Semiannual Report For the Six Months Ended

For the Six Months Ended June 30, 2007

Unless otherwise indicated, references in this semi-annual report to:

"$" and "U.S. dollars" are to the legal currency of the United States;

"China" and the "PRC" are to the People's Republic of China, excluding, for the purposes of this report only, Taiwan and the special administrative regions of Hong Kong and Macau;

"common shares" are to our common shares, par value $0.001 per share;

"GAAP" refers to general accepted accounting principles in the United States;

"RMB" and "Renminbi" are to the legal currency of China;

"Sinovac," "the Company," "we," "us," "our company" and "our" are to Sinovac Biotech Ltd., its predecessor entities and its consolidated subsidiaries;

"Sinovac Beijing" are to Sinovac Biotech Co., Ltd., our majority-owned subsidiary incorporated in China; and

"Tangshan Yian" are to Tangshan Yian Biological Engineering Co., Ltd., our wholly owned subsidiary in China.

Sinovac owns or has rights to various trademarks including Healive , Bilive and Anflu . All other company names, trade names, registered trademarks, trademarks and service marks included in this semi-annual report are property of their respective owners.

FORWARD-LOOKING INFORMATION

This semi-annual report contains forward-looking statements that relate to future events, including our future operating results and conditions, our prospects and our future financial performance and condition, all of which are largely based on our current expectations and projections. ``These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "may," "will," "expect," "anticipate," "future," "intend," "plan," "believe," "estimate," "is/are likely to" or other and similar expressions. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following:

our ability to maximize sales of our existing products within the Chinese market;

our ability to develop new vaccines;

our ability to improve our existing vaccines and lower our production costs;

our ability to expand our manufacturing facilities to meet need of the growing Chinese market and other geographic markets;

our ability to acquire new technologies and products;

uncertainties in and the timeliness of obtaining necessary foreign governmental approvals and licenses for marketing and sale of our vaccines in certain overseas markets;

our ability to compete successfully against our competitors;

risks associated with our corporate structure and the regulatory environment in China; and

other risks outlined in our filings with the SEC, including our annual report on Form 20-F.

The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect.

ITEM 1. Financial Statements

SINOVAC BIOTECH LTD.

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

Consolidated Balance Sheets

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. They should be read in conjunction with the financial statements and related footnotes for the Company's most recently completed year ended December 31, 2006. Except as otherwise noted, these unaudited interim consolidated financial statements are prepared applying the same accounting policies used in the annual consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

These interim results are not necessarily indicative of the results for other periods or for the year as a whole. The Company does not earn its revenue evenly throughout the year, although expenses, with the exception of certain sales expenses, are relatively constant from period to period. Vaccine sales have historically been lower in the first quarter because of Chinese New Year's celebrations. Vaccine sales are relatively higher in the fourth quarter, since this coincides with vaccination programs for children returning to school and with annual purchase planning by customers.

2. Accounting Policy Changes and New Accounting Pronouncement

(a) Accounting policy changes

Effective January 1, 2007, the Company has adopted the FASB Interpretation No. 48 (FIN 48).This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS Statement No. 109, "Accounting for Income Taxes". This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

In accordance with the FIN 48, the company has reviewed its tax position and has not found neither any income tax uncertainty, which could result in a tax liability to the company, nor interest and penalties pertained to the Company's tax position.

(b) New Accounting Pronouncement

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measures" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, the year beginning January 1, 2008 for the Company. The Company has not yet determined the impact adoption will have on the Company.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair

value option has been elected will be reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of SFAS No. 159 on its consolidated financial position and results of operations.

3. Accounts Receivable

5. Property, Plant and Equipment

5. Property, Plant and Equipment (continued)

As at June 30, 2007, a land-use right and plant and buildings with a net book value of $4,606,000 (December 31, 2006 -$4,567,000) were pledged as collateral for an outstanding bank loan (see note 7).

Depreciation expense for the six months ended June 30, 2007 and 2006 was $544,129 and $432,636, respectively.

6. Licenses and Permits

Amortization expense for the licenses and permits was $176,062 and $167,357 for six months ended June 30, 2007 and 2006 respectively.

The weighted average effective interest rate was 6.22% and 5.60% for six months ended June 30, 2007 and 2006, respectively.

8. Minority Interest

Minority interest represents the interest of minority shareholders in Sinovac Beijing based on their proportionate interest in the equity of that company adjusted for their proportionate share of income or losses from operations. In the six months ended June 30, 2007 and 2006, the minority interest was 28.44%.

9. Related Party Transactions

Related party transactions not disclosed elsewhere in the consolidated financial statements are as follows:

10. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at June 30, 2007 and December 31, 2006 consisted of the following:

The Company charged $ 138,551 and $490,712 of stock-based compensation relating to selling, general and administrative expenses for the six months ended June 30, 2007 and 2006, respectively. The stock compensation expenses are charged to the consolidated statement of operations over the vesting period of the options using the straight-line amortization method.

Aggregate intrinsic value of the Company's stock options is calculated as the difference between the exercise price of the options and the quoted price of the common shares that were in-the-money. The aggregate intrinsic value of the Company's stock options exercised under the Plan was $197,327 and $664,110, for the six months ended June 30, 2007 and 2006, determined as of the date of option exercise.

As at June 30, 2007, there was $121,406 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a period of 33 months. The estimated fair value of stock options vested during the six months periods ended June 30, 2007 and 2006 was $238,266 and $514,146, respectively.

13. Financial Instruments

The fair values of financial instruments are estimated at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.

The carrying value of cash and cash equivalents, accounts receivable, short-term loans, accounts payable and accrued liabilities, and due from and to related parties approximate their fair value. The fair value of long-term debt is based on the discounted value of contractual cash flows and at June 30, 2007 and December 31, 2006, approximates its carrying value. The discount rate is estimated using the rates currently offered for debt with similar remaining maturities.

The Company operates in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between US dollars and the Chinese currency RMB. Financial instruments that potentially subject the Company to concentration of credits risks consist principally of cash and trade receivables, the balances of which are stated on the consolidated balance sheets. The Company places its cash in high credit quality financial institutions. Ongoing credit evaluations of customers' financial condition are performed and the Company maintains provision for potential credit losses if necessary. The Company does not require collateral or other security to support financial instruments subject to credit risks. The Company is not subject to significant interest risk unless otherwise disclosed.

The Company exposure to interest rate risk relates primarily to the interest expenses associated with short-term and long-term bank loan as well as interest income provided by excess cash invested in demand and short-term deposits. Such borrowing and interest-earning instruments carry a degree of interest rate risk. The Company has not historically used, and does not expect to use in the future, any derivative financial instruments to manage our exposure to interest risk. The Company has not been exposed nor does the Company anticipate being exposed to material risks due to changes in interest rates. However, the future interest income and expense may increase or decrease due to changes in market interest rates.

14. Segmented Information

The Company operates exclusively in the biotech sector. The Company's business is considered as operating in one segment based upon the Company's organizational structure, the way in which the operation is managed and evaluated, the availability of separate financial results and materiality considerations. All revenues are generated in China. The Company's assets by geographical location are as follows:

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We are a China-based biopharmaceutical company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases. Our marketed product portfolio consists of regulatory-approved injectable vaccines products consists of vaccines against the hepatitis A, hepatitis B and influenza viruses. In 2002, we successfully launched our first product, Healive, which represents is the first inactivated hepatitis A vaccine developed, produced and marketed in China. In 2005, we received regulatory approvals in China for the sale of Bilive, a combination hepatitis A and B vaccine, and Anflu, a split virus influenza vaccine. Our pipeline consists of three vaccine product candidates in the preclinical and clinical development phases in China, including a vaccine for the H5N1 strain of pandemic influenza virus which has completed a phase I clinical trial, a vaccine for the Japanese encephalitis (JE) virus currently in pre-clinical development, and a vaccine for the SARS virus which has completed phase I clinical trials.

Our sales increased 189% to $13.51 million in the first half of 2007 from the first half of 2006, driven by the strong performance of Healive. We sold approximately 2.45 million doses of Healive in the first half of 2007. The strong Healive sales are the result of several factors. First, the China State Food and Drug Administration completed in the beginning of 2007 the phase out of Healive's competing products -- the liquid formulation of live hepatitis A vaccines -- from the market. As the phased out products were primarily distributed to less developed areas, we launched Healive in a cheaper packaging that allowed us to lower Healive's sales price and to increase our market penetration in these areas.

In the "Government Working Report" presented in March 2007 at the Fifth Session of Tenth National People's Congress, China's Premier Wen Jiabao indicated that the government will expand its immunization program and purchase vaccines, which could prevent 15 types of infectious diseases, such as hepatitis A and meningococcal disease. The Chinese government will increase funding for the vaccine program to RMB 2.8 billion. We believe this will present further market opportunities for our Healive products.

In the second half of 2007, we will continue our efforts to promote Healive sales. In addition, Anflu, our seasonal influenza vaccine, will be officially launched through an intensive and large- scale marketing campaign. We sponsored a large market promotion event to enhance awareness of our brand name and to consolidate our relationships with customers. The theme of the event was "Infectious Disease Control, Vaccine and Urban Security". This event was

held in August at DiaoYuTai State Guesthouse, which is well-known for hosting heads of state and well-known persons from around the world.

Research and Development

In May 2007, the SFDA granted us approval to commence the Phase II clinical trial of Panflu(TM), a human-use vaccine against the H5N1 strain of pandemic influenza virus. Panflu was jointly developed with China CDC.

We received SFDA approval for clinical trials for two types of the H5N1 vaccines. The first type is the H5N1 whole viron inactivated vaccine for which the Phase I clinical trial was completed in 2006. The second type of vaccine is the H5N1 split viron vaccine, for which the Phase I and II clinical trials will be conducted continuously. We expect Phase II clinical trials will commence simultaneously for the two types of vaccines in order to determine the vaccination dosage and inoculation schedule for drafting the registration standards and specifications for the vaccine.

In August 2007, Sinovac began to vaccinate volunteers for the clinical research on Pandemic Influenza Vaccine (H5N1), which is the continued research for Phase I clinical trial of whole viron H5N1 vaccine and the beginning of Phase I clinical trial of split H5N1 vaccine. The Company anticipates that the Phase II trials will commence shortly and the preliminary results from these clinical trials for both vaccines will be available early next year.