- Q4 2006 net revenues grew 36.0%, as compared to Q4 2005, to US$4.5
million
- Q4 2006 operating income up 148.1%, as compared to Q4 2005, to US$1.1
million
- 2006 fiscal year net revenues increased 25.3% year-over-year to US$16.4
million
- 2006 fiscal year net income grew 89.9% year-over year to US$3.9 million
SHENYANG, China, April 3 /PXinhua-RNewswire-FirstCall/ -- 3SBio Inc.
(Nasdaq: SSRX), 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, 2006.
Fourth Quarter 2006 Financial Highlights:
-- Total net revenues increased 36.0% over fourth quarter 2005 to RMB35.2
million (US$4.5 million).
-- Net revenue from our flagship injectable recombinant human
erythropoietin products, or EPO products, marketed under our EPIAO
brand, increased 28.8% over fourth quarter 2005 to RMB26.0 million
(US$3.3 million).
-- Net revenue from our protein-based therapeutic recombinant human
thrombopoietin products, or TPO products, marketed under our TPIAO
brand, increased 201.4% over fourth quarter 2005 to RMB5.9 million
(US$0.8 million).
-- Operating income increased 148.1% over fourth quarter 2005 to RMB8.7
million (US$1.1 million).
-- Net income increased 124.7% over fourth quarter 2005 to RMB7.1 million
(US$0.9 million).
-- Earnings per American Depositary Share ("ADS") for the fourth quarter
2006 were RMB0.50 (US$0.06), compared to RMB0.22 for the fourth quarter
2005.
Fiscal Year 2006 Financial Highlights:
Compared to fiscal year 2005 results,
-- Total net revenues increased 25.3% to RMB127.8 million (US$16.4
million).
-- Revenue from EPIAO increased 16.5% to RMB98.8 million (US$12.7 million)
-- Revenue from TPIAO increased 474.5% to RMB16.1 million (US$2.1 million)
-- Revenue from export sales increased 17.8% to RMB5.9 million (US$0.8
million).
-- Operating income increased 81.2% to RMB36.5 million (US$4.7 million).
-- Net income increased 89.9% to RMB30.5 million (US$3.9 million).
-- Earnings per ADS were RMB2.13 (US$0.27) in 2006, compared to RMB1.12
per ADS in 2005.
"We are very pleased with the growth of our earnings, and with our
continued strategic and operational progress," commented Dr. Jing Lou, chief
executive officer of 3SBio. "We achieved solid growth throughout our business,
especially with regard to our flagship EPO product, EPIAO, and our latest
internally developed TPO product, TPIAO. Our EPIAO products continued to be
the market leader both in terms of revenues and sales volume, with market
shares of 36% and 30%, respectively, for the fourth quarter 2006, according to
IMS Health and our internal data. Our TPIAO products continued to gain market
acceptance since launch, ending the fiscal year 2006 as our second biggest
revenue contributor, accounting for 12.6% of our total revenues for the year.
We continue to make steady progress in our robust development pipeline, and
just recently announced the addition to our product portfolio of our pre-
filled syringe EPIAO products. These developments further demonstrate our
focus on growth, margins and profitability through our proven R&D capabilities,
innovative and cost-effective manufacturing operations, established nationwide
sales and marketing network and market oriented management team."
Fourth Quarter and Fiscal Year 2006 Unaudited Financial Results
Net Revenues.
Our net revenues amounted to RMB35.2 million (US$4.5 million) in the
fourth quarter of 2006 compared to RMB35.6 million net revenues for third
quarter of 2006. Due to seasonality of our sales, the third quarter typically
represents the highest sales period for a year. The mitigation of seasonal
effects on our sales for the fourth quarter of 2006 was primarily due to the
quarter-over-quarter upward trend of our TPIAO products. Net revenues for
fourth quarter 2006 increased by 36.0%, over fourth quarter 2005.
Net revenues increased by 25.3% to RMB127.8 million (US$16.4 million) for
fiscal year 2006, from RMB102.0 million in 2005. This increase was primarily
attributable to the rapid market adoption of our TPIAO products, which
generated revenues of RMB16.1 million (US$2.1 million) in 2006, compared to
RMB2.8 million in 2005. TPIAO was our second largest revenue contributor in
2006, accounting for 12.6% of overall net revenues in the period. The
increase was also attributable to greater net revenues from our leading EPIAO
products, which increased by 16.5% from RMB84.8 million in 2005 to RMB98.8
million (US$12.7 million) in 2006.
Excluding revenues from our newly launched TPIAO, our overall rate of revenue
growth for 2006 was 12.6%, compared to 28.4% for 2005. This slowdown in
revenue growth rate was primarily attributable to a government sponsored anti-
corruption campaign, under which certain hospitals denied access to sales
representatives from pharmaceutical companies because the hospitals wanted to
avoid the perception of corruption, which in turn temporarily limited our
ability to expand into new hospitals in 2006. We support the government's
anti-corruption efforts and believe they will have a positive effect on the
pharmaceutical industry in China and on our business in the long run.
Gross Profit.
Gross profit increased 40.5% to RMB32.4 million (US$4.2 million) for the
fourth quarter 2006 from RMB23.1 million in the fourth quarter 2005.
Gross margin was 92.0% in the fourth quarter 2006, up slightly from 91.4%
in the third quarter 2006 and up from 89.1% in the fourth quarter 2005. In
fiscal 2006, cost of revenues decreased by 25.2% and gross margin improved
from 84.8% in 2005 to 90.9% in 2006. The improved margins were due to costs
reduction in fiscal 2006 primarily attributable to a decrease in depreciation
charges, reduced needs for provisions and charges such as inventory write-offs
and amortization of intangibles and an increased production yield for EPIAO in
2006.
Income from Operations.
Operating income for the fourth quarter of 2006 was RMB8.7 million
(US$1.1 million), representing a 21.2% decrease, compared to RMB11.1 million
in the third quarter of 2006, but up 148.1% from an operating income of RMB3.5
million in the fourth quarter of 2005. Operating margin for the fourth
quarter 2006 was 24.8%, lower than the 31.0% operating margin in the third
quarter of 2006, due to normal seasonality, but up from 13.6% in the fourth
quarter of 2005. The lower fourth quarter operating income and margin in 2006
as compared to the third quarter 2006 was mainly due to increased marketing
efforts in the fourth quarter of 2006 and the additional cost of RMB1.2
million (US$0.2 million) stock-based compensation associated with 312,504
restricted shares awarded in June 2006 and share options granted in October
2006 to purchase 1,060,000 ordinary shares.
Operating margin for 2006 was 28.6%, up from 19.8% for 2005, attributable
to continued operational improvements in our manufacturing and sales platforms
through increased product offerings and scale of operations.
Operating expenses.
Our total operating expenses increased by 20.0% from RMB66.4 million in
2005 to RMB79.6 million (US$10.2 million) in 2006. The increase was primarily
due to an increase in sales, marketing and distribution expenses.
-- Research and development expenses. Our research and development
expenses increased 90.9% to RMB6.1 million (US$0.8 million) for 2006
from RMB3.2 million for 2005. The increase was mainly attributable to
research and development expenses associated with TPIAO's phase IV
post-marketing clinical tests and the development of our EPIAO pipeline
products. The increase was also related to a one-time licensing fee
for the licensing and co-development of anti-TNF alpha monoclonal
antibody therapeutics with Epitomics Inc., and for continued
development of other pipeline products.
-- Sales, marketing and distribution expenses. Our sales, marketing and
distribution expenses increased 24.5% to RMB61.3 million (US$7.9
million) for 2006 from RMB49.2 million for 2005. The increase was
primarily attributable to higher staff costs and bonuses as well as the
increase in marketing and promotion costs for our TPIAO and higher
sales activities in general. Sales, marketing and distribution expenses
as a percentage of net revenues remained stable at around 48%.
-- General and administrative expenses. Our general and administrative
expenses decreased 12.1% from RMB14.0 million for 2005 to RMB12.3
million (US$1.6 million) for 2006. The decrease was primarily
attributable to the reduced requirement for bad debt provision and
depreciation, partially offset by an increase in stock-based
compensation charge. General and administrative expenses as a
percentage of net revenues decreased from 13.7% in 2005 to 9.6% in
2006.
Other expense, net.
Net other expense decreased 65.6% from RMB2.5 million for 2005 to RMB0.9
million (US$0.1 million) for 2006. The decrease was primarily due to lower
interest expenses resulting from reduced average bank borrowings in 2006.
Income before income tax expense and minority interests.
As a result of the foregoing, our income before income tax expense and
minority interests increased 101.9%, from RMB17.7 million for 2005 to RMB35.7
million (US$4.6 million) for 2006.
Income tax expense.
Our income tax expense increased 196.1% from RMB1.8 million for 2005 to
RMB5.2 million (US$0.7 million) for 2006, and our effective tax rate was 14.6%
for 2006, compared to 10.0% for 2005, primarily attributable to the effects of
non-deductible share-based compensation expenses in 2006 and increase in
applicable tax rate for our major operating subsidiary from 10% in 2005 to 15%
in 2006 due to the expiration of a tax holiday.
Net income.
As a result of the foregoing, our net income increased 89.9%, from RMB16.1
million for 2005 to RMB30.5 million (US$3.9 million) for 2006.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is preliminary and
subject to adjustments. 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, 2006 is still in progress. Adjustments to the financial
statements may be identified when audit work is completed, 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 RMB7.8041 to US$1.00, the noon buying rate for
US dollars in effect on December 29, 2006 for cable transfers of RMB per US
dollar as certified for customs purposes by the Federal Reserve Bank of New
York.
Related Party Transaction
The collaboration partner for our development of TNF alpha monoclonal
antibody is a related party, Epitomics Inc., the Chief Executive Officer of
which is an immediate family member of the Company's CSO. The collaboration
between the two companies is to combine 3SBio's development capabilities and
Epitomics' approach for generating large panel of therapeutic leads for the
purpose of the identification of best-in-class drug candidates for anti-TNF
therapy. Research and development fees of RMB0.4 million were payable to
Epitomics as of the year ended December 31, 2006. Under the terms of the
agreement Epitomics may receive royalties on any potential future products
sold in China.
Business Highlights
Pre-filled Syringe EPO -- On March 20, 2007, 3SBio Inc. announced that the
Company has received approval from China's State Food and Drug Administration
("SFDA") for licenses to produce and sell pre-filled syringe EPO products in
2,000 IU, 3,000 IU, 4,000 IU and 10,000 IU strengths under its brand name
EPIAO. The Company plans to launch pre-filled syringe EPIAO products within
2007.
TPIAO Launch -- In January 2006, 3SBio launched its newest internally
developed protein-based therapeutic product, TPIAO. TPIAO is a thrombopoietin,
or TPO, indicated for the treatment of chemotherapy-induced thrombocytopenia,
or platelet deficiency. TPIAO is the first protein-based therapeutic of its
type approved for thrombocytopenia in China. Since launch, TPIAO has become
3SBio's fastest growing product and second highest revenue contributor behind
EPIAO, representing 12.6% of sales revenues for the fiscal year 2006. With
market exclusivity in China until 2010, TPIAO represents a key growth driver
in 3SBio's market leading portfolio.
In-Licensed Products -- 3SBio complemented its portfolio of internally
developed products in 2006 with the addition of two in-licensed products,
Tietai Iron Sucrose Supplement and Baolijin, our recombinant human granulocyte
colony-stimulating factor or G-CSF, in-licensed in May and August 2006,
respectively. The in-licensing agreements for both products include five-year
exclusive distribution rights, and bolster the Company's market leading
portfolio of products focused on the oncology and nephrology therapeutic end
markets.
Development of Export Sales -- Throughout 2006, 3SBio received Good
Manufacturing Practice (GMP) approval from a growing list of countries,
further diversifying its export business. These included: Sri Lanka (March),
Trinidad & Tobago (July), Republic of Yemen (August), Guatemala (September),
and Colombia (November). While exports constitute a small percentage (4.6%)
of 3SBio's total sales for fiscal 2006, they represent a growing opportunity
which 3SBio intends to continue to develop in the future.
Awards for Excellence -- Further highlighting its goal to continually
strive for scientific and operational excellence, 3SBio received numerous
science and technology awards in 2006. These include:
-- first prize for Progress in Science and Technology awarded by the
government of Shenyang;
-- third prize for Transformation of Science and Technology Achievements,
awarded by the Science and Technology Department of Liaoning Province;
-- Team Award for Science and Technology Innovation during the Tenth
"Five-Year Plan", awarded by the Science and Technology Bureau of
Shenyang; and
-- the Individual Award for Science and Technology Innovation during the
Tenth "Five-Year Plan", presented to 3SBio CEO Dr. Jing Lou by the
Science and Technology Bureau of Shenyang.
Initial Public Offering - On February 7, 2007, 3SBio became the first
Chinese biotech company to list on the NASDAQ Global Market in an initial
public offering of 7.7 million ADSs. Including the exercised over-allotment
option of an additional 252,634 ADSs, the Company successfully raised
approximately US$105.7 million from this offering. As of the date of this
release, there were 152,084,155 shares of common stock outstanding, of which
the number of ADSs issued and available for trading is 8,452,140 ADSs.
Conference Call
3SBio senior management will host a conference call at 5:00 am (Pacific) /
8:00 am (Eastern) / 8:00 pm (Beijing/Hong Kong) on Tuesday, April 3, 2007 to
discuss its fourth quarter and fiscal year 2007 financial results and recent
business activity. The conference call may be accessed by calling (US)
+1 480 629 9564 / (UK) +44 (0)20 8515 2301 / (HK) +852 3009 5027. A telephone
replay will be available shortly after the call until April 16, 2007 at (US)
+1 303 590 3030 / (UK) +44 (0)20 7154 2833, Passcode: 3714705; and (HK)
+852 2287 4304, Passcode: 095110#.
A live webcast of the conference call and replay will be available on the
investor relations page of 3SBio's website at www.3sbio.com.
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 www.3sbio.com.
Safe Harbor Statement
Statements in this release regarding certain anticipated business
prospects resulting from the approval 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 expected market growth for pharmaceutical products in China; market
acceptance of 3SBio products; expected 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 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 that may affect the 3SBio's
financial results, please refer to the company's filings with the Securities
and Exchange Commission at www.sec.gov. 3SBio undertakes no obligation to
update or revise these forward-looking statements, whether as a result of new
information, future events or otherwise, after the date of this press release.
Contact:
Investor Contact:
Clara Mak, CFO
3SBio Inc.
No.3 A1, Road 10,
Shenyang Development Zone
Shenyang, China 110027
+86 (24) 2581 1820
IR@3sbio.com
www.3SBio.com
Investor Relations (HK):
Ruby Yim, Managing Director
Taylor Rafferty
Suite 2003-5 Vicwood Plaza
199 Des Voeux Road Central
Hong Kong, China
+852 3196 3712
3sbio@taylor-rafferty.com
www.taylor-rafferty.com
Investor Relations (US):
Mahmoud Siddig, Director
Taylor Rafferty
205 Lexington Avenue
8th Floor
New York, NY 10016
+1 (212) 889-4350
3sbio@taylor-rafferty.com
www.taylor-rafferty.com
Media Contact:
John Dooley
Taylor Rafferty
205 Lexington Avenue
8th Floor
New York, NY 10016
+1 (212) 889-4350
3sbio@taylor-rafferty.com
www.taylor-rafferty.com
3SBio Inc. and subsidiaries
Unaudited consolidated balance sheets
(expressed in thousands)
December 31,
2005(1) 2006 2006
RMB RMB US$
Assets
Current assets
Cash and cash equivalents 25,746 25,372 3,251
Accounts receivable, less allowance
for doubtful accounts:
December 31, 2005 - RMB5,892;
Dec. 31, 2006 - RMB4,871 (US$624) 34,376 37,402 4,793
Inventories 6,450 8,682 1,112
Prepaid expenses and other receivables 6,927 14,872 1,906
Amount due from shareholder 19,675 - -
Income tax prepaid 121 - -
Deferred tax assets 2,717 2,154 276
Total current assets 96,012 88,482 11,338
Property, plant and equipment, net 42,472 43,142 5,528
Lease prepayments 9,953 9,600 1,230
Deferred tax assets 2,124 1,251 160
Total assets 150,561 142,475 18,256
Liabilities
Current liabilities
Short-term bank loans 89,000 15,000 1,922
Accounts payable 1,336 1,769 227
Deferred grant income 924 611 78
Accrued expenses and other payables 11,039 16,708 2,141
Income tax payable - 1,167 150
Amount due to a director - 3,835 491
Amount due to investee company 1,813 - -
Other current liabilities 139 92 12
Total current liabilities 104,251 39,182 5,021
Long-term bank loans - 25,000 3,203
Deferred grant income 4,511 3,900 500
Other liabilities 677 585 75
Total liabilities 109,439 68,667 8,799
Commitments and contingencies
Minority interests 502 474 60
Shareholders' equity
Share capital - ordinary shares US$0.0001
par value, 500,000,000 shares authorized,
100,000,998 shares issued and outstanding
as of Dec. 31, 2006 - 80 10
Registered capital 62,974 - -
Additional paid-in capital 15,167 80,286 10,288
Statutory reserves 2,266 4,017 515
Accumulated losses (39,787) (11,049) (1,416)
Total shareholders' equity 40,620 73,334 9,397
Total liabilities and shareholders' equity 150,561 142,475 18,256
1 Derived from audited financial statements included in the Company's
registration statement on Form F-1 filed with the U.S. Securities and
Exchange Commission on February 7, 2007.
3SBio Inc. and subsidiaries
Unaudited quarterly consolidated statements of income
(expressed in thousands, except per share , per ADS and other share
and ADS data)
Three-month period ended
Dec. 31, 2005 Sept. 30,2006 Dec. 31, 2006
RMB RMB RMB US$
Net Revenues:
EPIAO 20,179 27,777 25,984 3,325
TPIAO 1,951 5,218 5,880 754
Intefen 1,501 1,064 1,527 195
Inleusin 228 199 310 40
Export 1,803 1,077 1,209 155
Others 221 308 298 43
Total 25,883 35,643 35,208 4,512
Cost of revenues (2,833) (3,060) (2,819) (361)
Gross profit 23,050 32,583 32,389 4,151
Operating expenses
Research and development
costs (885) (2,166) (2,346) (301)
Sales, marketing and
distribution expenses (14,072) (16,717) (17,832) (2,285)
General and administrative
expenses (4,578) (2,636) (3,491) (447)
Total operating expenses (19,535) (21,519) (23,669) (3,033)
Operating income 3,515 11,064 8,720 1,118
Other (expense)/income, net
Interest income 62 175 127 16
Interest expense (1,305) (875) (858) (110)
Grant income 1,008 1,145 732 94
Others (18) (3) (9) (1)
Total other (expense)/
income, net (253) 442 (8) (1)
Income before income
tax expense and minority
interests 3,262 11,506 8,712 1,117
Income tax expense (94) (1,397) (1,643) (211)
Income before minority
interests 3,168 10,109 7,069 906
Minority interests,
net of tax (9) (15) 27 3
Net income 3,159 10,094 7,096 909
Net income per share:
Basic and diluted 0.03 0.10 0.07 0.01
Weighted average
number of shares
outstanding 100,000,998 100,000,998 100,000,998 100,000,998
Net income per ADS:
Basic and diluted 0.22 0.71 0.50 0.06
Weighted average number
of ADSs outstanding 14,285,857 14,285,857 14,285,857 14,285,857
3SBio Inc. and subsidiaries
Unaudited consolidated statements of income
(expressed in thousands, except per share per ADS and other share and
ADS data)
Year ended December 31,
2004(1) 2005(1) 2006 2006
RMB RMB RMB US$
Net Revenues:
EPIAO 64,937 84,804 98,836 12,665
TPIAO - 2,795 16,056 2,057
Intefen 7,680 6,827 4,995 640
Inleusin 2,738 1,606 1,132 145
Export 1,736 4,990 5,878 753
Others 157 991 883 113
Total 77,248 102,013 127,780 16,373
Cost of revenues (15,027) (15,497) (11,598) (1,486)
Gross profit 62,221 86,516 116,182 14,887
Operating expenses
Research and
development costs (3,699) (3,196) (6,100) (782)
Sales, marketing
and distribution
expenses (38,762) (49,205) (61,280) (7,852)
General and
administrative
expenses (13,600) (13,956) (12,269) (1,572)
Total operating expenses (56,061) (66,357) (79,649) (10,206)
Operating income 6,160 20,159 36,533 4,681
Other income/(expense), net
Interest income 81 144 436 56
Interest expense (6,029) (5,551) (4,245) (544)
Grant income 6,442 3,771 3,146 403
Others - (850) (192) (25)
Total other income/
(expense), net 494 (2,486) (855) (110)
Income before income
tax expense
and minority interests 6,654 17,673 35,678 4,571
Income tax expense (226) (1,762) (5,217) (668)
Income before minority
interests 6,428 15,911 30,461 3,903
Minority interests,
net of tax 182 144 28 4
Net income 6,610 16,055 30,489 3,907
Net income per share:
Basic and diluted 0.07 0.16 0.30 0.04
Weighted average
number of
shares outstanding 100,000,998 100,000,998 100,000,998 100,000,998
Net income per ADS:
Basic and diluted 0.46 1.12 2.13 0.27
Weighted average
number of ADSs
outstanding 14,285,857 14,285,857 14,285,857 14,285,857
