China Biologic Products Reports First Quarter 2011 Results

PR Newswire
TAI'AN, China
May 9, 2011

TAI'AN, China, May 9, 2011 /PRNewswire-Asia-FirstCall/ -- China Biologic Products, Inc. (NASDAQ: CBPO) ("China Biologic" or the "Company"), one of the leading plasma-based biopharmaceutical companies in the People's Republic of China ("PRC"), today reported record sales and net income for the three months ended March 31, 2011.

Financial highlights for the first quarter 2011

    --  Total sales increased 27.2% to $34.5 million in the first quarter 2011,
        from $27.1 million the first quarter 2010.
    --  Gross profit increased 23.9% to $25.2 million in the first quarter 2011,
        from $20.3 million the first quarter 2010.
    --  Income from operations increased 9.8% to $14.5 million in the first
        quarter 2011, from $13.2 million the first quarter 2010.
    --  Net income attributable to China Biologic decreased 40.8% to $6.3
        million in the first quarter 2011, from $10.7 million in the first
        quarter 2010.
    --  Diluted earnings per share attributable to China Biologic decreased
        11.5% to $0.23 in the first quarter 2011, from $0.26 per diluted share
        in the first quarter 2010.
    --  Non-GAAP adjusted net income attributable to China Biologic increased
        5.2% to $8.0 million in the first quarter 2011, from $7.6 million in the
        first quarter 2010.
    --  Non-GAAP adjusted diluted earnings per share attributable to China
        Biologic increased 6.9% to $0.31 per diluted share in the first quarter
        2011, from $0.29 in the first quarter 2010.

CEO Comments

Mr. Chao Ming Zhao, Chief Executive Officer of China Biologic, said, "We are pleased with our 27% sales increase during the 2011 the first quarter from the first quarter of last year, which we primarily attribute to general price increases for many of our products due to a continued supply shortage. During the first quarter, we also continued to aggressively expand our direct sales to hospitals and inoculation centers in order to boost our future sales. We believe that our strategy to expand our direct institutional sales remains the best long-term model for serving our customers and expanding our products and markets in China.

"We expect that the following strategies will help improve our performance this year: (1) we expect our direct sales to continue expanding as a result of our direct and aggressive promotion; (2) the supply of raw material necessary for the production of hepatitis B and human rabies immunoglobulin products is expected to improve in the second half of the year; (3) we expect two of our new products to be approved by China's State Food and Drug Administration this year, potentially generating sales by year's end; and (4) we will continue to stringently control our expenses while sustaining our pursuit in achieving higher direct institutional sales.

"We believe that the successful implementation of the foregoing strategies, along with the continued expansion of China's economy, the government's continued emphasis on higher health standards, and our strategic locations and high operating standards, strengthens the Company's outlook for 2011, and so we continue to be optimistic that our results for 2011 will be good. To emphasize our confidence and determination, we are maintaining our previous guidance for the year 2011."

Results for the three months ended March 31, 2011

Revenues increased 27.2%, or $7.4 million, to $34.5 million for the first quarter of 2011 from $27.1 million for the same period in 2010. The increase was mainly due to a general increase in the price and volume of plasma based products.

    --  Sales from human albumin products rose approximately 55.1%
        quarter-over-quarter to approximately $19.7 million, accounting for
        approximately 57.2% of the total sales in the first quarter of 2011, as
        compared to the 46.9% for the same period in 2010. Sales volume of human
        albumin products increased by approximately 63.2% in the first quarter
        of 2011 as compared to the same period in 2010, while average selling
        price ("ASP") of human albumin decreased by 4.9%. The price decrease in
        human albumin is due to the increasing volume of imported human albumin
        products during 2010.

    --  Sales from human immunoglobulin for intravenous injection ("IVIG") grew
        by 93.3% to approximately $10.4 million in the first quarter of 2011,
        representing approximately 30.2% of total sales, as compared to
        approximately 19.9% of total sales for the same period in 2010. The
        increase in sales from IVIG was mainly due to an approximate 4.2% in the
        ASP of IVIG and an 85.5% increase in sales volume.

    --  Sales from the human tetanus immunoglobulin products rose approximately
        73.0% to approximately $1.2 million, contributing approximately 3.4% of
        total sales in the first quarter of 2011 as compared to approximately
        2.5% for the same period in 2010. The sales volume and ASP of human
        tetanus immunoglobulin increased approximately 68.5% and 2.7%,
        respectively.

    --  Sales from human hepatitis B immunoglobulin declined approximately 33.5%
        to approximately $2.2 million, contributing approximately 6.4% of the
        total sales in the first quarter of 2011 as compared to approximately
        12.3% in the same period of 2010. Although the ASP for sales of human
        hepatitis B immunoglobulin increased by 25.2% in the first quarter of
        2011, its sales volume decreased by approximately 46.9%.

    --  Sales from human rabies immunoglobulin decreased approximately 80.1% to
        $0.75 million, contributing approximately 2.2% of total sales in the
        first quarter of 2011 as compared to approximately 13.9% in the same
        period of 2010. Although the ASP for sales of human rabies
        immunoglobulin increased by 14.8% in the first quarter of 2011, its
        sales volume decreased by approximately 82.7%.

Gross profit increased $4.9 million or 23.9% to $25.2 million in the first quarter of 2011 from $20.3 million in the first quarter of 2010. Gross profit margin was 73.0% in the first quarter of 2011, as compared to the 74.5% for the same period in 2010.

Total operating expenses in the first quarter of 2011 increased 50.2% to $10.6 million, as compared to $7.1 million in the first quarter 2010. As a percentage of total sales, total operating expenses increased to 30.8% in the first quarter of 2011, from 26.1% for the same period in 2010.

Selling expenses increased by $1.5 million, or 159.8%, to $2.4 million in the first quarter of 2011 from $0.9 million in the first quarter of 2010. Selling expenses as a percent of sales increased to 7.1% in the first quarter of 2011 from 3.5% for the same period in 2010. The increase in selling expenses was primarily due to an increase in promotional and conference activities as we continued our efforts in expanding our customer base into hospital and inoculation centers throughout the PRC.

General and administrative expenses increased by $2.5 million, or 50.4%, to $7.5 million in the first quarter of 2010 from $5.0 million in the first quarter of 2010. General and administrative expenses as a percent of sales increased to 21.7% in the first quarter of 2011, from 18.3% in the first quarter of 2010. The increase in general and administrative expenses was primarily due to an increase in expenses related to payroll and employee benefits, as well as non-cash employee compensation. The increase in payroll is primarily due to the company's efforts to enhance corporate governance with the addition of two directors during the first quarter 2011, and the addition of a President in December 2010, as well as the addition of our new corporate offices in Beijing.

Research and development expenses decreased by $0.5 million, or 39.2%, to $0.7 million, from $1.2 million in the first quarter of 2010. As a percent of sales, research and development expenses were 2.1% and 4.3% in the first quarter of 2011 and 2010, respectively. The decrease in research and development expenses was primarily due to the decreased cost associated with the development of two new products that are at the end of their respective development stages. We expect to receive SFDA approval for these two products in the second half of 2011.

Income from operations increased 9.9% to $14.5 million, or 42.2% of total sales in 2011, as compared to $13.2million, or 48.8% in 2010.

For the three months ended March 31, 2011 and 2010, we recognized an income from the change in fair value of derivative liabilities in the amounts of $1.0 million and $3.8 million for the first quarter of 2011 and 2010, respectively. The recognized income from the change in the fair value of derivative liabilities in the first quarter of 2011 was mainly due to a decrease in the price of our common stock from $16.39 as of December 31, 2010 to $15.96 as of March 31, 2011. Future changes in the market price of our common stock could cause the fair value of these derivative financial instruments to change significantly in future periods.

Our provision for income taxes increased $1.2 million, or 38.8%, to $4.3 million in the first quarter of 2011, from $3.1 million in the first quarter of 2010. The increase in income tax provision was consistent with the increase in our net operating income in the 2011 first quarter, as compared to the 2010 first quarter, as we recorded a 25% income tax rate in the first quarter of 2011, subject to PRC governmental approval for our use of the 15% preferential tax rate for Shandong Taibang, which is in the process of reapplying the High and New Technology Enterprise qualification for an additional three years through to 2013.

GAAP net income attributable to China Biologic in the first quarter of 2011 was $6.3million, or $0.25 per diluted share, as compared to $10.6 million, or $0.4 per diluted share, in the same period of 2010. Non-GAAP adjusted net income was $7.97 million, or $0.31 per diluted share, in the first quarter of 2011, as compared to $7.57 million, or $0.29 per diluted share, in the first quarter of 2010. Non-GAAP adjusted net income and diluted earnings per share in the first quarter 2011 excluded an aggregate of $1.7 million charges, which are related to change in the fair value of derivative liabilities and non-cash employee compensation expenses after adding back interest related to the convertible notes under the if-converted method. Please see the table at the end of the release which reconciles our non-GAAP measures with the nearest comparable GAAP measures.

Financial Condition

As of March 31, 2011, the Company had $56.3 million in cash and cash equivalents, approximately $59.9 million in working capital, and a current ratio of 181.0%. Total shareholder's equity on March 31, 2011 was $143.9 million, as compared to $145.0 million at December 31, 2010.

Conference call

China Biologic will host a dial-in conference call at 7:30 a.m. EDT (New York) on May 10, 2011, to discuss its results for the first quarter 2011. To participate in the conference call, please dial the appropriate number about 10 minutes prior to the scheduled conference call time:

The dial-in details for the live conference call are:



    U.S. toll-free number      1 866 549 1292
    Mainland China toll-
     free number                 400 681 6949
    Hong Kong local access          3005 2050
    International toll
     number                    +852 3005 2050
    Participant pass code     674 477#

A telephone replay of the call will be available after the conclusion of the conference all through 8:30 a.m. EDT on May 17, 2011.

The dial-in details for the telephone replay are:



    U.S. toll-free number      1 866 753 0743
    Mainland China toll free
     number                      800 876 8594
    Hong Kong local access          3005 2020
    International dial-in
     toll number               +852 3005 2020
    Replay pass code          138 012#

Use of non-GAAP financial measures

This press release contains non-GAAP financial measures that exclude 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 (after adding back interest related to the convertible notes under the if-converted method). 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 these non-GAAP measures provide 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., 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. Please see the Company's website www.chinabiologic.com for additional information.

Safe harbor statement

This release may contain certain "forward-looking statements" relating to the business of China Biologic Products, Inc. and its subsidiaries. All statements, other than statements of historical fact included herein are "forward-looking statements," including, among others, statements regarding: the ability of the Company to achieve its commercial objectives, including the probability that the Company's new products will obtain governmental approval in time to realize revenues by the 2011 year end; the likelihood that the PRC economy will continue to expand and that its government will continue to place emphasis on higher health standards; the ability of the Company to maintain its strategic locations and high operating standards; the business strategy, plans, and objectives of the Company and its subsidiaries, including its ability to successfully implement its growth strategies, particularly, its strategy to expand direct sales to hospitals and inoculation centers in order to boost future sales, or meet its financial guidance for 2011; 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.

Company Contact



                                  Mr. Y. Tristan Kuo
                                Chief Financial Officer
                             China Biologic Products, Inc.
                              Telephone: +86-538-6202206
                              Email: ir@chinabiologic.com
    www.chinabiologic.com


    Financial statements follow.
    CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
    UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

                                                       For the
                                                        three
                                                        months
                                                        ended
                                                          -------
                                               March               March
                                                 31,                 31,
                                                2011                2010
                                               ------              ------
    Sales
                        External customers  $34,395,238         $26,861,522
                        Related party            75,584             237,031
                                                 ------             -------
    Total sales                              34,470,822          27,098,553
                                             ----------          ----------

    Cost of sales
                        External customers    9,277,204           6,798,854
                        Related party            34,394                   -
                                                 ------                 ---
    Cost of sales                             9,311,598           6,798,854
                                              ---------           ---------

    Gross profit                             25,159,224          20,299,699

    Operating expenses
                        Selling expenses      2,449,913             942,908
                        General and
                         administrative
                         expenses             7,464,141           4,962,252
                        Research and
                         development
                         expenses               710,991           1,168,655
                                                -------           ---------

    Income from
     operations                              14,534,179          13,225,884
                                             ----------          ----------

    Other expenses /
     (income)
                        Equity in income of
                         equity method
                         investee              (270,394)           (188,541)
                        Change in fair
                         value of
                         derivative
                         liabilities         (1,021,865)         (3,833,577)
                        Interest expense      1,680,922             333,589
                        Interest income        (170,131)           (152,536)
                        Other expenses /
                         (income), net          224,231            (819,969)
                                                -------            --------
    Total other
     expenses /
     (income), net                              442,763          (4,661,034)
                                                -------          ----------

    Earnings before
     income tax expense                      14,091,416          17,886,918

    Income tax expense                        4,263,216           3,071,147
                                              ---------           ---------

    Net income                                9,828,200          14,815,771

    Less: Net income
     attributable to
     the noncontrolling
     interest                                 3,519,225           4,152,022
                                              ---------           ---------

    Net income
     attributable to
     China Biologic
     Products, Inc.                           6,308,975          10,663,749
                                              =========          ==========

    Earnings per share:
                        Basic                     $0.26               $0.46
                                                  =====               =====
                        Diluted                   $0.23               $0.26
                                                  =====               =====

    Weighted average
     shares used in
     computation:
                        Basic                24,351,125          23,386,893
                                             ==========          ==========
                        Diluted              25,680,648          26,471,425
                                             ==========          ==========


    CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
    UNAUDITED CONSOLIDATED BALANCE SHEETS

                                              March      December
                                               31,          31,
                                                  2011         2010
                                                  ----         ----

    ASSETS
    Current Assets
         Cash and cash equivalents         $56,307,771  $64,941,368
         Accounts receivable, net of
          allowance for doubtful
          accounts                          13,310,481    9,922,111
         Accounts receivable -a
          related party                              -      212,611
         Inventories                        57,569,187   52,300,447
         Other receivables                   2,560,648    2,727,110
         Prepayments and prepaid
          expenses                           1,956,816      855,338
         Deferred tax assets                 2,213,843    1,860,753
                                             ---------    ---------
               Total Current Assets        133,918,746  132,819,738

    Property, plant and
     equipment, net                         39,589,552   39,511,731
    Intangible assets, net                  13,796,763   14,559,020
    Land use rights, net                     4,910,042    4,701,450
    Prepayments and deposits
     for property, plant and
     equipment                               4,643,394    4,254,423
    Goodwill                                17,895,424   17,778,231
    Equity method investment                 7,616,621    7,297,201
                                             ---------    ---------
                 Total Assets             $222,370,542 $220,921,794
                                          ============ ============

    LIABILITIES AND
     STOCKHOLDERS' EQUITY
    Current Liabilities
         Short-term bank loans              $6,108,000   $3,034,000
         Accounts payable                    4,895,796    4,392,772
         Due to a related party              3,220,814    3,192,140
         Other payables and accrued
          expenses                          19,634,379   21,606,730
         Advance from customers              3,256,243    3,560,018
         Income tax payable                  7,269,829    6,659,805
         Other taxes payable                 2,323,915    2,146,868
         Convertible notes                   2,654,722    1,196,233
         Derivative liabilities -
          embedded conversion option
          in convertible notes              14,053,624   14,561,661
         Derivative liabilities -
          warrants                          10,581,764   11,095,592
                                            ----------   ----------
               Total Current Liabilities    73,999,086   71,445,819
    Other payable                              334,718      333,008
    Deferred tax liabilities                 4,088,029    4,098,834
                                             ---------    ---------
               Total Liabilities            78,421,833   75,877,661
                                            ----------   ----------

    Stockholders' Equity
         Common stock: par value
          $.0001; 100,000,000 shares
          authorized; 24,351,125
              shares issued and
               outstanding at March 31,
               2011 and December 31, 2010        2,435        2,435
         Additional paid-in capital         31,845,086   35,435,139
         Retained earnings                  62,048,076   55,739,101
         Accumulated other
          comprehensive income               8,880,929    8,023,121
                                             ---------    ---------
         Total stockholders' equity
          attributable to China
          Biologic Products, Inc.          102,776,526   99,199,796

         Noncontrolling interest            41,172,183   45,844,337
                                            ----------   ----------

               Total Equity                143,948,709  145,044,133
                                           -----------  -----------

         Commitments and
          contingencies


               Total Liabilities and
                Equity                    $222,370,542 $220,921,794
                                          ============ ============



    CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
    UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                       For the three
                                                        months ended
                                                         -------------
                                                   March               March
                                                    31,                  31,
                                                   2011                 2010
                                                  ------               ------
    CASH FLOWS
     FROM
     OPERATING
     ACTIVITIES:
    Net income                                 $9,828,200         $14,815,771
    Adjustments
     to
     reconcile
     net income
     to cash
     provided by
     operating
     activities:
                         Depreciation           1,108,744             793,657
                         Amortization             884,588             869,251
                         Loss on
                          sale of
                          property,
                          plant and
                          equipment             8,502           3,019
                         (Reversal)
                          /
                          allowance
                          for
                          doubtful
                          accounts,
                          net                 (28,340)         23,329
                         Write-down
                          of
                          obsolete
                          inventories              74,715             198,559
                         Deferred
                          tax
                          (benefit)
                          /expense,
                          net                (377,359)         89,664
                         Stock
                          compensation          1,174,882             571,893
                         Change in
                          fair value
                          of
                          derivative
                          liabilities      (1,021,865)     (3,833,577)
                          Amortization
                          of
                          deferred
                          note
                          issuance
                          cost                 53,388          86,790
                          Amortization
                          of
                          discount
                          on
                          convertible
                          notes             1,458,489          99,318
                         Equity in
                          income of
                          equity
                          method
                          investee           (270,394)       (188,541)
       Change in
        operating
        assets and
        liabilities,
        net of
        acquisition
        in Dalin:
                         Accounts
                          receivable
                          -third
                          parties              (3,353,933)         (1,997,040)
                         Accounts
                          receivable
                          -related
                          party                   213,283             (47,452)
                         Other
                          receivables             272,337            (541,091)
                         Inventories           (4,981,926)         (4,283,720)
                         Prepayments
                          and prepaid
                          expenses             (1,172,953)           (512,690)
                         Accounts
                          payable                   503,023            (180,806)
                         Other
                          payables
                          and
                          accrued
                          expenses         (1,895,565)     (2,383,690)
                         Accrued
                          interest -
                          noncontrolling
                          interest
                          shareholders              -        (913,840)
                         Advance
                          from
                          customers              (326,128)            684,750
                         Income tax
                          payable                 564,195          (1,260,708)
                         Other taxes
                          payable                 162,340                   -
                                                  -------                 ---
    Net cash
     provided
     by
     operating
     activities                             2,878,223       2,092,846
                                                ---------           ---------

    CASH FLOWS
     FROM
     INVESTING
     ACTIVITIES:
       Acquisition
        of a
        subsidiary,
        net of cash
        acquired                                    -      (1,476,447)
       Purchase of
        property,
        plant and
        equipment                            (1,692,558)         (2,012,669)
       Purchase of
        intangible
        assets and
        land use
        right                                  (205,422)        (24,484)
                                                   --------             -------
    Net cash
     used in
     investing
     activities                                (1,897,980)         (3,513,600)
                                               ----------          ----------

    CASH FLOWS
     FROM
     FINANCING
     ACTIVITIES:
       Proceeds
        from
        warrants
        exercised                                       -             689,160
       Proceeds
        from short
        term bank
        loans                                   6,087,200           5,876,078
       Repayment
        for short
        term bank
        loans                                  (3,043,600)         (2,962,330)
       Payments
        made for
        acquiring
        noncontrolling
        interest                           (7,635,000)              -
       Dividend
        paid by
        subsidiaries
        to
        noncontrolling
        interest
        shareholders                       (5,589,920)     (4,780,790)
                                               ----------          ----------
    Net cash
     used in
     financing
     activities                               (10,181,320)         (1,177,882)
                                              -----------          ----------

    EFFECTS OF
     EXCHANGE
     RATE
     CHANGE IN
     CASH                                     567,480         (54,890)
                                                  -------             -------

    NET
     (DECREASE)
     INCREASE
     IN CASH                                   (8,633,597)         (2,653,526)
                                               ==========          ==========

    Cash and
     cash
     equivalents,
     beginning
     of year                               64,941,368      53,843,951
                                               ==========          ==========

    Cash and
     cash
     equivalents,
     end of
     year                                 $56,307,771     $51,190,425
                                              ===========         ===========

     Supplemental
     cash flow
     information
       Cash paid
        for income
        taxes                                  $4,076,381          $3,806,691
                                               ==========          ==========
       Cash paid
        for
        interest
        expense
        (net of
        capitalized
        interest)                            $278,610         $62,286
                                                 ========             =======
       Noncash
        investing
        and
        financing
        activities:
             Convertible
              notes
              conversion                 $              -          $1,809,771
                                       ===            ===          ==========
              Reclassification
              of warrant
              liability
              to paid-
              in capital
              upon
              warrants
              conversion                 $              -      $2,436,907
                                       ===            ===          ==========
             Net assets
              addition
              included
              in
              accounts
              payable                    $              -        $395,540
                                       ===            ===            ========
             Utilization
              of
              prepayments
              and
              deposits to
              acquire
              property,
              plant and
              equipment                  $              -        $424,858
                                       ===            ===            ========



                         RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                        FOR THE THREE MONTHS ENDED March, 2011 AND 2010


                                                     Three months Ended
                                                       March 31, 2011
                                                      Net         Diluted
    Net Income (Loss) Diluted EPS                   Income           EPS
    Adjusted Net Income - Non GAAP                $7,965,131         $0.31
    ------------------------------                ----------         -----
    Non-cash employee compensation (1)            $1,174,882         $0.05
    Income in fair value of derivative
     liabilities (2)                               $(508,037)       $(0.04)
    Interest of Convertible Notes  (3)            $1,503,139         $0.06
    Adjusted Net Income for diluted net income
     per share                                    $5,795,147         $0.25
    ------------------------------------------    ----------         -----
    Interest on the Notes                       $          -         $0.00
    Change in fair value of embedded conversion
     option in the Notes                        $          -         $0.00
    Change in fair value of warrants               $(513,828)        $0.00
    Net Income attributable to controlling
     interest                                     $6,308,975         $0.25
    Weighted average number of Shares             25,680,648




                                                    Three months Ended
                                                      March 31, 2010
                                                      Net          Diluted
    Net Income (Loss) Diluted EPS                   Income            EPS
    Adjusted Net Income - Non GAAP                 $7,574,186         $0.29
    ------------------------------                 ----------         -----
    Non-cash employee compensation (1)               $571,893         $0.03
    Income in fair value of derivative
     liabilities (2)                            $           -  $          -
    Interest of Convertible Notes  (3)          $           -  $          -
    Adjusted Net Income for diluted net income
     per share                                     $7,002,293         $0.26
    ------------------------------------------     ----------         -----
    Interest on the Notes                            $172,121         $0.01
    Change in fair value of embedded conversion
     option in the Notes                          $(2,057,342)       $(0.08)
    Change in fair value of warrants              $(1,776,235)       $(0.07)
    Net Income attributable to controlling
     interest                                     $10,663,749         $0.40
    Weighted average number of Shares              26,471,425

SOURCE China Biologic Products, Inc.

SOURCE: China Biologic Products, Inc.

China Biologic Products Reports First Quarter 2011 Results

PR Newswire

TAI'AN, China, May 9, 2011 /PRNewswire-Asia-FirstCall/ -- China Biologic Products, Inc. (NASDAQ: CBPO) ("China Biologic" or the "Company"), one of the leading plasma-based biopharmaceutical companies in the People's Republic of China ("PRC"), today reported record sales and net income for the three months ended March 31, 2011.

Financial highlights for the first quarter 2011

  • Total sales increased 27.2% to $34.5 million in the first quarter 2011, from $27.1 million the first quarter 2010.
  • Gross profit increased 23.9% to $25.2 million in the first quarter 2011, from $20.3 million the first quarter 2010.
  • Income from operations increased 9.8% to $14.5 million in the first quarter 2011, from $13.2 million the first quarter 2010.
  • Net income attributable to China Biologic decreased 40.8% to $6.3 million in the first quarter 2011, from $10.7 million in the first quarter 2010.
  • Diluted earnings per share attributable to China Biologic decreased 11.5% to $0.23 in the first quarter 2011, from $0.26 per diluted share in the first quarter 2010.
  • Non-GAAP adjusted net income attributable to China Biologic increased 5.2% to $8.0 million in the first quarter 2011, from $7.6 million in the first quarter 2010.
  • Non-GAAP adjusted diluted earnings per share attributable to China Biologic increased 6.9% to $0.31 per diluted share in the first quarter 2011, from $0.29 in the first quarter 2010.

CEO Comments

Mr. Chao Ming Zhao, Chief Executive Officer of China Biologic, said, "We are pleased with our 27% sales increase during the 2011 the first quarter from the first quarter of last year, which we primarily attribute to general price increases for many of our products due to a continued supply shortage. During the first quarter, we also continued to aggressively expand our direct sales to hospitals and inoculation centers in order to boost our future sales. We believe that our strategy to expand our direct institutional sales remains the best long-term model for serving our customers and expanding our products and markets in China.

"We expect that the following strategies will help improve our performance this year: (1) we expect our direct sales to continue expanding as a result of our direct and aggressive promotion; (2) the supply of raw material necessary for the production of hepatitis B and human rabies immunoglobulin products is expected to improve in the second half of the year; (3) we expect two of our new products to be approved by China's State Food and Drug Administration this year, potentially generating sales by year's end; and (4) we will continue to stringently control our expenses while sustaining our pursuit in achieving higher direct institutional sales.

"We believe that the successful implementation of the foregoing strategies, along with the continued expansion of China's economy, the government's continued emphasis on higher health standards, and our strategic locations and high operating standards, strengthens the Company's outlook for 2011, and so we continue to be optimistic that our results for 2011 will be good. To emphasize our confidence and determination, we are maintaining our previous guidance for the year 2011."

Results for the three months ended March 31, 2011

Revenues increased 27.2%, or $7.4 million, to $34.5 million for the first quarter of 2011 from $27.1 million for the same period in 2010. The increase was mainly due to a general increase in the price and volume of plasma based products.

  • Sales from human albumin products rose approximately 55.1% quarter-over-quarter to approximately $19.7 million, accounting for approximately 57.2% of the total sales in the first quarter of 2011, as compared to the 46.9% for the same period in 2010. Sales volume of human albumin products increased by approximately 63.2% in the first quarter of 2011 as compared to the same period in 2010, while average selling price ("ASP") of human albumin decreased by 4.9%. The price decrease in human albumin is due to the increasing volume of imported human albumin products during 2010.

  • Sales from human immunoglobulin for intravenous injection ("IVIG") grew by 93.3% to approximately $10.4 million in the first quarter of 2011, representing approximately 30.2% of total sales, as compared to approximately 19.9% of total sales for the same period in 2010. The increase in sales from IVIG was mainly due to an approximate 4.2% in the ASP of IVIG and an 85.5% increase in sales volume.

  • Sales from the human tetanus immunoglobulin products rose approximately 73.0% to approximately $1.2 million, contributing approximately 3.4% of total sales in the first quarter of 2011 as compared to approximately 2.5% for the same period in 2010. The sales volume and ASP of human tetanus immunoglobulin increased approximately 68.5% and 2.7%, respectively.

  • Sales from human hepatitis B immunoglobulin declined approximately 33.5% to approximately $2.2 million, contributing approximately 6.4% of the total sales in the first quarter of 2011 as compared to approximately 12.3% in the same period of 2010. Although the ASP for sales of human hepatitis B immunoglobulin increased by 25.2% in the first quarter of 2011, its sales volume decreased by approximately 46.9%.

  • Sales from human rabies immunoglobulin decreased approximately 80.1% to $0.75 million, contributing approximately 2.2% of total sales in the first quarter of 2011 as compared to approximately 13.9% in the same period of 2010. Although the ASP for sales of human rabies immunoglobulin increased by 14.8% in the first quarter of 2011, its sales volume decreased by approximately 82.7%.

Gross profit increased $4.9 million or 23.9% to $25.2 million in the first quarter of 2011 from $20.3 million in the first quarter of 2010. Gross profit margin was 73.0% in the first quarter of 2011, as compared to the 74.5% for the same period in 2010.

Total operating expenses in the first quarter of 2011 increased 50.2% to $10.6 million, as compared to $7.1 million in the first quarter 2010. As a percentage of total sales, total operating expenses increased to 30.8% in the first quarter of 2011, from 26.1% for the same period in 2010.

Selling expenses increased by $1.5 million, or 159.8%, to $2.4 million in the first quarter of 2011 from $0.9 million in the first quarter of 2010. Selling expenses as a percent of sales increased to 7.1% in the first quarter of 2011 from 3.5% for the same period in 2010. The increase in selling expenses was primarily due to an increase in promotional and conference activities as we continued our efforts in expanding our customer base into hospital and inoculation centers throughout the PRC.

General and administrative expenses increased by $2.5 million, or 50.4%, to $7.5 million in the first quarter of 2010 from $5.0 million in the first quarter of 2010. General and administrative expenses as a percent of sales increased to 21.7% in the first quarter of 2011, from 18.3% in the first quarter of 2010. The increase in general and administrative expenses was primarily due to an increase in expenses related to payroll and employee benefits, as well as non-cash employee compensation. The increase in payroll is primarily due to the company's efforts to enhance corporate governance with the addition of two directors during the first quarter 2011, and the addition of a President in December 2010, as well as the addition of our new corporate offices in Beijing.

Research and development expenses decreased by $0.5 million, or 39.2%, to $0.7 million, from $1.2 million in the first quarter of 2010. As a percent of sales, research and development expenses were 2.1% and 4.3% in the first quarter of 2011 and 2010, respectively. The decrease in research and development expenses was primarily due to the decreased cost associated with the development of two new products that are at the end of their respective development stages. We expect to receive SFDA approval for these two products in the second half of 2011.

Income from operations increased 9.9% to $14.5 million, or 42.2% of total sales in 2011, as compared to $13.2million, or 48.8% in 2010.

For the three months ended March 31, 2011 and 2010, we recognized an income from the change in fair value of derivative liabilities in the amounts of $1.0 million and $3.8 million for the first quarter of 2011 and 2010, respectively. The recognized income from the change in the fair value of derivative liabilities in the first quarter of 2011 was mainly due to a decrease in the price of our common stock from $16.39 as of December 31, 2010 to $15.96 as of March 31, 2011. Future changes in the market price of our common stock could cause the fair value of these derivative financial instruments to change significantly in future periods.

Our provision for income taxes increased $1.2 million, or 38.8%, to $4.3 million in the first quarter of 2011, from $3.1 million in the first quarter of 2010. The increase in income tax provision was consistent with the increase in our net operating income in the 2011 first quarter, as compared to the 2010 first quarter, as we recorded a 25% income tax rate in the first quarter of 2011, subject to PRC governmental approval for our use of the 15% preferential tax rate for Shandong Taibang, which is in the process of reapplying the High and New Technology Enterprise qualification for an additional three years through to 2013.

GAAP net income attributable to China Biologic in the first quarter of 2011 was $6.3million, or $0.25 per diluted share, as compared to $10.6 million, or $0.4 per diluted share, in the same period of 2010. Non-GAAP adjusted net income was $7.97 million, or $0.31 per diluted share, in the first quarter of 2011, as compared to $7.57 million, or $0.29 per diluted share, in the first quarter of 2010. Non-GAAP adjusted net income and diluted earnings per share in the first quarter 2011 excluded an aggregate of $1.7 million charges, which are related to change in the fair value of derivative liabilities and non-cash employee compensation expenses after adding back interest related to the convertible notes under the if-converted method. Please see the table at the end of the release which reconciles our non-GAAP measures with the nearest comparable GAAP measures.

Financial Condition

As of March 31, 2011, the Company had $56.3 million in cash and cash equivalents, approximately $59.9 million in working capital, and a current ratio of 181.0%. Total shareholder's equity on March 31, 2011 was $143.9 million, as compared to $145.0 million at December 31, 2010.

Conference call

China Biologic will host a dial-in conference call at 7:30 a.m. EDT (New York) on May 10, 2011, to discuss its results for the first quarter 2011. To participate in the conference call, please dial the appropriate number about 10 minutes prior to the scheduled conference call time:

The dial-in details for the live conference call are:

U.S. toll-free number

1 866 549 1292

Mainland China toll-free number

400 681 6949

Hong Kong local access

3005 2050

International toll number

+852 3005 2050

Participant pass code

674 477#



A telephone replay of the call will be available after the conclusion of the conference all through 8:30 a.m. EDT on May 17, 2011.

The dial-in details for the telephone replay are:

U.S. toll-free number

1 866 753 0743

Mainland China toll free number

800 876 8594

Hong Kong local access

3005 2020

International dial-in toll number

+852 3005 2020

Replay pass code

138 012#



Use of non-GAAP financial measures

This press release contains non-GAAP financial measures that exclude 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 (after adding back interest related to the convertible notes under the if-converted method). 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 these non-GAAP measures provide 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., 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. Please see the Company's website www.chinabiologic.com for additional information.

Safe harbor statement

This release may contain certain "forward-looking statements" relating to the business of China Biologic Products, Inc. and its subsidiaries. All statements, other than statements of historical fact included herein are "forward-looking statements," including, among others, statements regarding: the ability of the Company to achieve its commercial objectives, including the probability that the Company's new products will obtain governmental approval in time to realize revenues by the 2011 year end; the likelihood that the PRC economy will continue to expand and that its government will continue to place emphasis on higher health standards; the ability of the Company to maintain its strategic locations and high operating standards; the business strategy, plans, and objectives of the Company and its subsidiaries, including its ability to successfully implement its growth strategies, particularly, its strategy to expand direct sales to hospitals and inoculation centers in order to boost future sales, or meet its financial guidance for 2011; 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.

Company Contact

Mr. Y. Tristan Kuo

Chief Financial Officer

China Biologic Products, Inc.

Telephone: +86-538-6202206

Email: ir@chinabiologic.com

www.chinabiologic.com



Financial statements follow.

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME



For the three months ended




March 31, 2011



March 31, 2010


Sales







                     External customers

$

34,395,238


$

26,861,522


                     Related party


75,584



237,031


Total sales


34,470,822



27,098,553









Cost of sales







                     External customers


9,277,204



6,798,854


                     Related party


34,394



-


Cost of sales


9,311,598



6,798,854









Gross profit


25,159,224



20,299,699









Operating expenses







                     Selling expenses


2,449,913



942,908


                     General and administrative expenses


7,464,141



4,962,252


                     Research and development expenses


710,991



1,168,655









Income from operations


14,534,179



13,225,884









Other expenses / (income)







                     Equity in income of equity method investee


(270,394)



(188,541)


                     Change in fair value of derivative liabilities


(1,021,865)



(3,833,577)


                     Interest expense


1,680,922



333,589


                     Interest income


(170,131)



(152,536)


                     Other expenses / (income), net


224,231



(819,969)


Total other expenses / (income), net


442,763



(4,661,034)









Earnings before income tax expense


14,091,416



17,886,918









Income tax expense


4,263,216



3,071,147









Net income


9,828,200



14,815,771









Less: Net income attributable to the noncontrolling interest


3,519,225



4,152,022









Net income attributable to China Biologic Products, Inc.


6,308,975



10,663,749









Earnings per share:







                     Basic

$

0.26


$

0.46


                     Diluted

$

0.23


$

0.26









Weighted average shares used in computation:







                     Basic


24,351,125



23,386,893


                     Diluted


25,680,648



26,471,425





CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS




March 31,



December 31,




2011



2010









ASSETS







Current Assets







     Cash and cash equivalents

$

56,307,771


$

64,941,368


     Accounts receivable, net of allowance for doubtful accounts


13,310,481



9,922,111


     Accounts receivable - a related party


-



212,611


     Inventories


57,569,187



52,300,447


     Other receivables


2,560,648



2,727,110


     Prepayments and prepaid expenses


1,956,816



855,338


     Deferred tax assets


2,213,843



1,860,753


           Total Current Assets


133,918,746



132,819,738









Property, plant and equipment, net


39,589,552



39,511,731


Intangible assets, net


13,796,763



14,559,020


Land use rights, net


4,910,042



4,701,450


Prepayments and deposits for property, plant and equipment


4,643,394



4,254,423


Goodwill


17,895,424



17,778,231


Equity method investment


7,616,621



7,297,201


             Total Assets

$

222,370,542


$

220,921,794









LIABILITIES AND STOCKHOLDERS' EQUITY







Current Liabilities







     Short-term bank loans

$

6,108,000


$

3,034,000


     Accounts payable


4,895,796



4,392,772


     Due to a related party


3,220,814



3,192,140


     Other payables and accrued expenses


19,634,379



21,606,730


     Advance from customers


3,256,243



3,560,018


     Income tax payable


7,269,829



6,659,805


     Other taxes payable


2,323,915



2,146,868


     Convertible notes


2,654,722



1,196,233


     Derivative liabilities - embedded conversion option in convertible notes


14,053,624



14,561,661


     Derivative liabilities - warrants


10,581,764



11,095,592


           Total Current Liabilities


73,999,086



71,445,819


Other payable


334,718



333,008


Deferred tax liabilities


4,088,029



4,098,834


           Total Liabilities


78,421,833



75,877,661









Stockholders' Equity







     Common stock: par value $.0001; 100,000,000 shares authorized; 24,351,125
          shares issued and outstanding at March 31, 2011 and December 31, 2010



2,435




2,435


     Additional paid-in capital


31,845,086



35,435,139


     Retained earnings


62,048,076



55,739,101


     Accumulated other comprehensive income


8,880,929



8,023,121


     Total stockholders' equity attributable to China Biologic Products, Inc.


102,776,526



99,199,796









     Noncontrolling interest


41,172,183



45,844,337









           Total Equity


143,948,709



145,044,133









     Commitments and contingencies














           Total Liabilities and Equity

$

222,370,542


$

220,921,794





CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS



For the three months ended




March 31, 2011



March 31, 2010


CASH FLOWS FROM OPERATING ACTIVITIES:







Net income

$

9,828,200


$

14,815,771


Adjustments to reconcile net income to cash provided by operating activities:







                     Depreciation


1,108,744



793,657


                     Amortization


884,588



869,251


                     Loss on sale of property, plant and equipment


8,502



3,019


                     (Reversal) / allowance for doubtful accounts, net


(28,340)



23,329


                     Write-down of obsolete inventories


74,715



198,559


                     Deferred tax (benefit) / expense, net


(377,359)



89,664


                     Stock compensation


1,174,882



571,893


                     Change in fair value of derivative liabilities


(1,021,865)



(3,833,577)


                     Amortization of deferred note issuance cost


53,388



86,790


                     Amortization of discount on convertible notes


1,458,489



99,318


                     Equity in income of equity method investee


(270,394)



(188,541)


   Change in operating assets and liabilities, net of acquisition in Dalin:







                     Accounts receivable - third parties


(3,353,933)



(1,997,040)


                     Accounts receivable - related party


213,283



(47,452)


                     Other receivables


272,337



(541,091)


                     Inventories


(4,981,926)



(4,283,720)


                     Prepayments and prepaid expenses


(1,172,953)



(512,690)


                     Accounts payable


503,023



(180,806)


                     Other payables and accrued expenses


(1,895,565)



(2,383,690)


                     Accrued interest - noncontrolling interest shareholders


-



(913,840)


                     Advance from customers


(326,128)



684,750


                     Income tax payable


564,195



(1,260,708)


                     Other taxes payable


162,340



-


Net cash provided by operating activities


2,878,223



2,092,846









CASH FLOWS FROM INVESTING ACTIVITIES:







   Acquisition of a subsidiary, net of cash acquired


-



(1,476,447)


   Purchase of property, plant and equipment


(1,692,558)



(2,012,669)


   Purchase of intangible assets and land use right


(205,422)



(24,484)


Net cash used in investing activities


(1,897,980)



(3,513,600)









CASH FLOWS FROM FINANCING ACTIVITIES:







   Proceeds from warrants exercised


-



689,160


   Proceeds from short term bank loans


6,087,200



5,876,078


   Repayment for short term bank loans


(3,043,600)



(2,962,330)


   Payments made for acquiring noncontrolling interest


(7,635,000)



-


   Dividend paid by subsidiaries to noncontrolling interest shareholders


(5,589,920)



(4,780,790)


Net cash used in financing activities


(10,181,320)



(1,177,882)









EFFECTS OF EXCHANGE RATE CHANGE IN CASH


567,480



(54,890)









NET (DECREASE) INCREASE IN CASH


(8,633,597)



(2,653,526)









Cash and cash equivalents, beginning of year


64,941,368



53,843,951









Cash and cash equivalents, end of year

$

56,307,771


$

51,190,425









Supplemental cash flow information







   Cash paid for income taxes

$

4,076,381


$

3,806,691


   Cash paid for interest expense (net of capitalized interest)

$

278,610


$

62,286


   Noncash investing and financing activities:







         Convertible notes conversion

$

-


$

1,809,771


         Reclassification of warrant liability to paid-in capital upon warrants conversion

$

-


$

2,436,907


         Net assets addition included in accounts payable

$

-


$

395,540


         Utilization of prepayments and deposits to acquire property, plant and equipment

$

-


$

424,858






RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE THREE MONTHS ENDED March, 2011 AND 2010




Three months Ended

March 31, 2011



Three months Ended

March 31, 2010

Net Income (Loss) Diluted EPS


Net Income


Diluted EPS



Net Income


Diluted EPS

Adjusted Net Income - Non GAAP

$

7,965,131

$

0.31


$

7,574,186

$

0.29

Non-cash employee compensation (1)

$

1,174,882

$

0.05


$

571,893

$

0.03

Income in fair value of derivative liabilities (2)

$

(508,037)

$

(0.04)


$

-

$

-

Interest of Convertible Notes  (3)

$

1,503,139

$

0.06


$

-

$

-

Adjusted Net Income for diluted net income per share

$

5,795,147

$

0.25


$

7,002,293

$

0.26

Interest on the Notes

$

-

$

0.00


$

172,121

$

0.01

Change in fair value of embedded conversion option in the Notes

$

-

$

0.00


$

(2,057,342)

$

(0.08)

Change in fair value of warrants

$

(513,828)

$

0.00


$

(1,776,235)

$

(0.07)

Net Income attributable to controlling interest

$

6,308,975

$

0.25


$

10,663,749

$

0.40

Weighted average number of Shares


25,680,648





26,471,425






SOURCE China Biologic Products, Inc.

Web Site: http://www.chinabiologic.com


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