Sinovac Reports Unaudited First Half of 2017 Financial Results

BEIJING, Dec. 1, 2017 /PRNewswire/ -- Sinovac Biotech Ltd. (NASDAQ: SVA) ("Sinovac" or the "Company"), a leading provider of biopharmaceutical products in China, announced today that it reported its unaudited financial results for the six months ended June 30, 2017.

Financial Highlights

• Sales revenue for the first six months of 2017 was $66.9 million compared to $12.3 million in the prior year period, an increase of 442.6%. Sales increased primarily due to revenue generated by the Company's EV71 vaccine and a low comparison base in the second quarter of 2016 due to the Shandong vaccine scandal that negatively impacted the whole industry.
• Net income attributable to common shareholders was $10.9 million, or $0.19 per basic and diluted share, compared to net loss attributable to common shareholders of $8.3 million, or $(0.14) per basic and diluted share, in the prior year period.

Business Highlights

Research and Development

Varicella - Sinovac obtained clinical research approval for its proprietary varicella vaccine candidate from the CFDAin September2015 and completed clinical trials in 2017. The production license application was submitted to the CFDA in November 2017.

EV71 - In November 2017, Sinovac obtained clinical trial approval to conduct a trial on healthy children aged from three to five years old. This vaccine was initially approved in January 2016 to target healthy children aged from six months to three years old. The Company made an application to conduct clinical study in an expanded population in April 2017.

Mr. Weidong Yin, Chairman, President and CEO of the Sinovac, commented, "In the first half of 2017, we experienced a year-over-year revenue growth of 442.6%. The revenue increase was mainly driven by the sales of EV71 vaccine that we commercialized in 2016. After the Shandong incident, sales activities resumed after a new policy on vaccine distribution and logistics was implemented at the beginning of 2017.This resulted inhigher first half sales of our regular vaccines, including Healive, Bilive, Anflu and mumps, than those of first half of 2016.

From the beginning of this year, we also had a few developments of our R&D programs. We filed production license application of our PPV-23, completed phase II trial of our Sabin-IPV, and completed phase III clinical trial of our varicella vaccine. We also filed an application of production license with CFDA for our varicella vaccine recently. We believe the pipeline products developments bring future growth potential. Sinovac will keep executing our strategy to develop and provide vaccines to address the unmet medical needs."

Unaudited Financial Results for the First Six Months of 2017

Sales from continuing operations in the first half of 2017 were $66.9 million compared to $12.3 million in the prior year period. Sales increased primarily due to revenue generated by the Company's EV71 vaccine and a low comparison base in the second quarter of 2016 due to the Shandong vaccine scandal.

Gross profit from continuing operations was $59.2 million compared to gross profit of $4.0 million in the prior year period. The increase was primarily due to the contribution of EV71 vaccine sales in the first half of 2017. Gross margin was 88.4% compared to 32.2% in the prior year period. The low growth margin in the first half of 2016 was due to higher inventory provision provided for the hepatitis A&B and mumps vaccines, higher idle capacity costs charged to cost of sales, and a negative gross profit for the hepatitis A&B vaccine due to higher sales returns provision provided in the first half of 2016 as a result of the Shandong incident.

Selling, general and administrative expenses in the first half of 2017 were $36.7 million compared to $14.5 million in the same period of 2016. The Company's selling, general and administrative expenses increased with the higher level of sales activity. The Company also incurred a cost of $0.8 million relating to the proposed privatization of Sinovac.

R&D expenses in the first half of 2017 were $8.8 million compared to $4.9 million in the same period of 2016. The increase was mainly due to higher R&D expenses on the varicella and sIPV vaccine projects in the first half of 2017.

Income from continuing operations was $15.8 million compared to loss from continuing operations of $14.2 million in the prior year period.

Net income attributable to common shareholders was $10.9 million, or $0.19 per basic and diluted share, compared to net loss attributable to common shareholders of $8.3 million, or $(0.14) per basic and diluted share, in the prior year period.

Non-GAAP EBITDA was $15.9 million in the first half of 2017 compared to a loss of $11.9 million in the prior year period. Non-GAAP net income from continuing operations in the first half of 2017 was $16.2 million compared to a loss of $13.1 million in the prior year period. Non-GAAP diluted earnings per share from continuing operations in the first half of 2017 were $0.20 compared to a loss of $(0.17) per share in the prior year period. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

As of June 30, 2017, cash and cash equivalents totaled $55.0 million compared to $62.4 million as of December 31, 2016. For the six months ended June 30, 2017 net cash provided by operating activities was $5.1 million. Net cash used in investing activities was $6.8 million, which was due to the purchase of equipment. Net cash used in financing activities was $6.7 million, including loan proceeds of $11.2 million and loan repayments of $17.9 million. As of June 30, 2017, the Company had $21.8 million of bank loans due within one year. The Company expects that its current cash position will be able to support its operations for at least the next 12 months. The Company will seek new commercial bank loans to finance the commercialization of its pipeline products and for other operational purposes when appropriate.

About Sinovac

Sinovac Biotech Ltd. is a China-based biopharmaceutical company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases. Sinovac's product portfolio includes vaccines against enterovirus71, or EV71, hepatitis A and B, seasonal influenza, H5N1 pandemic influenza (avian flu), H1N1 influenza (swine flu), and mumps. The EV71 vaccine, an innovative vaccine developed by Sinovac against hand foot and mouth disease caused by EV71, was commercialized in China in 2016. In 2009, Sinovac was the first company worldwide to receive approval for its H1N1 influenza vaccine, which it has supplied to the Chinese Government's vaccination campaign and stockpiling program. The Company is also the only supplier of the H5N1 pandemic influenza vaccine to the government stockpiling program. The Company is developing a number of new products including a Sabin-strain inactivated polio vaccine, pneumococcal polysaccharides vaccine, pneumococcal conjugate vaccine and varicella vaccine. Sinovac primarily sells its vaccines in China, while also exploring growth opportunities in international markets. The Company has exported select vaccines to over 10 countries in Asia and South America. For more information, please visit the Company's website at www.sinovac.com.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that might cause such a difference include our inability to compete successfully in the competitive and rapidly changing marketplace in which we operate, failure to retain key employees, cancellation or delay of projects and adverse general economic conditions in the United States and internationally. These risks and other factors include those listed under "Risk Factors" and elsewhere in our Annual Report on Form 20-F as filed with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  The Company assumes no obligation to update the forward-looking information contained in this release.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Sinovac uses the following non-GAAP financial measures: non-GAAP EBITDA, non-GAAP net income from continuing operations and non-GAAP diluted EPS from continuing operations.  For more information on these non-GAAP financial measures, please refer to the table captioned "Reconciliations of non-GAAP Measures to the Nearest Comparable GAAP Measures" in this results announcement.

Sinovac believes that non-GAAP EBITDA, non-GAAP net income from continuing operations and non-GAAP diluted EPS from continuing operations help identify underlying trends in its business that could otherwise be distorted by the effect of certain income or expenses that Sinovac includes in income from operations from continuing operations, net income from continuing operations and diluted EPS from continuing operations. Sinovac believes that non-GAAP EBITDA, non-GAAP net income from continuing operations and non-GAAP diluted EPS from continuing operations provide useful information about its core operating results, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. Non-GAAP EBITDA, non-GAAP net income from continuing operations and non-GAAP diluted EPS from continuing operations should not be considered in isolation or construed as an alternative to income from operations from continuing operations, net income from continuing operations, diluted EPS from continuing operations, or any other measure of performance or as an indicator of Sinovac's operating performance. The non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.

Non-GAAP EBITDA represents income (loss) from continuing operations, excludes interest and financing expenses, interest income, net other income (expenses) and income tax benefit (expenses), and certain non-cash expenses, consisting of share-based compensation expenses, amortization and depreciation that Sinovac does not believe are reflective of the core operating performance during the periods presented.

Non-GAAP net income from continuing operations represents net income from continuing operations before share-based compensation expenses, and foreign exchange gain or loss.

Non-GAAP diluted EPS from continuing operations represents non-GAAP net income attributable to ordinary shareholders from continuing operations divided by the weighted average number of shares outstanding during the periods on a diluted basis, including accounting for the effect of the assumed conversion of options.

Contact

Sinovac Biotech Ltd.
Helen Yang
Tel: +86-10-8279-9871
Fax: +86-10-6296-6910
Email: ir@sinovac.com

ICR Inc.
Bill Zima
U.S: 1-646-308-1707
Email: william.zima@icrinc.com

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