Sinovac Reports Unaudited First Quarter 2020 Financial Results

June 30, 2020 13:20 UTC

 

 
 

BEIJING--(BUSINESS WIRE)-- Sinovac Biotech Ltd. Ltd. (NASDAQ: SVA) (“Sinovac” or the “Company”), a leading provider of biopharmaceutical products in China, announced today its unaudited financial results for the first quarter ended March 31, 2020.

First Quarter of 2020 Financial Summary

  • Sales for the first quarter of 2020 were $15.4 million, a decrease of 57.9% from $36.6 million in the prior year period.
  • While operating expenses decreased, net income attributable to common shareholders was impacted by the decrease in sales. The Company posted a loss attributable to common shareholders of $7.4 million, or $0.07 per basic and diluted share, compared to net income attributable to common shareholders of $1.2 million, or $0.01 per basic and diluted share, in the prior year period.

Business Highlights

Marketing and Sales

In the first quarter of 2020, the Company’s business was impacted by the outbreak of COVID-19. Vaccination centers were closed and vaccinations were suspended to stop potential transmission of COVID-19. Moving into the second quarter, sales of vaccines have gradually resumed along with easing of lockdown measures in many places in China, although the level of sales activity remains below the regular level. The Company will closely monitor overall trends in the second half of the year and adjust its operations accordingly.

Pipeline Development

COVID-19 Vaccine - the Company initiated the development of an inactivated vaccine against COVID-19 (named CoronaVac) on January 28th, 2020. Preclinical study results were published in the peer-reviewed academic journal Science. On April 13th, 2020 the National Medical Products Administration (“NMPA”) granted approval to conduct phase I and II clinical trials in China. The phase I and II trials commenced on April 16, 2020 in Jiangsu Province. China. A group of healthy adults aged 18-59 years old were vaccinated with a 0, 14 schedule. Preliminary phase I/II results were recently reported. There was no serious adverse event after vaccinating a total of 743 volunteers in the trials, demonstrating a good safety profile for the vaccine candidate. Over 90% seroconversion was observed in the phase II clinical trial after a two-dose vaccination 14 days apart. A Phase II study on elderly adults is being conducted which will be followed by child and adolescent groups. The Company expects to complete the phase II trial at the end of 2020. The Company has partnered with several companies outside of China for phase III efficacy studies, which is expected to start in the second half of 2020.

Quadrivalent Influenza vaccine (“QIV”) - QIV was approved by the NMPA in June 2020. The Company expects to launch the vaccine to the China market for the 2020-2021 flu season.

Sabin Inactivated Polio vaccine (“sIPV”) - An application of a product license for sIPV was submitted to NMPA in January 2019, which is expected to be granted in the beginning of 2021.

23-valent pneumococcal polysaccharide vaccine (“PPV”) – site inspection for PPV was completed in June 2020 and we expect to commercially launch PPV to Chinese market in the beginning of 2021.

Unaudited Financial Results for First Quarter 2020

Summary of sales and gross profit

(In $000 except percentage data)

 

2020 Q1

 

% of
Sales

 

2019 Q1

 

% of
Sales

Hepatitis A vaccine – Healive®

 

6,121

 

39.7%

 

10,531

 

28.8%

Hepatitis A&B vaccine – Bilive®

 

-

 

0.0%

 

-

 

0.0%

Hepatitis vaccines subtotal

 

6,121

 

39.7%

 

10,531

 

28.8%

Influenza vaccine

 

431

 

2.8%

 

-

 

0.0%

EV 71 vaccine - Inlive®

 

6,658

 

43.3%

 

25,351

 

69.4%

Mumps vaccine

 

2,181

 

14.2%

 

672

 

1.8%

Total sales

 

15,391

 

100.0%

 

36,554

 

100.0%

Cost of sales

 

1,981

 

12.9%

 

3,779

 

10.3%

Gross profit

 

13,410

 

87.1%

 

32,775

 

89.7%

In the first quarter of 2020, the COVID-19 outbreak impacted the regular business of the Company. Domestic sales ceased due to the suspension of vaccinations by the Chinese CDC in February 2020, and exports were disrupted due to cancellations of cargo flights and inflated freight costs. As a result, the Company’s sales for the first quarter of 2020 decreased 57.9% to $15.4 million from $36.6 million in the prior year period.

Gross profit in the first quarter of 2020 was $13.4 million, compared to a gross profit of $32.8 million in the prior year period. Gross margin was 87.1%, compared to 89.7% in the prior year period.

Selling, general and administrative expenses in the first quarter of 2020 decreased 30.2% to $16.5 million from $23.6 million in the prior year period. The Company incurred lower selling expenses as the market was inactive due to the COVID-19 outbreak.

R&D expenses in the first quarter of 2020 were $5.7 million, compared to $4.5 million in the prior year period, as the Company continued to invest in its product pipeline including sIPV and PPV, as well as the research and development of the COVID-19 vaccine.

Net loss in the first quarter of 2020 was $7.4 million, compared to net income of $3.6 million in the prior year period.

Net loss attributable to common shareholders was $7.4 million, or $0.07 per basic and diluted share, compared to net income attributable to common shareholders of $1.2 million, or $0.01 per basic and diluted share, in the prior year period.

As the Company announced on February 22, 2019, its Board of Directors determined that certain shareholders became “Acquiring Persons,” as defined in the Company’s Rights Agreement (“Rights Agreement”), and a “Trigger Event” occurred under the Rights Agreement. As a result, new common and preferred shares of the Company were issued into a trust for the benefit of the Company’s shareholders who did not trigger the Rights Plan. Excluding the effect of the “Trigger Event” and the newly issued common and preferred shares, basic and diluted loss per share for the first quarter of 2020 would have been $0.08.

Non-GAAP adjusted EBITDA was a loss of $7.3 million in the first quarter of 2020, compared to income of $6.8 million in the prior year period. Non-GAAP net loss in the first quarter of 2020 was $7.0 million, compared to income of $4.0 million in the prior year period. Non-GAAP diluted loss per share in the first quarter of 2020 was $0.07, compared to earnings of $0.01 per share in the prior year period. Non-GAAP diluted loss per share in the first quarter of 2020 excluding the effect of the “Trigger Event” and the newly issued common and preferred shares would have been $0.08. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

As of March 31, 2020, cash and cash equivalents increased to $165.3 million, compared to $152.7 million as of December 31, 2019. In the first quarter of 2020, net cash used in operating activities was $18.2 million, net cash provided by investing activities was $25.7 million, and net cash provided by financing activities was $6.6 million. As of March 31, 2020, the Company had $11.7 million of bank loans due within one year. The Company expects that its current cash position will be able to support its operations for at least the next 12 months.

The Company’s Interim Financial Statements are prepared and presented in accordance with U.S. GAAP. However, the Interim Financial Statements have not been audited or reviewed by the Company’s independent registered accounting firm.

Legal Proceedings

As previously disclosed by the Company, on March 13, 2018, 1Globe Capital LLC (“1Globe”) filed a complaint against the Company in the Antigua Court. The trial of the matter took place from December 3 to 5, 2018. On December 19, 2018, the Antigua judge handed down his judgment (the “Antigua Judgment”), finding in the Company’s favor in full, dismissing 1Globe’s claim and declaring that the Rights Agreement was validly adopted as a matter of Antigua law. On January 29, 2019, 1Globe filed a Notice of Appeal against the Antigua Judgment. On March 4, 2019, 1Globe filed an application for urgent interim relief, seeking an injunction to prevent the Company from continuing to implement its Rights Agreement until the resolution of the appeal. This application was heard on April 4, 2019, at which the Court of Appeal issued an order restraining the Company from operating the Rights Agreement in any way that affects 1Globe’s rights or shareholding or otherwise distributing the exchange shares to the Company’s shareholders who did not trigger the Rights Plan until after the determination of the appeal (the “Exchange Shares”). 1Globe’s appeal against the Antigua Judgment was heard on September 18, 2019, and the appeal decision is now pending.

As disclosed previously, on March 5, 2018, the Company filed a lawsuit in the Court of Chancery of the State of Delaware seeking a determination whether 1Globe, the Chiang Li Family, OrbiMed Advisors, LLC and certain other shareholders of the Company had triggered the Rights Agreement. On April 12, 2018, 1Globe filed an amended answer to the Company’s complaint, counterclaims, and a third-party complaint against the Company and Mr. Weidong Yin alleging, among other allegations, that the Rights Agreement is not valid. On March 6, 2019, the Delaware Chancery Court entered a status quo order providing that the Company not distribute any of the Exchange Shares to the Company’s shareholders who did not trigger the Rights Plan until the final disposition of the pending Delaware litigation or further order of the Court. On April 8, 2019, the Delaware Chancery Court stayed the Delaware litigation pending the outcome of 1Globe’s appeal of the Antigua Judgment.

Separately, Heng Ren Investments LP (“Heng Ren”) filed suit against Sinovac and Weidong Yin for alleged breach of fiduciary duties and wrongful equity dilution on May 31, 2019, in Massachusetts state court. Sinovac removed the matter from state court to the United States District Court for the District of Massachusetts. Heng Ren alleged that Mr. Yin breached fiduciary duties owed to minority shareholders, that Sinovac aided and abetted breaches of fiduciary duties, and that both Sinovac and Mr. Yin engaged in wrongful equity dilution. Heng Ren requested damages, attorneys’ fees, and prejudgment interest. Presently, the case is effectively stayed.

Status of Exchange Shares and Trading in the Company’s Shares

As a result of the pending legal proceedings described above, the Exchange Shares are expected to remain in a trust for the benefit of the Company’s shareholders who did not trigger the Rights Plan until, at least, the conclusion of the appeal against the Antigua Judgment and final disposition of the Delaware litigation or further order of the Delaware Chancery Court. The Exchange Shares remain issued and outstanding. The Nasdaq Stock Market LLC implemented a halt on trading of the Company’s common shares at the time of issuance of the Exchange Shares to the trust and the Company is currently unable to estimate when trading will resume.

About Sinovac

Sinovac Biotech Ltd. is a China-based biopharmaceutical company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases. Sinovac’s product portfolio includes vaccines against enterovirus71 (EV71), hepatitis A and B, seasonal influenza, Quadrivalent Influenza vaccine (“QIV”), H5N1 pandemic influenza (avian flu), H1N1 influenza (swine flu), varicella vaccine and mumps. Healive, the hepatitis A vaccine manufactured by the Company, has passed the assessment under WHO prequalification procedures in 2017. The EV71 vaccine, an innovative vaccine developed by Sinovac against hand foot and mouth disease caused by EV71, was commercialized in China in 2016. In 2009, Sinovac was the first company worldwide to receive approval for its H1N1 influenza vaccine, which it has supplied to the Chinese Government’s vaccination campaign and stockpiling program. The Company is also the only supplier of the H5N1 pandemic influenza vaccine to the government stockpiling program. The Company is developing a number of new products including a Sabin-strain inactivated polio vaccine, pneumococcal polysaccharides vaccine, and a SARS-CoV-2 (commonly referred to as COVID-19) vaccine. Sinovac primarily sells its vaccines in China, while also exploring growth opportunities in international markets. The Company is registering its products in over 30 countries outside of China. For more information please see the Company’s website at www.sinovac.com.

Safe Harbor Statement

This announcement may include certain statements that are not descriptions of historical facts, but are 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 terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. In particular, the outcome of any litigation is uncertain, and the Company cannot predict the potential results of the litigation it filed or that could be filed against it by others. Additionally, the triggering of a shareholder rights plan is nearly unprecedented, and the Company cannot predict the impact on the Company or its stock price should its rights plan have been triggered.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Sinovac uses the following non-GAAP financial measures: non-GAAP adjusted EBITDA, non-GAAP net income (loss) and non-GAAP diluted EPS. For more information on these non-GAAP financial measures, please refer to the table captioned “Reconciliations of non-GAAP Measures to the Nearest Comparable GAAP Measures” in this results announcement.

Sinovac believes that non-GAAP adjusted EBITDA, non-GAAP net income (loss) and non-GAAP diluted EPS help identify underlying trends in its business that could otherwise be distorted by the effect of certain income or expenses that Sinovac includes net income and diluted EPS. Sinovac believes that non-GAAP adjusted EBITDA, non-GAAP net income (loss) and non-GAAP diluted EPS provide useful information about its core operating results, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. Non-GAAP adjusted EBITDA, non-GAAP net income (loss) and non-GAAP diluted EPS should not be considered in isolation or construed as an alternative to income from operations, net income, diluted EPS, or any other measure of performance or as an indicator of Sinovac’s operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.

Non-GAAP adjusted EBITDA represents net income (loss) and excludes interest and financing expenses, interest income, net other income (expenses) and income tax benefit (expenses), and certain non-cash expenses, consisting of share-based compensation expenses, amortization and depreciation that Sinovac does not believe are reflective of the core operating performance during the periods presented.

Non-GAAP net income (loss) represents net income (loss) before share-based compensation expenses, and foreign exchange gain or loss.

Non-GAAP diluted EPS represents non-GAAP net income (loss) attributable to common shareholders divided by the weighted average number of shares outstanding during the periods on a diluted basis, including accounting for the effect of the assumed conversion of options.

SINOVAC BIOTECH LTD.

Consolidated Balance Sheets

As of March 31, 2020 and December 31, 2019

(Expressed in thousands of U.S. Dollars)

             
      March 31, 2020     December 31, 2019
Current assets      (Unaudited)      
             
Cash and cash equivalents   $

165,343

  $

152,718

Restricted cash    

3,117

   

3,160

Short-term investment    

21,184

   

50,274

Accounts receivable - net    

97,595

   

113,736

Inventories    

36,145

   

27,846

Prepaid expenses and deposits     

5,965

   

1,873

Total current assets    

329,349

   

349,607

             
Property, plant and equipment - net    

72,517

   

74,310

Prepaid land lease payments    

7,774

   

7,965

Right-of-use asset    

6,396

   

6,636

Long-term prepaid expenses to a related party    

23

   

23

Prepayment for acquisition of equipment    

5,042

   

2,390

Deferred tax assets    

12,221

   

11,368

Total assets    

433,322

   

452,299

             
Current liabilities            
Short-term bank loans and current portion of long-term bank loans    

11,678

   

5,934

Loan from a non-controlling shareholder    

6,496

   

6,607

Accounts payable and accrued liabilities     

46,415

   

58,890

Income tax payable    

1,751

   

1,904

Deferred revenue    

4,400

   

5,462

Deferred government grants    

3,398

   

2,738

Dividend Payable    

6,623

   

5,128

Lease liability    

528

   

536

Total current liabilities    

81,289

   

87,199

             
Deferred government grants    

3,799

   

3,986

Loan from a non-controlling shareholder    

1,412

   

1,436

Lease liability    

5,630

   

5,758

Other non-current liabilities    

1,696

   

1,725

Total long-term liabilities    

12,537

   

12,905

             
Total liabilities    

93,826

   

100,104

             
Equity            
Preferred stock    

15

   

15

Common stock    

99

   

99

Additional paid-in capital    

208,712

   

207,962

Accumulated other comprehensive loss    

(7,957)

   

(4,321)

Statutory surplus reserves    

33,533

   

33,533

Accumulated earnings    

49,374

   

56,731

Total shareholders' equity    

283,776

   

294,019

             
Non-controlling interests    

55,720

   

58,176

Total equity    

339,496

   

352,195

Total liabilities and equity   $

433,322

  $

452,299

SINOVAC BIOTECH LTD.

Consolidated Statements of Comprehensive Income (Loss)

For the three months ended March 31, 2020 and 2019

(Expressed in thousands of U.S. Dollars, except for numbers of shares and per share data)

             
       Three months ended March 31 
     

 2020 

   

 2019 

       (Unaudited)       (Unaudited) 
 Sales    $

               15,391

  $

               36,554

 Cost of sales     

1,981

   

3,779

 Gross profit      

13,410

   

32,775

             
 Selling, general and administrative expenses     

16,464

   

23,578

 Provision (recovery) for doubtful accounts     

100

   

(252)

 Research and development expenses     

5,693

   

4,491

 Loss on disposal of property, plant and equipment     

11

   

26

 Government grants recognized in income    

(19)

   

(20)

 Total operating expenses     

22,249

   

27,823

 Operating income (loss)     

(8,839)

   

4,952

             
 Interest and financing expenses      

(221)

   

(178)

 Interest income    

502

   

235

 Other income, net    

96

   

152

 Income (loss) before income taxes     

(8,462)

   

5,161

 Income tax recovery (expense)     

1,059

   

(1,563)

 Net income (loss)     

(7,403)

   

3,598

 Less: (income) loss attributable to non-controlling interests    

1,541

   

(1,809)

 Net income (loss) attributable to shareholders of Sinovac     

(5,862)

   

1,789

 Preferred stock dividends     

(1,495)

   

(608)

 Net income (loss) attributable to common shareholders of Sinovac     

(7,357)

   

1,181

             
 Net income (loss)     

(7,403)

   

3,598

 Other comprehensive income (loss), net of tax of nil             
 Foreign currency translation adjustments     

(4,551)

   

4,619

 Comprehensive income (loss)     

(11,954)

   

8,217

 Less: comprehensive (income) loss attributable to non-controlling interests      

2,456

   

(2,700)

 Comprehensive income (loss) attributable to shareholders of Sinovac    $

(9,498)

   

5,517

             
 Earnings (loss) per share             
 Basic net income (loss) per share     

(0.07)

   

                   0.01

 Diluted net income (loss) per share     

(0.07)

   

                   0.01

             
 Weighted average number of shares of common stock outstanding             
 Basic     

         98,903,243

   

         82,562,203

 Diluted     

         98,903,243

   

         82,749,247

SINOVAC BIOTECH LTD.

Consolidated Statements of Cash Flows

For the three months ended March 31, 2020 and 2019

(Expressed in thousands of U.S. Dollars)

       Three months ended
      March 31
     

2020

   

2019

       (Unaudited)       (Unaudited) 
Cash flows used in operating activities            
Net income (loss)    

(7,403)

   

3,598

Adjustments to reconcile net income to net cash used in operating activities:            
 - Deferred income taxes    

(1,059)

   

(658)

 - Share-based compensation    

750

   

751

 - Inventory provision    

10

   

20

 - Provision (recovery) for doubtful accounts    

100

   

(252)

 - Loss on disposal of property, plant and equipment    

11

   

26

 - Depreciation of property, plant and equipment    

767

   

1,044

 - Amortization of prepaid land lease payments    

59

   

61

 - Government grants recognized in income    

(19)

   

(20)

             
Changes in:            
 - Accounts receivable    

14,343

   

(2,955)

 - Inventories    

(8,906)

   

(4,081)

 - Income tax payable     

(122)

   

866

 - Prepaid expenses and deposits    

(4,182)

   

911

 - Deferred revenue     

(984)

   

(865)

 - Accounts payable and accrued liabilities    

(11,607)

   

(6,877)

 - Other non-current liabilities     -    

(272)

             
Net cash used in operating activities     

(18,242)

   

(8,703)

             
Cash flows used in financing activities            
 - Proceeds from bank loans    

            7,846

   

                 -  

 - Repayments of bank loans    

(1,916)

   

(1,322)

 - Proceeds from issuance of common stock, net of share issuance costs

                 -  

   

3

 - Government grants received    

               716

   

174

             
Net cash provided by (used in) financing activities    

6,646

   

(1,145)

             
Cash flows used in investing activities            
 - Purchase of short-term investments    

(21,494)

   

                 -  

 - Proceeds from redemption of short-term investments    

50,153

   

                 -  

 - Proceeds from disposal of quipment    

5

   

                 -  

 - Acquisition of property, plant and equipment    

(3,012)

   

(557)

             
Net cash provided by (used in) investing activities    

25,652

   

(557)

             
Effect of exchange rate changes on cash and cash equivalents and restricted cash    

(1,474)

   

1,282

             
Increase (decrease) in cash and cash equivalents and restricted cash    

12,582

   

(9,123)

             
Cash and cash equivalents and restricted cash, beginning of period

155,878

   

158,170

             
Cash and cash equivalents and restricted cash, end of period    

168,460

   

149,047

             

SINOVAC BIOTECH LTD.

Reconciliations of Non-GAAP measures to the nearest comparable GAAP measures

For the three months ended March 31, 2020 and 2019

(Expressed in thousands of U.S. Dollars, except for numbers of shares and per share data)

             
       Three months ended March 31 
     

 2020 

   

 2019 

       (Unaudited)       (Unaudited) 
 Net income (loss)     

(7,403)

   

3,598

 Adjustments:             
 Share-based compensation     

750

   

751

 Depreciation and amortization     

826

   

1,105

 Interest and financing expenses, net of interest income     

(281)

   

(57)

 Net other income     

(96)

   

(152)

 Income tax expense     

(1,059)

   

1,563

 Non-GAAP adjusted EBITDA     

(7,263)

   

6,808

             
 Net income (loss)     

(7,403)

   

3,598

 Add: Foreign exchange gain     

(336)

   

(378)

 Add: Share-based compensation     

750

   

751

 Non-GAAP net income (loss)     

(6,989)

   

3,971

             
 Net income (loss) attributable to common shareholders of Sinovac     

(7,357)

   

1,181

 Add: Non-GAAP adjustments to net income     

268

   

235

 Non-GAAP net income (loss) attributable to common
shareholders of Sinovac for computing non-GAAP diluted
earnings per share  
   

(7,089)

   

1,416

             
 Weighted average number of shares on a diluted basis     

98,903,243

   

82,749,247

 Diluted earnings (loss) per share     

(0.07)

   

0.01

 Add: Non-GAAP adjustments to net income per share     

0.00

   

0.00

 Non-GAAP Diluted earnings (loss) per share     

(0.07)

   

0.01

 

Contacts

Sinovac Biotech Ltd.
Helen Yang
Tel: +86-10-8279-9871
Fax: +86-10-6296-6910
Email: ir@sinovac.com

ICR Inc.
Bill Zima
U.S.: 1-646-308-1707
Email: william.zima@icrinc.com

 
 

Source: Sinovac Biotech Ltd.

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