TAI’AN, China, Nov. 16 /PRNewswire-Asia-FirstCall/ -- China Biologic Products, Inc. (“China Biologic,” or the “Company”), one of the leading plasma-based biopharmaceutical companies in the People’s Republic of China (“PRC”), operating through its indirect majority- owned subsidiaries, Shandong Taibang Biological Products Co. Ltd. (“Taibang”) and Guiyang Dalin Biologic Technologies Co., Ltd. (“Dalin”) and its equity investment in Xi’an Huitian Blood Products Co., Ltd. (“Huitian”), today reported financial results for the third quarter ended September 30, 2009.
“In the third quarter of 2009, we maintained our leadership position in the industry by continuing to provide high margin, plasma-based products to the market. Our operating income nearly doubled year-over-year, due to the contribution of our recently acquired Dalin subsidiary and healthy organic growth,” said Mr. Chao Ming Zhao, Chief Executive Officer. “Furthermore, we made major steps forward in expanding our research and development capabilities by engaging an expert in plasma-based research to serve as our director of R&D, and we entered into a collaboration agreement with a well- known blood institute in Sichuan Province. We believe that these measures will allow us to make tangible progress toward our goal of becoming the leading plasma-based pharmaceutical company in China.”
During the third quarter of 2009, the Company achieved the following milestones:
Third Quarter Results
Revenues for the third quarter of 2009 increased 95.9% to a record $27.0 million, compared to $13.8 million for the same period last year. The increase in revenues is primarily attributable to the consolidation of Dalin, a general increase in the price of plasma-based products, which was partially offset by a decline in sales volume by one of the Company’s products, and a 0.3% increase due to foreign exchange translation. During the third quarter of 2009, Dalin accounted for $10.0 million in revenue, or 37.1% of total revenues, and Taibang accounted for $17.0 million in revenue, or 62.9% of total revenues. Revenues, excluding the acquisition of Dalin, increased 23.2% year-over-year, as prior to January 1, 2009, Taibang accounted for 100% of the Company’s revenues.
Gross profit for the third quarter of 2009 was $20.1 million, up 107.8% from $9.7 million in the third quarter of 2008. Gross margin was 74.3%, up 430 basis points from 70.0% in the third quarter of 2008. The increase in gross profit margin was primarily due to general price increases and an increase in sales of higher margin products, which was partially offset by an increase in raw material costs.
Total operating expenses in the third quarter of 2009 increased 131.4% to $6.1 million versus $2.6 million in the prior year period. Selling expenses decreased 20.6% to $0.6 million, compared to $0.8 million in the third quarter of 2008. The decrease in selling expenses was primarily due to the reduction in marketing and promotion activities initiated in 2008, which was offset by the consolidation of Dalin’s selling activities, as well as increased marketing efforts to increase direct sales to new hospitals. As a percentage of sales, selling expenses in the third quarter of 2009 were 2.3%, down from 5.7% in the third quarter last year. General and administrative (“G&A”) expenses increased 216.3% to $5.2 million. As a percentage of sales, G&A expenses increased to 19.1% for the third quarter of 2009, from 11.8% for the same period in 2008. The increase in G&A expenses was mainly due to expenses related to the acquisition of Dalin, such as additional professional service charges and personnel-related costs and depreciation and amortization expenses. The Company also incurred $7,314 in non-cash employee compensation expenses as a result of grants to employees, consultants and directors made under the 2008 Equity Incentive Plan, compared to $20,613 for the same period in 2008.
Research and development expenses increased 30.6% to $0.3 million, or 1.0% of total revenues, compared to $0.2 million, or 1.5% of total revenue, in the third quarter of 2008. The dollar increase was due primarily to the consolidation of Dalin and increased costs from continuing clinical trials on new products.
Total other expenses in the third quarter of 2009 were $14.3 million. Between June 30, 2009 and September 30, 2009, the Company’s stock price increased from $4.03 per share to $7.52 per share. As a result, the Company recognized a loss of $13.2 million from changes in the fair value of derivative liabilities, including warrants and derivative instruments (including the conversion option) embedded in the Company’s Senior Secured Convertible Notes. No such charge occurred in the third quarter of 2008. In addition, the Company recorded a loss of $31,051 in equity income in connection with its 35% equity interest in Huitian, the Company’s unconsolidated affiliate, compared to a net gain of $90,390 in the second quarter of 2009, due to the additional depreciation and amortization expenses arising from the write-up of assets as a result of the equity investment. Net interest expense was $0.7 million for the third quarter of 2009 compared to interest income of $21,713 for the same period in 2008. The increase in interest expense is primarily due to financing related to the acquisition of Dalin.
Provision for income taxes increased 61.2% to $2.5 million for the third quarter of 2009, compared to $1.6 million for the same period last year. The increase in provision for income taxes is mainly due to the consolidation of Dalin, which was offset by the decrease of Taibang’s provision for income taxes. Taibang accrued its 2008 taxes at 25% before it was granted a 15% preferential tax rate for the 2008 tax year in early 2009. Net loss attributable to controlling interest for the third quarter of 2009 was $6.2 million, compared to net income attributable to controlling interest of $4.5 million in the third quarter of 2008. Fully diluted loss per share was $0.29 for the third quarter of 2009, compared to earnings per share of $0.21 in the third quarter of 2008.
Non-GAAP net income in the third quarter of 2009 was $7.1 million or $0.31 per fully diluted share, an increase of 56.8% from non-GAAP net income of $4.5 million, or $0.21 per fully diluted share in the third quarter of 2008.(*)
Nine Month Results
For the first nine months of 2009, total revenue was $81.4 million, up 142.4% from the first nine months of 2008. Revenues excluding the acquisition of Dalin increased 41.8% year-over-year to $47.6 million, compared to $33.6 million a year ago. Gross profit for the first nine months of 2009 was $59.0 million, up 147.5% from $23.8 million in the comparable period a year ago. Gross margin increased 200 basis points to 73.0% from 71.0% in the same period last year. Income from operations for the period was $40.6 million, up 159.7% from $15.6 million in the first nine months of 2008. Net income for the first nine months of 2009 was $5.0 million, down 42.7% from $8.8 million in the first nine months of 2008. Fully diluted earnings per share was $0.23 for the first nine months of 2009 compared to $0.40 in the first nine months of 2008. Adjusting for non-cash employee compensation expenses and changes in the fair value of derivative liabilities, including warrants and derivative instruments (including the conversion option) embedded in the Company’s Senior Secured Convertible Notes, non-GAAP net income for the first nine months of 2009 was $20.0 million, or $0.92 per fully diluted share, an increase of 99.7% from non-GAAP net income of $10.1 million or $0.46 per fully diluted share for the first nine months of 2008.
Financial Condition
As of September 30, 2009, the Company had $50.3 million in cash and cash equivalents, approximately $26.8 million in working capital, and a current ratio of 1.4:1. Total shareholder’s equity at the end of the third quarter of 2009 was $78.3 million, compared to $42.0 million at the end of 2008. The Company generated $35.5 million in net cash from operating activities for the first nine months of 2009 compared to $14.7 million in the same period of 2008.
Recent Developments
China Biologic was named to Forbes Magazine’s fifth annual list of Asia’s “200 Best Under a Billion” for the year 2009.
Business Outlook
Mr. Zhao added, “We believe that as a result of our recent equity investments in Dalin and Huitian, and as the only approved manufacturer of plasma-based biopharmaceuticals in Shandong Province, we are well-positioned to capitalize on the opportunities in our market. The acquisition of equity interests in Dalin and Huitian has accelerated our geographic expansion, diversified our customer base, and enhanced our technological capabilities, and has provided us with ownership interests in three of the 32 approved plasma-based biopharmaceutical manufacturers in China.
“During the fourth quarter of 2009 and into 2010, we expect to continue to experience strong demand for our products and services, as the tight supply and demand situation for plasma-based products in China is expected to persist. In the interim, we continue to invest in our research and development efforts aimed at expanding our product line to include higher-margin, technologically more advanced plasma-based biopharmaceutical products.”
Conference Call
China Biologic will host a conference call at 8:00 a.m. ET on Monday, November 16, 2009, to discuss the 2009 third quarter financial results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 866-356-3093. International callers should dial +1-617-597-5381. The pass code for the call is 91606809. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Monday, November 16, 2009 at 10:00 a.m. ET. To access the replay, dial 888-286-8010. International callers should dial +1-617-801-6888. The conference pass code is 78299906.
Use of Non-GAAP Financial Measures
GAAP results for the three months and nine months ended September 30, 2009, and September 30, 2008, include non-cash compensation expenses related to options granted to employees and directors under the Company’s 2008 Equity Incentive Plan and changes in the fair value of derivative liabilities, including warrants and derivative instruments (including the conversion option) embedded in the Company’s Senior Secured Convertible Notes. To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of this item in this release. The Company’s management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company’s historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
About China Biologic Products, Inc.
China Biologic Products, Inc. (the “Company”), through its indirect majority-owned subsidiaries, Shandong Taibang Biological Products Co. Ltd. and Guiyang Dalin Biologic Technologies Co., Ltd, and its equity investment in Xi’an Huitian Blood Products Co., Ltd., is currently the largest non-state- owned plasma-based biopharmaceutical company in China. The Company is a fully integrated biologic products company with plasma collection, production and manufacturing, research and development, and commercial operations. The Company’s plasma-based biopharmaceutical products are irreplaceable during medical emergencies, and are used for the prevention and treatment of various diseases. The Company sells its products to hospitals and other healthcare facilities in China.
Safe Harbor Statement
This release may contain certain “forward-looking statements” relating to the business of China Biologic Products, Inc. and its subsidiary companies. All statements, other than statements of historical fact included herein are “forward-looking statements,” including statements regarding: the significance of the Company’s acquisitions and acquisition strategy and the benefits of such acquisitions, including the expected impact on the Company’s 2009 revenues and net income; the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries, including its goal of becoming the leading plasma-based biopharmaceutical company in China; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as “believes,” “expects” or similar expressions, and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov ). All forward- looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
CONTACT: China Biologic Products, Inc., +86-538-6202206, Email:
IR@chinabiologic.com; Investor Relations Contact: CCG Investor Relations,
Mr. Athan Dounis, Account Manager, +1-646-213-1916, Email:
athan.dounis@ccgir.com, or Mr. Crocker Coulson, President, +1-646-213-1915,
Email: crocker.coulson@ccgir.com
Web site: http://www.chinabiologic.com/
