China Biologic Products Announces First Quarter 2010 Results
May 17, 2010
- Q1 revenue grew 28.1% to $27.1 million - Non-GAAP adjusted net income grew 60.6% to $7.5 million
TAI'AN, China, May 17 /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"), 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 its first quarter ended March 31, 2010.
First Quarter 2010 Highlights -- Revenues increased 28.1% year-over-year to $27.1 million -- Gross profit rose 35.9% year-over-year to $20.3 million, representing a gross margin of 74.9%, as compared to 70.6% a year ago -- Operating income grew 31.4% to $13.2 million -- GAAP net income attributable to controlling interest was $10.6 million, or $0.41 per diluted share, including a $3.8 million non-cash gain from change in the fair value of derivative liabilities -- Excluding the non-cash gain, interest on convertible notes and non-cash employee compensation, non-GAAP adjusted net income was $7.5 million or $0.28 per diluted share, a 60.6% increase from $4.7 million or $0.22 per diluted share a year ago
"We are pleased to report a strong start in 2010 with a robust 28% top-line and 61% adjusted bottom-line growth in the first quarter," said Mr. Chao Ming Zhao, Chief Executive Officer of China Biologic. "In addition to the strong financial performance, we have begun the expansion of our network of plasma collection centers with one acquisition and the approvals to build two new plasma stations. We expect that these opportunities for increased collection capacity, coupled with our advancing new product pipeline, will position us to gain market share and further strengthen the Company's leadership in the PRC plasma market."
First Quarter 2010 Results
Revenue for the first quarter of 2010 increased 28.1% to $27.1 million, from $21.1 million in the same 2009 period. The revenue growth is primarily attributable to a general price increase ranging from 3.1% to 118.3% across the Company's plasma-based product portfolio. The price increase is mainly due to the continued supply shortage in China's plasma industry. The Company anticipates the potential for some modest price increases in the future on select products but has not factored in any price increases in its 2010 guidance and outlook.
Human albumin product continues to be the largest product, accounting for 46.9% of total sales, and has experienced the smallest average price increase of 3.1%. The average price for the Company's most in-demand product, the human immunoglobulin for intravenous injection products, rose 34.2%, and contributed to 19.9% of total revenues, while, the average price for the Company's human immunoglobulin products contributed only 2.4% of total revenues, a 118.3% increase.
Gross profit for the first quarter of 2010 was $20.3 million, up 35.9%, from $14.9 million in the first quarter of 2009. Gross profit margin expanded to 74.9% from 70.6% in the same period a year ago and 72.6% in the fourth quarter of 2009. The gross profit margin expansion was primarily attributable to the increase in the average selling price of the Company's plasma products year-over-year and quarter-over-quarter.
Operating expenses in the first quarter increased 45.2% to $7.1 million, from $4.9 million in the same period last year. Higher expenses primarily reflected the 149.9% increase in research and development spending, mostly related to the development of two late stage pipeline projects, currently awaiting governmental approval. General and administrative expenses rose 29.8% in the 2010 period due to costs associated with the integration of multiple sites after the acquisition of Dalin, which was partially offset by lower legal and accounting expenses associated with the Dalin acquisition. Selling expenses increased 62.7% year-over-year due to higher salaries and promotional expenses associated with the Company's efforts to increase direct sales to hospitals and inoculation centers to drive volume growth. As a percentage of revenue, total operating expenses increased by 3.1% from 23.0% to 26.1% for the same period in 2009.
Income from operations in the 2010 first quarter was $13.2 million, a 31.4% increase from $10.1 million during the same period a year ago. Operating margin rose to 48.8% from 47.6% year-over-year.
Total net other income was $4.7 million in the 2010 first quarter, as compared to net other expense of $0.8 million in the same 2009 period. The increase primarily reflected a $3.8 million gain related to change in the fair value of warrant liabilities.
Income taxes increased to $3.2 million in the 2010 first quarter, from $2.0 million in the prior year. The effective tax rate was 17.9% in the first quarter, as compared to 21.9% same quarter last year.
Net income attributable to controlling interest for the 2010 first quarter was $10.6 million, or $0.41 per diluted share, and included a $3.8 million non-cash gain related to change in the fair value of derivative liabilities. Net income during the 2009 first quarter was $4.3 million, or $0.20 per diluted share, which included a non-cash $0.4 million charge related to change in the fair value of warrants.
Excluding non-cash employee compensation expenses, change in the fair value of derivative liabilities and interest related to the convertible notes under the if-converted method, non-GAAP adjusted net income for the three months ended March 31, 2010 was $7.5 million, or $0.28 per diluted share, up 60.6% from $4.7 million, or $0.22 per diluted share, in the same 2009 period.
As of March 31, 2010, the Company had $51.2 million in cash and cash equivalents, approximately $49.2 million in working capital, and a current ratio of 2.0x. Total stockholder's equity at the end of the quarter was $66.6 million, up from $50.5 million at the end of 2009.
The Company generated $2.1 million in net cash from operating activities in the first quarter of 2010, as compared to $7.1 million in the same period of 2009. The decline in operating cash flow was primarily due to an increase in inventory and accounts receivable and income taxes paid. Higher inventory reflected increased plasma collection and timing of SFDA approval of finished plasma goods, while higher accounts receivable reflects increased end-user sales to hospitals.
Recent Events and Updates
On April 5, 2010, Shandong Taibang, the Company's subsidiary was recognized by the Shandong Province Department of Science and Technology as a National Center of Excellence for New Drug and Technology Development. The award indicates provincial expectation that Shandong Taibang will serve as an industry model and help drive the development of the pharmaceutical industry in Shandong province. As a result of the award, Shandong Taibang along with other National Centers of Excellence companies, will have increased opportunities to collaborate on research and development opportunities and will be eligible for government funding and other support programs for use in new drug development efforts.
On May 12, 2010, China Biologic announced the achievement of a significant milestone with the receipt of Shandong provincial government approval to build two new plasma stations in Shandong. Once the new plasma stations are operational, the Company will have 18 total plasma stations and expects the two new plasma stations will increase aggregate plasma collection capacity by up to an additional to 80 metric tons over the next few years.
2010 Guidance and Business Outlook
China Biologic is guiding to 2010 revenues in the range of $142 million and $149 million and 2010 adjusted net income in the range of $34 million and $36 million. The first quarter of each year is typically the slowest period for the Company, mainly due to the Chinese New Year holiday that temporarily reduces customer purchase volume and slows the SFDA approval for the release of finished goods. In the first quarter of 2010, the Company saw the same pattern with a limited supply of certain plasma products due to the timing of government approval of new batches of products for commercialization. Management is confident in continuing strong growth for the remainder of 2010.
Guidance for 2010 adjusted net income excludes any non-cash gain or loss related to change in the fair value of derivative liabilities, stock-based compensation expense and any adjustments in the U.S. federal income tax provision in 2010 related to the expiration of the look-through exception for Subpart F income on December 31, 2009, and excluded any acquisitions, new product approvals or operational impact from new plasma stations. The guidance also does not assume any material price or volume increases during the year. As a matter of policy, the Company does not intend to update this guidance during the year.
China Biologic's applications for Human Prothrombin Complex Concentrate and Human Coagulation Factor VIII remain under SFDA review. Management expects to commercially launch these two products in late 2010 or early 2011. The new products will enrich the Company's product portfolio and enhance its competitive position in the plasma-based product market.
Mr. Zhao added, "Supply in China's plasma industry remains tight due to high government standards. At China Biologic, we are actively evaluating opportunities to expand our plasma market share by increasing the capacity of our existing plasma stations, expanding the target population of potential plasma donors and acquiring or building new plasma stations. Our acquisition of Yuncheng Ziguang Biotech earlier this year and the recent approval to build two new plasma stations in Shandong demonstrate the Company's commitment to growing the business for the long-term. We are off to a strong start in 2010 and we look forward to sharing our exciting development in the coming quarters."
China Biologic will host a conference call at 8:00 a.m. EDT on Monday, May 17, 2010, to discuss the first quarter of 2010 financial results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-409-5468. International callers should dial +1-702-894-2400. The pass code for the call is 74929602. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Monday, May 17, 2010 at 9:00 a.m. EDT. To access the replay, dial 800-642-1687, international callers should dial +1-706-645-9291. The conference pass code is 74929602.
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. 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 http://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 statements regarding: the ability of the Company to achieve the financial guidance provided by the management; the ability of the Company to win SFDA approval for its research and development pipeline projects, and commercially launch new products; the Company's ability to build new or expand existing plasma collection stations and increase plasma collection capacity; the Company's ability to otherwise achieve its commercial objectives, including its ability to gain market share and further strengthen the Company's leadership in the PRC plasma market; the business strategy, plans and objectives of the Company and its subsidiaries; 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.
FINANCIAL TABLES FOLLOW CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FOR THE THREE MONTHS ENDED March, 2010 AND 2009 Three Months Three Months Ended Ended March 31, 2010 March 31, 2009 Net Diluted Net Diluted Net Income (Loss) Diluted EPS Income EPS Income EPS Adjusted Net Income - Non GAAP $7,516,077 $0.28 $4,678,714 $0.22 Non-cash employee compensation (1) $571,893 $0.02 $27,373 $0.00 Income in fair value of derivative liabilities (2) ($3,833,577) ($0.14) $393,023 $0.02 Net Income attributable to controlling interest for diluted EPS (3) $10,777,761 $0.41 $4,258,318 $0.20 Interest add back on Convertible Notes $172,121 -- Net Income attributable to controlling interest $10,605,640 $4,258,318 Weighted average number of shares - diluted 26,471,425 21,434,942 (1) Non-cash compensation expenses related to options granted to employees and directors under the Company's 2008 Equity Incentive Plan (2) Adoption of a new accounting rule effective January 1, 2009 requires changes in the fair value of derivative liabilities to be recognized in earnings each quarter. (3) Net Income attributable to controlling interest for calculating diluted earnings per share includes interest add back on Convertible Notes. CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND MARCH 31, 2009 (Unaudited) 2010 2009 REVENUES: Revenues $26,861,522 $20,905,869 Revenues - related party 237,031 242,729 Total revenues 27,098,553 21,148,598 COST OF REVENUES: Cost of revenues 6,798,854 6,214,930 GROSS PROFIT 20,299,699 14,933,668 OPERATING EXPENSES: Selling expenses 942,908 579,496 General and administrative expenses 4,962,252 3,822,907 Research and development expenses 1,168,655 467,727 Total operating expenses 7,073,815 4,870,130 INCOME FROM OPERATIONS 13,225,884 10,063,538 OTHER EXPENSE (INCOME): Equity in income of unconsolidated affiliate (188,541) (40,247) Change in fair value of derivative liabilities (3,833,577) 393,023 Interest expense, net 181,053 370,853 Other income - related party (914,289) 0 Other expense, net 94,320 51,315 Total other expense (income), net (4,661,034) 774,944 INCOME BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST 17,886,918 9,288,594 PROVISION FOR INCOME TAXES 3,196,066 2,030,194 NET INCOME BEFORE NONCONTROLLING INTEREST 14,690,852 7,258,400 Less: Net income attributable to noncontrolling interest 4,085,212 3,000,082 NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST 10,605,640 4,258,318 OTHER COMPREHENSIVE INCOME: Foreign currency translation adjustments (4,654) 445,939 COMPREHENSIVE INCOME $10,600,986 $4,704,257 BASIC EARNINGS PER SHARE: Weighted average number of shares 23,386,893 21,434,942 Earnings per share $0.45 $0.20 DILUTED EARNINGS PER SHARE: Weighted average number of shares 26,471,425 21,434,942 Earnings per share $0.41 $0.20 CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF MARCH 31,2010 and DECEMBER 31, 2009 ASSETS March 31, December 31, 2010 2009 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $51,190,425 $53,843,951 Notes receivable 550,125 0 Accounts receivable, net of allowance for doubtful accounts of $1,255,629 and $1,254,955 as of March 31,2010 and December 31, 2009, respectively 3,764,123 1,767,076 Accounts receivable - related party 270,086 222,617 Other receivables 2,177,594 2,186,441 Inventories, net of allowance for obsolete of $717,960 and $519,333 as of March 31,2010 and December 31, 2009, respectively 39,175,405 35,132,724 Prepayments and deferred expense 1,672,261 1,299,125 Deferred tax assets 785,081 1,053,771 Total current assets 99,585,100 95,505,705 PLANT AND EQUIPMENT, net 31,867,690 28,873,413 OTHER ASSETS: Investment in unconsolidated affiliate 6,815,961 6,627,355 Prepayments - non-current 3,362,943 3,223,960 Intangible assets, net 20,335,295 21,180,322 Goodwill 12,425,589 12,425,589 Total other assets 42,939,788 43,457,226 Total assets $174,392,578 $167,836,344 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable $3,520,975 $3,701,843 Notes payable 0 48,598 Short term loans - bank 7,408,350 4,474,350 Short term loans - holder of noncontrolling interest 3,652,500 3,652,500 Other payables and accrued liabilities 17,282,264 19,246,814 Other payable - related parties 3,087,527 3,087,527 Accrued interest - holder of noncontrolling interest 1,154,687 2,068,526 Customer deposits 4,553,560 3,868,577 Taxes payable 7,519,268 8,774,079 Investment payable 2,195,365 2,195,365 Total current liabilities 50,374,496 51,118,179 OTHER LIABILITIES: Other payable - land use right 323,390 323,687 Notes payable, net of discount of $7,325,349 and $8,464,380 as of March 31, 2010 and December 31, 2009, respectively 174,651 89,760 Derivative liability - conversion option 15,275,245 19,960,145 Fair value of derivative instruments 9,177,262 12,701,262 Total other liabilities 24,950,548 33,074,854 Total liabilities 75,325,044 84,193,033 COMMITMENTS AND CONTINGENCIES EQUITY: Common stock, $0.0001 par value, 100,000,000 shares authorized, 23,500,803 and 23,056,442 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively 2,349 2,305 Additional paid-in-capital 28,024,808 22,517,077 Statutory reserves 19,831,853 17,414,769 Retained earnings 13,491,161 5,302,605 Accumulated other comprehensive income 5,272,137 5,276,791 Total shareholders' equity 66,622,308 50,513,547 NONCONTROLLING INTEREST 32,445,226 33,129,764 Total equity 99,067,534 83,643,311 Total liabilities and equity $174,392,578 $167,836,344 CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009 (Unaudited) 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net income attributable to controlling interest $10,605,640 $4,258,318 Net income attributable to noncontrolling interest 4,085,212 3,000,082 Consolidated net income 14,690,852 7,258,400 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 793,657 759,072 Amortization 869,251 838,459 Loss on disposal of equipment 3,019 (276) Recovery of bad debt previously reserved -- -- Allowance for bad debt - accounts receivables 23,329 26,581 Allowance for bad debt - other receivables and prepayments -- -- Allowance for obsolete inventories 198,559 -- Deferred tax assets 214,583 -- Stock based compensation 571,893 27,373 Change in fair value of derivative liabilities (3,833,577) 393,023 Amortization of deferred note issuance cost 86,790 -- Amortization of discount on convertible notes 99,318 -- Equity in income of unconsolidated affiliate (188,541) (40,246) Change in operating assets and liabilities: Notes receivable (549,938) (468,832) Accounts receivable (1,997,040) (97,007) Accounts receivable - related party (47,452) (212,367) Other receivables 8,847 (18,487) Inventories (4,283,720) (3,513,011) Prepayments and deferred expenses (512,690) (124,944) Accounts payable (180,806) (252,850) Other payables and accrued liabilities (2,383,690) 307,916 Accrued interest - holder of noncontrolling interest (913,840) 305,966 Customer deposits 684,750 2,872,712 Taxes payable (1,260,708) (979,190) Net cash provided by operating activities 2,092,846 7,082,292 CASH FLOWS FROM INVESTING ACTIVITIES: Cash acquired through acquisition 334 11,938,784 Payments made for acquisition (1,476,781) -- Purchase of plant and equipment (1,443,043) (986,640) Additions to intangible assets (24,484) (88,845) Advances on non-current assets (569,626) (474,736) Net cash (used in) provided by investing activities (3,513,600) 10,388,563 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from warrants conversion 689,160 -- Proceeds from short term loans - bank 5,924,660 -- Payments on short term loans - bank (2,962,330) 7,647,822 Payments on notes payables (48,582) -- Distribution paid to noncontrolling interest shareholders (4,780,790) -- Net cash (used in) provided by financing activities (1,177,882) 7,647,822 EFFECTS OF EXCHANGE RATE CHANGE IN CASH (54,890) 72,655 (DECREASE) INCREASE IN CASH (2,653,526) 25,191,332 CASH and CASH EQUIVALENTS, beginning of year 53,843,951 8,814,616 CASH and CASH EQUIVALENTS, end of year $51,190,425 $34,005,948 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Income taxes paid $3,806,691 $1,783,619 Interest paid (net of capitalized interest) $62,286 $236,649 Non-cash investing and financing activities: Reclassification of derivative liability to equity related to conversion of convertible notes $1,809,771 $-- Reclassification of derivative liability to equity related to exercise of warrants $2,436,907 $-- Distribution paid by offsetting accounts receivable - related party $-- $3,735,243 Net assets acquired with prepayments made in prior periods $-- $14,240,772 Net assets addition with unpaid commitment $395,540 $14,240,772 Plant and equipment acquired with prepayments made in prior periods $424,858 $87,305 For more information, please contact: Company Contact: Mr. Y. Tristan Kuo Chief Financial Officer China Biologic Products, Inc. Phone: +86-538-6202206 Email: IR@chinabiologic.com Web: http://www.chinabiologic.com/ Investor Relations Contact: Ms. Lei Huang, Account Manager CCG Investor Relations Phone: +1-646-833-3417 Email: firstname.lastname@example.org Web: http://www.ccgirasia.com/ Mr. Crocker Coulson, President Phone: +1-646-213-1915 Email: email@example.com
SOURCE: China Biologic Products, Inc.
CONTACT: Company Contact: Mr. Y. Tristan Kuo, Chief Financial Officer,
China Biologic Products, Inc., +86-538-6202206, or IR@chinabiologic.com; or
Investor Relations Contact: Ms. Lei Huang, Account Manager, CCG Investor
Relations, +1-646-833-3417, or firstname.lastname@example.org; or Mr. Crocker Coulson,
President, +1-646-213-1915, or email@example.com
Web site: http://www.chinabiologic.com/