ITEM 1. FINANCIAL STATEMENTS
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
INDEX TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
Note
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
USD
|
|
|
USD
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
223,243,489
|
|
|
|
183,765,533
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
2
|
|
|
61,146,341
|
|
|
|
33,918,796
|
|
Inventories
|
|
3
|
|
|
183,258,799
|
|
|
|
156,412,674
|
|
Prepayments and other current assets, net of allowance for doubtful accounts
|
|
|
|
|
17,644,030
|
|
|
|
15,320,913
|
|
Total Current Assets
|
|
|
|
|
485,292,659
|
|
|
|
389,417,916
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
4
|
|
|
145,410,658
|
|
|
|
132,091,923
|
|
Land use rights, net
|
|
|
|
|
24,180,767
|
|
|
|
23,389,384
|
|
Equity method investment
|
|
|
|
|
12,780,120
|
|
|
|
10,614,755
|
|
Loan receivable
|
|
5
|
|
|
44,283,000
|
|
|
|
43,245,000
|
|
Other non-current assets
|
|
|
|
|
6,256,555
|
|
|
|
6,198,531
|
|
Total Assets
|
|
|
|
|
718,203,759
|
|
|
|
604,957,509
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
Short-term bank loans
|
|
6
|
|
|
14,465,780
|
|
|
|
-
|
|
Accounts payable
|
|
|
|
|
6,340,255
|
|
|
|
6,158,601
|
|
Income tax payable
|
|
|
|
|
8,191,264
|
|
|
|
7,484,366
|
|
Other payables and accrued expenses
|
|
7
|
|
|
64,096,628
|
|
|
|
59,798,145
|
|
Total Current Liabilities
|
|
|
|
|
93,093,927
|
|
|
|
73,441,112
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income
|
|
|
|
|
3,599,654
|
|
|
|
3,755,648
|
|
Other liabilities
|
|
|
|
|
6,586,692
|
|
|
|
6,623,926
|
|
Total Liabilities
|
|
|
|
|
103,280,273
|
|
|
|
83,820,686
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
Common stock:
par value $0.0001;
100,000,000 shares authorized;
29,493,061 and 29,427,609
shares issued at June 30, 2017 and December 31, 2016, respectively;
27,238,357 and 27,172,905 shares outstanding at
June 30, 2017 and December 31, 2016, respectively
|
|
|
|
|
2,949
|
|
|
|
2,943
|
|
Additional paid-in capital
|
|
|
|
|
122,167,032
|
|
|
|
105,459,610
|
|
Treasury stock: 2,254,704 shares at June 30, 2017 and December 31, 2016, at cost
|
|
|
|
|
(56,425,094
|
)
|
|
|
(56,425,094
|
)
|
Retained earnings
|
|
|
|
|
499,505,734
|
|
|
|
438,483,401
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(13,264,788
|
)
|
|
|
(25,320,271
|
)
|
Total equity attributable to China Biologic Products, Inc.
|
|
|
|
|
551,985,833
|
|
|
|
462,200,589
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
|
|
62,937,653
|
|
|
|
58,936,234
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
|
|
614,923,486
|
|
|
|
521,136,823
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
12
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
|
|
|
718,203,759
|
|
|
|
604,957,509
|
|
See accompanying notes to Unaudited Condensed
Consolidated Financial Statements.
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
Note
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
|
|
USD
|
|
|
USD
|
|
|
USD
|
|
|
USD
|
|
Sales
|
|
11
|
|
|
89,277,897
|
|
|
|
91,421,155
|
|
|
|
180,731,009
|
|
|
|
177,008,866
|
|
Cost of sales
|
|
|
|
|
30,110,272
|
|
|
|
31,482,146
|
|
|
|
62,325,745
|
|
|
|
65,525,581
|
|
Gross profit
|
|
|
|
|
59,167,625
|
|
|
|
59,939,009
|
|
|
|
118,405,264
|
|
|
|
111,483,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
|
|
3,577,599
|
|
|
|
3,026,457
|
|
|
|
7,385,151
|
|
|
|
4,254,127
|
|
General and administrative expenses
|
|
|
|
|
14,264,476
|
|
|
|
12,573,683
|
|
|
|
29,521,242
|
|
|
|
23,901,696
|
|
Research and development expenses
|
|
|
|
|
1,924,671
|
|
|
|
1,303,815
|
|
|
|
3,282,034
|
|
|
|
2,398,538
|
|
Income from operations
|
|
|
|
|
39,400,879
|
|
|
|
43,035,054
|
|
|
|
78,216,837
|
|
|
|
80,928,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of an equity method investee
|
|
|
|
|
972,359
|
|
|
|
259,850
|
|
|
|
1,884,102
|
|
|
|
43,535
|
|
Interest expense
|
|
|
|
|
(286,358
|
)
|
|
|
(88,528
|
)
|
|
|
(348,868
|
)
|
|
|
(177,078
|
)
|
Interest income
|
|
|
|
|
1,617,054
|
|
|
|
1,292,069
|
|
|
|
3,240,893
|
|
|
|
3,043,209
|
|
Total other income, net
|
|
|
|
|
2,303,055
|
|
|
|
1,463,391
|
|
|
|
4,776,127
|
|
|
|
2,909,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
|
|
41,703,934
|
|
|
|
44,498,445
|
|
|
|
82,992,964
|
|
|
|
83,838,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
8
|
|
|
6,867,434
|
|
|
|
7,006,764
|
|
|
|
13,817,973
|
|
|
|
13,613,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
34,836,500
|
|
|
|
37,491,681
|
|
|
|
69,174,991
|
|
|
|
70,224,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
3,806,016
|
|
|
|
6,738,646
|
|
|
|
8,152,658
|
|
|
|
13,274,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to China Biologic Products, Inc.
|
|
|
|
|
31,030,484
|
|
|
|
30,753,035
|
|
|
|
61,022,333
|
|
|
|
56,950,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock:
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
1.10
|
|
|
|
1.12
|
|
|
|
2.17
|
|
|
|
2.08
|
|
Diluted
|
|
|
|
|
1.09
|
|
|
|
1.10
|
|
|
|
2.15
|
|
|
|
2.05
|
|
Weighted average shares used in computation:
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
27,213,984
|
|
|
|
26,698,996
|
|
|
|
27,199,011
|
|
|
|
26,642,461
|
|
Diluted
|
|
|
|
|
27,478,935
|
|
|
|
27,152,560
|
|
|
|
27,472,301
|
|
|
|
27,145,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
34,836,500
|
|
|
|
37,491,681
|
|
|
|
69,174,991
|
|
|
|
70,224,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of nil income taxes
|
|
|
|
|
10,692,318
|
|
|
|
(13,267,360
|
)
|
|
|
13,413,286
|
|
|
|
(10,697,608
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
45,528,818
|
|
|
|
24,224,321
|
|
|
|
82,588,277
|
|
|
|
59,527,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
4,859,899
|
|
|
|
4,468,767
|
|
|
|
9,510,461
|
|
|
|
11,447,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to China Biologic Products, Inc.
|
|
|
|
|
40,668,919
|
|
|
|
19,755,554
|
|
|
|
73,077,816
|
|
|
|
48,079,665
|
|
See accompanying notes to Unaudited Condensed
Consolidated Financial Statements.
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
USD
|
|
|
USD
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
69,174,991
|
|
|
|
70,224,723
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
6,043,854
|
|
|
|
4,590,028
|
|
Amortization
|
|
|
683,276
|
|
|
|
438,916
|
|
Loss on sale of property, plant and equipment
|
|
|
119,557
|
|
|
|
115,075
|
|
Allowance for doubtful accounts - accounts receivable, net
|
|
|
23,783
|
|
|
|
6,604
|
|
Allowance for doubtful accounts - other non-current assets
|
|
|
-
|
|
|
|
1,225,200
|
|
Write-down of obsolete inventories
|
|
|
-
|
|
|
|
61,497
|
|
Deferred tax benefit
|
|
|
(166,369
|
)
|
|
|
(1,584,958
|
)
|
Share-based compensation
|
|
|
16,201,189
|
|
|
|
9,307,099
|
|
Equity in income of an equity method investee
|
|
|
(1,884,102
|
)
|
|
|
(43,535
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(26,068,071
|
)
|
|
|
(13,856,209
|
)
|
Inventories
|
|
|
(22,769,252
|
)
|
|
|
(12,522,807
|
)
|
Prepayments and other current assets
|
|
|
(1,862,700
|
)
|
|
|
2,433,998
|
|
Accounts payable
|
|
|
33,359
|
|
|
|
(3,001,361
|
)
|
Income tax payable
|
|
|
519,895
|
|
|
|
4,339,536
|
|
Other payables and accrued expenses
|
|
|
(2,910,237
|
)
|
|
|
(4,465,594
|
)
|
Deferred income
|
|
|
(242,713
|
)
|
|
|
(255,394
|
)
|
Net cash provided by operating activities
|
|
|
36,896,460
|
|
|
|
57,012,818
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payment for property, plant and equipment
|
|
|
(15,975,643
|
)
|
|
|
(25,222,545
|
)
|
Payment for intangible assets and land use rights
|
|
|
(667,068
|
)
|
|
|
(1,351,789
|
)
|
Refund of deposits related to land use right
|
|
|
-
|
|
|
|
6,461,924
|
|
Proceeds from sale of property, plant and equipment
|
|
|
24,674
|
|
|
|
100,424
|
|
Long-term loan lent to a third party
|
|
|
-
|
|
|
|
(6,331,518
|
)
|
Net cash used in investing activities
|
|
|
(16,618,037
|
)
|
|
|
(26,343,504
|
)
|
See accompanying notes to Unaudited Condensed
Consolidated Financial Statements.
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
USD
|
|
|
USD
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from stock option exercised
|
|
|
506,239
|
|
|
|
2,364,952
|
|
Proceeds from short-term bank loans
|
|
|
23,009,280
|
|
|
|
-
|
|
Repayment of short-term bank loan
|
|
|
(8,715,000
|
)
|
|
|
-
|
|
Maturity of deposit as security for bank loans
|
|
|
-
|
|
|
|
37,756,405
|
|
Dividend paid by subsidiaries to noncontrolling interest shareholders
|
|
|
-
|
|
|
|
(7,921,952
|
)
|
Net cash provided by financing activities
|
|
|
14,800,519
|
|
|
|
32,199,405
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH
|
|
|
4,399,014
|
|
|
|
(3,772,623
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
39,477,956
|
|
|
|
59,096,096
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
183,765,533
|
|
|
|
144,937,893
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
223,243,489
|
|
|
|
204,033,989
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
|
13,621,188
|
|
|
|
10,841,209
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment included in payables
|
|
|
4,202,934
|
|
|
|
9,312,476
|
|
See accompanying notes to Unaudited Condensed
Consolidated Financial Statements.
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2017 AND 2016
NOTE 1 – BASIS OF PRESENTATION, SIGNIFICANT CONCENTRATION
AND RISKS
(a)
|
Basis of Presentation
|
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance
with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the U.S. Securities and Exchange Commission
(“SEC”). The December 31, 2016 consolidated balance sheet was derived from the audited consolidated financial statements
of China Biologic Products, Inc. (the “Company”). The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the December 31, 2016 audited consolidated financial statements of the Company included in the
Company’s annual report on Form 10-K for the year ended December 31, 2016.
In the opinion of management, all adjustments
(which include normal recurring adjustments) necessary to present a fair statement of the financial position as of June 30, 2017,
the results of operations for the three and six months ended June 30, 2017 and 2016 and cash flows for the six months ended June
30, 2017 and 2016, have been made.
The preparation of the unaudited condensed
consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited
condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives
of property, plant and equipment, the allowances for doubtful accounts, the fair value determinations of stock compensation awards,
the realizability of deferred tax assets and inventories, the recoverability of intangible assets, land use rights, property, plant
and equipment, equity method investment and loan receivable, and accruals for income tax uncertainties and other contingencies.
Recently Adopted Accounting Pronouncements
Effective January 1, 2017, on a retrospective
basis, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)
2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740). This update required that deferred tax assets and liabilities
be classified as noncurrent. As a result of adoption of this guidance, the Company reclassified current deferred income tax assets
in the amount of $4,625,996, which had been included in prepayments and other current assets, to other noncurrent assets as of
December 31, 2016. There was no impact on results of operations or cash flows as a result of the adoption of this guidance.
Effective
January 1, 2017, the Company adopted the FASB ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The standard
simplified certain aspects of the accounting for share-based payment transactions, including recognition of excess tax benefits
and deficiencies, classification of awards and classification in the statement of cash flows. As a result of adoption, the Company
elected to adopt the change regarding income taxes on a prospective basis to recognize excess tax benefits and deficiencies from
stock-based compensation as a discrete item in income tax expense, which were historically recorded as additional paid-in-capital.
In addition, the Company elected to apply the change regarding classification in the statement of cash flows prospectively to record
excess tax benefits from stock-based compensation from cash flows from financing activities to cash flows from operating activities.
The adoption of this standard in the first quarter of
this year had no material impact on the Company’s financial statements.
(b)
|
Significant Concentration and Risks
|
The Company maintains cash and deposit balances
at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for its bank
accounts located in the United States or may exceed Hong Kong Deposit Protection Board insured limits for its bank accounts located
in Hong Kong or may exceed the insured limits for its bank accounts in China established by China Deposit Insurance Fund Management
Institution.
Total cash at banks and deposits as of June
30, 2017 and December 31, 2016 amounted to $222,475,614 and $183,078,440, respectively, of which $2,434,242 and $2,744,704 are
insured, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed
to any significant risks on cash held in bank accounts.
As of June 30, 2017 and December 31, 2016,
the Company maintained cash and cash equivalents at banks in the following locations:
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
USD
|
|
|
USD
|
|
PRC, excluding Hong Kong
|
|
|
212,009,195
|
|
|
|
171,539,309
|
|
U.S.
|
|
|
10,466,419
|
|
|
|
11,539,131
|
|
Total
|
|
|
222,475,614
|
|
|
|
183,078,440
|
|
The Company’s two major products are
human albumin and human immunoglobulin for intravenous injection (“IVIG”). Human albumin accounted for 36.3% and 41.2%
of the total sales for the three months ended June 30, 2017 and 2016, respectively, and 38.3% and 39.7% of the total sales for
the six months ended June 30, 2017 and 2016, respectively. IVIG accounted for 33.3% and 33.6% of the total sales for the three
months ended June 30, 2017 and 2016, respectively, and 34.0% and 36.6% of the total sales for the six months ended June 30, 2017
and 2016, respectively. If the market demands for human albumin and IVIG cannot be sustained in the future or the price of human
albumin and IVIG decreases, the Company’s operating results could be adversely affected.
Substantially all of the Company’s customers
are located in the PRC. There were no customers that individually comprised 10% or more of the total sales during the three and
six months ended June 30, 2017 and 2016. No individual customer represented 10% or more of accounts receivables as at June 30,
2017 and December 31, 2016, respectively. The Company performs ongoing credit evaluations of its customers’ financial condition
and, generally, requires no collateral from its customers.
There was one supplier, namely, Xinjiang Deyuan
Bioengineering Co., Ltd. (“Xinjiang Deyuan”), that comprised 10% or more of the total purchases for the three and
six months ended June 30, 2017 and 2016. Chongqing Sanda Great Exploit Pharmaceutical Co, Ltd. represented more than 10% of accounts
payables as at June 30, 2017 and December 31, 2016.
NOTE 2 – ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 2017 and December
31, 2016 consisted of the following:
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
USD
|
|
|
USD
|
|
Accounts receivable
|
|
|
61,716,363
|
|
|
|
34,452,392
|
|
Less: Allowance for doubtful accounts
|
|
|
(570,022
|
)
|
|
|
(533,596
|
)
|
Total
|
|
|
61,146,341
|
|
|
|
33,918,796
|
|
The activity in the allowance for doubtful
accounts-accounts receivable for the six months ended June 30, 2017 and 2016 are as follows:
|
|
For the Six Months Ended
|
|
|
|
June 30,
2017
|
|
|
June 30,
2016
|
|
|
|
USD
|
|
|
USD
|
|
Beginning balance
|
|
|
533,596
|
|
|
|
443,624
|
|
Provisions
|
|
|
23,783
|
|
|
|
6,604
|
|
Foreign currency translation adjustment
|
|
|
12,643
|
|
|
|
(9,320
|
)
|
Ending balance
|
|
|
570,022
|
|
|
|
440,908
|
|
NOTE 3 – INVENTORIES
Inventories at June 30, 2017 and December 31,
2016 consisted of the following:
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
USD
|
|
|
USD
|
|
Raw materials
|
|
|
97,602,529
|
|
|
|
80,781,903
|
|
Work-in-process
|
|
|
33,790,504
|
|
|
|
24,994,839
|
|
Finished goods
|
|
|
51,865,766
|
|
|
|
50,635,932
|
|
Total
|
|
|
183,258,799
|
|
|
|
156,412,674
|
|
Provisions to write-down the carrying amount
of obsolete inventory to its estimated net realizable value amounted to nil and $1,937 during the three months ended June 30, 2017
and 2016, respectively, and provisions of nil and $61,497 was recorded during the six months ended June 30, 2017 and 2016, respectively,
which were recorded as cost of sales in the unaudited condensed consolidated statements of comprehensive income.
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 2017
and December 31, 2016 consisted of the following:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
|
|
USD
|
|
|
USD
|
|
Buildings
|
|
|
36,815,470
|
|
|
|
34,131,032
|
|
Machinery and equipment
|
|
|
56,603,923
|
|
|
|
52,467,764
|
|
Furniture, fixtures, office equipment and vehicles
|
|
|
8,400,694
|
|
|
|
7,843,567
|
|
Total property, plant and equipment, gross
|
|
|
101,820,087
|
|
|
|
94,442,363
|
|
Accumulated depreciation
|
|
|
(46,159,164
|
)
|
|
|
(39,315,011
|
)
|
Total property, plant and equipment, net
|
|
|
55,660,923
|
|
|
|
55,127,352
|
|
Construction in progress
|
|
|
80,953,387
|
|
|
|
61,825,470
|
|
Prepayment for property, plant and equipment
|
|
|
8,796,348
|
|
|
|
15,139,101
|
|
Property, plant and equipment, net
|
|
|
145,410,658
|
|
|
|
132,091,923
|
|
Depreciation expense for the three months ended
June 30, 2017 and 2016 was $2,991,721 and $2,322,405, respectively. Depreciation expense for the six months ended June 30, 2017
and 2016 was $6,043,854 and $4,590,028, respectively. No interest expenses were capitalized into construction in progress for the
three and six months ended June 30, 2017 and 2016.
NOTE 5 – LOAN RECEIVABLE
In August 2015, the Company entered into a
cooperation agreement with Xinjiang Deyuan and the controlling shareholder of Xinjiang Deyuan. Pursuant to the agreement, Guizhou
Taibang agreed to provide Xinjiang Deyuan with an interest-bearing loan at an interest rate of 6% per annum with an aggregate principal
amount of RMB300,000,000 (approximately $47,160,000). The loan is due July 31, 2018 and secured by a pledge of Deyuan Shareholder’s
58.02% equity interest in Xinjiang Deyuan. Interest will be paid on the 20th day of the last month of each quarter.
Interest income of $624,306 and $694,839 was
recognized and received by Guizhou Taibang for the three months ended June 30, 2017 and 2016, respectively, and interest income
of $1,232,486 and $1,347,145 was recognized and received by Guizhou Taibang for the six months ended June 30, 2017 and 2016, respectively.
NOTE 6 – SHORT-TERM BANK LOANS
In March 2017, the Company obtained a one-year
unsecured loan of RMB60,000,000 (approximately $8,715,000) from Bank of China (Taishan Branch) at an interest rate of 4.5675% per
annum. The loan is due on March 21, 2018 and interest will be paid on the 21th day of each month. In May 2017, the Company repaid
the loan before maturity date.
In April 2017, the Company obtained a one-year
unsecured loan of RMB98,000,000 (approximately $14,465,780) from China Everbright Bank at an interest rate of 4.35% per annum.
The loan is due on March 31, 2018 and interest will be paid on the 20th day of each month.
NOTE 7–OTHER PAYABLES AND ACCRUED
EXPENSES
Other payables and accrued expenses at June 30, 2017 and December
31, 2016 consisted of the following:
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
USD
|
|
|
USD
|
|
Payables to a potential investor
(1)
|
|
|
8,250,391
|
|
|
|
7,941,013
|
|
Salaries and bonuses payable
|
|
|
14,261,633
|
|
|
|
16,740,846
|
|
Accruals for sales commission and promotion fee
|
|
|
7,089,649
|
|
|
|
4,391,160
|
|
Dividends payable to noncontrolling interest
(2)
|
|
|
13,741,901
|
|
|
|
7,952,467
|
|
Payables for construction in progress
|
|
|
5,771,753
|
|
|
|
5,364,441
|
|
Other tax payables
|
|
|
3,081,560
|
|
|
|
1,918,248
|
|
Advance from customers
|
|
|
1,675,967
|
|
|
|
3,976,832
|
|
Deposits received
|
|
|
5,149,605
|
|
|
|
4,640,244
|
|
Others
|
|
|
5,074,169
|
|
|
|
6,872,894
|
|
Total
|
|
|
64,096,628
|
|
|
|
59,798,145
|
|
(1)
|
The payables to a potential investor comprises deposits received from a potential investor of $5,042,358
and $4,924,164 as of June 30, 2017 and December 31, 2016, respectively, and related interest plus penalty on these deposits totaling
$3,208,033 and $3,016,849 as of June 30, 2017 and December 31, 2016, respectively.
|
(2)
|
On March 2, 2017, Shandong Taibang declared a cash dividend distribution amounting RMB220,000,000
(approximately $31,955,000), of which RMB37,928,000 (approximately $5,509,042) represented the dividends payable to a noncontrolling
interest shareholder.
|
NOTE 8 – INCOME TAX
The Company’s effective income tax rates
were 17% and 16% for the three months ended June 30, 2017 and 2016, respectively. The Company’s effective income tax rates
were 17% and 16% for the six months ended June 30, 2017 and 2016, respectively.
The difference between the effective income
tax rates and statutory income tax rate of 25% for the three and six months ended June 30, 2017 and 2016 was primarily due to preferential
tax rate of 15% applicable to both Guizhou Taibang and Shandong Taibang in 2017 and 2016, which was partially offset by valuation
allowances against the deferred tax assets of China Biologic in the U.S. relating to operating losses.
As of and for the three and six months ended
June 30, 2017, the Company did not have any unrecognized tax benefits and thus no interest and penalties related to unrecognized
tax benefits were recorded. In addition, the Company does not expect that the amount of unrecognized tax benefits to change significantly
within the next 12 months.
NOTE 9 – OPTIONS AND NONVESTED SHARES
Options
A summary of stock options activity for the
six months ended June 30, 2017 is as follow:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Term in Years
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
USD
|
|
|
|
|
|
USD
|
|
Outstanding as of December 31, 2016
|
|
|
314,491
|
|
|
|
10.32
|
|
|
|
3.84
|
|
|
|
30,568,083
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(46,880
|
)
|
|
|
10.80
|
|
|
|
|
|
|
|
(4,672,851
|
)
|
Forfeited and expired
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2017
|
|
|
267,611
|
|
|
|
10.24
|
|
|
|
3.21
|
|
|
|
27,527,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested as of June 30, 2017
|
|
|
267,611
|
|
|
|
10.24
|
|
|
|
3.21
|
|
|
|
27,527,053
|
|
Exercisable as of June 30, 2017
|
|
|
267,611
|
|
|
|
10.24
|
|
|
|
3.21
|
|
|
|
27,527,053
|
|
For the three months ended June 30, 2017 and
2016, the Company recorded stock compensation expense with respect to stock options of nil and $243,578, respectively, in general
and administrative expenses. For the six months ended June 30, 2017 and 2016, the Company recorded stock compensation expense with
respect to stock options of nil and $487,156, respectively, in general and administrative expenses.
Nonvested shares
A summary of nonvested shares activity for the six months ended
June 30, 2017 is as follows:
|
|
Number of
nonvested
shares
|
|
|
Grant date
weighted average
fair value
|
|
|
|
|
|
|
USD
|
|
Outstanding at December 31, 2016
|
|
|
912,650
|
|
|
|
104.51
|
|
Granted
|
|
|
25,800
|
|
|
|
98.20
|
|
Vested
|
|
|
(18,572
|
)
|
|
|
79.48
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2017
|
|
|
919,878
|
|
|
|
104.84
|
|
For the three months ended June 30, 2017 and
2016, the Company recorded stock compensation expense with respect to nonvested shares of $8,129,124 and $4,494,126, respectively,
in general and administrative expenses. For the six months ended June 30, 2017 and 2016, the Company recorded stock compensation
expense with respect to nonvested shares of $16,201,189 and $8,819,943, respectively, in general and administrative expenses.
At June 30, 2017, approximately $67,999,368
of stock compensation expense with respect to nonvested shares is expected to be recognized over weighted average period of approximately
2.52 years.
NOTE 10 – FAIR VALUE MEASUREMENTS
Management used the following methods and assumptions
to estimate the fair value of financial instruments at the relevant balance sheet dates:
•Short-term financial instruments (including
cash and cash equivalents, accounts receivable, other receivables, accounts payable, short-term bank loans and other payables and
accrued expenses) – The carrying amounts of the short-term financial instruments approximate their fair values because of
the short maturity of these instruments.
•Loan receivable – The carrying
amounts of loan receivable approximate their fair value. The fair value is estimated using discounted cash flow analysis based
on the borrowing rates for similar borrowing.
NOTE 11 – SALES
The Company’s sales by products for the
three months ended June 30, 2017 and 2016 are as follows:
|
|
For the Three Months Ended
|
|
|
|
June 30,
2017
|
|
|
June 30,
2016
|
|
|
|
USD
|
|
|
USD
|
|
Human Albumin
|
|
|
32,375,022
|
|
|
|
37,707,805
|
|
Immunoglobulin products:
|
|
|
|
|
|
|
|
|
Human Immunoglobulin for Intravenous Injection
|
|
|
29,663,496
|
|
|
|
30,673,660
|
|
Other Immunoglobulin products
|
|
|
12,709,939
|
|
|
|
8,205,752
|
|
Placenta Polypeptide
|
|
|
9,225,786
|
|
|
|
10,890,493
|
|
Others
|
|
|
5,303,654
|
|
|
|
3,943,445
|
|
Total
|
|
|
89,277,897
|
|
|
|
91,421,155
|
|
The Company’s sales by products for the
six months ended June 30, 2017 and 2016 are as follows:
|
|
For the Six Months Ended
|
|
|
|
June 30,
2017
|
|
|
June 30,
2016
|
|
|
|
USD
|
|
|
USD
|
|
Human Albumin
|
|
|
69,233,313
|
|
|
|
70,336,659
|
|
Immunoglobulin products:
|
|
|
|
|
|
|
|
|
Human Immunoglobulin for Intravenous Injection
|
|
|
61,416,482
|
|
|
|
64,831,422
|
|
Other Immunoglobulin products
|
|
|
21,003,606
|
|
|
|
17,106,067
|
|
Placenta Polypeptide
|
|
|
19,472,755
|
|
|
|
16,598,897
|
|
Others
|
|
|
9,604,853
|
|
|
|
8,135,821
|
|
Total
|
|
|
180,731,009
|
|
|
|
177,008,866
|
|
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Commitments
As of June 30, 2017, commitments outstanding
for operating lease approximated $0.8 million.
As of June 30, 2017, commitments outstanding
for the purchase of property, plant and equipment approximated $23.0 million.
As of June 30, 2017, commitments outstanding
for the purchase of plasma from July 1, 2017 to 2018 approximated $25.1 million.
NOTE 13 - EARNINGS PER SHARE
The following table sets forth the computation
of basic and diluted earnings per share for the periods indicated:
|
|
For the Three Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
USD
|
|
|
USD
|
|
|
|
|
|
|
|
|
Net income attributable to China Biologic Products, Inc.
|
|
|
31,030,484
|
|
|
|
30,753,035
|
|
Earnings allocated to participating nonvested shares
|
|
|
(1,026,685
|
)
|
|
|
(775,050
|
)
|
Net income used in basic/diluted earnings per common stock
|
|
|
30,003,799
|
|
|
|
29,977,985
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing basic earnings per common stock
|
|
|
27,213,984
|
|
|
|
26,698,996
|
|
Dilutive effect of outstanding stock options
|
|
|
264,951
|
|
|
|
453,564
|
|
Weighted average shares used in computing diluted earnings per common stock
|
|
|
27,478,935
|
|
|
|
27,152,560
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common stock
|
|
|
1.10
|
|
|
|
1.12
|
|
Diluted earnings per common stock
|
|
|
1.09
|
|
|
|
1.10
|
|
During the three months ended June 30, 2017
and 2016, no potential ordinary shares outstanding were excluded from the calculation of diluted earnings per common stock.
The following table sets forth the computation
of basic and diluted earnings per share for the periods indicated:
|
|
For the Six Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
USD
|
|
|
USD
|
|
|
|
|
|
|
|
|
Net income attributable to China Biologic Products, Inc.
|
|
|
61,022,333
|
|
|
|
56,950,290
|
|
Earnings allocated to participating nonvested shares
|
|
|
(2,009,186
|
)
|
|
|
(1,422,528
|
)
|
Net income used in basic/diluted earnings per common stock
|
|
|
59,013,147
|
|
|
|
55,527,762
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing basic earnings per common stock
|
|
|
27,199,011
|
|
|
|
26,642,461
|
|
Dilutive effect of outstanding stock options
|
|
|
273,290
|
|
|
|
503,009
|
|
Weighted average shares used in computing diluted earnings per common stock
|
|
|
27,472,301
|
|
|
|
27,145,470
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common stock
|
|
|
2.17
|
|
|
|
2.08
|
|
Diluted earnings per common stock
|
|
|
2.15
|
|
|
|
2.05
|
|
During the six months ended June 30, 2017 and
2016, no potential ordinary shares outstanding were excluded from the calculation of diluted earnings per common stock.
NOTE 14 - SUBSEQUENT EVENT
On July 21, 2017, China Biologic Products Holdings, Inc. (the
“Successor”) succeeded to the interests of China Biologic Products, Inc. (the “Predecessor”) following
a redomicile merger pursuant to an agreement and plan of merger dated as of April 28, 2017 (the “Merger Agreement”)
between the Successor and the Predecessor. Pursuant to the Merger Agreement, the Predecessor merged with and into the Successor,
with the Successor surviving the merger and each issued and outstanding shares of Predecessor's common stock being converted into
the right to receive one ordinary share of the Successor.
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
|
Special Note Regarding Forward Looking
Statements
In addition to historical information,
this report contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the
Exchange Act. We use words such as “believe,” “expect,” “anticipate,” “project,”
“target,
”
“plan,” “optimistic,”
“intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking
statements. Such statements include, among others, those concerning market and industry growth and demand and acceptance of new
and existing products; expectations regarding governmental approvals of our new products; any projections of sales, earnings,
revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations;
any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions
or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance
and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” described in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2016, as well as assumptions, which, if they were to ever materialize
or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking
statements.
Readers are urged to carefully review
and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise
interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects.
The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as
required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations
or future events.
Use of Terms
Except as otherwise indicated by the context
and for the purposes of this report only, references in this report to:
|
·
|
“China
Biologic,” “we,” “us,” the “Company” or “our”
are (i) before July 21, 2017, to China Biologic Products, Inc., a Delaware corporation,
and (ii) after July 21, 2017, to China Biologic Products Holdings, Inc., an exempted
company incorporated under the laws of the Cayman Islands, and, in each case, unless
the context requires otherwise, the applicable company’s direct and indirect subsidiaries;
|
|
·
|
“China”
or “PRC” are to the People’s Republic of China, excluding, for the
purposes of this report only, Taiwan and the special administrative regions of Hong Kong
and Macau;
|
|
·
|
“Exchange
Act” are to the Securities Exchange Act of 1934, as amended;
|
|
·
|
“Guizhou
Taibang” are to Guizhou Taibang Biological Products Co., Ltd., a PRC company indirectly
wholly owned by us;
|
|
·
|
“Huitian”
are to Xi’an Huitian Blood Products Co., Ltd., a PRC company in which we hold an
indirect minority equity interest;
|
|
·
|
“RMB”
are to the legal currency of China;
|
|
·
|
“SEC”
are to the Securities and Exchange Commission;
|
|
·
|
“Securities
Act” are to the Securities Act of 1933, as amended;
|
|
·
|
“Shandong
Taibang” are to Shandong Taibang Biological Products Co. Ltd., a PRC company indirectly
majority owned by us; and
|
|
·
|
“U.S.
dollars,” “USD” and “$” are to the legal currency of the
United States of America.
|
Overview of Our Business
We are a biopharmaceutical company principally
engaged in the research, development, manufacturing and sales of human plasma-based biopharmaceutical products, or plasma products,
in China. We operate our business through a majority owned subsidiary, Shandong Taibang, a company based in Tai’an, Shandong
Province and a wholly owned subsidiary, Guizhou Taibang, a company based in Guiyang, Guizhou Province. We also hold a minority
equity interest in Huitian, a plasma products company based in Xi’an, Shaanxi Province.
We have a strong product portfolio with
over 20 different dosage forms of plasma products and other biopharmaceutical products across nine categories. All of our products
are prescription medicines administered in the form of injections. Our principal products are human albumin and immunoglobulin
for intravenous injection, or IVIG. Albumin has been used for almost 50 years to treat critically ill patients by assisting the
maintenance of adequate blood volume and pressure. IVIG is used for certain disease prevention and treatment by enhancing specific
immunity. These products use human plasma as their principal raw material. Sales of human albumin products represented approximately
36.3% and 41.2% of our total sales for the three months ended June 30, 2017 and 2016, respectively, and 38.3% and 39.7% of our
total sales for the six months ended June 30, 2017 and 2016, respectively. Sales of IVIG products represented approximately 33.3%
and 33.6% of our total sales for the three months ended June 30, 2017 and 2016, respectively, and 34.0% and 36.6% of our total
sales for the six months ended June 30, 2017 and 2016, respectively.
Our sales model focuses on direct sales
to hospitals and inoculation centers and is complemented by distributor sales. For the three months ended June 30, 2017 and 2016,
our top five customers accounted for approximately 16.4% and 16.7%, respectively, of our total sales. For the six months ended
June 30, 2017 and 2016, our top five customers accounted for approximately 18.0% and 16.4%, respectively, of our total sales.
We operate and manage our business as
one single segment. We do not account for the results of our operations on a geographic or other basis.
Our principal executive offices are located
at 18th Floor, Jialong International Building, 19 Chaoyang Park Road, Chaoyang District, Beijing 100125, People’s Republic
of China. Our corporate telephone number is (8610) 6598-3111 and our fax number is (8610) 6598-3222. We maintain a website at
http://www.chinabiologic.com
that contains information about our company, but that information is not part of this report
or incorporated by reference herein.
Recent Developments
Completion of Redomicile Merger
On July 21, 2017, China Biologic Products
Holdings, Inc. (the “Successor”) succeeded to the interests of China Biologic Products, Inc. (the “Predecessor”)
following a redomicile merger pursuant to an agreement and plan of merger dated as of April 28, 2017 (the “Merger Agreement”)
between the Successor and the Predecessor. Pursuant to the Merger Agreement, the Predecessor merged with and into the Successor,
with the Successor surviving the merger and each issued and outstanding shares of Predecessor’s common stock being converted
into the right to receive one ordinary share of the Successor.
Second Quarter Financial Performance Highlights
The following are some financial highlights
for the three months ended June 30, 2017:
|
·
|
Sales
:
Sales decreased by $2.1 million, or 2.3%, to $89.3 million for the three months ended
June 30, 2017, from $91.4 million for the same period in 2016.
|
|
·
|
Gross
profit
: Gross profit decreased by $0.7 million, or 1.2%, to $59.2 million for
the three months ended June 30, 2017, from $59.9 million for the same period in 2016.
|
|
·
|
Income
from operations
: Income from operations decreased by $3.6 million, or 8.4%, to
$39.4 million for the three months ended June 30, 2017, from $43.0 million for the same
period in 2016.
|
|
·
|
Net
income attributable to our company
: Net income increased by $0.2 million, or
0.6%, to $31.0 million for the three months ended June 30, 2017, from $30.8 million for
the same period in 2016.
|
|
·
|
Diluted
earnings per share
: Diluted earnings per share was $1.09 for the three months
ended June 30, 2017, as compared to $1.10 for the same period in 2016.
|
Results of Operations
Comparison of Three Months Ended June 30, 2017 and June
30, 2016
The following table sets forth key components
of our results of operations in thousands of U.S. dollars for the periods indicated.
|
|
For the Three Months
Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Amount
|
|
|
% of
Total
Sales
|
|
|
Amount
|
|
|
% of
Total
Sales
|
|
|
|
(U.S. dollars in thousands, except percentage and per share data)
|
|
Sales
|
|
|
89,278
|
|
|
|
100.0
|
|
|
|
91,421
|
|
|
|
100.0
|
|
Cost of sales
|
|
|
30,110
|
|
|
|
33.7
|
|
|
|
31,482
|
|
|
|
34.4
|
|
Gross profit
|
|
|
59,168
|
|
|
|
66.3
|
|
|
|
59,939
|
|
|
|
65.6
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
3,578
|
|
|
|
4.0
|
|
|
|
3,026
|
|
|
|
3.3
|
|
General and administrative expenses
|
|
|
14,264
|
|
|
|
16.0
|
|
|
|
12,574
|
|
|
|
13.8
|
|
Research and development expenses
|
|
|
1,925
|
|
|
|
2.2
|
|
|
|
1,304
|
|
|
|
1.4
|
|
Total operating expenses
|
|
|
19,767
|
|
|
|
22.2
|
|
|
|
16,904
|
|
|
|
18.5
|
|
Income from operations
|
|
|
39,401
|
|
|
|
44.1
|
|
|
|
43,035
|
|
|
|
47.1
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of an equity method investee
|
|
|
972
|
|
|
|
1.1
|
|
|
|
260
|
|
|
|
0.3
|
|
Interest expense
|
|
|
(286
|
)
|
|
|
(0.3
|
)
|
|
|
(89
|
)
|
|
|
(0.1
|
)
|
Interest income
|
|
|
1,617
|
|
|
|
1.8
|
|
|
|
1,292
|
|
|
|
1.4
|
|
Total other income, net
|
|
|
2,303
|
|
|
|
2.6
|
|
|
|
1,463
|
|
|
|
1.6
|
|
Income before income tax expense
|
|
|
41,704
|
|
|
|
46.7
|
|
|
|
44,498
|
|
|
|
48.7
|
|
Income tax expense
|
|
|
6,867
|
|
|
|
7.7
|
|
|
|
7,007
|
|
|
|
7.7
|
|
Net income
|
|
|
34,837
|
|
|
|
39.0
|
|
|
|
37,491
|
|
|
|
41.0
|
|
Less: Net income attributable
to noncontrolling interest
|
|
|
3,806
|
|
|
|
4.2
|
|
|
|
6,738
|
|
|
|
7.4
|
|
Net income attributable to our company
|
|
|
31,031
|
|
|
|
34.8
|
|
|
|
30,753
|
|
|
|
33.6
|
|
Earnings per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1.10
|
|
|
|
|
|
|
|
1.12
|
|
|
|
|
|
Diluted
|
|
|
1.09
|
|
|
|
|
|
|
|
1.10
|
|
|
|
|
|
Sales
Our sales decreased by $2.1 million, or
2.3%, to $89.3 million for the three months ended June 30, 2017, compared to $91.4 million for the same period in 2016. In RMB
terms, our total sales increased by 2.5% for the three months ended June 30, 2017 as compared to the same period in 2016. The
increase in sales in RMB terms for the three months ended June 30, 2017 was primarily attributable to the sales increase in hyper-immune
products, mainly including human rabies immunoglobulin and human tetanus immunoglobulin, together with the sales increase in human
coagulation factor VIII and human prothrombin complex concentrate, which was partially offset by the decrease of sales in human
albumin products and placenta polypeptide.
The following table summarizes the breakdown
of sales by major types of product:
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Human albumin
|
|
|
32.4
|
|
|
|
36.3
|
|
|
|
37.7
|
|
|
|
41.2
|
|
|
|
(5.3
|
)
|
|
|
(14.1
|
)
|
Immunoglobulin products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IVIG
|
|
|
29.7
|
|
|
|
33.3
|
|
|
|
30.7
|
|
|
|
33.6
|
|
|
|
(1.0
|
)
|
|
|
(3.3
|
)
|
Other immunoglobulin products
|
|
|
12.7
|
|
|
|
14.2
|
|
|
|
8.2
|
|
|
|
9.0
|
|
|
|
4.5
|
|
|
|
54.9
|
|
Placenta polypeptide
|
|
|
9.2
|
|
|
|
10.3
|
|
|
|
10.9
|
|
|
|
11.9
|
|
|
|
(1.7
|
)
|
|
|
(15.6
|
)
|
Others
|
|
|
5.3
|
|
|
|
5.9
|
|
|
|
3.9
|
|
|
|
4.3
|
|
|
|
1.4
|
|
|
|
35.9
|
|
Totals
|
|
|
89.3
|
|
|
|
100.0
|
|
|
|
91.4
|
|
|
|
100.0
|
|
|
|
(2.1
|
)
|
|
|
(2.3
|
)
|
During the three months ended June 30,
2017 as compared to the three months ended June 30, 2016:
|
·
|
the
average price for our approved human albumin products, which accounted for 36.3% of our
total sales for the three months ended June 30, 2017, decreased by 2.7% and 7.3% in RMB
term and in USD term, respectively, mainly due to the combined effect of both a decrease
in price we charged certain distributors reflecting intensified market competition and
a lower sales proportion from the higher-unit-price dosages; and
|
|
·
|
the
average price for our approved IVIG products, which accounted for 33.3% of our total
sales for the three months ended June 30, 2017, increased by 1.2% in RMB term and decreased
by 3.6% in USD term mainly due to an increase in price we charged the company’s
major distributors.
|
The sales volume of our products depends
on market demand and our production volume. The production volume of our human albumin products and IVIG products depends primarily
on the general plasma supply. The production volume of our hyper-immune products, which include human rabies immunoglobulin, human
hepatitis B immunoglobulin and human tetanus immunoglobulin products, is subject to the availabilities of specific vaccinated
plasma and our production capacity. The supply of specific vaccinated plasma requires several months of lead time. Our production
facility currently can only accommodate the production of one type of hyper-immune products at any given time and we rotate the
production of different types of hyper-immune products from time to time in response to market demand. As such, the sales volume
of any given type of hyper-immune products may vary significantly from quarter to quarter.
The sales volume of human albumin products
decreased by 7.4% for the three months ended June 30, 2017 as compared to the same period in 2016, which largely reflected the
inventory control in connection with the production suspension of our Shandong subsidiary in the second half year of 2017, as
well as the negative impact of recent changes in market dynamics, including intensified market competition in distribution channels
and certain government healthcare reform measures limiting hospitals’ purchase power in the second quarter of 2017.
The sales volume of IVIG products remained
stable for the three months ended June 30, 2017 as compared to the same period in 2016.
Revenue from other immunoglobulin products
increased by 54.9% in USD term for the three months ended June 30, 2017 as compared to the same period in 2016, mainly due to
sales increase of human rabies immunoglobulin and human tetanus immunoglobulin, which reflected our enhanced production volume
in response to the strong market demand in the second quarter of 2017 compared with the same period last year.
Revenue from placenta polypeptide products
decreased by 11.1% and 15.6% in RMB term and USD term, respectively, for the three months ended June 30, 2017 as compared to the
same period in 2016, attributable to a decrease in sales volume in the second quarter of 2017 following a higher-than-normal product
sales volume in the first quarter of 2017, compared with a high comparison base in the same period in 2016.
Revenue from human coagulation factor
VIII and human prothrombin complex concentrate, which are included in other plasma products, increased by 47.2% and 40.1% in RMB
term and USD term, respectively, for the three months ended June 30, 2017 as compared to the same period in 2016, representing
5.9 % of total sales for the three months ended June 30, 2017. This reflects our continued medical marketing activities.
Cost of sales
and
gross profit
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Cost of sales
|
|
|
30.1
|
|
|
|
31.5
|
|
|
|
(1.4
|
)
|
|
|
(4.4
|
)
|
as a percentage of total sales
|
|
|
33.7
|
%
|
|
|
34.4
|
%
|
|
|
|
|
|
|
(0.7
|
)
|
Gross Profit
|
|
|
59.2
|
|
|
|
59.9
|
|
|
|
(0.7
|
)
|
|
|
(1.2
|
)
|
Gross Margin
|
|
|
66.3
|
%
|
|
|
65.6
|
%
|
|
|
|
|
|
|
0.7
|
|
Our cost of sales was $30.1 million, or
33.7% of our sales for the three months ended June 30, 2017, as compared to $31.5 million, or 34.4% of our sales for the same
period in 2016. In RMB terms, our cost of sales increased by 0.4% for the three months ended June 30, 2017, as compared to the
same period in 2016. Our gross profit was $59.2 million and $59.9 million for the three months ended June 30, 2017 and 2016, respectively,
representing gross margins of 66.3% and 65.6%, respectively.
Our cost of sales and gross margin are
affected by the product pricing, raw material costs, product mix, yields and manufacturing efficiency. In an effort to increase
plasma collection volume and expand our donor base, we increased the nutrition fees paid to donors consistent with industry practice.
We expect the nutrition fees to be paid to donors will continue to increase as a result of improving living standards in China.
Consequently, future improvements on profit margins will need to be derived from increases in product pricing, yields and manufacturing
efficiency, as well as from optimizing the product mix.
The decrease in cost of sales as a percentage
of sales for the three months ended June 30, 2017 as compared to the same period in 2016 was mainly due to a greater proportion
of sales derived from hyper-immune products with a higher profit margin.
Operating expenses
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Operating expenses
|
|
|
19.8
|
|
|
|
16.9
|
|
|
|
2.9
|
|
|
|
17.2
|
|
as a percentage of total sales
|
|
|
22.2
|
%
|
|
|
18.5
|
%
|
|
|
|
|
|
|
3.7
|
|
Our total operating expenses increased
by $2.9 million, or 17.2%, to $19.8 million for the three months ended June 30, 2017, from $16.9 million for the same period in
2016. As a percentage of sales, total operating expenses increased by 3.7% to 22.2% for the three months ended June 30, 2017,
from 18.5% for the same period in 2016. The increase of the total operating expenses was mainly due to the increase of general
and administrative expenses as discussed below.
Selling expenses
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Selling expenses
|
|
|
3.6
|
|
|
|
3.0
|
|
|
|
0.6
|
|
|
|
20.0
|
|
as a percentage of total sales
|
|
|
4.0
|
%
|
|
|
3.3
|
%
|
|
|
|
|
|
|
0.7
|
|
Our selling expenses increased by $0.6 million, or 20.0%, to
$3.6 million for the three months ended June 30, 2017, from $3.0 million for the same period in 2016. As a percentage of sales,
our selling expenses increased by 0.7% to 4.0% for the three months ended June 30, 2017, from 3.3% for the same period in 2016
primarily due to higher marketing and promotion costs related to certain hyper-immune products, coagulation factor products and
placenta polypeptide products.
General and administrative expenses
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
General and administrative expenses
|
|
|
14.3
|
|
|
|
12.6
|
|
|
|
1.7
|
|
|
|
13.5
|
|
as a percentage of total sales
|
|
|
16.0
|
%
|
|
|
13.8
|
%
|
|
|
|
|
|
|
2.2
|
|
Our general and administrative expenses
increased by $1.7 million, or 13.5%, to $14.3 million for the three months ended June 30, 2017, from $12.6 million for the same
period in 2016. General and administrative expenses as a percentage of sales increased by 2.2% to 16.0% for the three months ended
June 30, 2017, from 13.8% for the same period in 2016. The increase in general and administrative expenses was mainly due to the
increase in share-based compensation expenses totaling $3.4 million, as well as a prepayment provision of $1.2 million incurred
in the second quarter of 2016.
Research and development expenses
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Research and development expenses
|
|
|
1.9
|
|
|
|
1.3
|
|
|
|
0.6
|
|
|
|
46.2
|
|
as a percentage of total sales
|
|
|
2.2
|
%
|
|
|
1.4
|
%
|
|
|
|
|
|
|
0.8
|
|
Our research and development expenses
increased by $0.6 million, or 46.2%, to $1.9 million for the three months ended June 30, 2017, from $1.3 million for the same
period in 2016, mainly due to the increased expenditure incurred for certain clinical trial programs for the three months period
ended June 30, 2017.
Income tax
|
|
For the Three Months
Ended June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Income tax
|
|
|
6.9
|
|
|
|
7.0
|
|
|
|
(0.1
|
)
|
|
|
(1.4
|
)
|
as a percentage of total sales
|
|
|
7.7
|
%
|
|
|
7.7
|
%
|
|
|
-
|
|
|
|
-
|
|
Our provision for income taxes decreased
by $0.1 million, or 1.4%, to $6.9 million for the three months ended June 30, 2017, from $7.0 million for the same period in 2016.
Our effective income tax rate was 16.5% and 15.7% for the three months ended June 30, 2017 and 2016, respectively. The difference
between the effective income tax rates and statutory income tax rate of 25% for the three months ended June 30, 2017 and 2016
was primarily due to the application of a preferential tax rate of 15% to both Guizhou Taibang and Shandong Taibang in 2017 and
2016, which was partially offset by valuation allowances against the deferred tax assets of China Biologic in the U.S. relating
to operating losses.
Comparison of Six Months Ended June
30, 2017 and June 30, 2016
The following table sets forth key components
of our results of operations in thousands of U.S. dollars for the periods indicated.
|
|
For the Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Amount
|
|
|
% of
Total
Sales
|
|
|
Amount
|
|
|
% of
Total
Sales
|
|
|
|
(U.S. dollars in thousands, except percentage and per share data)
|
|
Sales
|
|
|
180,731
|
|
|
|
100.0
|
|
|
|
177,009
|
|
|
|
100.0
|
|
Cost of sales
|
|
|
62,326
|
|
|
|
34.5
|
|
|
|
65,526
|
|
|
|
37.0
|
|
Gross profit
|
|
|
118,405
|
|
|
|
65.5
|
|
|
|
111,483
|
|
|
|
63.0
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
7,385
|
|
|
|
4.1
|
|
|
|
4,254
|
|
|
|
2.4
|
|
General and administrative expenses
|
|
|
29,521
|
|
|
|
16.3
|
|
|
|
23,902
|
|
|
|
13.5
|
|
Research and development expenses
|
|
|
3,282
|
|
|
|
1.8
|
|
|
|
2,399
|
|
|
|
1.4
|
|
Total operating expenses
|
|
|
40,188
|
|
|
|
22.2
|
|
|
|
30,555
|
|
|
|
17.3
|
|
Income from operations
|
|
|
78,217
|
|
|
|
43.3
|
|
|
|
80,928
|
|
|
|
45.7
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of an equity method investee
|
|
|
1,884
|
|
|
|
1.0
|
|
|
|
44
|
|
|
|
(0.0
|
)
|
Interest expense
|
|
|
(349
|
)
|
|
|
(0.2
|
)
|
|
|
(177
|
)
|
|
|
(0.1
|
)
|
Interest income
|
|
|
3,241
|
|
|
|
1.8
|
|
|
|
3,043
|
|
|
|
1.8
|
|
Total other income, net
|
|
|
4,776
|
|
|
|
2.6
|
|
|
|
2,910
|
|
|
|
1.7
|
|
Income before income tax expense
|
|
|
82,993
|
|
|
|
45.9
|
|
|
|
83,838
|
|
|
|
47.4
|
|
Income tax expense
|
|
|
13,818
|
|
|
|
7.6
|
|
|
|
13,614
|
|
|
|
7.7
|
|
Net income
|
|
|
69,175
|
|
|
|
38.3
|
|
|
|
70,224
|
|
|
|
39.7
|
|
Less: Net income attributable
to noncontrolling interest
|
|
|
8,153
|
|
|
|
4.5
|
|
|
|
13,274
|
|
|
|
7.5
|
|
Net income attributable to our company
|
|
|
61,022
|
|
|
|
33.8
|
|
|
|
56,950
|
|
|
|
32.2
|
|
Earnings per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.17
|
|
|
|
|
|
|
|
2.08
|
|
|
|
|
|
Diluted
|
|
|
2.15
|
|
|
|
|
|
|
|
2.05
|
|
|
|
|
|
Sales
Our sales increased by $3.7 million, or
2.1%, to $180.7 million for the six months ended June 30, 2017, compared to $177.0 million for the same period in 2016. In RMB
terms, our total sales increased by 7.4% for the six months ended June 30, 2017 as compared to the same period in 2016. The increase
in sales in RMB terms for the six months ended June 30, 2017 was primarily attributable to the sales increase in placenta polypeptide
products, certain hyper-immune products and human albumin.
The following table summarizes the breakdown
of sales by major types of product:
|
|
For the Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Human albumin
|
|
|
69.2
|
|
|
|
38.3
|
|
|
|
70.3
|
|
|
|
39.7
|
|
|
|
(1.1
|
)
|
|
|
(1.6
|
)
|
Immunoglobulin products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IVIG
|
|
|
61.4
|
|
|
|
34.0
|
|
|
|
64.8
|
|
|
|
36.6
|
|
|
|
(3.4
|
)
|
|
|
(5.2
|
)
|
Other immunoglobulin products
|
|
|
21.0
|
|
|
|
11.6
|
|
|
|
17.1
|
|
|
|
9.7
|
|
|
|
3.9
|
|
|
|
22.8
|
|
Placenta polypeptide
|
|
|
19.5
|
|
|
|
10.8
|
|
|
|
16.6
|
|
|
|
9.4
|
|
|
|
2.9
|
|
|
|
17.5
|
|
Others
|
|
|
9.6
|
|
|
|
5.3
|
|
|
|
8.2
|
|
|
|
4.6
|
|
|
|
1.4
|
|
|
|
17.1
|
|
Totals
|
|
|
180.7
|
|
|
|
100.0
|
|
|
|
177.0
|
|
|
|
100.0
|
|
|
|
3.7
|
|
|
|
2.1
|
|
During the six months ended June 30, 2017
as compared to the six months ended June 30, 2016:
|
·
|
the
average price for our approved human albumin products, which accounted for 38.3% of our
total sales for the six months ended June 30, 2017, decreased by 1.9% and 6.8% in RMB
term and in USD term, respectively, mainly due to the combined effect of both a decrease
in price we charged certain distributors reflective of intensified market competition
and a lower sales proportion from the higher-unit-price dosages; and
|
|
·
|
the
average price for our approved IVIG products, which accounted for 34.0% of our total
sales for the six months ended June 30, 2017, increased by 2.3% in RMB term and decreased
by 2.8% in USD term mainly due to an increase in price we charged the company’s
major distributors.
|
The sales volume of human albumin products
increased by 5.6% for the six months ended June 30, 2017 as compared to the same period in 2016, primarily due to enhanced production
and sales volume at Guizhou Taibang as a result of increased plasma supply volume. The sales volume of IVIG products decreased
by 2.5% for the six months ended June 30, 2017 as compared to the same period in 2016, primarily due to a high comparison base
in the six months period ended June 30, 2016 when we sold the IVIG products processed from the approximately 143 tonnes of source
plasma and plasma pastes outsourced from Xinjiang Deyuan in 2015.
Revenue from hyper-immune products, which
were included in other immunoglobulin products, increased by 26.1% in USD term for the six months ended June 30, 2017 as compared
to the same period in 2016, mainly attributable to an increase in sales of human rabies immunoglobulin, reflecting our enhanced
production volume in response to a strong market demand.
Revenue from placenta polypeptide products
increased by 23.5% and 17.5% in RMB term and USD term, respectively, reaching 10.8% of total sales, for the six months ended June
30, 2017 as compared to the same period in 2016, attributable to higher-than-normal product sales volume in the first quarter
of 2017 possibly in anticipation of the nationwide implementation of a two-invoice policy system which will potentially result
in a higher billing price for distributors in the future.
Revenue from human coagulation factor
VIII and human prothrombin complex concentrate, which are included in other plasma products, increased by 29.3% and 22.9% in RMB
term and USD term, respectively, for the six months ended June 30, 2017 as compared to the same period in 2016, reflecting our
continued medical marketing activities, representing at 5.3% of total sales for the six months period ended June 30, 2017.
Cost of sales
and
gross profit
|
|
For the Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Cost of sales
|
|
|
62.3
|
|
|
|
65.5
|
|
|
|
(3.2
|
)
|
|
|
(4.9
|
)
|
as a percentage of total sales
|
|
|
34.5
|
%
|
|
|
37.0
|
%
|
|
|
|
|
|
|
(2.5
|
)
|
Gross Profit
|
|
|
118.4
|
|
|
|
111.5
|
|
|
|
6.9
|
|
|
|
6.2
|
|
Gross Margin
|
|
|
65.5
|
%
|
|
|
63.0
|
%
|
|
|
|
|
|
|
2.5
|
|
Our cost of sales was $62.3 million, or
34.5% of our sales for the six months ended June 30, 2017, as compared to $65.5 million, or 37.0% of our sales for the same period
in 2016. Our gross profit was $118.4 million and $111.5 million for the six months ended June 30, 2017 and 2016, respectively,
representing gross margins of 65.5% and 63.0%, respectively.
The decrease in cost of sales as a percentage
of sales for the six months ended June 30, 2017 as compared to the same period in 2016 was mainly due to greater sales proportion
of higher-margin hyper-immune products and placenta polypeptide products, as well as lower sales proportion of the high-cost outsourced
raw plasma.
Operating expenses
|
|
For the Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Operating expenses
|
|
|
40.2
|
|
|
|
30.6
|
|
|
|
9.6
|
|
|
|
31.4
|
|
as a percentage of total sales
|
|
|
22.2
|
%
|
|
|
17.3
|
%
|
|
|
|
|
|
|
4.9
|
|
Our total operating expenses increased
by $9.6 million, or 31.4%, to $40.2 million for the six months ended June 30, 2017, from $30.6 million for the same period in
2016. As a percentage of sales, total operating expenses increased by 4.9% to 22.2% for the six months ended June 30, 2017, from
17.3% for the same period in 2016. The increase in the total operating expenses was mainly due to the increase in the selling
expenses and general and administrative expenses as discussed below.
Selling expenses
|
|
For the Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Selling expenses
|
|
|
7.4
|
|
|
|
4.3
|
|
|
|
3.1
|
|
|
|
72.1
|
|
as a percentage of total sales
|
|
|
4.1
|
%
|
|
|
2.4
|
%
|
|
|
|
|
|
|
1.7
|
|
Our selling expenses increased by $3.1 million, or 72.1%, to
$7.4 million for the six months ended June 30, 2017, from $4.3 million for the same period in 2016. As a percentage of sales,
our selling expenses increased by 1.7% to 4.1% for the six months ended June 30, 2017, from 2.4% for the same period in 2016,
primarily due to higher marketing and promotion costs related to placenta polypeptide products, coagulation factor products and
certain hyper-immune products.
General and administrative expenses
|
|
For the Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
General and administrative expenses
|
|
|
29.5
|
|
|
|
23.9
|
|
|
|
5.6
|
|
|
|
23.4
|
|
as a percentage of total sales
|
|
|
16.3
|
%
|
|
|
13.5
|
%
|
|
|
|
|
|
|
2.8
|
|
Our general and administrative expenses
increased by $5.6 million, or 23.4%, to $29.5 million for the six months ended June 30, 2017, from $23.9 million for the same
period in 2016. General and administrative expenses as a percentage of sales increased by 2.8% to 16.3% for the six months ended
June 30, 2017, from 13.5% for the same period in 2016. The increase in general and administrative expenses was mainly due to the
increase in share-based compensation expenses totaling $6.9 million, as well as a prepayment provision of $1.2 million incurred
in the second quarter of 2016.
Research and development expenses
|
|
For the Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Research and development expenses
|
|
|
3.3
|
|
|
|
2.4
|
|
|
|
0.9
|
|
|
|
37.5
|
|
as a percentage of total sales
|
|
|
1.8
|
%
|
|
|
1.4
|
%
|
|
|
|
|
|
|
0.4
|
|
Our research and development expenses
increased by $0.9 million, or 37.5%, to $3.3 million for the six months ended June 30, 2017, from $2.4 million for the same period
in 2016, mainly due to the expenditure incurred for certain clinical trial programs for the six months period ended June 30, 2017.
Income tax
|
|
For the Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
|
Amount
|
|
|
%
|
|
|
|
(U.S. dollars in millions, except percentage)
|
|
Income tax
|
|
|
13.8
|
|
|
|
13.6
|
|
|
|
0.2
|
|
|
|
1.5
|
|
as a percentage of total sales
|
|
|
7.6
|
%
|
|
|
7.7
|
%
|
|
|
|
|
|
|
(0.1
|
)
|
Our provision for income taxes increased
by $0.2 million, or 1.5%, to $13.8 million for the six months ended June 30, 2017, from $13.6 million for the same period in 2016.
Our effective income tax rate was 16.6% and 16.2% for the six months ended June 30, 2017 and 2016, respectively. The difference
between the effective income tax rates and statutory income tax rate of 25% for the six months ended June 30, 2017 and 2016 was
primarily due to the application of a preferential tax rate of 15% to both Guizhou Taibang and Shandong Taibang in 2017 and 2016,
which was partially offset by valuation allowances against the deferred tax assets of China Biologic in the U.S. relating to operating
losses.
Liquidity and Capital Resources
To date, we have financed our operations
primarily through cash flows from operations, supplemented by bank borrowings and equity contributions by our shareholders. As
of June 30, 2017, we had $223.2 million in cash and cash equivalents, primarily consisting of demand deposits.
The following table provides the summary
of our cash flows for the periods indicated:
|
|
For the Six Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(U.S. dollars in millions)
|
|
Net cash provided by operating activities
|
|
|
36.9
|
|
|
|
57.0
|
|
Net cash used in investing activities
|
|
|
(16.6
|
)
|
|
|
(26.3
|
)
|
Net cash provided by financing activities
|
|
|
14.8
|
|
|
|
32.2
|
|
Effects of exchange rate change on cash
|
|
|
4.3
|
|
|
|
(3.8
|
)
|
Net increase in cash and cash equivalents
|
|
|
39.4
|
|
|
|
59.1
|
|
Cash and cash equivalents at beginning of the period
|
|
|
183.8
|
|
|
|
144.9
|
|
Cash and cash equivalents at end of the period
|
|
|
223.2
|
|
|
|
204.0
|
|
Operating Activities
Net cash provided by operating activities
for the six months ended June 30, 2017 was $36.9 million, as compared to $57.0 million for the same period in 2016. The decrease
in net cash provided by operating activities was primarily due to the increases in accounts receivable and inventories.
Accounts receivable
Accounts receivable increased by $26.1
million during the six months ended June 30, 2017, as compared to $13.9 million in the same period of 2016. The accounts receivable
turnover days for plasma products increased to 51 days during the first half year of 2017 from 35 days in the first half year
of 2016. The increased turnover days are combined results of a higher percentage of direct sales and a higher concentration on
large hospital customers and distributor customers that typically request longer credit terms.
Inventories
Inventories increased by $22.8 million
in the six months period ended June 30, 2017, mainly comprising of outsourced and our self-collected raw material plasma increase.
This increase was higher than the inventory increase of $12.5 million in the same quarter of 2016, mainly because we had to stockpile
sufficient inventories in preparation for the planned temporary production suspension at our Shandong facility.
Investing Activities
Our use of cash for investing activities
was primarily for the acquisition of property, plant and equipment and a long-term loan to a third party.
Net cash used in investing activities
for the six months ended June 30, 2017 was $16.6 million, as compared to $26.3 million for the same period in 2016. During the
six months ended June 30, 2017 and 2016, we paid $16.6 million and $26.6 million, respectively, for the acquisition of property,
plant and equipment, land use rights and intangible assets for Shandong Taibang and Guizhou Taibang. In addition, during the six
months ended June 30, 2016, we granted a loan of $6.3 million to Xinjiang Deyuan pursuant to a cooperation agreement we entered
into with Xinjiang Deyuan in August 2015.
Financing Activities
Net cash provided by financing activities
for the six months ended June 30, 2017 was $14.8 million, as compared to net cash provided by financing activities of $32.2 million
for the same period in 2016. The net cash provided by financing activities in the six months period ended June 30, 2017 mainly
consisted of $14.3 million short-term loan net proceeds. The net cash provided by financing activities for the six months ended
June 30, 2016 mainly consisted of $2.4 million proceeds from the exercise of stock options and the maturity of a $37.8 million
time deposit as a security collateral for a 24-month loan which was fully repaid in June 2015, partially offset by a dividend
of $7.9 million paid to the noncontrolling shareholder by Shandong Taibang.
Management believes that our company has
sufficient cash on hand and will continue to have positive cash inflow for its operations from the sale of its products in the
PRC market.
Obligations under Material Contracts
The following table sets forth our material contractual obligations
as of June 30, 2017:
|
|
Payments Due by Period
|
|
Contractual Obligations
|
|
Total
|
|
|
Less than
one year
|
|
|
One to
three years
|
|
|
Three to
five years
|
|
|
More than
five years
|
|
|
|
(U.S. dollars in millions)
|
|
Operating lease commitment
|
|
|
0.8
|
|
|
|
0.4
|
|
|
|
0.3
|
|
|
|
-
|
|
|
|
0.1
|
|
Purchase commitment
|
|
|
25.1
|
|
|
|
22.3
|
|
|
|
2.8
|
|
|
|
-
|
|
|
|
-
|
|
Capital commitment
|
|
|
23.0
|
|
|
|
20.7
|
|
|
|
2.3
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
48.9
|
|
|
|
43.4
|
|
|
|
5.4
|
|
|
|
-
|
|
|
|
0.1
|
|
Seasonality of Our Sales
Our operating results and operating cash
flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities
or new product introductions.
Inflation
Inflation does not materially affect our
business or the results of our operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.
Critical Accounting Policies
Critical accounting policies are those
we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount
of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies
may result in materially different amounts being reported under various conditions or different assumptions being used. There
have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2016.