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Dr. Jing Lou, chief executive officer of 3SBio, commented, "Our strongresults for the quarter demonstrate our continued focus on profitable growthdriven by solid execution of our business plan. Nowhere is this more evidentthan in our core product portfolio, where sales of our flagship EPIAOincreased 30.7% over the third quarter 2006. According to the latest IMSHealth data and our internal data, our EPIAO products continued to maintainmarket leadership in the second quarter of 2007 in terms of revenues and salesvolume in China, with market shares of approximately 36.8% and 30.8%,respectively. In addition, sales of EPIAO have been bolstered by our newlycreated oncology sales force, which has been instrumental in allowing us tofurther penetrate the growing oncology market in China. We also witnessedcontinued market acceptance of our newest proprietary TPO product, TPIAO,which increased 171.6% over the third quarter 2006, representing 25.3% of ourtotal revenues for the third quarter 2007."
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"With these results, we have now reported four consecutive quarters ofsolid growth since our IPO. I believe our ongoing focus on growth, margins andprofitability will allow us continue to deliver positive returns for ourshareholders."
Third Quarter 2007 Unaudited Financial Results
Net Revenues.
Our net revenues amounted to RMB56.1 million (US$7.5 million) in the thirdquarter 2007 compared to RMB35.6 million net revenues for the third quarter2006, representing an increase of 57.3%, primarily attributable to thecontinued growth of our flagship EPO product, EPIAO, as well as the rapidsales growth in our TPO product, TPIAO. Net revenues from EPIAO increased by30.7% from RMB27.8 million in the third quarter 2006 to RMB36.3 million(US$4.8 million) in the third quarter 2007, resulting from increased EPIAOsales efforts focusing on the growing oncology market in China supported byour specialized oncology sales force which was established in the firstquarter of 2007. In addition, net revenues from TPIAO increased 171.6% fromRMB5.2 million in the third quarter 2006 to RMB14.2 million (US$1.9 million)in the third quarter 2007. Our TPIAO products further strengthened itsposition as our second largest revenue contributor, accounting for 25.3% oftotal net revenues for the third quarter 2007 as compared to 14.6% in thethird quarter 2006. Sales from our in-licensed Iron Sucrose supplement andour sales from the export of our products also continued to grow steadily,accounting for 2.0% and 5.1% of our overall sales, respectively, in the thirdquarter 2007.
Gross Profit.
Gross profit increased 57.4% to RMB51.3 million (US$6.8 million) for thethird quarter 2007 from RMB32.6 million in the third quarter 2006. Grossmargin was 91.5% in the third quarter 2007, in line with 91.4% in the thirdquarter 2006.
Operating Expenses.
Our total operating expenses increased by 55.4% from RMB22.0 million inthe third quarter of 2006 to RMB34.2 (US$4.6 million) in the third quarter2007. This increase was primarily due to costs relating to increased sellingand promotional efforts, including expansion of our sales force, and to alesser extent from higher research and development costs incurred primarilyfor our three late-stage pipeline products and higher corporate expensesassociated with being a public company. However, selling expenses as apercentage of total net revenues improved from 46.9% in the third quarter 2006to 45.9% in the third quarter 2007 as a result of improved economies of scale,partially offset by increased investment in sales force expansion.
Inco
