Sinovac Reports Unaudited Fourth Quarter and Full Year 2015 Financial Results

BEIJING, April 5, 2016 /PRNewswire/ -- Sinovac Biotech Ltd. (NASDAQ: SVA), a leading provider of biopharmaceutical products in China, announced today its unaudited fourth quarter and twelve month financial results for the period ended December 31, 2015.

Fourth Quarter 2015 Financial Highlights
(compared to the fourth quarter of 2014)

• Quarterly sales from continuing operations were $23.0million, an increase of 13.1% from $20.3 million in the prior year period.
• Gross profit from continuing operations was $15.7million, an increase of 2.3% from $15.3million in the prior year period. Gross margin was 68.3%, compared to 75.5% in the prior year period.
• Net income from continuing operations was $1.3million, compared to a net income of $2.4 million in the prior year period.Net loss from discontinued operations was $109 thousand, compared to net loss from discontinued operations of $217 thousand in the prior year period.
• Net income attributable to common shareholders was $504 thousand, or $0.01 per basic and diluted share, compared to net income attributable to common shareholders of $1.3 million, or $0.02 per basic and diluted share in the prior year period.
• Non-GAAP EBITDA decreased by 14% to $4.5 million in the fourth quarter of 2015, compared to $5.1 million in the prior year period. Non-GAAP net income from continuing operations in the fourth quarter of 2015 was $2.2million, a decrease of 15% compared to $2.6million in the prior year period.

Full Year 2015 Financial Highlights
(compared to the full year 2014)

• Total sales from continuing operations in 2015 were $67.4 million, an increase of 7.1% from $62.9 million in 2014.
• Gross profit from continuing operations in 2015 was $49.0 million, an increase of 3.2% from $47.5 million in2014. Gross margin was 72.7%, compared to 75.4% in 2014.
• Net income from continuing operations was $515 thousand, compared to a net income of $1.2 million in 2014. Net loss from discontinued operations was $728 thousand, compared to net loss of $1.5 million in 2014.
• Net loss attributable to common shareholders in 2015 was $1.1 million, or $0.02 net loss per basic and diluted share, compared to net loss of $851 thousand, or $0.02 net loss per basic and diluted share in 2014.
• Non-GAAP EBITDA increased by 7% to $11.2 million in 2015, compared to $10.4 million in 2014. Non-GAAP net income from continuing operations in 2015 was $2.4 million, an increase of 12% compared to $2.1 million in 2014.

Mr. Weidong Yin, Chairman, President and CEO of the Sinovac, commented, "We achieved continued sales growth in 2015, despite a more challenging market environment for vaccine sales. Our total sales increased to $67.4 million in 2015, primarily due to the recognition of H5N1 vaccine revenue, in addition to consistent recurring sales from our core products. We were pleased with the milestone achievements of our product pipeline this past year. Our next core product, the EV71 vaccine, obtained its new drug certification, production license and GMP certification, and is now in commercial production. We expect to begin the sales of EV71 by June 30, 2016. The EV71 vaccine is the first innovative vaccine product successfully developed and commercialized by Sinovac and represents the first of several pipeline product candidates being developed to grow the business in the coming years. We look forward to improving our financial performance and enhancing our market position over the long term upon the commercialization of this product."

"We also began phase III clinical trials for the pneumococcal polysaccharides vaccine in April 2015, and acquired clinical trial licenses for the Sabin-IPV vaccine, varicella vaccine and pneumococcal conjugate vaccine. We will continue to execute our strategies to advance our pipeline products and fuel further growth."

Fourth Quarter 2015 Business Highlights

Research and Development

EV71 -- The China Food and Drug Administration (CFDA) issued the new drug certificate and production license for Sinovac's enterovirus 71 ("EV71") vaccine at the end of December, 2015. After the ten-day public notification, Sinovac was granted the Good Manufacturing Practices ("GMP") certificate in January 2016, becoming one of only two manufacturers in China that had been approved to commercialize the product. The Company expects to launch the EV71 vaccine by June 30, 2016. Our EV71 vaccine was approved to be used by children aged from six months to three years old with each child receiving two doses.

Sabin Inactivated Polio Vaccine -- In December 2015, Sinovac obtained approval to begin human clinical trials on its sabin-inactivated polio vaccine (or "sIPV") candidate. The Company plans to start the clinical trials in the first half of 2016. As previously announced,I n the WHO's Expressions of Interest (EOI) initiative, Sinovac has entered into a license agreement with Intravacc (Institute for Translational Vaccinology), which is based in the Netherlands to develop and commercialize sIPV for distribution to China and other countries.

Varicella -- Sinovac Dalian obtained the approval to begin the clinical trials on its varicella vaccine candidate in October 2015. The clinical trials are expected to be launched in the first half of 2016.

Pneumococcal Conjugate Vaccine -- Pneumococcal Conjugate Vaccine obtained clinical trials approval in January 2015. Sinovac plans to start the trials within 2016.

Combination Vaccines Containing Measles -- In September 2015, Sinovac (Dalian) entered into a technology transfer and supply agreement with GSK, to use GSK's measles seeds to develop a measles vaccine and combination vaccines containing measles for the China market. Under this agreement, GSK agreed to transfer its measles seeds, provide reasonable assistance and relevant technical materials to Sinovac Dalian for the purpose of developing and producing combination vaccines which would extend Sinovac's product offerings. As our next key portfolio of live attenuated vaccine products, some of our combination vaccines containing measles target the Expanded Program of Immunization (EPI) market, which will drive up our sales in the public market over the long run.

Recent Developments

Disposal of Tangshan Yian In December 2015, Sinovac entered into an equity interest transfer agreement with Beijing Kuai Le Xing Biotech Co., Ltd. to transfer Sinovac's 100% equity interest in Tangshan Yian Biological Engineering Co., Ltd. to Beijing Kuai Le Xing Biotech Co., Ltd. for a total consideration of RMB 13.0 million (approximately $2.0 million). The transaction has not been completed as of December 31, 2015. As a result of this transaction, Tangshan Yian's operating results, assets, liabilities, and cash flows are presented as discontinued operations in Sinovac's financial statements. Tangshan Yian has incurred losses so the disposal will have a positive effect on Sinovac's results of operations.

Unaudited Financial Results for Fourth Quarter 2015

Quarterly sales from continuing operations were $23.0 million, an increase of 13.1% from $20.3million in the prior year period. The sales increase was primarily due to recognition of H5N1 revenue. Excluding H5N1 revenue, quarterly sales from continuing operations were $19.1 million, a decrease of5.4% from $20.2 million in the comparative period. The sales amount was adversely affected by changes in foreign exchange rates, specifically $662 thousand of the $1.2 million decrease in sales was attributable to foreign exchange rate changes.

Gross profit from continuing operations was $15.7 million, an increase of 2.3% from $15.3 million in the prior year period. Gross margin was 68.3%, compared to 75.5% in the prior year period. Excluding H5N1, quarterly gross margin was68.6%, compared to 76.4% in the prior year period. The decrease was primarily due to higher inventory provision for influenza and mumps vaccines in the fourth quarter of 2015.

Selling, general and administrative expenses in the fourth quarter of 2015 were $11.7million, compared to $9.8million in the same period of 2014. The additional selling expenses was incurred to promote the new product in the fourth quarter of 2015 compared to that in the prior year period.

R&D expenses in the fourth quarter of 2015 were $2.9million, compared to $3.5 million in the same period of 2014.

Net income from continuing operations was $1.3million, compared to a net income of $2.4 million in the prior year period.Net loss from discontinued operations was $109 thousand, compared to net loss of $217 thousand in the prior year period.

Net income attributable to common shareholders was $504 thousand, or $0.01 per basic and diluted share, compared to a net income attributable to common shareholders of $1.3 million, or $0.02 per basic and diluted share, in the fourth quarter of 2014.

Non-GAAP EBITDA decreased by 14% to $4.5 million in the fourth quarter of 2015, compared to $5.1 million in the prior year period. Non-GAAP net income from continuing operations in the fourth quarter of 2015 was $2.2 million, a decrease of 15% compared to $2.6 million in the prior year period. Non-GAAP diluted EPS from continuing operations in the fourth quarter of 2015 was $0.03, which was the same with that 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.

Unaudited Financial Results for twelve months ended December 31, 2015

Total sales from continuing operations in 2015 were $67.4 million, an increase of 7.1% from $62.9 million in 2014. Excluding H5N1 revenue recognized, sales from continuing operations were $63.6 million, an increase of 1.3% from $62.7 million in 2014.Sales recognized in the financial statements were adversely affected by changes in foreign exchange rates; RMB-denominated sales increased by 9.2%.

Gross profit from continuing operations in 2015 was $49.0 million, an increase of 3.2% from $47.5 million in2014. Gross margin was 72.7%, compared to 75.4% in 2014.Excluding H5N1, gross margin was 73.4%, compared to 75.7% in 2014.The decrease was primarily due to a lower utilization rate of the Company's hepatitis and influenza vaccine production facilities and higher inventory provision of influenza and mumps vaccines in 2015.

Selling, general and administrative expenses in 2015 were $37.4million, compared to$34.2million in 2014.The increase was mainly due to increased G&A expenses associated with the trial production of the EV71 vaccine for the site inspection, as well as an increase in stock-based compensation related to options and restricted shares granted in 2015.

R&D expenses in 2015 were $9.5million, compared to $10.9million in 2014. The R&D expenses were primarily incurred from pneumococcal polysaccharide vaccine, varicella and sIPVdevelopment.

Net income from continuing operations was $515 thousand, compared to a net income of $1.2 million in 2014. Net loss from discontinued operations was $728 thousand, compared to net loss of $1.5 million in 2014.

Net loss attributable to common shareholders in 2015 was $1.1 million, or $(0.02) per basic and diluted share, compared to net loss of $851thousand, or $(0.02) per basic and diluted share, in 2014.

Non-GAAP EBITDA increased by 7% to $11.2 million in 2015, compared to $10.4 million in 2014. Non-GAAP net income from continuing operations in 2015 was $2.4 million, an increase of 12% compared to $2.1 million in 2014. Non-GAAP diluted EPS from continuing operations in 2015 was $0.03, compared to $0.03 in 2014. Reconciliations of Non-GAAP measures to the nearest comparable GAAP measures are included at the end of this results announcement.

As of December 31, 2015, cash and cash equivalents, restricted cash totaled $65.5million, compared to $91.3million as of December 31, 2014. In 2015, net cash provided by operating activities was $2.7 million. Net cash used in investing activities was $4.5 million, which was for the purchase of property, plant and equipment. Net cash used in financing activities was $24.2million, including loan proceeds of $21.3million and loan repayment of $46.8million.As of December 31, 2015, the Company had $21.8million of bank loans due within one year.The Company expects that its current cash position will be able to support its operations for 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.

Conference Call Details

Sinovac will host a conference call on Tuesday, April 5, 2016, at 8:00 a.m. EDT (Tuesday, April 5, 2016 at 8:00 p.m. China Standard Time) to review the Company's financial results and provide an update on recent corporate developments.

To access the conference call, please dial 1-877-407-9039 (USA) or 1-201-689-8470 (International). A replay of the call will be available from 11 a.m. EDT on April 5, 2016 through April 19, 2016. To access the replay, please dial 1-877-870-5176 (USA) or 1-858-384-5517 (International) and reference the replay pin number 13633773.

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 hepatitis A and B, seasonal influenza, H5N1 pandemic influenza (avian flu), H1N1 influenza (swine flu), mumps and canine rabies. 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. Sinovac's newly developed innovative vaccine against HFMD caused by EV71 entered the commercialization production phrase and will be launched into the market by the end of first half of 2016. The Company is currently 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 Mexico, Mongolia, Nepal, Tajikistan, Bangladesh, Chile and the Philippines, and was recently granted a license to commercialize its influenza vaccine in Guatemala. 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 EPSfrom continuing operations, or any other measure of performance or as an indicator of Sinovac's operating performance. These 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 from operations from continuing operations(which excludes interest and financing expenses, interest income, other income, net, income tax expenses) before certain non-cash expenses, consisting of stock-based compensation expenses, amortization and depreciation that Sinovac does not believe are reflective of its core operating performance during the periods presented.

Non-GAAP net income from continuing operations represents net income from continuing operationsbefore stock-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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