SHENYANG, China, May 14 /Xinhua-PRNewswire-FirstCall/ -- 3SBio Inc. ("3SBio" or "the Company"), a leading China-based biotechnology company focused on researching, developing, manufacturing and marketing biopharmaceutical products, today announced its unaudited financial results for the first quarter ended March 31, 2008.
Dr. Jing Lou, chief executive officer of 3SBio, commented, "I am pleased to announce a solid first quarter, marked by continued sales growth in our core products EPIAO and TPIAO. Our results demonstrate the underlying health of the oncology and nephrology therapeutic end-markets in which we operate and the growing market positions of our brands. In addition, we continued to realize the benefits of our focused business development strategy, as we witnessed increased revenue contribution and market acceptance for our in- licensed Iron Sucrose product. Finally, in the first quarter 2008, we have made significant progress in advancing our phase III clinical trials and are confident in our timetable to file with the SFDA in the second half of 2008 for all three trials. As an R&D focused company, we continued to make progress on our early stage pipeline and expect to file for clinical trial applications for NuPIAO, our second generation EPO, by the end of 2008."
"The fundamentals of our business remain strong as we expand our organization in order to capitalize on the growth opportunities presented by the growing and under-penetrated China market. With these results, we again demonstrate our focus on maintaining growth and profitability, which we believe is the most effective way to build shareholder value over the long- term."
First Quarter 2008 Unaudited Financial Results:
Net Revenues. Our net revenues amounted to RMB55.5 million (US$7.9 million) in the first quarter 2008 compared to RMB35.4 million for the first quarter 2007, representing an increase of 56.8%, primarily attributable to the continued increase in sales from EPIAO and TPIAO. Net revenues from our leading EPIAO products increased by 41.2% from RMB25.1 million in the first quarter 2007 to RMB35.5 million (US$5.1 million) in the first quarter 2008. This increase resulted from our continued success in the oncology market as well as from the strong underlying demand in the dialysis market; trends which we believe demonstrate the fundamental health of the Chinese EPO market. Net revenues from our TPIAO product increased by 103.8% over the first quarter 2007 to RMB15.4 million (US$2.2 million) due to the continued increase in physician acceptance of the product in the marketplace. Our TPIAO products remain our second largest revenue contributor, accounting for 27.8% of total net revenues for the first quarter 2008 as compared to 21.4% in the first quarter 2007. Revenue from our in-licensed Iron Sucrose supplement was RMB1.4 million (US$0.2 million), representing an increase of 154.5% over the first quarter 2007, accounting for 2.5% to our overall sales for the first quarter 2008.
Gross Profit. Gross profit increased 55.8% to RMB50.6 million (US$7.2 million) for the first quarter 2008 from RMB32.4 million in the first quarter 2007. Gross margin was 91.1% in the first quarter 2008, in line with 91.7% in the first quarter 2007.
Operating Expenses. Total operating expenses, representing 65.6% of total net revenues, increased 74.4% to RMB36.4 million (US$5.2 million) for the first quarter 2008 from RMB20.9 million, representing 58.9% of total net revenues, in the first quarter of 2007. This increase reflects increased sales and marketing expenses in our continued efforts to establish the TPIAO brand and increase market share of the oncology market for our EPIAO products. This increase in total operating expenses also reflects our effort in the expansion of our organization, including strengthening our sales and marketing infrastructure, to capitalize on the growing pharmaceutical market in China.
Research and development expense, representing 5.0% of total net revenues, increased by 26.0% to RMB2.8 million (US$0.4 million) in the first quarter 2008 from RMB2.2 million, representing 6.2% of total net revenues, in the first quarter 2007. This increase was mainly due to expenses associated with the Phase IV clinical trial of TPIAO and other research and development related expenses.
Sales, marketing and distribution expense, representing 46.2% of total net revenues, increased by 64.5% to RMB25.6 million (US$3.7 million) in the first quarter 2008 from RMB15.6 million, representing 44.0% of total net revenues, in the first quarter 2007 as a result of increased personnel, conference, promotional and advertising costs in line with the expansion of our sales and marketing network in China.
General and administration expense, representing 14.4% of total net revenues, increased by 158.6% to RMB8.0 million (US$1.1 million) in the first quarter 2008 from RMB3.1 million, representing 8.7% of total net revenues, in the first quarter 2007. This increase was a result of increased personnel cost and professional fees associated with being a public company since February 2007.
Income from Operations. As a result of the foregoing, operating income for the first quarter 2008 increased by 22.4% to RMB14.2 million (US$2.0 million) as compared to RMB11.6 million in the first quarter 2007. Operating margin for the first quarter 2008 was 25.6% as compared to 32.8% for the first quarter 2007.
Total Other Income, net. Net other income increased by 38.7% to RMB8.8 million (US$1.3 million) in the first quarter 2008, as compared to net other income of RMB6.4 million in the first quarter 2007, as a result of increased interest income from the net proceeds from our IPO in February 2007. No interest expense was incurred in the first quarter 2008 as compared to RMB0.4 million in first quarter 2007.
Income before Income Tax Expense and Minority Interests. As a result of the foregoing, our income before income tax expense and minority interests increased by 28.2% to RMB23.0 million (US$3.3 million) in the first quarter 2008 from RMB18.0 million in the first quarter 2007.
Income Tax Expense. Our income tax expense increased by 90.2% to RMB3.3 million (US$0.5 million) for the first quarter 2008 from RMB1.8 million for the first quarter 2007. The effective tax rate was 14.5% for the first quarter 2008 as compared to 9.8% for the first quarter 2007. The increase in tax expense and effective tax rate were attributable to the corporate income tax rate for a major operating subsidiary from 15% to 18% effective from January 1, 2008.
Under the Enterprise Income Tax (EIT) Law, effective January 1, 2008, China adopted a uniform tax rate of 25% for all enterprises (including foreign-invested enterprises) and revoked the current tax exemption, reduction and preferential treatments applicable to foreign-invested enterprises. A "new and high tech enterprise" prior to January 1, 2008 will gradually transition to the new tax rate within five years, i.e. 18% for 2008, 20% for 2009, 22% for 2010, 24% for 2011 and 25% for 2012, unless it is re-identified as a "new and high tech enterprise" under the EIT Law during the transition period. Companies that are re-identified to be a "new and high tech enterprise" can continue to enjoy the preferential tax rate of 15%. The relevant PRC authority has issued the Management Measures of Identifying New and High-Tech Enterprises and its annex, Key Fields of New and High-Tech Supported by the State in April 2008 although detailed application procedures have not been announced.
Net Income. As a result of the foregoing, our net income increased by 22.3% to RMB19.8 million (US$2.8 million) for the first quarter 2008 from RMB16.2 million for first quarter 2007.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on our year- end financial statements, which could result in significant differences from this unaudited financial information.
Currency Convenience Translation
For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB7.0120 to US$1.00, the noon buying rate for US dollars in effect on March 31, 2008 for cable transfers of RMB per US dollar as certified for customs purposes by the Federal Reserve Bank of New York.
Phase III Programs Update
We continued to make progress across our phase III clinical trials during the first quarter 2008.
High-dosage EPIAO
We have completed the Phase III trial for high-dosage (36,000 IU) EPIAO and will commence patient follow-up visits in the second half of 2008. The data generated from these follow-up visits are not required for SFDA approval and are for our internal reference only. We remain confident in the overall safety and efficacy of the product and expect filing with SFDA in the third quarter of 2008.
TPIAO for ITP
As we announced in the last quarter earnings release, the Phase III trial for TPIAO for the treatment of idiopathic thrombocytopenic purpura (ITP) was delayed due to a higher than expected patient drop-off rate (patients left the hospital before the required observation time) as a result of the protocol setting employed by the clinical centers. We have corrected the protocol setting, enrolled five other large clinical centers to the trial and increased the level and frequency of clinical monitoring to increase the speed of patient recruitment. To date, we have seen significant progress and expect to complete the clinical study and file with the SFDA in the fourth quarter of 2008.
NuLeusin
We have completed the Phase III trial for NuLeusin, our second generation IL-2, with positive results based on our data to date. We expect to file with the SFDA for approval in the second half of 2008.
Conference Call
3SBio senior management will host a conference call at 5:00 am (Pacific) / 8:00 am (Eastern) / 8:00 pm (Beijing/Hong Kong) on Thursday, May 15, 2008 to discuss its 2008 first quarter financial results and recent business activity. The conference call may be accessed by calling (US) +1-480-248-5081 / (UK) +44(0)20-8515-2301 / (HK) +852-3009-5027. A telephone replay will be available shortly after the call until May 29, 2008 at (US) +1-303-590-3030/ (UK) +44(0)20-7154-2833, Passcode: 3872203; and (HK) +852-2287-4304, Passcode: 030 110#.
A live webcast of the conference call and replay will be available on the investor relations page of 3SBio's website at http://www.3sbio.com
About 3SBio Inc.
3SBio Inc. is a leading, fully integrated biotechnology company focused on researching, developing, manufacturing and marketing biopharmaceutical products, primarily in China. For more information, please visit 3SBio on the web at http://www.3sbio.com .
Safe Harbor Statement
Statements in this release regarding certain anticipated business prospects constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon 3SBio management's current expectations, and actual results could differ materially. Among the factors that could cause 3SBio's actual results to differ from what the company currently anticipates may include competition from other domestic and foreign pharmaceutical companies; the expected market growth for pharmaceutical products in China; market acceptance of 3SBio products; expected hospital or patient demand for our products; 3SBio's ability to expand its production, sales and distribution network and other aspects of its operations; its ability to effectively protect its intellectual property; changes in the healthcare industry in China, including changes in the healthcare policies and regulations of the PRC government and changes in the healthcare insurance sector in the PRC; and fluctuations in general economic and business conditions in China. For additional information on these and other factors that may affect the 3SBio's financial results, please refer to the company's filings with the Securities and Exchange Commission at http://www.sec.gov. 3SBio undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this press release.
CONTACT: Investor Contact: Kevin Teo, CFO of 3SBio Inc. at +86-24-2581-
1820 or IR@3sbio.com; Investor Relations (US): Mahmoud Siddig, Director of
Taylor Rafferty at +1-212-889-4350 or 3sbio@taylor-rafferty.com; Investor
Relations (HK): Ruby Yim, Managing Director of Taylor Rafferty at +852 3196
3712 or 3sbio@taylor-rafferty.com; Media Contact: John Dudzinsky, Director
of Taylor Rafferty at +1-212-889-4350 or 3sbio@taylor-rafferty.com
Web site: http://www.3sbio.com/
