BEIJING, Jan. 12 /Xinhua-PRNewswire/ -- Sinovac Biotech Ltd. (Sinovac) announced its semiannual report revealed 18% Sales Growth and 73% Margins for First Six Months of 2005.
Company sales were entirely comprised of Healive(TM), generating $2,699,000 in sales, corresponding to revenue growth of 18%. The growth was attributable to an increase of the number of salespersons and marketing activities. However, new regulations for vaccine distribution in China caused sales growth to be slower than the corresponding period in 2004. Management believes sales growth is accelerating as the market adapts to the new regulations.
Gross profit margin increased to 73.0% from 66.7% in the six months ended June 30, 2004. The increase in gross profit margin was due to economies of scale, which enables increased Healive(TM) production while decreasing the average cost per unit.
Sinovac CEO, Mr. Weidong Yin said, “Our performance in the first half of 2005 proves our ability to grow in spite of major changes in how we market and distribute our products. I am confident we have the right business strategy and balance between product pipeline, marketing and sales; we are now positioned for accelerated growth in 2006.”
Selling, General and Administrative Expenses (“SG&A expenses”) increased 18% to $2,201,000 due to increased marketing expenses for exploration of new markets and sales persons’ bonuses for 2004. Marketing expenses included in the SG&A increased 104% to $1,071,000. Sinovac expects additional increases in SG&A to support continuing market penetration and brand awareness.
Research and Development Expenses reflect amounts spent on the split flu, pandemic influenza vaccine (avian flu vaccine for humans), and Japanese encephalitis vaccines. Total research and development expenses aggregated $216,000. The expenses associated with SARS vaccine development were funded by a government grant.
Stock-Based Compensation
The Company took aggressive steps to reduce the number of stocks options granted; canceling, with the consent of the option holders, 1,977,000 stock options that had been granted in April 2004. Under U.S. generally accepted accounting principles, the expense associated with the granting of stock options is normally recognized over the vesting period. On cancellation of stock options, the full remaining amount of the expense is recognized immediately. As a result, cancellation of the April 2004 stock options resulted in an abnormally large stock-based compensation charge in the current period. The Company incurred stock-based compensation of $2,897,000. About $1.4 million was attributable to the cancellation of the April 2004 stock options.
The Company’s net loss was $3,466,000. While sales and gross profit margin increased, the resulting increase in gross profit was more than offset by increased SG&A expenses and stock-based compensation. However, stock based compensation does not affect the Company’s cash flow. On a pro forma basis, the net loss was $568,000 before stock based compensation charge and $2,069,000 before the stock based compensation relating to the cancellation of stock options.
Sinovac’s capital requirements have been funded by cash flow from sales revenue and issuances of common stock. The Company’s working capital was $1,589,000 at June 30, 2005. Unrestricted cash and cash equivalents is sufficient to fund the Company’s business over the next 12 months. Additionally, the Company is seeking to raise additional capital to finance expansion.
Changes in Internal Control over Financial Reporting
During the reporting period, management identified shortcomings in Sinovac’s disclosure controls relating to the accounting treatment of purchased intellectual property. Since then, the Company has revised controls relating to the cost of whether such assets should be capitalized or charged to operations as in-process research and development. In conjunction with this change, Sinovac revised its controls relating to when amortization should commence on the purchase of vaccine rights, and revised controls relating to the presentation of reverse merger transactions.
Apart from these, there were no changes in internal control for financial reporting during the fiscal period ended June 30, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control for financial reporting. Sinovac’s executive management now concludes that Company disclosure controls and procedures are effective, and will endeavor to disclose all future financial filings in a timely manner.
About Sinovac
Sinovac Biotech Ltd. is a world leader in the research, development, manufacture and commercialization of vaccines for endemic and pandemic viruses such as hepatitis and influenza, and for fast emerging viruses such as SARS and avian influenza (bird flu). The Company’s objective is to provide Chinese children with the best vaccines in the world, and let children in the world use vaccines made in China.
Additional information about Sinovac is available on the Company website, http://www.sinovac.com
For additional information, investor newsletters and corporate updates, please email your request to: info@sinovac.com
THIS NEWS RELEASE MAY INCLUDE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE UNITED STATES SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED, WITH RESPECT TO ACHIEVING CORPORATE OBJECTIVES, DEVELOPING ADDITIONAL PROJECT INTERESTS, SINOVAC’S ANALYSIS OF OPPORTUNITIES IN THE ACQUISITION AND DEVELOPMENT OF VARIOUS PROJECT INTERESTS AND CERTAIN OTHER MATTERS. THESE STATEMENTS ARE MADE UNDER THE “SAFE HARBOR” PROVISIONS OF THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND INVOLVE RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
CONTACT: Craig H. Bird Investor Relations (215) 782 - 8682 Toll Free: 1-866-360-8682 (North America) sinovac@verizon.net
Sinovac Biotech Ltd.
CONTACT: Craig H. Bird, Investor Relations, +1-215-782-8682,1-866-360-8682, sinovac@verizon.net
Web site: http://www.sinovac.com/
