Sinovac Reports Record Second Quarter 2008 Unaudited Financial Results
Mr. Weidong Yin, Chairman, President and CEO, commented, "We are pleasedto announce our record performance for this quarter, which can be attributedto Healive sales that exceeded market expectation. The devastating May 2008earthquake in the Sichuan province resulted in health challenges presented bythe destruction of clean water and sanitation infrastructure. In the face ofthis tragedy, we are proud to have been able to meet the increased demand forthe hepatitis A vaccine after Sinovac was selected by Ministry of Health andprovincial governments as the sole supplier of hepatitis A vaccine to theregion. This illustrates the government's trust in the quality of ourvaccines and our capability to provide comprehensive marketing and salesservice and support to the local CDC and demonstrates that we have theproduction capacity and reliable delivery channel to fulfill urgent demand ona timely basis. We believe the experience served as a valuable opportunity forSinovac to demonstrate its ability to meet the public's needs as we continueto cultivate the public market for our hepatitis A vaccine."
Three Months Ended June 30, 2008
For the second quarter 2008, sales increased 73% to $16.5 million,compared to $9.5 million in the second quarter 2007. The growth was driven byhigher sales of Healive(R) and Bilive(R) following the May 12th earthquake.Government orders after the earthquake generated about $4.6 million, which arenot expected to recur in future periods. Sales and other amounts, which arereported here in US dollars, were also affected by the strengthening of theChinese RMB against the US dollar in the last year.
During the second quarter of 2008, Sinovac sold 2.72 million doses ofHealive(R), up from 1.75 million doses for the same period of 2007. Highersales in the second quarter 2008 resulted from Healive promotion campaigntargeting the private market and the increased demand following the May 12thearthquake. During the second quarter of 2008, Sinovac sold 180,000 doses ofBilive(R) compared to sales returns of 13,000 doses in the comparative period.
Gross profit for second quarter 2008 was $13.9 million, with a grossmargin of 84.0%, compared to $8.2 million and 86.5%, respectively, for thesame period of 2007.
Total operating expenses for the second quarter 2008 increased to $6.9million, compared to $3.6 million in the same period 2007. Selling, generaland administrative expenses for second quarter of 2008 were $6.0 million,compared to $3.5 million in the same period of 2007. The year-over-yearincrease in SG&A expenses was in line with the increased sales. SG&A expensesas a percentage represented 36.5% of revenues in the second quarter of 2008,compared to 36.3% in the same period in the prior year.
Gross expenditures on research and development expenses for the secondquarter of 2008 were $794,000 compared to $322,000 in the same period of 2007.R&D expenses net of government grants were $667,000 for the second quarter of2008, compared to ($53,000) in the same period of 2007. The R&D expensesrecognized as a reduction to government grants were $127,000 in the secondquarter of 2008, compared to $375,000 in the same period of 2007. The R&Dexpenses were mainly incurred for the Japanese encephalitis vaccine programand pandemic influenza immunogenic persistence research of Panflu.
Operating income was $7.0 million for the second quarter of 2008, comparedto $4.7 million in the same period of 2007. The year-over-year increase inoperating income reflected the significant increase in vaccine sales and themoderately higher R&D expenses.
Net income for the second quarter of 2008 also included $400,000 of
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