TAI'AN, China, Nov. 12 /Xinhua-PRNewswire-FirstCall/ -- China
Biologic Products, Inc. (OTC:CBPO) (BULLETIN BOARD: CBPO) ("China
Biologic," the "Company"), one of the leading plasma-based
pharmaceutical companies in the People's Republic of China ("PRC"),
today reported financial results for the third quarter ended
September 30, 2008. Third Quarter 2008 Highlights -- Revenues
increased 54.4% year-over-year to $13.8 million -- Gross profit
increased 45.1% to $9.7 million over the third quarter 2007 --
Gross margin was 70%, compared 74.5% for the same period last year
-- Operating income totaled $7.0 million, up 97.3% from the
previous year -- Net income totaled $4.5 million, or $0.21 per
diluted share "We are pleased to report strong revenue and net
income results in the third quarter, primarily due to price
increases for our plasma-based products and lower operating
expenses," said Mr. Chao Ming Zhao, CEO of China Biologic Products,
"During the quarter, the SFDA renewed our GMP certification for our
newly constructed plasma-based products facility that has 700 tons
of annual production capacity. We also received approval to
commence clinical trials of Human Coagulation Factor VIII. More
recently, we were pleased to announce two proposed acquisitions
that will transform China Biologic into the largest non-
state-owned plasma-based biopharmaceutical company in China."
During the quarter, the Company achieved the following milestones:
-- Received renewal of its certification of compliance with Good
Manufacturing Practices ("GMP") set by the PRC's State Food and
Drug Administration (the "SFDA") -- Received approval to commence
clinical trial of Human Coagulation Factor VIII product ("FVIII"),
a coagulation treatment for hemophilia and mass hemorrhaging Third
Quarter 2008 Results Revenues for the third quarter of 2008 were
$13.8 million, up 54.4% compared to $8.9 million for the same
period of 2007. The increase in revenues is primarily attributable
to a general increase in prices of plasma-based products together
with foreign exchange translation benefits. During the third
quarter, plasma-based products experienced a price increase of
approximately 22.4%, weighted average, period to period. This was
offset by a decrease in the sales volume of our human tetanus
immunoglobulin and human rabies immunoglobulin products, due
primarily to the availability of these products in inventory. Gross
profit increased 45.1% to $9.7 million, while the gross margin was
70.0% for the third quarter of 2008, compared with $6.7 million and
74.5% in the third quarter of 2007, respectively. The decrease in
gross margin is mainly due to the increased cost of raw material
and the Company's newly implemented marketing strategies to
increase plasma donations. Total operating expenses for the third
quarter of 2008 were $2.6 million, or 19.0% of revenue, down 15.2%
from the same period in 2007. Selling expenses, as a percentage of
revenues, were 5.7% and 19.5%, respectively, a decrease of 55.2% to
$0.78 million. The decrease in selling expense is primarily due to
higher expenses incurred during the third quarter of 2007 to
initiate a new marketing strategy during that period. In addition,
the decrease in selling expense is also due to management's ability
to reduce traveling, meeting, conference and office expenses
related to selling activities during the third quarter of 2008.
General and administrative ("G&A") expenses were $1.6 million
or 11.7% of revenue, an increase of 42.8% from the same period last
year. The increase in G&A is mainly due to the increase in
personnel cost, costs associated with being a public company, and
travel expenses as management pursued acquisition opportunities for
the Company. A non-cash employee compensation expense of $0.02
million was created as on July 24, 2008 as a result of the
Company's grant of options to purchase an aggregate of 60,000
shares of its common stock under the 2008 Equity Incentive Plan to
its three independent directors. Research and development expenses
decreased 6% to $0.20 million, or 1.5% of revenues, compared to
$0.21 million, or 2.4% of revenues in the same period last year.
The dollar and percentage decrease was primarily due to the
decrease in research activities and clinical trials for the
Company's new products. As a result of the decrease in operating
expenses, income from operations significantly increased 97.3% to
$7.0 million during the third quarter of 2008, representing an
operating margin of 51.1%, as compared to $3.6 million and 40% in
the same period of 2007. Provision for income taxes increased
180.8% year over year to $1.6 million due to the increase in net
profit during the third quarter of 2008 and the commencement of
China's new unified income tax rate. The Company provisioned its
income tax for the third quarter of 2008 at the new PRC corporate
income tax rate of 25%, as compared with the 15% preferential tax
rate during the 2007 fiscal year. The Company is in the process of
applying for status as a new or high-technology company in order to
qualify for the favorable tax rate of 15%. During the third quarter
of 2008, the Company received a tax rebate in the amount of
approximately $0.3 million for its reinvestment of its dividends
back into Shandong Taibang at the end of the 2007 fiscal year. The
tax rebate was recorded as an offset to the Company's provision for
income tax in the third quarter of 2008. Net income for the third
quarter of 2008 grew 98.3% year over year, to $4.5 million or $0.21
per fully diluted share. Net margin during the period was 32.5%,
compared to 25.3% in the same quarter of last year. The significant
increase in net income was primarily attributable to higher sales
revenue combined with the decreases in operating expenses and
foreign exchange translation. Foreign exchange translation
accounted for a 17.6% increase in net income, period to period,
while our revenues increased in RMB terms by 80.7%, as compared to
the same period in 2007. Nine Months Results For the first nine
months of 2008, total revenue was $33.6 million, up 32% from the
first nine months of 2007. Gross profit for the first nine months
of 2008 was $23.8 million, up 39.1% from $17.1 million in the
comparable period a year ago. Gross margin was 71% compared to
67.4% for the first nine months of 2008 and 2007, respectively.
Income from operations for the period was $15.6 million, up 36.9%
from $11.4 million in the first nine months of 2007. Net income for
the first nine months of 2008 was $8.8 million, up 15.5% from $7.6
million in the first nine months of 2007. Fully diluted earnings
per share were $0.40 for the first nine months of 2008 compared to
$0.35 in the first nine months of 2007. Non-GAAP net income in the
first nine months of 2008 was $10.1 million or $0.46 per fully
diluted share, a 32.4% increase from net income of $7.6 million, or
$0.35 per fully diluted share in first nine months of 2007.* *
Excludes Stock Based Compensation ("SBC"). See Table 1 for a
reconciliation of Net Income and EPS to exclude SBC. Financial
Condition As of September 30, 2008, the Company had $14.6 million
in cash, approximately $16.6 million in working capital and a
current ratio of 2.2. Shareholder's equity at the end of the third
quarter of 2008 was $34.5 million compared to $22.4 million at the
end of 2007. The Company generated $14.7 million net cash from
operating activities for the nine months ended September 30, 2008.
Recent Developments (1) Announced two proposed acquisitions,
subject to completion of due diligence, which would transform the
Company into the largest non- state-owned plasma-based
biopharmaceutical company in China -- Entered into agreement to
acquire 90% controlling interest in Chongqing Dalin Biologic
Technologies Co., Ltd., which owns 54% of the equity interest in
Qianfeng Biological Products Co., Ltd., one of the largest
plasma-based biopharmaceutical companies in Guiyang, China --
Entered into agreement to acquire 35% of the equity interest in
Xi'an Huitian Blood Products Co., Ltd., a biopharmaceutical company
in Xi'an, China (2) Provided preliminary guidance for revenues in
2009 of $90 million to $100 million and net income of $18 million
to $22 million; targeted combined revenue for 2008 to be in the
range of $48 million to $50 million and combined net income to be
between $9 million to $10 million, subject to completion of
acquisitions and due diligence. Business Outlook For the most
recent quarter, the PRC's State Food and Drug Administration (the
"SFDA") granted China Biologic's production facility in Tai'an City
renewal of its certification of compliance with Good Manufacturing
Practices ("GMP") set by the SFDA. Commencing January of 2008, the
SFDA implemented stricter pharmaceutical GMP inspection standards
designed to intensify supervision of drug producers and ensure drug
quality. The new inspection standards include 259 articles, up from
225 articles in the previous standards, covering areas such as the
sourcing of raw materials, manufacturing processes, self-inspection
processes at each stage of production and transportation. China
Biologic's newly constructed facility with 700 tons of annual
production capacity for plasma- based products was certified to be
in compliance with the new standards. The renewed GMP Certification
replaces the current GMP certification for the production facility,
which was renewed in 2004. The GMP certification is valid for five
years following the date of issuance. The Company's continued focus
on research and development represents the key to becoming a leader
in the biopharmaceutical industry. The Company has received SFDA
approval for the clinical trials of Human Coagulation Factor VIII
("FVIII"), a coagulation treatment for hemophilia and mass
hemorrhaging. It has commenced preparations for the clinical study
and expects to receive results by mid-2009. If the clinical study
is successful, management expects to get SFDA's approval for
production to launch the product at the beginning of 2010.
Therefore, for the next few quarters, the Company expects higher
research and development expenses as it increases its clinical
trial activities. Currently, China Biologic is the only approved
manufacturer of plasma- based biopharmaceuticals in Shandong
Province, which has a population of 93 million. China Biologic
currently produces about 200 tons of plasma-based products per year
and has 700 tons of annual production capacity. The Company is
pursuing an aggressive acquisition strategy aimed at becoming the
largest non-state-owned producer of plasma-based products in China.
On September 26, 2008, the Company agreed to acquire a 90%
controlling interest in Chongqing Dalin Biologic Technologies Co.,
Ltd. ("Dalin"). Dalin owns 54% of the equity interest in Qianfeng
Biological Products Co., Ltd. ("Qianfeng"), one of the largest
plasma-based biopharmaceutical companies in China, located in
Guiyang, Guizhou Province. The acquisition will increase plasma
collection to almost double current levels and significantly
increase the Company's production capacity, and established market
share in Guizhou Province. Qianfeng is one of the largest
plasma-based biopharmaceutical companies in China and the only
operating manufacturer in Guizhou Province, which has a population
of 39 million. Qianfeng produces about 250 tons of products per
year with annual production capacity of 400 tons. China Biologic
believes that Qianfeng currently has approximately 9.5% market
share in China, as compared to the Company's 6.1%, which would
result in a combined market share of approximately 15.6%. The top 6
largest plasma-based biopharmaceutical companies in China including
Qianfeng have a total market share of approximately 50%. On October
10, 2008, the Company entered into an agreement to acquire 35% of
the equity interest in Xi'an Huitian Blood Products Co., Ltd.
("Huitian"), a biopharmaceutical company based in Xi'an, Shaanxi
Province. The acquisition will enable China Biologic to increase
its plasma collection, add to production capacity and expand into
Shaanxi Province, which has had historically high collection
volumes. Huitian is the only biopharmaceutical manufacturer in
Shaanxi Province, which has a population of 37 million. Huitian
produces about 80 tons of plasma-based products per year and has
200 tons of annual production capacity. China Biologic believes
that Huitian currently has approximately 1.2% market share in
China, which would result in a combined market share of
approximately 17% if the Dalin acquisition is also included. The
closings of the Dalin and Huitian acquisitions are subject to
customary closing conditions, including the completion to the
Company's reasonable satisfaction of its business, legal,
accounting, and regulatory due diligence review of the two
companies, including their operations, financial condition,
capitalization and regulatory compliance programs. The Company has
targeted combined revenue for 2008 to be in the range of $48
million to $50 million and combined net income to be between $9
million to $10 million, including only a portion of the 4th quarter
operations from the two acquisitions. Assuming the full year
consolidation of the two acquisitions, management estimates
revenues for 2009 will be in the range of $90 million to $100
million with net income between $18 million to $22 million. The
Company will continue to evaluate the potential synergies that may
emerge from the two acquisitions, which remain subject to due
diligence efforts in process. "We are excited about the year ahead
as we seek to integrate the acquisitions we announced," remarked
Mr. Zhao. "In addition to securing the plasma supply, increasing
our production capacity and expanding geographically, we see
significant potential synergies through sharing of technological
know-how, leveraging China Biologic's strong brand name and
cross-sell opportunities." Non-GAAP reconciliation table *TABLE 1
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 2008 AND 2007 Three Months Ended Three Months
Ended Adjusted Net Income September 30, 2008 September 30, 2007
Diluted Diluted Net Income (Loss) Diluted EPS Net Income EPS Net
Income EPS Adjusted Amount - Non GAAP $4,499,159 $0.21 $2,258,514
$0.11 Non-cash employee compensation (1) $20,613 $0.00 -- -- Amount
per consolidated statement of operations $4,478,546 $0.21
$2,258,514 $0.11 Adjusted Net Income Nine Months Ended Nine Months
Ended September 30, 2008 September 30, 2007 Diluted Diluted Net
Income (Loss) Diluted EPS Net Income EPS Net Income EPS Adjusted
Amount - Non GAAP $10,064,301 $0.46 $7,600,857 $0.35 Non-cash
employee compensation (1) $1,283,801 $0.06 -- -- Amount per
consolidated statement $8,780,500 $0.40 $7,600,857 $0.35 of
operations (1) Both non-cash compensation expenses are in
connection with adoption of the equity incentive plan granting
share options on the Company's common stock to employees and
directors Use of Non-GAAP Financial Measures GAAP results for the
three months ended September 30, 2008 include non- cash stock based
compensation charges. To supplement the Company's condensed
consolidated financial statements presented on a GAAP basis, the
Company has provided non-GAAP financial information excluding the
impact of this item in this release. The Company's management
believes that this non-GAAP measure provides investors with a
better understanding of how the results relate to the Company's
historical performance. A reconciliation of the adjustments to GAAP
results appears in the table accompanying this press release. This
additional non-GAAP information is not meant to be considered in
isolation or as a substitute for GAAP financials. The non-GAAP
financial information that the Company provides also may differ
from the non-GAAP information provided by other companies. About
China Biologic Products, Inc. China Biologic Products, Inc.,
through its indirect majority-owned subsidiary Shandong Taibang, is
currently the only plasma-based biopharmaceutical company approved
by the government of Shandong Province, the second largest province
with a population of 93 million. The company is engaged primarily
in research, manufacturing, and sale of plasma-based
biopharmaceutical products to hospitals and other health care
facilities in China. Plasma-based Human Albumin is used mainly to
increase blood volume while Immunoglobulin is used for disease
prevention and treatment. Safe Harbor Statement This release may
contain certain "forward-looking statements" relating to the
business of China Biologic Products, Inc. and its subsidiary
companies. All statements, other than statements of historical fact
included herein are "forward-looking statements," including
statements regarding: the Company's proposed acquisitions and
acquisition strategy, the benefits of proposed acquisitions, the
ability of the Company to achieve its commercial objectives; the
business strategy, plans and objectives of the Company and its
subsidiaries; and any other statements of non-historical
information. These forward-looking statements are often identified
by the use of forward-looking terminology such as "believes,"
"expects" or similar expressions, involve known and unknown risks
and uncertainties. Although the Company believes that the
expectations reflected in these forward-looking statements are
reasonable, they do involve assumptions, risks and uncertainties,
and these expectations may prove to be incorrect. Investors should
not place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. The Company's
actual results could differ materially from those anticipated in
these forward-looking statements as a result of a variety of
factors, including those discussed in the Company's periodic
reports that are filed with the Securities and Exchange Commission
and available on its website ( http://www.sec.gov/ ). All
forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by
these factors. Other than as required under the securities laws,
the Company does not assume a duty to update these forward-looking
statements. CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND
2007 (Unaudited) Three months ended Nine months ended September 30,
September 30, 2008 2007 2008 2007 REVENUES $13,799,915 $8,938,186
$33,574,764 $25,442,097 COST OF SALES 4,138,077 2,281,280 9,725,103
8,293,628 GROSS PROFIT 9,661,838 6,656,906 23,849,661 17,148,469
OPERATING EXPENSES Selling expenses 780,246 1,741,829 1,785,340
2,444,297 General and administrative expenses 1,613,620 1,129,785
4,472,286 2,838,126 Research and development expenses 201,037
213,865 664,652 435,500 Stock-based compensation expense 20,613 --
1,283,801 -- Total operating expenses 2,615,516 3,085,479 8,206,079
5,717,923 INCOME FROM OPERATIONS 7,046,322 3,571,427 15,643,582
11,430,546 OTHER EXPENSES Interest income (36,841) (13,628)
(67,331) (30,741) Interest expense 15,128 49,300 59,800 112,637
Other income (19,409) (42,870) (19,976) (46,963) Other expense
77,224 146,167 130,243 173,302 Total other expenses 36,102 138,969
102,736 208,235 INCOME BEFORE PROVISION FOR INCOME TAXES AND
MINORITY INTEREST 7,010,220 3,432,458 15,540,846 11,222,311
PROVISION FOR INCOME TAXES 1,572,816 560,030 4,437,141 1,858,992
NET INCOME BEFORE MINORITY INTEREST 5,437,404 2,872,428 11,103,705
9,363,319 LESS MINORITY INTEREST 958,858 613,914 2,323,205
1,762,462 NET INCOME 4,478,546 2,258,514 8,780,500 7,600,857
FOREIGN CURRENCY TRANSLATION GAIN 121,814 336,137 1,992,939 799,229
OTHER COMPREHENSIVE INCOME $4,600,360 $2,594,651 $10,773,349
$8,400,086 BASIC EARNINGS PER SHARE Weighted average number of
shares 21,434,942 21,434,942 21,434,942 21,434,942 Earnings per
share $0.21 $0.11 $0.41 $0.35 DILUTED EARNINGS PER SHARE Weighted
average number of shares 21,504,629 21,434,942 21,713,170
21,434,942 Earnings per share $0.21 $0.11 $0.40 $0.35 CHINA
BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS AS OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007 A S S E T S
September 30, December 31, 2008 2007 (Unaudited) CURRENT ASSETS:
Cash $14,223,956 $5,010,033 Restricted cash 345,268 -- Accounts
receivable, net of allowance for doubtful accounts of $1,221,956
and $1,238,772 as of September 30, 2008 and December 31, 2007,
respectively 607,662 316,869 Notes receivable -- 41,130 Other
receivables 438,131 425,163 Other receivable - related party
308,324 290,307 Inventories 13,415,093 9,505,074 Prepayments and
deferred expense 510,334 138,756 Total current assets 29,848,768
15,727,332 PLANT AND EQUIPMENT, net 18,627,057 15,434,124 OTHER
ASSETS: Long term prepayments 2,415,631 711,459 Long term
prepayment - related party 551,112 516,456 Intangible assets, net
904,747 915,874 Total other assets 3,871,490 2,143,789 Total assets
$52,347,315 $33,305,245 L I A B I L I T I E S A N D S H A R E H O L
D E R S' E Q U I T Y CURRENT LIABILITIES: Accounts payable
$2,931,432 $2,677,587 Short term loans - bank -- 685,500 Short term
loan - minority shareholder 771,169 722,674 Other payables and
accrued liabilities 2,574,761 1,200,068 Other payable - land use
right 324,907 305,571 Dividend payable 1,906,713 506,626 Customer
deposits 817,099 398,794 Taxes payable 3,959,221 384,788 Total
current liabilities 13,285,302 6,881,608 COMMITMENT AND
CONTINGENCIES 41,011 142,120 MINORITY INTEREST 4,568,137 3,885,892
SHAREHOLDERS' EQUITY: Common stock, $0.0001 par value, 100,000,000
shares authorized, 21,434,942 shares issued and outstanding at
September 30, 2008 and December 31, 2007, respectively 2,143 2,143
Paid-in-capital 10,672,106 9,388,305 Statutory reserves 5,897,569
4,513,077 Retained earnings 13,279,314 5,883,306 Accumulated other
comprehensive income 4,601,733 2,608,794 Total shareholders' equity
34,452,865 22,395,625 Total liabilities and shareholders' equity
$52,347,315 $33,305,245 CHINA BIOLOGIC PRODUCTS, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (UNAUDITED) 2008 2007 CASH
FLOWS FROM OPERATING ACTIVITIES: Net income $8,780,500 $7,600,857
Adjustments to reconcile net income to cash provided by operating
activities: Minority Interest 2,323,205 1,762,462 Depreciation
914,575 611,020 Amortization 80,753 64,168 Loss on disposal of
equipment 73,310 6,077 Stock-based compensation 1,283,801 -- Change
in operating assets and liabilities: Accounts receivable (353,412)
1,491,832 Notes receivable 43,011 76,424 Other receivables 15,251
(604,324) Inventories (3,206,654) (1,667,404) Prepayments and
deferred expenses (355,012) 221,553 Accounts payable 72,681 277,185
Other payables and accrued liabilities 1,267,099 183,946 Customer
deposits 383,703 200,832 Taxes payable 3,477,543 725,644 Contingent
liability (108,430) -- Net cash provided by operating activities
14,691,924 10,950,272 CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (3,154,996) (6,377,620) Additions
to intangible assets (9,620) (233,537) Proceeds from sale of
equipment 53,078 26,199 Advances for potential acquisition
(1,463,000) Advances on building, equipment and intangible assets
purchases (160,256) (621,600) Net cash used in investing activities
(4,734,794) (7,206,558) CASH FLOWS FINANCING ACTIVITIES: Change in
restricted cash (338,353) -- Repayments to shareholders --
(134,095) Proceeds from short term loans - bank -- 1,292,000
Payments on short term loans - bank (716,850) (2,593,000) Payments
on long term debt -- (261,280) Dividends paid to minority
shareholder (286,740) (476,597) Net cash used in financing
activities (1,341,943) (2,172,972) EFFECTS OF EXCHANGE RATE CHANGE
IN CASH 598,736 284,751 INCREASE IN CASH 9,213,923 1,855,493 CASH,
beginning of period 5,010,033 4,268,220 CASH, end of period
$14,223,956 $6,123,713 SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION Income taxes paid $1,830,589 $1,086,987 Interest paid
(net of capitalized interest) $47,197 $128,879 Non-cash
transactions Accounts receivables in exchange for accrued
liabilities $887,720 $596,398 For more information, please contact:
Company Contact: Mr. Y. Tristan Kuo CFO China Biologic Products,
Inc. Tel: +86-538-620-2206 Email: Web site:
http://www.chinabiologic.com/ Investor Relations Contact: Mr.
Crocker Coulson President CCG Investor Relations Tel:
+1-646-213-1915 (NY office) Email: Web site:
http://www.ccgirasia.com/ DATASOURCE: China Biologic Products, Inc.
CONTACT: Mr. Y. Tristan Kuo, CFO, China Biologic Products, Inc,
+86-538- 620-2206, or Mr. Crocker Coulson, President, CCG Investor
Relations, +1-646-213-1915, for China Biologic Products, Inc. Web
site: http://www.chinabiologic.com/
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