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

BEIJING, Nov. 3, 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 third quarter of 2015.

Third Quarter 2015 Financial Highlights

• Total sales in the third quarter of 2015 increased by 14.4% to $78.8 million from $68.9 million in the same quarter of 2014.
• Gross profit increased by 9.0% to $50.8 million from $46.6 million in the same quarter of 2014. Gross margin decreased by 3.1 basis points to 64.5% in the third quarter of 2015 from 67.6% in the third quarter of 2014.
• Income from operations increased by 1.2% to $35.0 million from $34.6 million in the same quarter of 2014. Operating margin decreased to 44.5% in the third quarter of 2015 from 50.2% in the same quarter of 2014.
• Net income attributable to the Company increased by 13.9% to $22.9 million from $20.1 million in the same quarter of 2014. Fully diluted net income per share increased to $0.82 from $0.76 in the same quarter of 2014.
• Non-GAAP adjusted net income attributable to the Company increased by 23.6% to $26.2 million from $21.2 million in the same quarter of 2014. Non-GAAP adjusted net income per share increased to $0.94 from $0.81 in the same quarter of 2014.

Mr. David (Xiaoying) Gao, Chairman and Chief Executive Officer of China Biologic, commented, "We are pleased to report another healthy quarter that exceeded our expectations, despite a slightly negative impact from foreign currency translation, as we were able to sell a greater volume of finished products made from the purchased plasma than we originally anticipated and benefited from modestly better product pricing. During this quarter, market demand for plasma products remained strong and we continued to make progress on our further penetration into tier-one markets. As we announced last quarter, we expected to experience a lower year-over-year growth rate in the third quarter compared to the first half of the year, due to a relatively high volume sold in the third quarter of 2014 following the first batch approval from the upgraded Guizhou facility last July. Additionally, we had a relatively low volume of products available for sale during most of the third quarter this year following the meaningful growth in demand for our products in the first half of the year. However, our inventories have now been replenished as the first 143 tonnes of plasma and pastes purchased earlier this from Xinjiang Deyuan year have been fully processed. Since late September, we began to deliver to the market products made from such raw materials. The majority of these products are expected to be delivered to the market in 2016."

Mr. Gao continued, "We recently announced several important developments. We entered into a strategic cooperation agreement with Xinjiang Deyuan to source no less than 500 tonnes of raw plasma over the next three years. Access to this additional source material represents a meaningful growth catalyst for China Biologic, as we continue to expand our own collection capabilities. As part of this effort, we were pleased to announce that we received approval in October to start plasma collection in our newly built branch collection facility in Shandong Province. Also, in October, Shandong Taibang received approval from the CFDA to begin clinical trials on a new generation IVIG product. We expect to be able to begin commercial production of the new generation IVIG in 2018 in our new operating facility in Shandong."

"As we anticipate a continued positive trend in the fourth quarter, we are confident that we will be able to reach the high end of our full year sales guidance range and we now expect to deliver net income results above our previous guidance. Looking forward to 2016, we will focus our operational efforts on several key areas, which include: continuing to achieve double-digit growth in plasma collection volume, managing public tenders in local markets to ensure stable or improved product pricing, further deepening our IVIG penetration in tier-one markets, and overseeing the plasma collection from Xinjiang Deyuan's plasma stations. Finally, we currently expect that the new Xi'an Huitian facility, in which we have a minority equity interest, will obtain GMP certification and resume production in the second half of 2016," Mr. Gao concluded.

Third Quarter 2015 Financial Performance

Total sales, excluding foreign currency impact, increased by 15.9% in RMB terms, or 14.4% in USD terms, to $78.8 million from $68.9 million in the third quarter of 2015, compared with the same quarter of 2014. The increase was primarily attributable to increases in sales volume of major plasma-based products.

During the third quarter of 2015, human albumin and IVIG products remained the two largest sales contributors. The sales volume of human albumin and IVIG products increased by 15.7% and 14.6%, respectively, in the reporting quarter. As a percentage of total sales, sales from human albumin products increased to 38.7% in the third quarter of 2015 from 38.3% in the same quarter of 2014. Sales from IVIG was 41.4% in the third quarter of 2015, as compared to 41.7% in the same quarter of 2014.

The average price for human albumin products, excluding foreign exchange impact, increased by approximately 1.2% in RMB terms, or decreased by approximately 0.2% in USD terms, in the third quarter of 2015, compared with the same quarter of 2014. The average price for IVIG products, excluding foreign exchange impact, increased by approximately 0.5% in RMB terms, or decreased by approximately 0.9% in USD terms, in the third quarter of 2015 compared with the same quarter of 2014.

Cost of sales was $28.0 million in the third quarter of 2015, compared to $22.4 million in the same quarter of 2014. As a percentage of total sales, cost of sales was 35.5%, as compared to 32.4% in the same quarter of 2014. The increase in cost of sales was mainly due to increased sales volume and increased plasma collection costs, and from the higher cost of products made from the purchased raw plasma.

Gross profit increased by 9.0% to $50.8 million in the third quarter of 2015 from $46.6 million in the same quarter of 2014. Gross margin was 64.5% and 67.6% in the third quarter of 2015 and 2014, respectively.

Total operating expenses in the third quarter of 2015 increased by 32.8% to $15.8 million from $11.9 million in the same quarter of 2014 due to increases in general and administrative expenses, mainly resulting from higher share-based compensation expenses. As a percentage of total sales, total operating expenses increased to 20.0% in the third quarter of 2015 from 17.3% in the same quarter of 2014.

Selling expenses in the third quarter of 2015 increased by 12.5% to $2.7 million from $2.4 million in the same quarter of 2014. As a percentage of total sales, selling expenses remained relatively stable at 3.4%, compared with 3.5% in the same quarter of 2014.

General and administrative expenses in the third quarter of 2015 were $11.5 million compared to $7.7 million in the same quarter of 2014. The increase in general and administrative expenses was mainly due to a $2.2 million increase in share-based compensation expenses. As a percentage of total sales, general and administrative expenses increased to 14.6% in the third quarter of 2015 from 11.2% in the third quarter of 2014.

Research and development expenses in the third quarter of 2015 were $1.6 million, compared to $1.8 million in the same quarter of 2014. As a percentage of total sales, research and development expenses decreased to 2.0% in the third quarter of 2015 from 2.6% in the same quarter of 2014.

Income from operations for the third quarter of 2015 increased by 1.2% to $35.0 million from $34.6 million in the same period of 2014. Operating margin decreased to 44.5% in the third quarter of 2015 from 50.2% in the same quarter of 2014.

Income tax expense in the third quarter of 2015 was $6.0 million, compared to $7.0 million in the same quarter of 2014, representing a decrease of 14.3%. The effective income tax rates were 16.8% and 19.9% in the third quarter of 2015 and 2014, respectively.

Net incomeattributable to the Company increased by 13.9% to $22.9 million in the third quarter of 2015 from $20.1 million in the same quarter of 2014. Net margin remained stable at 29.0%, compared to 29.1% in the same quarter of 2014. Fully diluted net income per share increased to $0.82 in the third quarter of 2015 from $0.76 in the third quarter of 2014.

Non-GAAP adjusted net income attributable to the Company increased by 23.6% to $26.2 million in the third quarter of 2015 from $21.2 million in the same quarter of 2014. Non-GAAP net margin increased to 33.2% from 30.8% in the same quarter of 2014. Non-GAAP adjusted net income per diluted share increased to $0.94 in the third quarter of 2015 from $0.81 in the third quarter of 2014.

Non-GAAP adjusted net income and diluted earnings per share in the third quarter of 2015 exclude $3.3 million of non-cash employee share-based compensation expenses.

First Nine Months 2015 Financial Performance

Total sales, excluding foreign currency impact, increased by 23.6% in RMB terms, or 23.2% in USD terms, to $228.2 million from $185.3 million, in the first nine months of 2015 compared with the same period of 2014. The increase in sales was primarily driven by increases in sales volume of major plasma-based products and placenta polypeptide. As a percentage of total sales, sales from human albumin products and IVIG products were 37.5% and 43.6%, respectively, for the first nine months of 2015.

Cost of sales was $79.5 million in the first nine months of 2015, compared to $59.0 million in the same period of 2014. Cost of sales as a percentage of total sales was 34.8%, as compared to 31.8% in the same period of 2014.

Gross profit increased by 17.7% to $148.7 million in the first nine months of 2015 from $126.3 million in the same period of 2014. Gross margin was 65.2% in the first nine months of 2015, compared to 68.2% in the same period of 2014. 

Total operating expenses in the first nine months of 2015 increased by 11.2% to $38.7 million from $34.8 million in the same period of 2014. As a percentage of total sales, total operating expenses decreased to 17.0% for the first nine months of 2015, from 18.8% in the same period of 2014.

Income from operations in the first nine months of 2015 increased by 20.2% to $110.0 million from $91.5 million in the same period of 2014.

Income tax expense in the first nine months of 2015 was $17.8 million, as compared to $16.8 million in the same period of 2014. The effective income tax rate was 15.9% and 17.6% in the first nine months of 2015 and 2014, respectively.

Net incomeattributable to the Company increased by 25.3% to $72.8 million for the first nine months of 2015, from $58.1 million in the same period of 2014. Net margin was 31.9% and 31.3% for the first nine months of 2015 and 2014, respectively.

Non-GAAP adjusted net income attributable to the Company was $79.7 million, or $2.94 per diluted share, for the first nine months of 2015, compared with $60.8 million, or $2.34 per diluted share, in the same period of 2014.

Non-GAAP adjusted net income and diluted earnings per share for the first nine months of 2015 exclude $7.0 million of non-cash employee share-based compensation expenses.

As of September 30, 2015, the Company had $142.7 million in cash and cash equivalents, primarily consisting of cash on hand and demand deposits, and $38.8 million in time deposits.

Net cash provided by operating activities for the first nine months of 2015 was $72.3 million, as compared to $64.1 million for the same period in 2014. The increase in net cash provided by operating activities was primarily due to increases in net income, other payables and accrued expenses, and decreases in prepayment and other current assets, partially offset by increases in accounts receivable and inventories during the nine months ended September 30, 2015.

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