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BEIJING, Jan. 12 /Xinhua-PRNewswire/ -- Sinovac Biotech Ltd. (Sinovac)
(Amex: SVA) announced its semiannual report revealed 18% Sales Growth and 73%
Margins for First Six Months of 2005.
Company sales were entirely comprised of Healive(TM), generating
$2,699,000 in sales, corresponding to revenue growth of 18%. The growth was
attributable to an increase of the number of salespersons and marketing
activities. However, new regulations for vaccine distribution in China caused
sales growth to be slower than the corresponding period in 2004. Management
believes sales growth is accelerating as the market adapts to the new
regulations.
Gross profit margin increased to 73.0% from 66.7% in the six months ended
June 30, 2004. The increase in gross profit margin was due to economies of
scale, which enables increased Healive(TM) production while decreasing the
average cost per unit.
Sinovac CEO, Mr. Weidong Yin said, "Our performance in the first half of
2005 proves our ability to grow in spite of major changes in how we market and
distribute our products. I am confident we have the right business strategy
and balance between product pipeline, marketing and sales; we are now
positioned for accelerated growth in 2006."
Selling, General and Administrative Expenses ("SG&A expenses") increased
18% to $2,201,000 due to increased marketing expenses for exploration of new
markets and sales persons bonuses for 2004. Marketing expenses included in
the SG&A increased 104% to $1,071,000. Sinovac expects additional increases
in SG&A to support continuing market penetration and brand awareness.
Research and Development Expenses reflect amounts spent on the split flu,
pandemic influenza vaccine (avian flu vaccine for humans), and Japanese
encephalitis vaccines. Total research and development expenses aggregated
$216,000. The expenses associated with SARS vaccine development were funded by
a government grant.
Stock-Based Compensation
The Company took aggressive steps to reduce the number of stocks options
granted; canceling, with the consent of the option holders, 1,977,000 stock
options that had been granted in April 2004. Under U.S. generally accepted
accounting principles, the expense associated with the granting of stock
options is normally recognized over the vesting period. On cancellation of
stock options, the full remaining amount of the expense is recognized
immediately. As a result, cancellation of the April 2004 stock options
resulted in an abnormally large stock-based compensation charge in the current
period. The Company incurred stock-based compensation of $2,897,000. About
$1.4 million was attributable to the cancellation of the April 2004 stock
options.
The Companys net loss was $3,466,000. While sales and gross profit
margin increased, the resulting increase in gross profit was more than offset
by increased SG&A expenses and stock-based compensation. However, stock based
compensation does not affect the Companys cash flow. On a pro forma basis,
the net loss was $568,000 before stock based compensation charge and
$2,069,000 before the stock based compensation relating to the cancellation of
stock options.
Sinovacs capital requirements have been funded by cash flow from sales
revenue and issuances of common stock. The Companys working capital was
$1,589,000 at June 30, 2005. Unrestricted cash and cash equivalents is
sufficient to fund the Companys business over the next 12 months.
Additionally, the Company is seeking to raise additional capital to finance
expansion.
Changes in Internal Control over Financial Reporting
During the reporting period, management identified shortcomings in
Sinovacs disclosure controls relating to the accounting treatment of
purchased intellectual property. Since then, the Company has revised controls
relating to the cost of whether such assets should be capitalized or charged
to operations as in-process research and development. In conjunction with this
change, Sinovac revised its controls relating to when amortization should
commence on the purchase of vaccine rights, and revised controls relating to
the presentation of reverse merger transactions.
Apart from these, there were no changes in internal control for financial
reporting during the fiscal period ended June 30, 2005 that have materially
affected, or are reasonably likely to materially affect, our internal control
for financial reporting. Sinovacs executive management now concludes that
Company disclosure controls and procedures are effective, and will endeavor to
disclose all future financial filings in a timely manner.
About Sinovac
Sinovac Biotech Ltd. is a world leader in the research, development,
manufacture and commercialization of vaccines for endemic and pandemic viruses
such as hepatitis and influenza, and for fast emerging viruses such as SARS
and avian influenza (bird flu). The Companys objective is to provide Chinese
children with the best vaccines in the world, and let children in the world
use vaccines made in China.
Additional information about Sinovac is available on the Company website,
http://www.sinovac.com
For additional information, investor newsletters and corporate updates,
please email your request to: info@sinovac.com
THIS NEWS RELEASE MAY INCLUDE FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, AND SECTION 21E OF THE UNITED STATES SECURITIES AND EXCHANGE ACT OF
1934, AS AMENDED, WITH RESPECT TO ACHIEVING CORPORATE OBJECTIVES, DEVELOPING
ADDITIONAL PROJECT INTERESTS, SINOVACS ANALYSIS OF OPPORTUNITIES IN THE
ACQUISITION AND DEVELOPMENT OF VARIOUS PROJECT INTERESTS AND CERTAIN OTHER
MATTERS. THESE STATEMENTS ARE MADE UNDER THE "SAFE HARBOR" PROVISIONS OF THE
UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND INVOLVE
RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE IN THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
CONTACT:
Craig H. Bird
Investor Relations
(215) 782 - 8682
Toll Free: 1-866-360-8682 (North America)
sinovac@verizon.net
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