China Biologic Products Announces First Quarter 2010 Results

PRNewswire
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.

Financial Condition

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."

Conference Call

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: lei.huang@ccgir.com
   Web:   http://www.ccgirasia.com/

   Mr. Crocker Coulson, President
   Phone: +1-646-213-1915
   Email: crocker.coulson@ccgir.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 lei.huang@ccgir.com; or Mr. Crocker Coulson,
President, +1-646-213-1915, or crocker.coulson@ccgir.com

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