3SBio Inc. Announces Unaudited Fourth Quarter and Full Year 2009 Results
Dr. Jing Lou, chief executive officer of 3SBio, commented: "3SBio againdelivered strong operating and financial performance in our third consecutiveyear since going public in early 2007. We are very pleased with our newstrategic partnerships which we believe will provide an innovative platformfor the future development of our product pipeline. We will also continue toinvest in our internal R&D programs, including NuPIAO, our second generationEPO product. With construction of our Shenyang plant completed, we will nowfocus on seeking China GMP certification and validation as the next stage ofour strategy to satisfy the growing demand in China for high quality,cost-effective oncology and nephrology treatments. Given the strong demandoutlook for our core products, we anticipate achieving a 2010 total netrevenue target of between US$56 million to US$58 million, representingapproximately a 20-25% increase over 2009."
Full Year Ended December 31, 2009 Unaudited Financial Results
Net revenues. Net revenues for 2009 increased by 30.3% to RMB316.9 million(US$46.4 million), from RMB243.2 million (US$35.7 million) in 2008. Theincrease was primarily attributable to increased sales from our EPIAO andTPIAO products, underpinned by continued strong demand in the oncology andnephrology markets.
Net revenues from EPIAO in 2009 increased by 26.9% to RMB196.1 million(US$28.7 million) from RMB154.6 million (US$22.7 million) in 2008. Netrevenues from TPIAO in 2009 increased by 32.7% to RMB89.7 million (US$13.1million) from RMB67.6 million (US$9.9 million) in 2008. In addition, revenuefrom our export business was RMB13.2 million (US$1.9 million), representing anincrease of 59.4% over 2008, while revenue from IV Iron Sucrose was RMB10.7million (US$1.6 million), representing an increase of 53.4% over 2008.
Gross profit. Gross profit for 2009 increased by 31.7% to RMB291.7 million(US$42.7 million) compared to RMB221.5 million (US$32.5 million) in 2008.Gross margin for 2009 increased to 92.0% compared to 91.1% in 2008.
Operating expenses. Non-GAAP operating expenses were RMB201.3 million(US$29.5 million) for 2009, an increase of 24.1% from RMB162.1 million(US$23.8 million) in 2008. GAAP operating expenses were RMB207.3 million(US$30.4 million) for 2009, an increase of 19.3% from RMB173.7 million(US$25.5 million) in 2008.
Operating income. Non-GAAP operating income increased by 52.3% to RMB90.9million (US$13.3 million), compared to RMB59.7 million (US$8.8 million) in2008. GAAP operating income for 2009 increased by 76.6% to RMB84.4 million(US$12.4 million), compared to RMB47.8 million (US$7.0 million) in 2008.Non-GAAP operating margin for 2009 was 28.7%, compared to 24.6% in 2008. GAAPoperating margin for 2009 was 26.6%, compared to 19.6% in 2008.
Net income. Non-GAAP net income for 2009 increased by 20.3% to RMB90.3million (US$13.2 million) compared with RMB75.0 million (US$11.0 million) in2008. Non-GAAP net margin for 2009 was 28.5% as compared to 30.8% in 2008.Non-GAAP net income per ADS for 2009 increased to RMB4.18 (US$0.61) fromRMB3.46 (US$0.51) in 2008.
GAAP net income for 2009 increased by 111.0% to RMB83.4 million (US$12.2million) compared with RMB39.5 million (US$5.8 million) in 2008. GAAP netmargin for 2009 was 26.3% as compared to 16.3% in 2008. GAAP net income perADS on a fully-diluted basis for 2009 increased to RMB3.87 (US$0.57) fromRMB1.82 (US$0.27) in 2008.
Cash and cash equivalents / Time deposits. 3SBio had positive operatingcash flow of RMB87.7 million (US$12.9 million) for the year ended December 31,2009 and as of December 31, 2009, had cash, cash equivalents, restricted cashand time deposits of RMB740.5 million (US$108.5 million), a 1.0% increase fromRMB733.0 million (US$107.4 million) as of December 31, 2008.
Three Months Ended December 31, 2009 Unaudited Financial Results
Net revenues. Net revenues increased by 23.7% to RMB74.3 million (US$10.9million) for the fourth quarter of 2009 from RMB60.1 million (US$8.8 million)for the same period in 2008. This increase was largely due to continued strongsales of EPIAO and TPIAO which grew by 15.8% and 27.4%, respectively, over thesame period in 2008. TPIAO remained 3SBio's second largest revenue contributorin the quarter, accounting for 28.1% of total net revenues. Export salesincreased by 255.7% to RMB4.1 million (US$0.6 million), and revenues from IVIron Sucrose rose 12.2% to RMB2.0 million (US$0.3 million).
Gross profit. As a result of continued sales growth from key products,gross profit for the fourth quarter of 2009 increased by 25.0% to RMB68.0million (US$10.0 million) from RMB54.4 million (US$8.0 million) for the sameperiod in 2008. Gross margins increased to 91.6% for the fourth quarter of2009 from 90.6% for the same period in 2008.
Operating expenses. Non-GAAP operating expenses were RMB54.7 million(US$8.0 million) for the fourth quarter of 2009, an increase of 12.9% fromRMB48.5 million (US$7.1 million) for the same period in 2008. GAAP operatingexpenses were RMB58.1 million (US$8.5 million) for the fourth quarter of 2009,an increase of 2.4% from RMB56.7 million (US$8.3 million) for the same periodin 2008.
Operating income. Non-GAAP operating income for the fourth quarter of 2009grew by 122.5% to RMB13.5 million (US$2.0 million), compared to RMB6.1 million(US$0.9 million) in the fourth quarter of 2008. GAAP operating income wasRMB9.9 million (US$1.5 million) for the fourth quarter of 2009, an increase of12.2 million (US$1.8 million) from an operating loss of RMB2.3 million (US$0.3million) for the same period in 2008. Non-GAAP operating margin was 18.2% forthe fourth quarter of 2009, as compared to 10.1% in the same period in 2008.GAAP operating margin for the fourth quarter of 2009 was 13.4% as compared to-3.8% for the same period in 2008.
Interest income. The Company recorded net interest income of RMB2.4million (US$0.3 million) for the fourth quarter of 2009, compared to RMB5.9million (US$0.9 million) for the same period in 2008. This was largely due toa declining interest rate environment.
Net income. Non-GAAP net income for the fourth quarter of 2009 was RMB14.5million (US$2.1 million), 28.0% higher than non-GAAP net income of RMB11.3million (US$1.7 million) for the same period in 2008. Non-GAAP net income perADS on a fully-diluted basis for the fourth quarter of 2009 increased toRMB0.66 (US$0.10) from RMB0.52 (US$0.08) for the same period in 2008. Non-GAAPnet margin for the fourth quarter of 2009 was 19.5% as compared to 18.8% forthe same period in 2008.
GAAP net income was RMB13.7 million (US$2.0 million) for the fourthquarter of 2009, an increase of RMB15.1 million over a net loss of RMB1.5million (US$0.2 million) for the same period in 2008. GAAP net income per ADSon a fully-diluted basis for the fourth quarter of 2009 increased to RMB0.63 (US$0.09) from a loss of RMB0.07 (US$0.01) for the same period in 2008. GAAPnet margin for the fourth quarter of 2009 was 18.4% as compared to -2.4% forthe same period in 2008.
2010 Full Year Guidance and Selected Company Objectives
Based on current market and operating conditions and the following goals,the Company's total net revenue target for the full year 2010 is between US$56million to US$58 million, an estimated year-over-year increase ofapproximately 20% to 25%. Other operating objectives include:
3SBio's senior management will host a conference call at 5:00 am (Pacific)/ 8:00 am (Eastern) / 9:00 pm (Beijing/Hong Kong) on February 12, 2010 todiscuss its 2009 fourth quarter and annual financial results and recentbusiness activity. The conference call may be accessed using the dial-innumbers below:
A telephone replay will be available two hours after the call untilFebruary 20, 2010 at:
A live webcast of conference will be available on the investor relationspage of 3SBio's website at http://bbs.3sbio.com/en/News/xinvestors.aspx and athttp://tinyurl.com/3Sbio4Q09 . A replay of the webcast will be availablewithin one hour after the conclusion of the call.
Non-GAAP Financial Measures: Reconciliation of GAAP to Non-GAAP
To supplement the Company's financial information presented in accordancewith generally accepted accounting principles ("GAAP"), the Company hasutilized some non-GAAP financial measures to provide investors and managementwith supplemental measures that facilitate comparisons of operatingperformance and trends with prior and future operating performance, and thatmay not otherwise be apparent on a GAAP basis. These non-GAAP financialmeasures include non-GAAP cost of revenue, non-GAAP gross profit, non-GAAPoperating expenses, non-GAAP operating income, non-GAAP net income, non-GAAPnet income per share, and non-GAAP net income per ADS. These measures may bedifferent from non-GAAP financial measures used by other companies. Thepresentation of this financial information, which is not prepared under anycomprehensive set of accounting rules or principals, is not intended to beconsidered in isolation or as a substitute for the financial informationprepared and presented in accordance with GAAP. Non-GAAP measures havelimitations in that they do not reflect all of the amounts associated with theCompany's results of operations as determined in accordance with GAAP. Thesemeasures should only be used to evaluate the Company's results of operationsin conjunction with the corresponding GAAP measures. Please see the attachedreconciliation of GAAP to non-GAAP for an explanation of the amounts excludedto arrive at non-GAAP financial measures for the three-month periods endedDecember 31, 2009 and December 31, 2008 and for the full year ended December31, 2009 and December 31, 2008.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is preliminary andsubject to adjustments and modifications. The audited financial statements andrelated notes are to be included in the Company's annual report on Form 20-Ffor the year ending December 31, 2009. Adjustments and modifications to thefinancial statements may be identified during the course of the audit work,which could result in significant differences from this preliminary unauditedfinancial information.
Currency Convenience Translation
For the convenience of readers, certain RMB amounts have been translatedinto US dollars at the rate of RMB6.8259 to US$1.00, the noon buying rate forUS dollars in effect on December 31, 2009 as set forth in the H.10 statisticalrelease of the U.S. Federal Reserve Board. A rate of 6.8225 was used forcomparative purposes as of December 31, 2008, which was the noon buying ratefor US dollars on that date for cable transfers of RMB per US dollar ascertified for customs purposes by the Federal Reserve Bank of New York.
About 3SBio Inc.
3SBio Inc. is a leading, fully integrated biotechnology company focused onresearching, developing, manufacturing and marketing biopharmaceuticalproducts, primarily in China. For more information, please visit 3SBio on theweb at http://www.3sbio.com .
Safe Harbor Statement
Certain statements in the disclosures of 3SBio, Inc. (the "Company" or"3SBio") with respect to the fourth quarter and the year of 2009("Disclosures") that are not purely historical in nature may constitute"forward-looking statements" within the meaning of the Private SecuritiesLitigation Reform Act of 1995. The Disclosures include the press release, theconference call and any accompanying materials, and any other informationissued, released or publicized by the Company with respect to the fourthquarter and the year of 2009.
These forward-looking statements address activities, events, conditions,or developments that we currently expect or anticipate may occur in the future,and include, but may not be limited to, discussions and statements regardingrevenue guidance, product development, timing of plant construction completion,testing and certification, impact of the government policies and regulations,regulatory approval process, production capacity, capital expense estimate,future operations, investment portfolio management, and future strategies.Forward-looking statements can be identified by such terminology as "believe,""expect," "plans," "strategy," "potential", "prospects," "forecast,""estimate," "project," "anticipate," "aim," "will" or "would", "may" or"might", and words, phrases, expressions, and usages of similar meaning orsubstance or the negative of such words, phrases, expressions and usages.
Forward-looking statements are based on management's current assumptions,beliefs, expectations, and projections, in light of the information currentlyavailable to it, and actual results, performances, or achievements coulddiffer materially from those implied or expressed by the forward-lookingstatements. Among the factors that could cause 3SBio's actual results todiffer from what the Company currently anticipates may include competitionfrom other domestic and foreign pharmaceutical companies; the expected marketgrowth for pharmaceutical products in China; market acceptance of 3SBioproducts; expected hospital or patient demand for our products; the completionof 3SBio's ongoing clinical trials as planned; receipt and timing ofregulatory approvals for 3SBio's new products and uses; 3SBio's ability toexpand its production, sales and distribution network and other aspects of itsoperations; its ability to effectively protect its intellectual property;changes in the healthcare industry in China, including changes in thehealthcare policies and regulations of the PRC government and changes in thehealthcare insurance sector in the PRC; and fluctuations in general economicand business conditions in China.
For additional information on factors identified above and other riskfactors, uncertainties and assumptions that may affect 3SBio's business,financial conditions and results of operations, please refer to the Company'sfilings with the Securities and Exchange Commission at www.sec.gov, and, inparticular, "Introduction - Cautionary Statement concerning Forward LookingStatements," Item 3.D "Risk Factors," Item 5. "Operating and Financial Reviewand Prospects," and other applicable discussions in 3SBio's annual report onForm 20-F for the year ended December 31, 2008.
All the statements in the Disclosures speak as of the date of the initialrelease, even if subsequently made available on the 3SBio website or otherwise.3SBio undertakes no obligation to update or revise these forward-lookingstatements, whether as a result of new information, subsequent events orotherwise, after the date of this press release.Full Year 2009 Financial Highlights: -- Total net revenues in 2009 increased by 30.3% year-over-year to RMB316.9 million (US$46.4 million) compared to RMB243.2 million (US$35.7 million) in 2008. -- Non-GAAP operating income in 2009 increased by 52.3% year-over-year to RMB90.9 million (US$13.3 million) and GAAP operating income increased by 76.6% to RMB84.4 million (US$12.4 million). -- Non-GAAP net income in 2009 increased by 20.3% year-over-year to RMB90.3 million (US$13.2 million). GAAP net income increased by 111.0% year-over-year to RMB83.4 million (US$12.2 million). -- Non-GAAP net income per American Depositary Share (ADS) on a fully-diluted basis in 2009 was RMB4.18 (US$0.61) compared with RMB3.46 (US$0.51) in 2008. GAAP net income per ADS on a fully-diluted basis in 2009 was RMB3.87 (US$0.57) compared with RMB1.82 (US$0.27) in 2008. Fourth Quarter 2009 Financial Highlights: -- Total net revenues increased by 23.7% over the fourth quarter of 2008 to RMB74.3 million (US$10.9 million). -- Non-GAAP operating income was RMB13.5 million (US$2.0 million), an increase of RMB7.4 million (US$1.1 million) over the fourth quarter of 2008. GAAP operating income was RMB9.9 million (US$1.5 million), compared to an operating loss of RMB2.3 million (US$0.3 million) in the fourth quarter of 2008. -- Non-GAAP net income was RMB14.4 million (US$2.1 million), an increase of RMB3.2 million (US$0.5 million) over the fourth quarter of 2008 on a non-GAAP basis. GAAP net income was RMB13.7 million (US$2.0 million), compared to a net loss of RMB1.5 million (US$0.2 million) in the fourth quarter of 2008. -- Non-GAAP net income per ADS on a fully-diluted basis was RMB0.66 (US$0.10) for the fourth quarter of 2009 compared with RMB0.52 (US$0.08) for the fourth quarter of 2008. GAAP net income per ADS on a fully-diluted basis was RMB0.63 (US$0.09) compared with a net loss of RMB0.07 (US$0.01) for the fourth quarter of 2008. Full Year 2009 Business Highlights -- EPIAO, the Company's flagship injectable recombinant human erythropoietin (EPO) product, demonstrated strong growth with net revenue in 2009 rising 26.9% to RMB196.1 million (US$28.7 million), compared to RMB154.6 million (US$22.7 million) in 2008. -- Net revenues for TPIAO, the Company's novel recombinant human thrombopoietin (TPO) product, increased by 32.7% to RMB89.7 million (US$13.1 million) in 2009, compared to RMB67.6 million (US$9.9 million) in 2008. -- Export revenue increased 59.4%, accounting for 4.2% of total revenue in 2009, compared to 3.4% in 2008. Eleven new registration certificates from eight countries were granted in 2009. TPIAO was approved in the Philippines, the first market outside of China. -- Work continues with the SFDA to secure regulatory approval of the three Phase III applications currently under review: 36,000 IU dosage formulation of EPIAO, NuLeusin and a TPIAO label extension for the treatment of idiopathic thrombocytopenic purpura (ITP). Events Subsequent to December 31, 2009 -- An application for a registration trial for Feraheme was submitted to the State Food and Drug Administration (SFDA). Feraheme is a new generation IV iron therapy licensed through a strategic partnership with AMAG Pharmaceuticals. -- A collaboration and license agreement was signed with Panacor Bioscience to develop and commercialize Nephoxil(R), a differentiated iron-based phosphate binder that is not polymer-based and free of aluminum, lanthanum and calcium for the treatment for hyperphosphatemia in CKD patients. -- A strategic alliance was formed with Ascentage Pharma Group Corporation Ltd. to research, develop and commercialize best-in-class targeted cancer therapeutics focusing on programmed cell death, or apoptosis. The alliance represents 3SBio's key strategic initiative to develop a novel pipeline in cancer therapeutics. -- Construction of the new EPIAO and TPIAO manufacturing plant in Shenyang was completed and work is underway on the application to the SFDA for Good Manufacturing Practice (GMP) certification. -- 3SBio submitted an application to the SFDA to conduct Phase I clinical trials for NuPIAO, the Company's second generation EPO product.
SOURCE 3SBio Inc.
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