BEIJING, Aug. 23, 2016 /PRNewswire/ -- Sinovac Biotech Ltd. (NASDAQ: SVA), a leading provider of biopharmaceutical products in China, announced today its unaudited second quarter ended June 30, 2016.
Mr. Weidong Yin, Chairman, President and CEO of the Sinovac, commented, "As forecasted on our first quarter earnings call, we experienced a continued decline to our financial results in the second quarter due to the incident involving the improper distribution and sale of vaccines in Shandong province. This impacted nationwide sales of private-pay market vaccines as vaccine companies halted vaccine delivery to wait for the interpretation of new regulation by the Chinese government."
"In mid-June, the China Food and Drug Administration ("CFDA") and China's Ministry of Health jointly issued an interpretation of the new requirement and execution plan during the transition period before the infrastructure is set up to fully comply with the new regulation. This allowed vaccine sales and delivery in the private-pay market to resume following the joint government announcement. Since then, we have experienced a rebound in sales activity. When the private-pay vaccine market was reactivated, our sales and marketing team launched marketing activities for promoting our newly approved EV71 vaccines. There have been vaccination kick-off ceremonies, commercial launch activities at the provincial level, as well as educational seminars and marketing activities, as planned. By now, we have delivered our EV71 vaccine to 16 provinces and three municipalities and we expect these numbers to keep increasing."
Mr. Yin also commended, "During the second quarter, we also made progress on our pipeline programs with the continuation of clinical trials of our varicella vaccine and completed preparation for the trials of our sIPV vaccine. We expect that sales in our fiscal second half of the year will be much stronger than the first half and look forward to updating our investors on our latest progress and achievements in the months ahead."
Second Quarter 2016 Business Highlights
Marketing and Sales
EV71 - Sinovac's EV71 was approved for commercialization early this year. After private pay market vaccine sales resumed, sales and marketing of EV71 vaccine was initiated immediately and Sinovac's Public Tender market: Sinovac won the tender of supplying Healive to Beijing over the course of 2016 to 2018. The total value of the tender is RMB 32 million ($4.8 million). Sinovac was selected to be the sole supplier of Healive to Shanghai for 2016 and the value of the contract is RMB 3.2 million ($0.5 million).
Research and Development
Varicella The vaccine candidate was approved to commence human clinical trials in 2015. The phase I clinical trial was initiated in May 2016 in Henan Province. The phase I trial is designed as a single-center, randomized, double-blinded, and placebo controlled study. 270 subjects were enrolled. The preliminary results show the vaccine has a good safety profile. We expect to initiate the phase III trial in September 2016.
sIPV - The clinical trial license was received in December 2015. Sinovac has obtained the clinical site approval and ethics committee approval for conducting the trial. Preparation for the trial is now complete and we expect to conduct clinical trial phase I in the beginning of September 2016.
Unaudited Financial Results for Second Quarter 2016
2016Q2 | % of Sales | 2015Q2 | % of Sales | ||||
(In $000 except percentage data) | |||||||
Hepatitis A Healive | 877 | 63.7% | 8,462 | 45.8% | |||
Hepatitis A&B Bilive | (1,359) | (98.7)% | 9,216 | 49.8% | |||
Hepatitis vaccines subtotal | (482) | (35.0)% | 17,678 | 95.6% | |||
Influenza vaccine | 248 | 18.0% | 526 | 2.8% | |||
Enterovirus 71 vaccine | 1,562 | 113.4% | - | - | |||
Mumps vaccine | 49 | 3.6% | 287 | 1.6% | |||
Regular sales | 1,377 | 100.0% | 18,491 | 100.0% | |||
H5N1 | - | - | - | - | |||
Total sales | 1,377 | 100.0% | 18,491 | 100.0% | |||
Cost of sales | 3,737 | 271.4% | 3,283 | 17.8% | |||
Gross profit | (2,360) | (171.4)% | 15,208 | 82.2% | |||
Quarterly sales from continuing operations were $1.4 million compared to $18.5 million in the prior year period. The sales decrease was due to lower sales to Centers for Disease Control and Prevention ("CDCs") and no sales to distributors combined with an increase in sales returns as a result of the vaccine incident in Shandong province.
Gross loss from continuing operations was $2.4 million, compared to gross profit of $15.2 million in the prior year period.
Selling, general and administrative expenses in the second quarter of 2016 were $8.3 million, compared to $9.0 million in the same period of 2015. Generally, the Company's selling, general and administrative expenses declined with the lower level of sales activity, but there were other significant factors that offset this trend, including a cost of $786 thousand relating to the proposed privatization of Sinovac; and a recorded expense of $526 thousand resulting from the depreciation of the RMB against the United States dollar.
R&D expenses in the second quarter of 2016 were $2.8 million, compared to $2.2 million in the same period of 2015. The increase was mainly due to higher R&D expenses on the MMR vaccine project in the second quarter of 2016.
Loss from continuing operations was $12.6 million compared to an income of $3.7 million in the prior year period. The second quarter of 2015 includes a loss from discontinued operations of $244 thousand whereas no such income or loss was received in the second quarter of 2016.
Net loss attributable to common shareholders was $9.6 million, or ($0.17) per basic and diluted share, compared to net income attributable to common shareholders of $2.3 million, or $0.04 per basic and diluted share in the prior year period.
Non-GAAP EBITDA was negative $12.0 million in the second quarter of 2016, compared to $6.3 million in the prior year period. Non-GAAP net loss from continuing operations in the second quarter of 2016 was $11.7 million, compared to net income of $3.9 million in the prior year period. Non-GAAP diluted net loss per share from continuing operations in the second quarter of 2016 was $0.15, compared to net income of $0.05 per share in the prior year period. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.
Unaudited Financial Results for First Half of 2016
2016H1 | % of Sales | 2015H1 | % of Sales | ||
(In $000 except percentage data) | |||||
Hepatitis A Healive | 4,524 | 36.7% | 11,385 | 41.1% | |
Hepatitis A&B Bilive | (1,143) | (9.3)% | 14,271 | 51.5% | |
Hepatitis vaccines subtotal | 3,381 | 27.4% | 25,656 | 92.6% | |
Influenza vaccine | 710 | 5.8% | 1,112 | 4.0% | |
Enterovirus 71 vaccine | 1,562 | 12.7% | - | - | |
Mumps vaccine | 286 | 2.3% | 930 | 3.4% | |
Regular sales | 5,939 | 48.2% | 27,698 | 100.0% | |
H5N1 | 6,392 | 51.8% | - | - | |
Total sales | 12,331 | 100.0% | 27,698 | 100.0% | |
Cost of sales | 8,363 | 67.8% | 5,591 | 20.2% | |
Gross profit | 3,968 | 32.2% | 22,107 | 79.8% |
Sales from continuing operations were $12.3 million in the first half of 2016, a decrease of 55.5% from $27.7 million in the prior year period. Excluding H5N1 revenue, sales from continuing operations were $5.9 million in the first half of 2016, a decrease of 78.6% from $27.7 million in the prior year period.The sales decrease was due to lower sales to customers and additional sales return provision provided as a result of the vaccine incident in Shandong province.
Gross profit from continuing operations was $4.0 million, a decrease of 82.1% from $22.1 million in the prior year period. Gross margin was 32.2%, compared to 79.8% in the prior year period. Excluding H5N1, the first half year gross margin was 3.7%, compared to 80.4% in the prior year period. The decrease was mainly due to higher inventory provision provided for hepatitis A&B and mumps vaccines, higher idle capacity costs charged to cost of sales, and a negative gross profit for the hepatitis A&B vaccine due to higher sales returns provision provided in the first half of 2016.
Selling, general and administrative expenses in the first half of 2016 were $14.5 million, compared to $15.8 million in the same period of 2015. The Company's selling, general and administrative expenses declined with the lower level of sales activity, but there were other significant factors that offset this trend including a cost of $856 thousand relating to the proposed privatization of Sinovac and a recorded expense of $403 thousand resulting from the depreciation of the RMB against the United States dollar.
R&D expenses in the first half of 2016 were $4.9 million, compared to $4.4 million in the same period of 2015.
Net loss from continuing operations was $14.2 million, compared to a net income of $1.0 million in the prior year period. Net income from discontinued operations was $2.3 million, compared to a net loss of $436 thousand in the prior year period.
Net loss attributable to common shareholders was $8.3 million or ($0.14) per basic and diluted share in the first half of 2016, compared to net income attributable to common shareholders of $20 thousand, or $0.00 per basic and diluted share, in the first half year of 2015.
Non-GAAP EBITDA was negative $11.9 million loss in the first half of 2016, compared to $6.0 million in the prior year period. Non-GAAP net loss from continuing operations in the first half of 2016 was $13.1 million, compared to a net income of $1.3 million in the prior year period. Non-GAAP diluted net loss per share from continuing operations in the first half of 2016 was $0.17, compared to net income of $0.01 per share in the prior year period. Reconciliations of Non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.
As of June 30, 2016, cash and cash equivalents totaled $49.2 million, compared to $63.8 million as of December 31, 2015. In the first half of 2016, net cash used in operating activities was $15.6 million. Net cash used in investing activities was $3.7 million, which was for the purchase of equipment. Net cash provided by financing activities was $5.7 million, including loan proceeds of $22.7 million and loan repayment of $17.8 million. As of June 30, 2016, the Company had $23.8 million of bank loans due within one year. The Company expects that its current cash position will be able to support its operations for the next 12 months. The Company will seek new commercial bank loans to finance the commercialization of its pipeline products and for other operational purposes when appropriate.
Conference Call Details
Sinovac will host a conference call on Tuesday, August 23, 2016, at 8:00 a.m. EDT (Tuesday, August 23, 2016 at 8:00 p.m. China Standard Time) to review the Company's financial results and provide an update on recent corporate developments.
To access the conference call, please dial 1-877-407-9039 (USA) or 1-201-689-8470 (International). A replay of the call will be available after the earnings call through September 6, 2016. To access the replay, please dial 1-877-870-5176 (USA) or 1-858-384-5517 (International) and reference the replay pin number 13643261.
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 hepatitis A and B, seasonal influenza, H5N1 pandemic influenza (avian flu), H1N1 influenza (swine flu), mumps and canine rabies. 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. Sinovac's newly developed innovative vaccine against HFMD caused by EV71 is ready for market launch. The Company is currently developing a number of new products including a Sabin-strain inactivated polio vaccine, pneumococcal polysaccharides vaccine, pneumococcal conjugate vaccine and varicella vaccine. Sinovac primarily sells its vaccines in China, while also exploring growth opportunities in international markets. The Company has exported select vaccines to Mexico, Mongolia, Nepal, Tajikistan, Bangladesh, Chile and the Philippines, and was recently granted a license to commercialize its influenza vaccine in Guatemala. For more information, please visit the Company's website at www.sinovac.com.
Safe Harbor Statement
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward looking statements. Factors that might cause such a difference include our inability to compete successfully in the competitive and rapidly changing marketplace in which we operate, failure to retain key employees, cancellation or delay of projects and adverse general economic conditions in the United States and internationally.
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