omniture

3SBio Inc. Announces Unaudited Fourth Quarter and Fiscal Year 2008 Results

2009-03-12 04:59 1089


Company Exceeds Guidance with 2008 Revenue of RMB243.2 million (US$35.7 million); Full year 2008 Adjusted Non-GAAP Operating Income Grew 20.6% over 2007 to RMB59.7 million (US$8.8 million)

Provides 2009 Net Revenue Guidance Range of US$43-US$45 million

SHENYANG, China, March 12 /PRNewswire-Asia/ -- 3SBio Inc. (Nasdaq: SSRX) ("3SBio" or "the Company"), a leading China-based biotechnology company focused on researching, developing, manufacturing and marketing biopharmaceutical products, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2008.

Fiscal Year 2008 Financial Highlights:

-- Total net revenues increased 35.0% over 2007 to RM243.2 million

(US$35.7 million).

-- Adjusted non-GAAP operating income was RMB59.7 million (US$8.8 million)

for 2008, when excluding share-based compensation expense and a RMB6.9

million (US$1.0 million) recognition of the one-time upfront payment

related to the licensing deal with AMAG Pharmaceuticals. Adjusted

non-GAAP operating income was RMB49.5 million (US$6.8 million) for 2007.

GAAP operating income for 2008 was RMB47.8 million (US$7.0 million).

-- Adjusted non-GAAP net income was RMB75.0 million (US$11.0 million),

further excluding non-operating investment losses on available-for-sale

securities, comparing to adjusted non-GAAP net income of RMB79.8

million (US$10.9 million) in 2007. GAAP net income for 2008 was RMB39.5

million (US$5.8 million).

-- Adjusted non-GAAP earnings per American depositary share ("ADS") were

RMB3.46 (US$0.51), compared to RMB3.81 (US$0.52) in 2007. GAAP earnings

per ADS for 2008 were RMB1.82 (US$0.27).

Fourth Quarter 2008 Financial Highlights:

-- Total net revenues increased 31.5% over the fourth quarter of 2007 to

RMB60.1 million (US$8.8 million).

-- Adjusted non-GAAP operating income for the fourth quarter was RMB6.1

million (US$0.9 million) when excluding share-based compensation

expense and the AMAG recognition. Adjusted non-GAAP operating income

was RMB6.3 million (US$0.9 million) for 2007. GAAP operating loss was

RMB2.3 million (US$0.3 million) for the quarter.

-- Adjusted non-GAAP net income was RMB11.3 million (US$1.7 million),

compared to adjusted non-GAAP net income of RMB15.3 million for 2007.

GAAP net loss for the quarter was RMB1.5 million (US$0.2 million).

-- Adjusted non-GAAP earnings per ADS were RMB0.52 (US$0.08), compared to

RMB0.70 (US$0.10) in fourth quarter of 2007. GAAP loss per ADS was

RMB0.07 (US$0.01) for the fourth quarter of 2008.

* Please refer to "Reconciliation Tables of GAAP to adjusted Non-GAAP

Figures" at the end of this press release. Adjusted (Non-GAAP) items

for the three- and twelve-month periods ended December 31, 2007 have

been revised to conform to the current year's presentation basis.

Fiscal Year 2008 Business Highlights:

-- EPIAO, the Company's flagship injectable recombinant human

erythropoietin ("EPO") products, continued to outpace EPO market growth

in China. Net revenue from EPIAO increased 32.0% year-over-year in the

fourth quarter of 2008 to RMB39.3 million (US$5.8 million), and

increased 27.5% to RMB154.6 million (US$22.7 million) for the full year

2008, as 3SBio further enhanced its market leadership position, with

41.1% of EPO market share according to fourth quarter 2008 IMS data.

-- The high quality of EPIAO, a key factor contributing to EPIAO's success

and leading market position in China, was further validated by a study

sponsored by Amgen. The study shows that among 12 EPO products

manufactured in Asia, 3SBio's EPIAO has the biophysical and biochemical

properties that most resemble Epogen. The article was published in the

Journal of Pharmaceutical Sciences in July, 2008.

-- TPIAO, the Company's protein-based therapeutic recombinant human

thrombopoietin ("TPO") products, continued their rapid uptake trend and

are increasingly adopted as the standard of care for Chemo Induced

Thrombocytopenia. TPIAO net revenue increased 39.7% year-over-year in

the fourth quarter of 2008 to RMB16.4 million (US$2.4 million), and

increased 56.9% in 2008 to RMB67.6 million (US$9.9 million).

-- 3SBio completed all three Phase III programs on schedule, and submitted

them for SFDA approval:

-- In September 2008, the Company filed for approval of a 36,000 IU

dosage formulation of EPIAO for the treatment of anemia associated

with chemotherapy in cancer patients. If approved, 36,000 IU dosage

formulation of EPIAO will further enhance the Company's effort to

penetrate Oncology market given the convenience of a weekly

injection.

-- In November 2008, the Company filed for approval of NuLeusin for the

treatment of late stage metastatic renal cell carcinoma, and if

approved this is expected to be the only treatment of this kind

available in China. NuLeusin, 3SBio's second-generation IL-2, is a

genetically modified form of IL-2, possessing improved biochemical

properties over naturally occurring IL-2.

-- In December 2008, the Company filed for approval of a TPIAO label

extension for the treatment of idiopathic thrombocytopenic purpura

(ITP) in China, representing the first of a series of indications

that the Company plans to pursue to build and grow TPIAO brand.

-- 3SBio demonstrated its business development capabilities through a

strategic partnership with AMAG Pharmaceutical, to develop and

commercialize Ferumoxytol, a new generation of IV Iron therapy, in

China. 3SBio plans to initiate China SFDA registration trials in 2009,

further enhancing the Company's long term growth potential through a

diversified product portfolio.

-- The Company streamlined internal organization structures and vendor

relationships, to further strengthen capabilities and increase

operational efficiency, and recruited key management staff.

-- 3SBio expanded the Oncology and Nephrology focused sales and marketing

organization to over 221 personnel, covering over 2000 leading

hospitals in China.

-- 3SBio was jointly certified by the Liaoning Provincial Office of

Science and Technology, Liaoning Provincial Department of Finance,

National Revenue Office of Liaoning Province and Local Revenue

Administration of Liaoning Province as a "High-Tech Enterprise." A

"High-Tech Enterprise" is an official designation accorded to a company

that, among other criteria, is engaged in a business field which

receives special endorsement from the national government and has more

than 60% of its income from high-tech products or services.

Dr. Jing Lou, Chief Executive Officer of 3SBio, commented, "3SBio delivered solid operating and financial performance in our second consecutive year since going public in early 2007. We once again demonstrated our ability to execute on our business strategy and achieve above market rate top-line growth and solid bottom-line operating profitability, despite significant investment in building brands in the marketplace, developing new products and growing the organization. 3SBio enters 2009 as a company with strengthened capabilities to generate a solid operating cash flow, a robust balance sheet, and a stream of near-term new product offerings to sustain mid- and long-term growth. Based on our 2008 performance and our view on the macro economic environment, as well as market and operating conditions in 2009, we are confident in setting a total net revenue target of between US$43 million to US$45 million for the full year of 2009."

Fourth Quarter and Fiscal Year 2008 Unaudited Financial Results

Net revenues. Net revenues increased by 31.5% to RMB60.1 million (US$8.8 million) in the fourth quarter of 2008 from the same period in 2007. This increase was primarily due to the growth in TPIAO and EPIAO products, which increased by 32.0% and 39.7%, respectively, from the same period in 2007.

Net revenues increased by 35.0% to RMB243.2 million (US$35.7 million) in 2008 from RMB180.2 million (US$24.7 million) in 2007. This increase was primarily attributed to the continued growth in EPIAO products, sales of which increased by 27.5% from RMB121.2 million (US$16.6 million) in 2007 to RMB154.6 million (US$22.7 million) in 2008. The growth in sales from EPIAO was driven in part by an expanded oncology sales force, which continued to perform well. The Company also witnessed rapid market adoption of TPIAO products, which generated revenues of RMB67.6 million (US$9.9 million) in 2008, compared to RMB43.1 million (US$5.9 million) in 2007. TPIAO was 3SBio's second largest revenue contributor in 2008, accounting for 27.8% of our total net revenues in the period. Sales from in-licensed Iron Sucrose supplement increased 117.8% to RMB7.0 million (US$1.0 million) in 2008. Export sales registered a steady growth of 22.2% to RMB8.3 million (US$1.2 million) in 2008, accounting for 3.4% of total net revenue.

Gross profit. As a result of strong sales across our product lines, gross profit increased by 36.3% to RMB54.4 million (US$8.0 million) in the fourth quarter of 2008 from RMB39.9 million (US$5.5 million) for the same period in 2007. Gross margin increased to 90.6% in the fourth quarter 2008 from 87.4% for the same period in 2007.

In 2008, gross profit grew 36.1% to RMB221.5 million (US$32.5 million) from RMB162.7 million (US$22.3 million) in 2007. Gross margin of 91.1% in 2008 remained in line with the gross margin of 90.3% in 2007.

Operating income/loss. Adjusted non-GAAP operating income for the fourth quarter was RMB6.1 million (US$0.9 million), excluding share-based compensation expense of RMB1.4 million (US$0.2 million) and a RMB6.9 million (US$1.0 million) recognition of the upfront payment related to the licensing deal with AMAG Pharmaceuticals. Adjusted non-GAAP operating income for the full year was RMB59.7 million (US$8.8 million), an increase of 20.6% over year 2007. Adjusted non-GAAP operating income was RMB49.5 million (US$6.8 million) for 2007.

GAAP operating loss was RMB2.3 million (US$0.3 million) in the fourth quarter 2008, down from operating income of RMB6.1 million (US$0.8 million) for the same period in 2007. Operating income decreased by 1.6% to RMB47.8 million (US$7.0 million) in 2008 from RMB48.5 million (US$6.7 million) in 2007.

Operating expenses. Adjusted non-GAAP operating expenses were RMB48.5 million (US$7.1 million) in the fourth quarter and RMB162.1 million (US$23.8 million) in the full year of 2008. This was an increase of 44.3% and 43.2% from adjusted non-GAAP operating expenses of RMB33.6 million (US$4.6 million) and RMB113.2 million (US$15.5 million) in the fourth quarter and full year of 2007 respectively.

-- Research and development cost (non-GAAP). Adjusted R&D cost for the

fourth quarter was RMB5.3 million (US$0.8 million) and RMB15.0 million

(US$2.2 million) for the full year, excluding the one-time upfront

payment for the license fee of RMB6.9 million (US$1.0 million) and

share-based compensation expense. This was an increase of 43.4% and

29.0% from adjusted R&D cost of RMB3.7 million (US$0.5 million) and

RMB11.6 million (US$1.6 million) in the fourth quarter and full year of

2007 respectively. The overall increase in R&D cost for the fourth

quarter and fiscal year 2008 was mainly attributable to research and

development expenses associated with the number of clinical tests

conducted and the continued development of other pipeline products.

-- Sales, marketing and distribution expenses (non-GAAP). Adjusted Sales,

marketing and distribution expenses for the fourth quarter were RMB38.0

million (US$5.6 million) and RMB118.8 million (US$17.4 million) for the

full year, excluding share-based compensation expense. This was an

increase of 67.4% and 41.1% from adjusted expenses of RMB22.7 million

(US$3.1 million) and RMB84.2 million (US$11.5 million) in the fourth

quarter and full year of 2007 respectively. The increase was primarily

attributable to higher sales activities in general, continued

investment in building the TPIAO brand and EPIAO penetration of the

Oncology market.

-- General and administrative expenses (non-GAAP). Adjusted general and

administrative expenses for the fourth quarter were RMB5.1 million

(US$0.8 million) and RMB28.4 million (US$4.2 million) for the full year,

excluding share-based compensation expense. This was a decrease of

28.6% and an increase of 63.1% from adjusted general and administrative

expenses of RMB7.2 million (US$1.0 million) and RMB17.4 million (US$2.4

million) in the fourth quarter and full year of 2007 respectively. The

increase in general and administrative expense in fiscal year 2008 was

primarily attributable to compliance cost associated with being a

public company and increase of management personnel.

In the fourth quarter of 2008, total GAAP operating expenses increased by 67.8% to RMB56.7 million (US$8.3 million) as compared to the same period in 2007. In 2008, total GAAP operating expenses increased by 52.1% to RMB173.7 million (US$25.5 million) from RMB114.2 million (US$15.7 million) in 2007.

-- Research and development costs (GAAP). Research and development cost

increased by 234.8% to RMB12.4 million (US$1.8 million) in the fourth

quarter 2008 from RMB3.7 million (US$0.5 million) for the same period

in 2007. Research and development cost increased by 93.2% to RMB22.5

million (US$3.3 million) in 2008 from RMB11.6 million (US$1.6 million)

in 2007, with R&D cost as a percentage of total net revenues increasing

to 9.2% in 2008 from 6.5% in 2007.

-- Sales, marketing and distribution expenses (GAAP). Sales, marketing and

distribution expenses increased by 68.8% to RMB38.3 million (US$5.6

million) in the fourth quarter 2008 from RMB22.7 million (US$3.1

million) for the same period in 2007. Sales, marketing and distribution

expenses increased 37.4% to RMB119.8 million (US$17.6 million) for 2008

from RMB84.2 million (US$11.5 million) for 2007. Sales, marketing and

distribution expenses as a percentage of total net revenues increased

to 49.2% in 2008 from 46.7% in 2007.

-- General and administrative expenses (GAAP). General and administrative

expenses decreased by 19.2% to RMB6.0 million (US$0.9 million) in the

fourth quarter 2008 from RMB7.4 million (US$1.0 million) for the same

period in 2007. General and administrative expenses increased 71.2% to

RMB31.5 million (US$4.6 million) in 2008 from RMB18.4 million (US$2.4

million) in 2007. General and administrative expenses as a percentage

of net revenues increased to 12.9% in 2008 from 10.2% in 2007.

Interest income. The Company recorded net interest income of RMB5.9 million (US$0.9 million) in fourth quarter 2008 as compared RMB9.0 million (US$1.2 million) for the same period in 2007. 3SBio recorded net interest income of RMB24.0 million (US$3.5 million) in 2008 as compared to net interest income of RMB35.2 million (US$4.8 million) for 2007. The decrease in interest income was due in part to an environment with decreasing interest rates.

Net income/loss. Adjusted non-GAAP net income for the fourth quarter was RMB11.3 million (US$1.7 million), excluding several one-off items, including recognition of the AMAG licensing deal of RMB6.9 million (US$1.0 million) and recognition of an RMB4.4 million (US$0.7 million) impairment loss on available-for-sale securities. For 2008, adjusted non-GAAP net income was RMB75.0 million (US$11.0 million), comparing to adjusted net income of RMB79.8 million (US$10.9 million) in 2007.

GAAP net loss was RMB1.5 million (US$0.2 million) in the fourth quarter 2008, compared to net income of RMB17.9 million (US$2.4 million) for the same period in 2007. GAAP net income for 2008 was RMB39.5 million (US$5.8 million), compared to RMB81.5 million (US$11.2 million) in 2007.

Cash and cash equivalents/Time deposits. As of December 31, 2008, 3SBio had cash, cash equivalents and time deposits of RMB733.0 million (US$107.4 million), compared to RMB811.0 million (US$111.2 million) as of December 31, 2007.

2009 Full Year Guidance & Selected Company Objectives

-- Maintain and enhance the Company's EPIAO market share leadership

position, through continued penetration of the Oncology market and

gaining market share within the Dialysis market.

-- Maximize the commercial potential of TPIAO, through continuing

penetration of the Oncology market and the initiation of clinical

trials for other potential high value indications.

-- Focus on working with the SFDA to secure regulatory approval of the

three new product programs; 36,000 IU dosage formulation of EPIAO,

NuLeusin, and TPIAO label extension for the treatment of ITP.

-- Initiate Ferumoxytol registration trial in China, following US FDA

approval.

-- Submit application for clinical trials of NuPIAO, the Company's second

generation EPO product.

-- Leverage Nephrology and Oncology focused franchise and strong balance

sheet to continue efforts in the business development front.

-- Complete construction on our new EPIAO plant to support future growth

of EPIAO in China, and as the first step towards exploring global

biosimilar opportunities.

Based on these goals and current market and operating conditions, the Company's total net revenue target for the full year 2009 is estimated to be between US$43 million to US$45 million, resulting in year-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) / 8:00 pm (Beijing/Hong Kong) on Thursday, March 12, 2009. The conference call may be accessed using the dial-in numbers below:

International Toll Dial-In Number: +6567357955

China (Landline) 800 819 0121

China (Mobile) 400 620 8038

U.K. 08082346646

U.S. 18665194004

H.K. 800933053

Conference ID: 87494181

A telephone replay will be available shortly after the call until March 19, 2009, at:

International Dial-In Number: +61 2 8235 5000

U.S. Dial-in Number: 18662145335

Conference ID: 87494181

A live webcast of the conference call and the replay will be available on the investor relations page of 3SBio's website at http://www.3sbio.com/en/News/ShowInfo_nnn11.aspx?ID=71 .

Reconciliation of GAAP to Adjusted Non-GAAP

The Company has utilized some adjusted Non-GAAP financial measures to provide investors and management with supplemental measures that facilitate comparisons of operating performance and trends with prior and future operating performance, and that may not otherwise be apparent on a GAAP basis. Please see the attached Reconciliation Tables of GAAP to Adjusted Non-GAAP Figures for an explanation of the amounts excluded to arrive at adjusted non-GAAP figures for the three-month and full year periods ended December 31, 2008 and 2007.

Statement Regarding Unaudited Financial Information

The unaudited financial information set forth above is preliminary and subject to adjustments and modifications. The audit of the financial statements and related notes to be included in our annual report on Form 20-F for the year ended December 31, 2008 is still in progress. Adjustments and modifications to the financial statements may be identified during the course of this audit work, which could result in significant differences from this preliminary unaudited financial information.

Currency Convenience Translation

For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.8225 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2008 for cable transfers of RMB per US dollar as certified for customs purposes by the Federal Reserve Bank of New York. 2007 RMB figures were translated into US dollars at the rate of RMB7.2946 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2007.

About 3SBio Inc.

3SBio Inc. is a leading, fully integrated biotechnology company focused on researching, developing, manufacturing and marketing biopharmaceutical products, primarily in China. For more information, please visit 3SBio on the web at http://www.3sbio.com

Safe Harbor Statement

Certain statements in this release that are not purely historical in nature, including the 2009 full year guidance information, statements contained in "2009 Full Year Guidance & Selected Company Objectives" section, and management comments, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon 3SBio management's current expectations, and actual results could differ materially. Among the factors that could cause 3SBio's actual results to differ from what the company currently anticipates may include: competition from other domestic and foreign pharmaceutical companies; the market conditions or pharmaceutical products in China; market acceptance of 3SBio products; hospital or patient demand for our products; 3SBio's ability to expand its production, sales and distribution network and other aspects of its operations; its ability to develop and commercialize additional products or additional indications for existing products; its ability to analyze additional in-licensing opportunities; its ability to effectively protect its intellectual property; changes in the healthcare industry in China, including changes in the healthcare policies and regulations of the PRC government and changes in the healthcare insurance sector in the PRC; and fluctuations in general economic and business conditions in China. For additional information on these and other factors as well as risks, uncertainties and assumptions that may adversely and materially affect the 3SBio's business, financial conditions and results of operations, please refer to the company's filings with the Securities and Exchange Commission at http://www.sec.gov , particularly information set forth in Item 3.D "Risk Factors" in 3SBio's annual report on Form 20-F for the year ended Dec. 31, 2007, as continually amended and updated. 3SBio undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this press release.

3SBio Inc. and Subsidiaries

Unaudited Consolidated Balance Sheets

(expressed in thousands) December 31 December 31 December 31

2007 2008 2008

RMB RMB US$

Assets

Current assets

Cash and cash equivalents 811,026 439,237 64,380

Time deposits with financial

institutions -- 293,809 43,065

Accounts receivable, less

allowance for doubtful

accounts:

December 31, 2007 - RMB5,257;

December 31, 2008 RMB4,503 (US$660) 55,186 73,767 10,812

Inventories 6,882 7,748 1,136

Prepaid expenses and other

receivables 12,074 8,249 1,209

Structured deposits 3,527 -- --

Deferred tax assets 2,335 1,802 264

Total current assets 891,030 824,612 120,866

Available-for-sale securities 15,196 26,700 3,914

Property, plant and equipment, net 49,465 78,185 11,459

Lease prepayments 9,247 8,894 1,304

Non-current deposits 6,124 8,521 1,249

Intangible assets, net -- 5,225 766

Income tax receivable 556 -- --

Deferred tax assets 1,857 781 114

Total assets 973,475 952,918 139,672

Liabilities

Current liabilities

Accounts payable 1,693 1,939 284

Deferred grant income 374 374 55

Accrued expenses and other

payables 22,626 25,273 3,705

Income tax payable -- 1,256 184

Other current liabilities 67 57 8

Total current liabilities 24,760 28,899 4,236

Deferred grant income 3,526 3,152 462

Other liabilities 848 472 69

Total liabilities 29,134 32,523 4,767

Commitments and contingencies

Minority interests 549 -- --

Shareholders' equity

Share capital - ordinary shares

US$0.0001 par value, 500,000,000

shares authorized, 152,099,155 and

150,575,955 shares issued and

outstanding as of December 31, 2007

and 2008, respectively 122 121 18

Additional paid-in capital 917,527 908,377 133,144

Accumulated other comprehensive

loss (48,338) (102,126) (14,970)

Retained earnings 74,481 114,023 16,713

Total shareholders' equity 943,792 920,395 134,905

Total liabilities, minority

interests and shareholders' equity 973,475 952,918 139,672

Reconciliation Tables of GAAP to Adjusted Non-GAAP Figures

Three Months Ended December 31, 2008

(unaudited) Actual Actual Adjustment Adjusted Adjusted

GAAP GAAP Non-GAAP Non-GAAP

RMB US$ RMB RMB US$

Net Revenues:

EPIAO 39,326 5,764 39,326 5,764

TPIAO 16,373 2,400 16,373 2,400

Intefen 1,199 176 1,199 176

Inleusin 209 31 209 31

Iron 1,796 263 1,796 263

Export 1,148 168 1,148 168

Others 13 2 13 2

Total net revenues 60,064 8,804 60,064 8,804

Cost of revenues (5,622) (824) 110 (1) (5,512) (808)

Gross profit 54,442 7,980 54,552 7,996

Operating expenses

Research and

development

costs (12,439) (1,823) 7,110 (2) (5,329) (781)

Sales, marketing

and distribution

expenses (38,337) (5,619) 309 (1) (38,028) (5,574)

General and

administrative

expenses (5,960) (874) 825 (1) (5,135) (753)

Total operating

expenses (56,736) (8,316) (48,492) (7,108)

Operating (loss)

/income (2,294) (336) 6,060 888

Other income

/(expenses), net

Interest income 5,916 867 5,916 867

Grant income 107 16 107 16

Impairment loss on

available-for-sale

securities (4,391) (644) 4,391 (3) -- --

Others (716) (105) (716) (105)

Total other

income, net 916 134 5,307 778

(Loss)/income

before

income tax

expense and

minority interests (1,378) (202) 11,367 1,666

Income tax expense (457) (67) -- (4) (457) (67)

(Loss)/income

before minority

interests (1,835) (269) 10,910 1,599

Minority interests,

net of tax 377 55 377 55

Net (loss)/income (1,458) (214) 11,287 1,654

Three Months Ended December 31, 2008

(unaudited), continued

Actual Actual Adjustment Adjusted Adjusted

GAAP GAAP Non-GAAP Non-GAAP

RMB US$ RMB RMB US$

Net (loss)/in

come per share:

Basic and diluted (0.01) (0.00) 0.08 0.01

Basic weighted

average number

of shares

outstanding 150,575,955 150,575,955 150,575,955 150,575,955

Effect of

dilutive

potential

shares -- -- 10,500 10,500

Diluted

weighted

average

number of

shares

outstanding 150,575,955 150,575,955 150,586,455 150,586,455

Net (loss)/in

come per ADS:

Basic and

diluted (0.07) (0.01) 0.52 0.08

Basic

weighted

average

number of

ADSs

outstanding 21,510,851 21,510,851 21,510,851 21,510,851

Effect of

dilutive

potential

ADSs -- -- 1,500 1,500

Diluted

weighted

average

number of

ADSs

outstanding 21,510,851 21,510,851 21,512,351 21,512,351

Notes to reconciliation of our GAAP statements of income to our adjusted non-GAAP statements of income:

(1) To exclude share-based compensation expense.

(2) To exclude one-time upfront payment for licenses fee of RMB 6,948,000

and share-based compensation expense of RMB 162,000 for R&D staff.

(3) To exclude investment losses on available-for-sale securities

(4) No income tax effect on adjustments is required as they are incurred

by overseas companies that are not subject to income tax.

Three Months Ended December 31, 2007

(unaudited) Actual Actual Adjustment Adjusted Adjusted

GAAP GAAP Non-GAAP Non-GAAP

RMB US$ RMB RMB US$

Net Revenues:

EPIAO 29,798 4,085 29,798 4,085

TPIAO 11,718 1,606 11,718 1,606

Intefen 1,128 155 1,128 155

Inleusin 251 34 251 34

Iron 970 133 970 133

Export 1,625 223 1,625 223

Others 193 26 193 26

Total revenues 45,683 6,262 45,683 6,262

Cost of revenues (5,737) (786) (5,737) (786)

Gross profit 39,946 5,476 39,946 5,476

Operating expenses

Research and

Development costs (3,715) (509) (3,715) (509)

Sales, marketing

and distribution

expenses (22,712) (3,114) (22,712) (3,114)

General and

administrative

expenses (7,379) (1,012) 192 (1) (7,187) (985)

Total operating

expenses (33,806) (4,635) (33,614) (4,608)

Operating income 6,140 841 6,332 868

Other income/

(expenses), net

Interest income 9,048 1,240 9,048 1,240

Interest expense (70) (10) (70) (10)

Grant income 199 27 199 27

Others 299 41 299 41

Total other

income, net 9,476 1,298 9,476 1,298

Income before

Income tax

expense and

minority

interests 15,616 2,139 15,808 2,166

Income tax

credit/

(expense) 2,163 297 (2,739) (2) (576) (79)

Income before

minority

interests 17,779 2,436 15,232 2,087

Minority

interests,

net of tax 116 15 116 16

Net income 17,895 2,451 15,348 2,103

Three Months Ended December 31, 2007

(unaudited), continued

Actual Actual Adjustment Adjusted Adjusted

GAAP GAAP Non-GAAP Non-GAAP

RMB US$ RMB RMB US$

Net income

Per share:

Basic and

diluted 0.12 0.02 0.10 0.01

Basic

weighted

average

number

of shares

outstanding 152,099,155 152,099,155 152,099,155 152,099,155

Effect of

dilutive

potential

shares 323,897 323,897 323,897 323,897

Diluted

weighted

average

number

of shares

outstanding 152,423,052 152,423,052 152,423,052 152,423,052

Net income

per ADS:

Basic and

diluted 0.82 0.11 0.7 0.10

Basic

weighted

average

number

of ADSs

outstanding 21,728,451 21,728,451 21,728,451 21,728,451

Effect of

dilutive

potential

ADSs 46,271 46,271 46,271 46,271

Diluted

weighted

average

number

of ADSs

outstanding 21,774,722 21,774,722 21,774,722 21,774,722

Notes to reconciliation of our GAAP statements of income to our adjusted statements of income:

(1) To exclude share-based compensation expense

(2) To exclude reinvestment

Year Ended December 31, 2008

(unaudited) Actual Actual Adjustment Adjusted Adjusted

GAAP GAAP Non-GAAP Non-GAAP

RMB US$ RMB RMB US$

Net Revenues:

EPIAO 154,570 22,656 154,570 22,656

TPIAO 67,585 9,906 67,585 9,906

Intefen 4,989 731 4,989 731

Inleusin 773 113 773 113

Iron 6,984 1,024 6,984 1,024

Export 8,289 1,215 8,289 1,215

Others 55 8 55 8

Total revenues 243,245 35,653 243,245 35,653

Cost of

revenues (21,741) (3,187) 370 (1) (21,371) (3,132)

Gross profit 221,504 32,466 221,874 32,521

Operating

expenses

Research and

development

costs (22,477) (3,295) 7,469 (2) (15,008) (2,200)

Sales,

marketing

and

distribution

expenses (119,778) (17,556) 1,000 (1) (118,778) (17,410)

General and

administrative

expenses (31,458) (4,611) 3,097 (1) (28,361) (4,157)

Total operating

expenses (173,713) (25,462) (162,147) (23,767)

Operating income 47,791 7,004 59,727 8,754

Other income/

(expenses), net

Interest income 23,953 3,511 23,953 3,511

Grant income 388 57 388 57

Net realized

(loss)/gain

on available-

for-sale

securities (18,995) (2,784) 19,144 (3) 149 22

Impairment loss

on available-

for-sale

securities (4,391) (644) 4,391 (4) -- --

Others 1,896 278 1,896 278

Total other

Income ,net 2,851 418 26,386 3,868

Income before

income tax

expense and

minority

interests 50,642 7,422 86,113 12,622

Income tax

expense (11,649) (1,707) -- (5) (11,649) (1,707)

Income before

minority

interests 38,993 5,715 74,464 10,915

Minority

interests,

net of tax 549 80 549 80

Net income 39,542 5,795 75,013 10,995

Year Ended December 31, 2008

(unaudited), continued

Actual Actual Adjustment Adjusted Adjusted

GAAP GAAP Non-GAAP Non-GAAP

RMB US$ RMB RMB US$

Net income per

share:

Basic and diluted 0.26 0.04 0.49 0.07

Basic weighted

average number

of shares

outstanding 151,655,631 151,655,631 151,655,631 151,655,631

Effect of dilutive

potential shares 57,118 57,118 57,118 57,118

Diluted weighted

average number

of shares

outstanding 151,712,749 151,712,749 151,712,749 151,712,749

Net income per ADS:

Basic and diluted 1.82 0.27 3.46 0.51

Basic weighted

average number of

ADSs outstanding 21,665,090 21,665,090 21,665,090 21,665,090

Effect of dilutive

potential ADSs 8,160 8,160 8,160 8,160

Diluted weighted

average number of

ADSs outstanding 21,673,250 21,673,250 21,673,250 21,673,250

Notes to reconciliation of our GAAP statements of to our adjusted non-GAAP statements of income:

(1) To exclude share-based compensation expense.

(2) To exclude one-time upfront payment for license fee of RMB6,948,000

and share-based compensation expense of RMB 521,000 for R&D staff.

(3) To exclude realized loss on available-for-sale securities.

(4) To exclude impairment loss on available-for-sale securities.

(5) No income tax effect on adjustments is required as they are

incurred by overseas companies that are not subject to income tax.

Year Ended December 31, 2007

(unaudited) Actual Actual Adjustment Adjusted Adjusted

GAAP GAAP Non-GAAP Non-GAAP

RMB US$ RMB RMB US$

Net Revenues:

EPIAO 121,220 16,618 -- 121,220 16,618

TPIAO 43,074 5,905 -- 43,074 5,905

Intefen 4,123 565 -- 4,123 565

Inleusin 1,027 141 -- 1,027 141

Iron 3,206 440 -- 3,206 440

Export 6,784 930 -- 6,784 930

Others 739 101 -- 739 101

Total revenues 180,173 24,700 180,173 24,700

Cost of

revenues (17,427) (2,389) -- (17,427) (2,389)

Gross profit 162,746 22,311 162,746 22,311

Operating

expenses

Research and

development

costs (11,635) (1,595) -- (11,635) (1,595)

Sales,

marketing

and

distribution

expenses (84,187) (11,541) -- (84,187) (11,541)

General and

administrative

expenses (18,379) (2,520) 995 (1) (17,384) (2,383)

Total

operating

expenses (114,201) (15,656) (113,206) (15,519)

Operating

income 48,545 6,655 49,540 6,792

Other income/

(expenses),

net

Interest

income 36,015 4,937 36,015 4,937

Interest

expense (825) (113) -- (825) (113)

Grant income 1,067 146 -- 1,067 146

Others 205 28 -- 205 28

Total other

income, net 36,462 4,998 36,462 4,998

Income before

income tax

expense

and minority

interests 85,007 11,653 86,002 11,790

Income tax

expense (3,419) (469) (2,739) (2) (6,158) (844)

Income

before

minority

interests 81,588 11,184 79,844 10,946

Minority

interests,

net of tax (75) (10) (75) (10)

Net income 81,513 11,174 79,769 10,936

Year Ended December 31, 2007

(unaudited), continued

Actual Actual Adjustment Adjusted Adjusted

GAAP GAAP Non-GAAP Non-GAAP

RMB US$ RMB RMB US$

Net income per share:

Basic and diluted 0.56 0.08 0.54 0.07

Basic weighted

average number

of shares 146,646,049 146,646,049 146,646,049 146,646,049

outstanding

Effect of dilutive

potential shares 68,993 68,993 68,993 68,993

Diluted weighted

average number of

shares outstanding 146,715,042 146,715,042 146,715,042 146,715,042

Net income per ADS:

Basic and diluted 3.89 0.53 3.81 0.52

Basic weighted

average number

of ADSs 20,949,436 20,949,436 20,949,436 20,949,436

outstanding

Effect of dilutive

potential ADSs 9,856 9,856 9,856 9,856

Diluted weighted

average number ADSs

of outstanding 20,959,292 20,959,292 20,959,292 20,959,292

Notes to reconciliation of our GAAP statements of income to our adjusted statements of income:

(1) To exclude share-based compensation expense.

(2) To exclude reinvestment tax refund.

Source: 3SBio Inc.
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