49.7% in the same quarter of 2014.

Income tax expense in the first quarter of 2015 was $5.6 million, as compared to $5.3 million in the same quarter of 2014, representing an increase of 5.7%. The effective income tax rates were 15.9% and 18.2% for the three months ended March 31, 2015 and 2014, respectively.

Net incomeattributable to the Company increased by 26.8% to $23.2 million in the first quarter of 2015, from $18.3 million in the same quarter of 2014. Net margins were 33.0% and 32.5% for the three months ended March 31, 2015 and 2014, respectively. Fully diluted net income per share was $0.87 in the first quarter of 2015, as compared to $0.69 in the first quarter of 2014.

Non-GAAP adjusted net income attributable to the Company increased by 30.9% to $25.0 million in the first quarter of 2015, from $19.1 million in the same quarter of 2014. Net margins were 35.5% and 33.9% for the three months ended March 31, 2015 and 2014, respectively. Non-GAAP adjusted net income per share was $0.94 per diluted share in the first quarter of 2015, as compared to $0.73 in the first quarter of 2014.

Non-GAAP adjusted net income and diluted earnings per share for the three months ended March 31, 2015 excluded $1.8 million of non-cash employee share-based compensation expenses.

As of March 31, 2015, the Company had cash and cash equivalents of $86.0 million, compared to $80.8 million as of December 31, 2014.

Net cash provided by operating activities for the three months ended March 31, 2015 was $16.5 million, as compared to $11.5 million for the three months ended March 31, 2014. The increase in net cash provided by operating activities was primarily due to the increase in net income for the three months ended March 31, 2015 as compared to the same period in 2014. Accounts receivable increased by $9.2 million during the three months ended March 31 2015, as compared to $6.4 million during the same period in 2014, primarily due to a change in sales strategy to collaborate more closely with specialized distributors in their bidding efforts with provincial centers for disease control and prevention to facilitate the sales of human rabies immunoglobulin products. As a result, the Company granted credit terms ranging from two to three months to these specialized distributors rather than requiring full prepayments prior to deliveries.

Net cash used in investing activities for the three months ended March 31, 2015 was $8.5 million, as compared to net cash provided by investing activities of $0.9 million for the same period in 2014. During the three months ended March 31, 2015 and 2014, the Company paid $8.5 million and $7.5 million, respectively, for the acquisition of property, plant and equipment, intangible assets and land use right for Shandong Taibang and Guizhou Taibang. During the three months ended March 31, 2014, the Company received a refund of deposit of $1.6 million from the local government due to a decrease in the size of a land parcel that was granted to the Company in Guizhou, and received $6.6 million upon the maturity of a time deposit.

Net cash used in financing activities for the three months ended March 31, 2015was $2.1 million, as compared to $78.2 million used for the same period in 2014.

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