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Net revenues. Net revenues increased by 35.8% to RMB92.6 million (US$13.6million) for the third quarter of 2009 from RMB68.2 million (US$10.0 million)for the same period in 2008. This increase was largely due to continuedstrength from EPIAO and TPIAO products, which increased by 32.6% and 41.3%,respectively, over the same period in 2008. TPIAO remained 3SBio's secondlargest revenue contributor in the quarter, accounting for 30.1% of total netrevenues. Export sales declined by 6.4% to RMB2.3 million (US$0.3 million),and revenues from our in-licensed IV Iron Sucrose supplement rose 113.7% toRMB3.7 million (US$0.5 million).
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Gross profit. As a result of continued sales growth from key products,GAAP gross profit for the third quarter of 2009 increased by 38.3% to RMB86.1million (US$12.6 million) from RMB62.2 million (US$9.2 million) for the sameperiod in 2008. GAAP gross margin increased by 1.7% to 93.0% for the thirdquarter of 2009 from 91.3% for the same period in 2008.
Operating expenses. GAAP operating expenses were RMB57.6 million (US$8.4million) for the third quarter of 2009, an increase of 38.6% from GAAPoperating expenses of RMB41.5 million (US$6.1 million) for the same period in2008. Non-GAAP operating expenses were RMB56.4 million (US$8.3 million) forthe third quarter of 2009, an increase of 40.3% from non-GAAP operatingexpenses of RMB40.2 million (US$5.9 million) for the same period in 2008. Theincrease in operating expenses was largely driven by higher R&D expenses,particularly at the early stage of the pipeline.
Operating income. GAAP operating income was RMB28.5 million (US$4.2million) for the third quarter of 2009, an increase of 37.8% from operatingincome of RMB20.7 million (US$3.1 million) for the same period in 2008.Non-GAAP operating income for the third quarter of 2009 grew by 34.7% toRMB29.8 million (US$4.4 million), compared to RMB22.1 million (US$3.3 million)in the third quarter of 2008.
GAAP operating margin for the third quarter of 2009 was 30.8% as comparedto 30.4% for the same period in 2008. Non-GAAP operating margin was 32.2% forthe third quarter of 2009, as compared to 32.4% in the same period in 2008.
Interest income. The Company recorded net interest income of RMB2.6million (US$0.4 million) for the third quarter of 2009, compared to RMB5.5million (US$0.8 million) for the same period in 2008.
Net income. GAAP net income was RMB26.9 million (US$3.9 million) for thethird quarter of 2009, 1343.5% higher than net income of RMB1.9 million(US$0.3 million) for the same period in 2008. GAAP net income per ADS on afully-diluted basis for the third quarter of 2009 increased to RMB1.25 (US$0.18) from RMB0.09 (US$0.01) for the same period in 2008. GAAP net marginfor the third quarter of 2009 was 29.1% as compared to 2.7% for the sameperiod in 2008.
Non-GAAP net income for the third quarter of 2009 was RMB28.2 million(US$4.1 million), 25.6% higher than non-GAAP net income of RMB22.4 million(US$3.3 million) for the same period in 2008. Non-GAAP net income per ADS on afully diluted basis for the third quarter of 2009 increased to RMB1.31 (US$0.19) from RMB1.03 (US$0.15) for the same period in 2008. Non-GAAP netmargin for the third quarter of 2009 was 30.4% as compared to 32.9% for thesame period in 2008.
Nine months ended September 30, 2009 Unaudited Financial Results
Net revenues. Net revenues for the first nine months of 2009 increased by32.5% to RMB242.6 million (US$35.5 million), from RMB183.2 million (US$27.0million) for the same period in 2008. The increase was primarily attributableto increased sales from our EPIAO and TPIAO products, underpinned by continuedstrong demand in the oncology and nephrology markets.
Net revenues from EPIAO for the first nine months of 2009 increased by30.6% to RMB150.5 million (US$22.1 million) from RMB115.2 million (US$17.0million) for same period in 2008. Net revenues from TPIAO in the first ninemonths of 2009 increased by 34.4% to RMB68.8 million (US$10.1 million) fromRMB51.2 million (US$7.5 million) for the same period in 2008. In addition,revenue from our export business was RMB9.1 million (US$1.3 million),representing an increase of 27.9% over the first nine months of 2008, whilerevenue from our in-licensed IV Iron Sucrose supplement was RMB8.7 million(US$1.3 million), representing an increase of 67.7% over the first nine monthsof 2008.
Gross profit. GAAP gross profit for the first nine months of 2009increased by 33.9% to RMB223.7 million (US$32.8 million) from RMB167.1 million(US$24.6 million) for the same period in 2008. GAAP gross margin increased by1.0% to 92.2% for the first nine month months of 2009 from 91.2% for the sameperiod in 2008.
Operating income. For the first nine months ended September 30, 2009, GAAPoperating income increased by 48.6% to RMB74.5 million (US$10.9 million),compared to RMB50.1 million (US$7.4 million) for the same period in 2008. Non-GAAP operating income increased by 44.3% to RMB77.5 million (US$11.4 million),compared to RMB53.7 million (US$7.9 million) for the same period in 2008.
GAAP operating margin for the first nine months ended September 30, 2009was 30.7% as compared to 27.3% for the nine months ended September 30, 2008.Non-GAAP operating margin was 31.9% for the nine months ended September 30,2009, as compared to 29.3% in the same period in 2008.
Net income. GAAP net income for the first nine months of 2009 increasedby 70.2% to RMB69.8 million (US$10.2 million) compared with RMB41.0 million(US$6.0 million) for the same period in 2008. GAAP net margin for the firstnine months ended September 30, 2009 was 28.8% as compared to 22.4% for thesame period in 2008. GAAP net income per ADS on a fully diluted basis for thefirst nine months of 2009 increased to RMB3.24 (US$0.47) from RMB1.89 (US$0.28)for the same period in 2008.
Non-GAAP net income for the first nine months of 2009 increased by 19.0%to RMB75.8 million (US$11.1 million) compared with RMB63.7 million (US$9.4million) for the same period in 2008. Non-GAAP net margin for the first ninemonths ended September 30, 2009 was 31.2% as compared to 34.8% for the sameperiod in 2008. Non-GAAP net income per ADS for the first nine months of 2009increased to RMB3.52 (US$0.52) from RMB2.93 (US$0.43) for the same period in2008.
Cash and cash equivalents / Time deposits. 3SBio had positive operatingcash flows of RMB61.6 million (US$9.0 million) for the first nine months of2009, and as of September 30, 2009 retained a strong balance sheet with cash,cash equivalents and time deposits of RMB731.5 million (US$107.2 million), a0.2% decrease from RMB733.0 million (US$107.4 million) as of December 31, 2008.
2009 Full Year Guidance
Based on current market conditions and visibility provided during thethird quarter, the Company reiterates its total net revenue target for thefull year of 2009 of between US$43 million to US$45 million, resulting in ayear-over-year increase of approximately 21% to 26%.
Conference Call
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 November 13, 2009 todiscuss its 2009 third quarter financial results and recent business activity.The conference call may be accessed using the dial-in numbers below:
Webcast
A live webcast of the conference will be available on the investorrelations page of 3SBio's website athttp://bbs.3sbio.com/en/News/xinvestors.aspx and athttp://tinyurl.com/yf93ntk . A replay of the webcast will be available withinone 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 general accepted accounting principles ("GAAP"), the Company has utilizedsome non-GAAP financial measures to provide investors and management withsupplemental measures that facilitate comparisons of operating performance andtrends with prior and future operating performance, and that may not otherwisebe apparent on a GAAP basis. These non-GAAP financial measures include non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, non-GAAP net income per share, andnon-GAAP net income per ADS. These measures may be different from non-GAAPfinancial measures used by other companies. The presentation of this financialinformation, which is not prepared under any comprehensive set of accountingrules or principals, is not intended to be considered in isolation or as asubstitute for the financial information prepared and presented in accordancewith GAAP. Non-GAAP measures have limitations in that they do not reflect allof the amounts associated with the Company's results of operations asdetermined in accordance with GAAP. These measures should only be used toevaluate the Company's results of operations in conjunction with thecorresponding GAAP measures. Please see the attached reconciliation of GAAP tonon-GAAP for an explanation of the amounts excluded to arrive at non-GAAPfinancial measures for the three-month periods ended September 30, 2009 andSeptember 30, 2008 and for the nine month periods ended September 30, 2009 andSeptember 30, 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 our annual report on Form 20-F for theyear ending December 31, 2009. Adjustments and modifications to the financialstatements may be identified during the course of the audit work, which couldresult in significant differences from this preliminary unaudited financialinformation.
Currency Convenience Translation
For the convenience of readers, certain RMB amounts have been translatedinto US dollars at the rate of RMB6.8262 to US$1.00, the noon buying rate forUS dollars in effect on September 30, 2009 for cable transfers of RMB per USdollar as certified for customs purposes by the Federal Reserve Bank of NewYork. A rate of 6.7899 was used for comparative purposes as of September 30,2008.
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") for the third quarter of fiscal 2009 ("Disclosures") that are notpurely historical in nature may constitute "forward-looking statements" withinthe meaning of the Private Securities Litigation Reform Act of 1995. TheDisclosures include the press release, the conference call and anyaccompanying materials, and any other information issued, released orpublicized by the Company with respect to the third quarter of fiscal 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.Third Quarter 2009 Financial Highlights: -- Total net revenues increased by 35.8% over the third quarter of 2008 to RMB92.6 million (US$13.6 million). -- Operating income increased by 37.8% over the third quarter of 2008 to RMB28.5 million (US$4.2 million) on a GAAP basis, and increased by 34.7% over the third quarter of 2008 to RMB29.8 million (US$4.4 million) on a non-GAAP basis. -- Net income increased by 1343.5% over the third quarter of 2008 to RMB26.9 million (US$3.9 million) on a GAAP basis, and increased by 25.6% over the third quarter of 2008 to RMB28.2 million (US$4.1 million) on a non-GAAP basis. -- Net income per American Depositary Share ("ADS") for the third quarter of 2009 was RMB1.25 (US$0.18) compared with RMB0.09 (US$0.01) for the third quarter of 2008 on a GAAP basis, and RMB1.31 (US$0.19) for the third quarter of 2009 compared with RMB1.03 (US$0.15) for the third quarter of 2008 on a non-GAAP basis. First Nine Months 2009 Financial Highlights: -- Total net revenues in the first nine months of 2009 increased by 32.5% to RMB242.6 million (US$35.5 million) compared to RMB183.2 million (US$27.0 million) in the first nine months of 2008. -- Operating income increased by 48.6% over the first nine months of 2008 to RMB74.5 million (US$10.9 million) on a GAAP basis, and increased by 44.3% to RMB77.5 million (US$11.4 million) on a non-GAAP basis. -- Net income increased by 70.2% over the first nine months of 2008 to RMB69.8 million (US$10.2 million) on a GAAP basis, and increased by 19.0% over the first nine months of 2008 to RMB75.8 million (US$11.1 million) on a non-GAAP basis. -- Net income per ADS on a fully-diluted basis for the first nine months of 2009 was RMB3.24 (US$0.47) compared with RMB1.89 (US$0.28) for the first nine months of 2008 on a GAAP basis, and RMB3.52 (US$0.52) compared with RMB2.93 (US$0.43) for the first nine months of 2008 on a non-GAAP basis. Third Quarter 2009 Business Highlights -- EPIAO, the Company's flagship injectable recombinant human erythropoietin ("EPO") product, demonstrated strong growth with net revenue from EPIAO in the third quarter of 2009 rising 32.6% to RMB56.6 million (US$8.3 million) compared to RMB42.7 million (US$6.3 million) in the third quarter of 2008. -- Net revenues for TPIAO, the Company's novel recombinant human thrombopoietin ("TPO") product, increased by 41.3% to RMB27.9 million (US$4.1 million) in the third quarter of 2009, compared to RMB19.7 million (US$2.9 million) in the third quarter of 2008. -- Construction of the new EPIAO and TPIAO manufacturing plant in Shenyang remains on schedule for completion this year in preparation for validation and certification next year. -- Dr. Jing Lou, chief executive officer of 3SBio, commented: "Overall, the business is performing as expected with a strong set of results this quarter and we reiterate our full-year guidance of US$43-45 million. Construction of our new plant remains on schedule and we look forward to moving to validation and certification next year. We continued to develop our product pipeline and will update the market when we have reached significant milestones in the approval process." Three months ended September 30, 2009 Unaudited Financial Results
SOURCE 3SBio Inc.
