China Biologic Products (CBPO) - Comments & Business Outlook

First Quarter 2014 Financial Results

• Total sales in the first quarter of 2014 increased by 4.1% to $56.3 million from $54.0 million in the same quarter of 2013.
• Non-GAAP adjusted net income per share was $0.73, compared to $0.59 in the same quarter of 2013.

Mr. David (Xiaoying) Gao, Chairman and Chief Executive Officer of China Biologic, commented, “We are pleased to have further increased our revenue in the first quarter, in spite of strong financial performance in the prior year period, as well as a temporary production suspension of Guizhou Taibang’s plasma production during this period. During the reporting quarter, our Shandong facility maintained strong sales growth momentum, and our Guizhou facility experienced a 37% sales decrease due to the production suspension, which was in line with our internal forecast. Our plasma collection volume continued to grow as planned. Our operating margin and net margin of the first quarter of 2014 reached 49.7% and 32.5%, respectively, representing a year-on-year improvement. This solid growth was primarily attributable to strong market demand, especially for our human albumin products, stable product pricing, a more profitable product mix, improved plasma utilization efficiency, as well as effective cost control measures.”

“During the reporting quarter, human albumin products and IVIG products remained our two largest sales contributors, while other products also experienced positive developments. We experienced modest growth in both price and sales volume of albumin products. For our higher-margin hyper-immune products, in particular, human rabies immunoglobulin products, our overall market share continues to grow and we experienced strong growth in sales volume during the reporting quarter. The overall revenue contribution from rabies immunoglobulin products increased to 12% of total sales from 2% in the same quarter of 2013. We attribute this success to our R&D efforts in the last year, which improved vaccination practices on specialty plasma collection and production yields. As a result, we increased the supply of rabies vaccinated plasma and expanded their production in our Shandong subsidiaries since the second half of 2013. Additionally, sales of human coagulation factor VIII continued to ramp up, which further improved the Company’s plasma utilization efficiency. For our non-plasma products, thanks to the recent remodeling of our placenta polypeptide production line, sales volume of placenta polypeptide increased by 21% year-over-year in the first quarter and we expect its production volume to continue to rise in the coming quarters. ”

Mr. Gao continued, “As for our operational developments, Guizhou Taibang received GMP certification for its placenta polypeptide production facility in January and GMP certification for its plasma production in March. Our Guizhou Taibang facility has since resumed production with increased production capacity. We also began commercial production of human prothrombin complex concentrate at Guizhou Taibang. With these updates, we expect more products available for sales in the second half of 2014. We are confident that we can enhance our total sales and operating efficiency to meet growing market demand. We expect the growth momentum we saw in the first quarter to accelerate in the following quarters.”

“Finally, at the non-operational level, we repurchased 2.5 million shares of common stock from Ms. Siu Ling Chan, an individual shareholder of our Company, at a total consideration of $70 million in February 2014. Through this transaction, we continue to enhance our shareholding structure and increase shareholder value,” concluded Mr. Gao.

Outlook

For the full year of 2014, the Company reiterates its full year financial forecast of total sales in the range of $230 million to $240 million and full year non-GAAP adjusted net income in the range of $67 million to $69 million. This guidance assumes only organic growth and excludes acquisitions and necessarily assumes no significant adverse product price changes during 2014.