EX-99.1 2 tv520180_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Sinovac Reports Unaudited Second Half of 2018 Financial Results and Files 2018 Annual Report on Form 20-F

 

BEIJING, China, April 29, 2019 /PRNewswire/ -- Sinovac Biotech Ltd. (NASDAQ: SVA) (“Sinovac” or the “Company”), a leading provider of biopharmaceutical products in China, has filed its 2018 annual report on Form 20-F with the U.S. Securities and Exchange Commission for the year ended December 31, 2018. The Company also reported its unaudited financial results for the second half of the year ended December 31, 2018.

 

Second Half of 2018 Financial Highlights

 

ŸSales for the second half of 2018 were $107.2 million, which remains the same compared to $107.4 million in the prior year period. Revenue generated by Hepatitis A vaccine increased by $12.0 million compared to same period in 2017, which was offset by $13.6 million decrease in the Company’s influenza vaccine. In second half of 2018, nil revenue generated by the Company’s influenza vaccine in the flu season 2018-2019 caused by the suspension of influenza vaccine production and destruction of inventory in April 2018 as a result of the disruptive actions of the minority shareholder of our subsidiary, Sinovac Biotech Co., Ltd.

 

ŸNet income attributable to common shareholders was $7.7 million, or $0.11 per basic and diluted share, compared to net income attributable to common shareholders of $15.0 million, or $0.26 per basic and diluted share, in the prior year period.

 

Full Year 2018 Financial Highlights

 

ŸSales in 2018 were $229.7 million, an increase of 31.7% from $174.3 million in 2017. Sales increased primarily due to revenue generated by the Company’s EV71 vaccine.
ŸNet income attributable to common shareholders was $21.8 million, or $0.34 per basic and diluted share in 2018, compared to net income attributable to common shareholders of $25.8 million, or $0.45 per basic and diluted share in 2017.

 

 

Business Highlights

 

Marketing and Sales

The overall vaccine market in China grew in 2018 despite serious impacts from the Changchun vaccine scandal. In addition, although there was no seasonal flu vaccine supply in 2018 due to the production suspension, total sales of the Company’s regular products increased by 31.7% year over year.

 

 

 

 

Research and Development

 

Varicella – Human clinical studies have been completed. The new drug application (NDA) was filed with the National Medical Products Administration (NMPA, previously known as the China State Food and Drug Administration) in November 2017. The clinical site inspection was completed in 2018. The technical review on the registration dossier was also conducted in 2018 and supplementary documents were issued and responded to during the year.

 

Sabin Inactivated Polio Vaccine (sIPV) – The Company has completed phase III clinical studies, which found that the immune responses against the three types of poliovirus in the studied sIPV were not inferior to those achieved with the control IPV and demonstrated a good safety profile. A sequential study of inoculation with bivalent oral polio vaccine (bOPV) was completed in 2018. In January 2019, the NDA was submitted to the NMPA. The consistency study on three consecutive lots is expected to start in 2019.

 

23 Valent Pneumococcal Polysaccharide Vaccine – The Company filed an NDA in June 2017. The clinical trial site inspection has been completed, and a registration dossier is being reviewed by the NMPA. The technical review on the registration dossier was conducted in 2018 and supplementary documents were issued and responded to during the year.

 

Quadrivalent Influenza Vaccine (QIV) – Phase III trial has been completed. The preliminary results of the trial show that the vaccine is safe and immunogenic. The NDA has been filed, and the application is under review by the NMPA.

 

Unaudited Financial Results for Second Half of 2018

 

Summary of sales and gross profit

 

(In $000 except percentage data)  2018 2H   % of Sales   2017 2H   % of Sales 
Hepatitis A – Healive   26,567    24.8%   14,542    13.5%
Hepatitis A&B – Bilive   662    0.6%   5,502    5.2%
Hepatitis vaccines subtotal   27,229    25.4%   20,044    18.7%
Influenza vaccine   (35)   0.0%   13,550    12.6%
Enterovirus 71 vaccine   78,424    73.2%   72,533    67.5%
Mumps vaccine   1,542    1.4%   1,311    1.2%
Total sales   107,160    100.0%   107,438    100.0%
Cost of sales   11,386    10.6%   12,505    11.6%
Gross profit   95,774    89.4%   94,933    88.4%

 

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Sales for the second half of 2018 were $107.2 million, which remains the same compared to $107.4 million in the prior year period. Revenue generated by Hepatitis A vaccine increased by $12.0 million compared to same period in 2017, which was offset by $13.6 million decrease in the Company’s influenza vaccine. In second half of 2018, nil revenue generated by the Company’s influenza vaccine in the flu season 2018-2019 caused by the suspension of influenza vaccine production and destruction of inventory in April 2018 as a result of the disruptive actions of the minority shareholder of our subsidiary, Sinovac Biotech Co., Ltd.

 

Gross profit was $95.8 million compared to gross profit of $94.9 million in the prior year period. Gross margin was 89.4% compared to 88.4% in the prior year period. Gross profit in the second half of 2018 increased slightly due to a change in sales mix, with a greater proportion of sales generated by the Company’s higher-margin EV71 vaccine.

 

Selling, general and administrative expenses in the second half of 2018 were $69.2 million compared to $50.6 million in the same period of 2017. The increase was mainly due to higher professional and consulting fees associated with ongoing litigation.

 

R&D expenses in the second half of 2018 were $11.8 million compared to $11.7 million in the same period of 2017.

 

Net income in the second half of 2018 was $13.5 million compared to $20.9 million in the prior year period.

 

Net income attributable to common shareholders was $7.7 million, or $0.11 per basic and diluted share, compared to net income attributable to common shareholders of $15.0 million, or $0.26 per basic and diluted share, in the prior year period.

 

Non-GAAP adjusted EBITDA was $20.6 million in the second half of 2018 compared to $35.4 million in the prior year period. Non-GAAP net income in the second half of 2018 was $15.9 million compared to $20.2 million in the prior year period. Non-GAAP diluted earnings per share in the second half of 2018 were $0.13 compared to $0.25 per share in the prior year period. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

 

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Financial Results for the Twelve Months Ended December 31, 2018

 

Summary of sales and gross profit

 

(In $000 except percentage data)  2018   % of Sales   2017   % of Sales 
Hepatitis A – Healive   52,420    22.8%   27,421    15.7%
Hepatitis A&B – Bilive   11,006    4.8%   10,430    6.0%
Hepatitis vaccines subtotal   63,426    27.6%   37,851    21.7%
Influenza vaccine   2,028    0.9%   13,544    7.7%
Enterovirus 71 vaccine   162,537    70.8%   121,284    69.6%
Mumps vaccine   1,659    0.7%   1,667    1.0%
Total sales   229,650    100.0%   174,346    100.0%
Cost of sales   24,723    10.8%   20,240    11.6%
Gross profit   204,927    89.2%   154,106    88.4%

 

Sales in 2018 were $229.7 million, an increase of 31.7% from $174.3 million in 2017. Sales increased primarily due to revenue generated by the Company’s EV71 and hepatitis vaccines.

 

Gross profit in 2018 was $204.9 million, an increase of 33.0% from $154.1 million in 2017. Gross margin was 89.2% compared to 88.4% in 2017. Gross profit in 2018 also increased primarily due to higher sales generated by the Company’s EV71 vaccine.

 

Selling, general and administrative expenses in 2018 were $137.0 million compared to $87.4 million in 2017. The Company’s selling, general and administrative expenses increased with the higher level of sales activity. The Company incurred $11.4 million in professional and consulting fees associated with ongoing litigation.

 

R&D expenses in 2018 were $21.9 million compared to $20.5 million in 2017. R&D expenses were mainly incurred by the development of varicella vaccine and sIPV.

 

Net income was $36.1 million in 2018 compared to net income of $36.7 million in 2017.

 

Net income attributable to common shareholders was $21.8 million, or $0.34 per basic and diluted share in 2017, compared to net income attributable to common shareholders of $25.8 million, or $0.45 per basic and diluted share in 2017.

 

Non-GAAP adjusted EBITDA was $54.8 million in 2018 compared to $51.3 million in 2017. Non-GAAP net income in 2018 was $39.9 million compared to net income of $36.4 million in 2017. Non-GAAP diluted earnings per share in 2018 were $0.38 compared to diluted earnings per share of $0.44 in 2017. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

 

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As of December 31, 2018, cash and cash equivalents and restricted cash totaled $158.2 million compared to $116.0 million as of December 31, 2017. In 2018, net cash provided by operating activities was $7.9 million. Net cash used in investing activities was $25.3 million, which was primarily due to the purchase of short-term investments. Net cash provided by financing activities was $64.2 million, including loan proceeds of $18.9 million and loan repayment of $43.9 million. As of December 31, 2018, the Company had $3.3 million of bank loans due within one year. The Company expects that its current cash position will be able to support its operations for at least the next 12 months.

 

About Sinovac

 

Sinovac Biotech Ltd. is a China-based biopharmaceutical Company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases. Sinovac's product portfolio includes vaccines against enterovirus71, or EV71, hepatitis A and B, seasonal influenza, H5N1 pandemic influenza (avian flu), H1N1 influenza (swine flu), and mumps. Healive, the hepatitis A vaccine manufactured by the Company has passed the assessment under WHO Prequalification procedures in 2017. The EV71 vaccine, an innovative vaccine developed by Sinovac against hand foot and mouth disease caused by EV71, was commercialized in China in 2016. In 2009, Sinovac was the first company worldwide to receive approval for its H1N1 influenza vaccine, which it has supplied to the Chinese Government's vaccination campaign and stockpiling program. The Company is also the only supplier of the H5N1 pandemic influenza vaccine to the government stockpiling program. The Company is developing a number of new products including a Sabin-strain inactivated polio vaccine, pneumococcal polysaccharides vaccine, pneumococcal conjugate vaccine and varicella vaccine. Sinovac primarily sells its vaccines in China, while also exploring growth opportunities in international markets. The Company has exported select vaccines to over 10 countries in Asia and South America. For more information please see the Company’s website at www.sinovacbio.com.

 

Safe Harbor Statement

 

This press release contains “forward-looking statements” within the meaning of the United States federal securities laws. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that might cause such a difference include our inability to compete successfully in the competitive and rapidly changing marketplace in which we operate, failure to retain key employees, cancellation or delay of projects, failure to satisfy regulatory and other requirements, disapproval or delay in approval of new products by regulatory bodies, disruptions to our operations, the results of any pending litigation, potential litigation relating to our shareholder rights plan, any halt in trading of the Company’s securities, and adverse general economic conditions in China, the United States and elsewhere. These risks and other factors include those listed under “Risk Factors” and elsewhere in our Annual Report on Form 20-F as filed with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company assumes no obligation to update the forward-looking information contained in this release.

 

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Non-GAAP Financial Measures

 

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Sinovac uses the following non-GAAP financial measures: non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS.  For more information on these non-GAAP financial measures, please refer to the table captioned “Reconciliations of non-GAAP Measures to the Nearest Comparable GAAP Measures” in this results announcement.

 

Sinovac believes that non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS help identify underlying trends in its business that could otherwise be distorted by the effect of certain income or expenses that Sinovac includes net income and diluted EPS. Sinovac believes that non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS provide useful information about its core operating results, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. Non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS should not be considered in isolation or construed as an alternative to income from operations, net income, diluted EPS, or any other measure of performance or as an indicator of Sinovac’s operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies.  Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.

 

Non-GAAP adjusted EBITDA represents net income and excludes interest and financing expenses, interest income, net other income (expenses) and income tax benefit (expenses), and certain non-cash expenses, consisting of share-based compensation expenses, amortization and depreciation that Sinovac does not believe are reflective of the core operating performance during the periods presented.

 

Non-GAAP net income represents net income before share-based compensation expenses, and foreign exchange gain or loss.

 

Non-GAAP diluted EPS represents non-GAAP net income attributable to common shareholders divided by the weighted average number of shares outstanding during the periods on a diluted basis, including accounting for the effect of the assumed conversion of options.

 

Contact

 

Sinovac Biotech Ltd.

Helen Yang

Tel: +86-10-8279-9871

Fax: +86-10-6296-6910

Email: ir@sinovac.com

 

ICR Inc.

Bill Zima

U.S: 1-646-308-1707

Email: william.zima@icrinc.com

 

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SINOVAC BIOTECH LTD.

Consolidated Balance sheets

As of December 31, 2018 and December 31, 2017

(Expressed in thousands of U.S. Dollars)

          

   December 31, 2018   December 31, 2017 
Current assets          
           
Cash and cash equivalents  $158,170   $114,415 
Short-term investment   18,908    - 
Restricted cash   -    1,549 
Accounts receivable - net   74,464    66,205 
Income tax receivable   2,999    - 
Inventories   25,091    19,618 
Prepaid expenses and deposits   4,543    2,101 
Total current assets   284,175    203,888 
           
Property, plant and equipment - net   70,920    76,430 
Prepaid land lease payments   8,304    9,028 
Long-term inventories   90    - 
Long-term prepaid expenses to a related party   23    25 
Prepayment for acquisition of equipment   470    528 
Deferred tax assets   5,798    9,320 
Total assets   369,780    299,219 
           
Current liabilities          
Short-term bank loans   3,321    18,152 
Accounts payable and accrued liabilities   49,991    59,418 
Income tax payable   -    8,862 
Deferred revenue   2,907    4,073 
Deferred government grants   1,986    2,038 
Total current liabilities   58,205    92,543 
           
Deferred government grants   5,961    4,474 
Long-term bank loans   3,890    14,849 
Deferred revenue   90    - 
Loan from a non-controlling shareholder   6,705    7,070 
Other non-current liabilities   3,001    3,143 
Total long-term liabilities   19,647    29,536 
           
Total liabilities   77,852    122,079 
           
Commitments and contingencies          
           
Equity          
Preferred stock   -    - 
Common stock   71    57 
Additional paid-in capital   204,998    115,339 
Accumulated other comprehensive income (loss)   (2,099)   7,075 
Statutory surplus reserves   26,643    19,549 
Accumulated earnings   23,820    9,132 
Total shareholders' equity   253,433    151,152 
           
Non-controlling interests   38,495    25,988 
Total equity   291,928    177,140 
Total liabilities and equity  $369,780   $299,219 

 

 

 

 

SINOVAC BIOTECH LTD.

Consolidated Statements of Comprehensive Income

For the six months and twelve months ended December 31, 2018 and 2017

(Expressed in thousands of U.S. Dollars, except for numbers of shares and per share data)

 

   Six months ended December 31   Twelve months ended December 31 
   2018   2017   2018   2017 
   (Unaudited)   (Unaudited)         
Sales  $107,160   $107,438   $229,650   $174,346 
Cost of sales   11,386    12,505    24,723    20,240 
Gross profit   95,774    94,933    204,927    154,106 
                     
Selling, general and administrative expenses   69,177    50,646    137,003    87,365 
Provision (recovery) for doubtful accounts   (1,756)   407    820    934 
Research and development expenses   11,836    11,710    21,910    20,489 
Loss on disposal and impairment of property, plant and equipment   57    29    75    42 
Government grants recognized in income   (150)   (137)   (197)   (141)
Total operating expenses   79,164    62,655    159,611    108,689 
Operating income   16,610    32,278    45,316    45,417 
                     
Interest and financing expenses   (420)   (747)   (1,070)   (1,569)
Interest income   1,089    719    2,016    1,183 
Other income (expenses)   175    (91)   321    13 
Income before income taxes   17,454    32,159    46,583    45,044 
Income tax expense   (3,912)   (11,299)   (10,472)   (8,339)
Net Income   13,542    20,860    36,111    36,705 
Less: Income attributable to non-controlling interests   (5,845)   (5,906)   (14,329)   (10,898)
Net income attributable to shareholders of Sinovac   7,697    14,954    21,782    25,807 
                     
Net income   13,542    20,860    36,111    36,705 
Other comprehensive income (loss), net of tax of nil                    
Foreign currency translation adjustments   (5,569)   4,581    (10,996)   8,098 
Comprehensive income   7,973    25,441    25,115    44,803 
Less: comprehensive income attributable to non-controlling interests   (4,741)   (6,752)   (12,507)   (12,089)
Comprehensive income attributable to shareholders of Sinovac  $3,232   $18,689    12,608   $32,714 
                     
Earnings per share                    
Basic net income per share   0.11    0.26    0.34    0.45 
Diluted net income per share   0.11    0.26    0.34    0.45 
                     
Weighted average number of shares of common stock outstanding                    
Basic   70,993,470    57,052,268    64,727,146    57,033,816 
Diluted   71,257,734    57,250,279    64,977,554    57,101,191 

 

 

 

  

SINOVAC BIOTECH LTD.

Consolidated Statements of Cash Flows

For the six and twelve months ended December 31, 2018 and 2017

(Expressed in thousands of U.S. Dollars)                

 

   Six months ended   Tweleve months ended 
   December 31   December 31 
   2018   2017   2018   2017 
   (Unaudited)   (Unaudited)         
Cash flows provided by operating activities                    
Net income   13,542    20,860    36,111    36,705 
Adjustments to reconcile net income to net cash provided by operating activities:                    
 - Deferred income taxes   4,609    (2,743)   3,146    (4,921)
 - Share-based compensation   1,474    495    4,305    979 
 - Inventory provision   53    957    2,529    1,231 
 - Provision (recovery) for doubtful accounts   (1,756)   407    820    934 
 - Loss on disposal and impairment of property, plant and equipment   57    29    75    42 
 - Depreciation of property, plant and equipment and amortization of licenses   2,398    2,515    4,887    4,638 
 - Amortization of prepaid land lease payments   120    126    249    243 
 - Government grants recognized in income   (150)   (137)   (197)   (141)
                     
Changes in:                    
 - Accounts receivable   26,196    17,223    (13,082)   (13,482)
 - Inventories   (3,992)   (1,933)   (9,412)   (5,531)
 - Income tax payable   (6,410)   9,237    (11,844)   4,948 
 - Prepaid expenses and deposits   (2,188)   (1,062)   (2,613)   (622)
 - Deferred revenue   3,014    3,460    (892)   987 
 - Accounts payable and accrued liabilities   (16,149)   7,934    (6,167)   33,416 
 - Other non-current liablitites   28    330    28    330 
                     
Net cash provided by operating activities   20,846    57,698    7,943    59,756 
                     
Cash flows provided by (used in) financing activities                    
 - Proceeds from bank loans   5,498    17,465    18,898    28,636 
 - Repayments of bank loans   (20,095)   (20,760)   (43,886)   (38,708)
 - Proceeds from issuance of common stock, net of share issuance costs   83,673    1,229    85,304    1,264 
 - Proceeds from shares subscribed   64    428    64    428 
 - Government grants received   2,995    2,506    3,800    2,598 
 - Loan from a non-controlling shareholder   -    4,440    -    4,440 
                     
Net cash provided by (used in) financing activities   72,135    5,308    64,180    (1,342)
                     
Cash flows used in investing activities                    
 - Purchase of short-term investments   (19,670)   -    (19,670)   - 
 - Proceeds from disposal of equipment   22    19    22    19 
 - Acquisition of property, plant and equipment   (2,754)   (5,147)   (5,613)   (11,915)
                     
Net cash used in investing activities   (22,402)   (5,128)   (25,261)   (11,896)
                     
Effect of exchange rate changes on cash and cash equivalents and restricted cash   (519)   3,107    (4,656)   4,005 
                     
Increase in cash and cash equivalents and restricted cash   70,060    60,985    42,206    50,523 
                     
Cash and cash equivalents and restricted cash, beginning of period   88,110    54,979    115,964    65,441 
                     
Cash and cash equivalents and restricted cash, end of period   158,170    115,964    158,170   $115,964 

  

 

 

   

SINOVAC BIOTECH LTD.

Reconciliations of Non-GAAP measures to the nearest comparable GAAP measures

For the six and twelve months ended December 31, 2018 and 2017

(Expressed in thousands of U.S. Dollars, except for numbers of shares and per share data)             

 

   Six months ended December 31   Twelve months ended December 31 
   2018   2017   2018   2017 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Net income   13,542    20,860    36,111    36,705 
Adjustments:                    
   Share-based compensation   1,474    495    4,305    979 
   Depreciation and amortization   2,518    2,641    5,136    4,881 
   Interest and financing expenses, net of interest income   (669)   28    (946)   386 
   Net other (income) expense   (175)   91    (321)   (13)
   Income tax expense   3,912    11,299    10,472    8,339 
Non-GAAP adjusted EBITDA   20,602    35,414    54,757    51,277 
                     
Net income   13,542    20,860    36,111    36,705 
   Add: Foreign exchange (gain) loss   853    (1,188)   (559)   (1,323)
   Add: Share-based compensation   1,474    495    4,305    979 
Non-GAAP net income   15,869    20,167    39,857    36,361 
                     
Net Income attributable to shareholders of Sinovac   7,697    14,954    21,782    25,807 
Add: Non-GAAP adjustments to net income   1,345    (693)   2,764    (344)
Non-GAAP net income attributable to shareholders of Sinovac for computing non-GAAP diluted earnings (loss) per share   9,042    14,261    24,546    25,463 
                     
Weighted average number of shares on a diluted basis   71,257,734    57,250,279    64,977,554    57,101,191 
Diluted earnings per share   0.11    0.26    0.34    0.45 
Add: Non-GAAP adjustments to net income per share   0.02    (0.01)   0.04    (0.01)
Non-GAAP Diluted earnings per share   0.13    0.25    0.38    0.44