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Mr. Weidong Yin, Chairman, President and CEO, commented, "Our firstquarter sales demonstrate the continued execution of our commercializationstrategy. We were pleased with the 123% increase in quarterly sales. Wecontinue to experience robust Healive(R) sales due to favorable marketdevelopment trends in China."
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Mr. Yin continued, "We are pleased with the continued clinical advancementof our pandemic influenza vaccine formulations. In early April, we received aproduction license from the SFDA to exclusively supply Panflu(TM), our wholeviron H5N1 pandemic influenza vaccine, to the national stockpiling program.Recently, we successfully completed Phase I trials for the split vaccine andintend to commence the Phase II trials during the second quarter of 2008."
Three Months Ended March 31, 2008
For the first quarter 2008, sales increased 123% to $8.9 million, comparedto $4.0 million in the first quarter 2007. The growth was driven by highersales of Healive(R) with further market.
Gross profit for first quarter of 2008 was $7.8 million, with a grossmargin of 88.2%, compared to $3.3 million and 83.9%, respectively, for thesame period of 2007. The higher gross margin resulted from the increasedeconomies of scale and lower average unit costs associated with Healive(R)production.
Total operating expenses for the first quarter of 2008 increased to $4.7million, compared to $1.9 million in the same period of 2007. Selling, generaland administrative expenses for first quarter of 2008 were $3.6 million,compared to $1.3 million in the same period of 2007. The year-over-yearincrease in SG&A expenses reflected Sinovac's extensive promotion campaign forHealive(R), and the recruiting of additional employees for the production,quality control, sales, and marketing segments to position the Company formarket growth.
The aggregated research and development expenses for the first quarter of2008 were $933,000 compared to $477,000 in the same period of 2007. Our netR&D expenses were $929,000 for the first quarter of 2008, compared to $444,000in the same period of 2007. The R&D expenses recognized as a reduction togovernment grants were $4,000 in the first quarter of 2008, compared to$33,000 in the same period of 2007.
Operating income was $3.1 million for the first quarter of 2008, comparedto $1.5 million in the same period of 2007. The year-over-year increase inoperating income reflected the significant increase in vaccine sales and themoderately higher operating expenses.
Net income for the first quarter of 2008 was $1.6 million, or $0.04 perdiluted share, compared to $776,000, or $0.02 per diluted share, in the sameperiod of 2007. Net income for the first quarter of 2008 included $158,000 ofinterest and financing expenses, $719,000 of income taxes, and $739,000 ofminority interest. Net income for the same period of 2007 included $86,000 ofinterest and financing expenses, $342,000 of income taxes, and $310,000 ofminority interest.
As of March 31, 2008, Sinovac's cash and cash equivalents totaled $20.6million, compared to $17.1 million as of December 31, 2007.
Sales and Marketing
During the first quarter of 2008, Sinovac sold approximately 1.5 milliondoses of Healive(R), up from 0.7 million doses for the same period of 2007.Higher sales in the first quarter of 2008 resulted from Healive promotioncampaign targeting the private market. During the first quarter of 2008,Sinovac sold 31,000 doses of Bilive(R) and 24,000 doses seasonal flu vaccine.
Research and Development
In April 2008, Sinovac was granted a production license for Panflu(TM) byth
