First Quarter Revenue Grows 23.7% Year-over-year to RMB68.6 Million (US$10.0
Million); Operating Income Grows 41.7% Year-over-year to RMB20.1 million (US$2.9 million); Company Reiterates FY2009 Revenue Guidance
SHENYANG, China, May 19 /PRNewswire-Asia-FirstCall/ -- 3SBio Inc. ("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 first quarter ended March 31, 2009.
First Quarter 2009 Financial Highlights: -- Total net revenues increased 23.7% over the first quarter of 2008 to RMB68.6 million (US$10.0 million). -- Operating income (non-GAAP) for the first quarter of 2009 was RMB20.6 million (US$3.0 million), an increase from RMB14.6 million (US$2.1 million) for the first quarter of 2008. GAAP operating income was RMB20.1 million (US$2.9 million) for the first quarter of 2009, an increase from RMB14.2 million (US$2.0 million) for the first quarter of 2008. -- Net income (non-GAAP) for the first quarter of 2009 was RMB21.0 million (US$3.1 million), compared to RMB20.2 million (US$2.9 million) for the first quarter of 2008. GAAP net income for the quarter was RMB15.9 million (US$2.3 million) for the first quarter of 2009, compared to GAAP net income of RMB19.8 million (US$2.8 million) for the first quarter of 2008. -- Earnings per share (non-GAAP) for the first quarter of 2009 were RMB0.14 (US$0.02), compared to RMB0.13 (US$0.02) for the first quarter of 2008. GAAP earnings per share were RMB0.11 (US$0.02) for the first quarter of 2009, compared to GAAP earnings per share of RMB0.13 (US$0.02) for the first quarter of 2008.
* Please refer to "Non-GAAP Financial Measures: Reconciliation of GAAP to non-GAAP" section below for the definition and rationale of all of the non-GAAP measures. Non-GAAP items for the three-month period ended March 31, 2008 have been included as comparatives to conform to the current year's presentation basis.
First Quarter 2009 Business Highlights: -- EPIAO, the Company's flagship injectable recombinant human erythropoietin ("EPO") products, demonstrated resilient growth despite a challenging environment, with net revenue from EPIAO rising 21.0% over the first quarter of 2008 to RMB42.9 million (US$6.3 million) in the first quarter of 2009. -- TPIAO net revenue increased 21.3% to RMB18.7 million (US$2.7 million) in the first quarter of 2009. TPIAO, the Company's protein-based therapeutic recombinant human thrombopoietin ("TPO") products, demonstrated its continued success in a slowing economy. -- 3SBio continued to work closely with the SFDA to advance the regulatory approval of the three new product programs submitted in 2008: 36,000 IU dosage formulation of EPIAO, NuLeusin, and TPIAO label extension for the treatment of ITP. -- Construction continued on schedule on the Company's new EPIAO plant, which will support the future growth of EPIAO and serve as the first step towards exploring global biosimilar opportunities.
"3SBio had a strong start to 2009, delivering revenue growth and demonstrating the continued acceptance of our keystone EPIAO and TPIAO products in domestic and international markets," commented Dr. Jing Lou, Chief Executive Officer of 3SBio. "Our operating margin was solid and we continued to generate positive cash flow, strengthening our bottom line performance while ensuring 3SBio is in a financial position to pursue synergistic business development opportunities that will positively benefit our company. 3SBio has worked diligently to develop a portfolio of current and future pharmaceutical products, and we remain on track to achieve our 2009 financial and operational objectives."
First Quarter 2009 Unaudited Financial Results
Net revenues. Net revenues increased by 23.7% to RMB68.6 million (US$10.0 million) for the first quarter of 2009 from RMB55.5 million (US$7.9 million) for the same period of 2008. This increase was largely due to continued strength from TPIAO and EPIAO products which increased by 21.3% and 21.0%, respectively, over the same period of 2008, and to a lesser degree by impressive growth from export sales which grew 75.6% and our iron product sales which grew 47.5% over the same period of last year.
The growth in sales from EPIAO was driven in part by an expanded oncology sales force, which continued to perform well. TPIAO remained 3SBio's second largest revenue contributor in the quarter, accounting for 27.3% of total net revenues. Export sales exceeded RMB3.3 million (US$0.5 million), and sales of 3SBio's IV Iron Sucrose rose to RMB2.0 million (US$0.3 million) for the first quarter of 2009.
Gross profit. As a result of continued sales growth from key products despite the economic situation, gross profit increased by 23.8% to RMB62.6 million (US$9.2 million) for the first quarter of 2009 from RMB50.6 million (US$7.2 million) for the same period of 2008. Gross margin increased slightly to 91.3% for the first quarter of 2009 from 91.1% for the first quarter of 2008 and 90.6% for the fourth quarter of 2008.
Operating income. Non-GAAP operating income for the first quarter of 2009 grew 40.7% year-over-year to RMB20.6 million (US$3.0 million). GAAP operating income was RMB20.1 million (US$2.9 million) for the first quarter 2009, an increase of 41.7% from operating income of RMB14.2 million (US$2.0 million) for the same period of 2008.
Operating expenses. Non-GAAP operating expenses were RMB42.1 million (US$6.2 million) for the first quarter of 2009. GAAP operating expenses were RMB42.5 million (US$6.2 million) for the first quarter of 2009, an increase of 16.8% from GAAP operating expenses of RMB36.4 million (US$5.2 million) for the same period of last year. Increase in operating expenses was largely driven by the increased sales & marketing expenses as 3SBio continued necessary marketing efforts.
-- Research and development ("R&D") cost. GAAP R&D cost for the first quarter of 2009 was RMB2.5 million (US$0.4 million), or 3.6% of net revenue, compared to RMB2.8 million (US$0.4 million), or 5.0% of net revenue for the same period of last year. The decline in R&D cost for the first quarter of 2009 was due to the conclusion of several major trials in the last quarter of 2008. -- Sales, marketing and distribution expenses. GAAP sales, marketing and distribution expenses for the first quarter of 2009 were RMB32.9 million (US$4.8 million), compared to RMB25.6 million (US$3.7 million) for the same period of last year. This represented a slight increase to 48.0% of net revenue for the first quarter of 2009, compared to 46.2% of net revenue for the same period of last year. 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. GAAP general and administrative expenses for the first quarter of 2009 were RMB7.1 million (US$1.0 million), representing a decrease of 11.3% from general and administrative expenses of RMB8.0 million (US$1.1 million) for the same period of 2008. This marked a decline to 10.3% of net revenue for the first quarter of 2009, compared to 14.4% of net revenue for the first quarter of 2008.
* Please refer to "Non-GAAP Financial Measures: Reconciliation of GAAP to Non-GAAP" section below for specific non-GAAP operating expenses measures.
Interest income. The Company recorded net interest income of RMB4.1 million (US$0.6 million) for the first quarter of 2009, as compared RMB7.4 million (US$1.1 million) for the same period in 2008. As experienced last quarter, the decrease in interest income was partially due to the decrease in the prevailing market interest rates in the first quarter of 2009 compared to the same period of last year.
Net income. Non-GAAP net income for the first quarter of 2009 was RMB21.0 million (US$3.1 million), excluding share-based compensation and recognition of an impairment loss of RMB4.6 million (US$0.7 million) on available-for-sale securities. This was comparable to non-GAAP net income of RMB20.2 million (US$2.9 million) for the first quarter of 2008.
GAAP net income was RMB15.9 million (US$2.3 million) for the first quarter 2009, compared to net income of RMB19.8 million (US$2.8 million) for the same period of 2008. GAAP net income was largely impacted by the recognition of an impairment loss on available-for-sale securities. Based on the current market condition and the performance of the available-for-sale securities held by the Company, the Company expects no further impairment losses from the financial instruments currently being held.
Cash and cash equivalents/Time deposits. 3SBio had positive operating cash flows for the first quarter of 2009, and as of March 31, 2009 retained a strong balance sheet with cash, cash equivalents and time deposits of RMB752.3 million (US$110.1 million), an increase from RMB733.0 million (US$107.4 million) as of December 31, 2008 and a slight decline from RMB790.4 million (US$ 112.7 million) as of March 31, 2008.
Full Year 2009 Guidance
Based on current market conditions and visibility provided during the first quarter, the Company maintains its total net revenue target for the full year 2009 of between US$43 million to US$45 million, resulting in a 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 Wednesday, May 20, 2009. The conference call may be accessed using the dial-in numbers below:
International Toll Dial-In Number: +6567357955 China (Landline): 8008190121 China (Mobile): 4006208038 U.K.: 08082346646 U.S.: 18665194004 Hong Kong: 800933053 Conference ID: 97106460
A telephone replay will be available shortly after the call until May 27, 2009, at:
International Dial-In Number: +61 2 8235 5000 U.S Dial-in Number: +18662145335 Conference ID: 97106460
A live webcast of the conference call and the replay will be available on the investor relations page of 3SBio's website at http://bbs.3sbio.com/en/News/xinvestors.aspx .
Filing of 20F
3SBio filed its Annual Report on Form 20-F for the year ended December 31, 2008 with the SEC on April 21, 2009. The Company's Form 20-F and complete audited financial statements can be found at http://www.3sbio.com/ . Hard copy versions of the complete audited financial statements are available free of charge upon request from 3SBio's Investor Relations.
Non-GAAP Financial Measures: Reconciliation of GAAP to non-GAAP
To supplement the Company's financial statements presented in accordance with general accepted accounting principles ("GAAP"), the Company has utilized some 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. These non-GAAP financial measures include operating income and operating expenses before stock based compensation expense, and net income, and earnings per share before stock based compensation expense and recognition of an impairment loss on available-for-sale securities. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principals, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. Please see the attached reconciliation of GAAP to non-GAAP for an explanation of the amounts excluded to arrive at non-GAAP financial measures for the three-month periods ended March 31, 2008 and March 31, 2009.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is preliminary and subject to adjustments and modifications. The audited financial statements and related notes are to be included in our annual report on Form 20-F for the year ending December 31, 2009. 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 RMB6.8329 to US$1.00, the noon buying rate for US dollars in effect on March 31, 2009 for cable transfers of RMB per US dollar as certified for customs purposes by the Federal Reserve Bank of New York. 2008 RMB figures were translated into US dollars at the rate of RMB7.0120 to US$1.00, the noon buying rate for US dollars in effect on March 31, 2008.
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" section, management comments and the statements of Dr. Jing Lou, Chief Executive Officer of 3SBio, 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. As a result, actual results may differ materially from the forward-looking statements contained herein. For additional information on risk factors identified herein and other risk factors, uncertainties and assumptions that may adversely and materially affect 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/ , including information detailed in Item 3.D "Risk Factors" in 3SBio's annual report on Form 20-F for the year ended December 31, 2008, 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, except as required by law.
3SBio Inc. and subsidiaries Unaudited consolidated balance sheet (expressed in thousands) December 31, March 31, March 31, 2008 2009 2009 RMB RMB US$ Assets Current assets Cash and cash equivalents 439,237 302,164 44,222 Time deposits with financial institutions 293,809 450,098 65,872 Accounts receivable, less allowance for doubtful accounts: December 31, 2008 - - RMB4,503; March
31, 2009 - - RMB4,565 (US$668) 73,767 80,891 11,838
Inventories 7,748 8,984 1,315 Prepaid expenses and other receivables 8,249 7,767 1,137 Deferred tax assets 1,802 1,600 234 Total current assets 824,612 851,504 124,618 Available-for-sale securities 26,700 19,758 2,892 Property, plant and equipment, net 78,185 88,208 12,909 Lease prepayments 8,894 8,806 1,289 Non-current deposits 8,521 6,723 984 Intangible assets, net 5,225 4,950 724 Deferred tax assets 781 251 37 Total assets 952,918 980,200 143,453 Liabilities Current liabilities Accounts payable 1,939 3,102 454 Deferred grant income 374 374 55 Accrued expenses and other payables 25,273 31,958 4,677 Income tax payable 1,256 4,470 654 Other current liabilities 57 -- -- Total current liabilities 28,899 39,904 5,840 Deferred grant income 3,152 3,058 448 Other liabilities 472 -- -- Total liabilities 32,523 42,962 6,288 Commitments and contingencies -- -- -- Shareholders' equity Share capital -ordinary shares US$0.0001 par value, 500,000,000 shares authorized, 150,586,455 issued and outstanding as of March 31, 2009 and 152,099,155 issued and outstanding as of December 31, 2008. 121 121 18 Additional paid-in capital 908,377 908,873 133,014 Accumulated other comprehensive loss (102,126) (101,665) (14,879) Retained earnings 114,023 129,909 19,012 To Total shareholders' equity 920,395 937,238 137,165 Total liabilities and shareholders' equity 952,918 980,200 143,453 3SBio Inc. and subsidiaries Unaudited quarterly consolidated statements of income (expressed in thousands, except per share , per ADS and other share and ADS data) Three Months Ended March 31, 2009 GAAP GAAP Adjustment RMB US$ RMB Net Revenues EPIAO 42,910 6,280 -- TPIAO 18,710 2,738 -- Intefen 1,266 185 -- Inleusin 268 39 -- Iron 2,046 299 -- Export 3,331 487 -- Others 67 10 -- Total net revenues 68,598 10,038 -- Cost of revenues (5,999) (878) 51 (1) Gross profit 62,599 9,160 -- Operating expenses Research and development costs (2,457) (360) 70 (1) Sales, marketing and distribution expenses (32,949) (4,822) 134 (1) General and administrative expenses (7,089) (1,037) 193 (1) Total operating expenses (42,495) (6,219) Operating income 20,104 2,941 Other income / (expenses), net Interest income 4,072 596 -- Grant income 94 14 Impairment loss on available- for-sale Securities (4,624) (677) 4,624 (2) Others (342) (50) -- Total other income / (expenses), net (800) (117) Income before income tax expense 19,304 2,824 -- Income tax expense (3,418) (500) Net income 15,886 2,324 Net income per share Basic and diluted (3) 0.11 0.02 Basic weighted average number of shares Outstanding 150,586,455 150,586,455 Diluted weighted average number of shares Outstanding 150,586,455 150,586,455 Net income per ADS Basic and diluted (3) 0.74 0.11 Basic weighted average number of ADSs Outstanding 21,512,351 21,512,351 Diluted weighted average number of ADSs Outstanding 21,512,351 21,512,351 Non-GAAP Non-GAAP RMB US$ Net Revenues EPIAO 42,910 6,280 TPIAO 18,710 2,738 Intefen 1,266 185 Inleusin 268 39 Iron 2,046 299 Export 3,331 487 Others 67 10 Total net revenues 68,598 10,038 Cost of revenues (5,948) (870) Gross profit 62,650 9,168 Operating expenses Research and development costs (2,387) (349) Sales, marketing and distribution expenses (32,815) (4,802) General and administrative expenses (6,896) (1,009) Total operating expenses (42,098) (6,160) Operating income 20,552 3,008 Other income / (expenses), net Interest income 4,072 596 Grant income 94 14 Impairment loss on available- for-sale Securities -- -- Others (342) (50) Total other income / (expenses), net 3,824 560 Income before income tax expense 24,376 3,568 Income tax expense (3,418) (500) Net income 20,958 3,068 Net income per share Basic and diluted (3) 0.14 0.02 Basic weighted average number of shares Outstanding 150,586,455 150,586,455 Diluted weighted average number of shares Outstanding 150,586,455 150,586,455 Net income per ADS Basic and diluted (3) 0.97 0.14 Basic weighted average number of ADSs Outstanding 21,512,351 21,512,351 Diluted weighted average number of ADSs Outstanding 21,512,351 21,512,351
Notes to reconciliation of our GAAP statements of income to our non-GAAP statements of income:
(1). To exclude share-based compensation expense from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results. (2). To exclude impairment loss on available-for-sale securities from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results. (3). The options that the Company had granted had no impact on diluted EPS for the quarter ended March 31, 2009, because the average market price of the Company's common stock during the period was less than the price at which the options would have been convertible into the Company's common stock. The weighted average exercise price of the outstanding options as of March 31, 2009 was $1.10 per share. 3SBio Inc. and subsidiaries Unaudited quarterly consolidated statements of income (expressed in thousands, except per share, per ADS and other share and ADS data) Three Months Ended March 31,2008 GAAP GAAP Adjustment RMB US$ RMB Net Revenues EPIAO 35,469 5,058 -- TPIAO 15,420 2,199 -- Intefen 1,084 155 -- Inleusin 177 25 -- Iron 1,387 198 -- Export 1,897 270 -- Others 33 5 -- Total net revenues 55,467 7,910 -- Cost of revenues (4,911) (700) 34 (1) Gross profit 50,556 7,210 Operating expenses Research and development costs (2,756) (393) 51 (1) Sales, marketing and distribution expenses (25,623) (3,654) 93 (1) General and administrative expenses (7,994) (1,140) 245 (1) Total operating expenses (36,373) (5,187) Operating income 14,183 2,023 Other income / (expenses), net Interest income 7,386 1,053 Grant income 93 13 Others 1,355 194 Total other income / (expenses), net 8,834 1,260 Income before income tax expense and minority interests 23,017 3,283 Income tax expense (3,344) (477) Income before minority interests 19,673 2,806 Minority interests, net of tax 77 11 Net income 19,750 2,817 Net income per share Basic and diluted 0.13 0.02 Basic weighted average number of shares Outstanding 152,099,155 152,099,155 Effect of dilutive potential shares 1,634 1,634 Diluted weighted average number of shares Outstanding 152,100,789 152,100,789 Net income per ADS: Basic and diluted 0.91 0.13 Basic weighted average number of ADSs Outstanding 21,728,451 21,728,451 Effect of dilutive potential ADSs 233 233 Diluted weighted average number of ADSs Outstanding 21,728,684 21,728,684 Non-GAAP Non-GAAP RMB US$ Net Revenues EPIAO 35,469 5,058 TPIAO 15,420 2,199 Intefen 1,084 155 Inleusin 177 25 Iron 1,387 198 Export 1,897 270 Others 33 5 Total net revenues 55,467 7,910 Cost of revenues (4,877) (696) Gross profit 50,590 7,214 Operating expenses Research and development costs (2,705) (386) Sales, marketing and distribution expenses (25,530) (3,641) General and administrative expenses (7,749) (1,105) Total operating expenses (35,984) (5,132) Operating income 14,606 2,082 Other income / (expenses), net Interest income 7,386 1,053 Grant income 93 13 Others 1,355 194 Total other income / (expenses), net 8,834 1,260 Income before income tax expense and minority interests 23,440 3,343 Income tax expense (3,344) (477) Income before minority interests 20,096 2,866 Minority interests, net of tax 77 11 Net income 20,173 2,877 Net income per share Basic and diluted 0.13 0.02 Basic weighted average number of shares Outstanding 152,099,155 152,099,155 Effect of dilutive potential shares 1,634 1,634 Diluted weighted average number of shares Outstanding 152,100,789 152,100,789 Net income per ADS: Basic and diluted 0.93 0.13 Basic weighted average number of ADSs Outstanding 21,728,451 21,728,451 Effect of dilutive potential ADSs 233 233 Diluted weighted average number of ADSs Outstanding 21,728,684 21,728,684
Notes to reconciliation of our GAAP statements of income to our non-GAAP statements of income:
(1). To exclude share-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results. For further information, please contact: Investor Contact: 3SBio Inc. Bo Tan, CFO Tel: +86-24-2581-1820 Email: Tanbo@3sbio.com Investor Relations (China): FD Beijing Peter Schmidt Tel: +86-10-8591-1953 Email: Peter.schmidt@fd.com Investor Relations (US): FD US Evan Smith John Capodanno Tel: +1-212-850-5600
3SBio Inc.
CONTACT: 3SBio Inc., Bo Tan, CFO, +86-24-2581-1820, Tanbo@3sbio.com or FD
Beijing, Peter Schmidt, +86-10-8591-1953, Peter.schmidt@fd.com and FD US, Evan
Smith/John Capodanno, +1-212-850-5600, all for 3SBio Inc.
Web site: http://www.3sbio.com/
