Sinovac Reports Unaudited First Quarter 2010 Financial Results - Conference call scheduled for Thursday

Sinovac Reports Unaudited First Quarter 2010 Financial Results

Conference call scheduled for Thursday, May 13, 2010 at 8:00 PM EDT

May 13, 2010 Sinovac Biotech Ltd. (NASDAQ:

China-based vaccine manufacturer, announced today its unaudited financial results for the three-month period

ended March 31, 2010.

First Quarter 2010 Financial

Highlights (comparisons to First Quarter 2009)

Sales for the first quarter decreased 32%

Operating loss for the first quarter was

$865,000, compared to operating income of $646,000

Net loss attributable to shareholders for

the first quarter was $307,000, with loss per diluted share of $0.01

Cash and cash equivalents at March 31,

2010 increased to $118.9 million, reflecting the closing of the common share

public offering in February 2010

In April 2010, Sinovac s joint venture, Sinovac Dalian,

submitted an application to China s State Food and Drug Administration (SFDA)

to commence human clinical trials for its mumps vaccine. The proprietary mumps vaccine developed by

Sinovac Dalian represents not only the first live attenuated vaccine for which

Sinovac Dalian has filed a clinical trial application, but also the first

candidate from the joint venture s pipeline for which a clinical trial

application has been submitted to and accepted by the SFDA since the formation

of the joint venture in January 2010.

In May 2010, Sinovac Biotech, through its wholly owned

subsidiary Sinovac Biotech (Hong Kong) Ltd, made an initial cash contribution

of 60 million RMB, or approximately $8.8 million, to Sinovac Dalian, the

Company s 30%-owned joint venture that was established in January 2010.

Mr. Weidong Yin, Chairman, President and CEO of Sinovac, commented,

As we indicated in early April, the demand for

the vaccinations in the private pay market across China was unfortunately

impacted by the product safety media reports that the SFDA subsequently

determined to be unfounded. As a leading

supplier of hepatitis A and seasonal influenza vaccines to the private pay and

public markets, our first quarter 2010 sales were impacted by the reduced

industry demand. Our domestic

sales and marketing strategy is being augmented to reflect the current

landscape. We are expanding our

geographic reach by focusing on the rural markets and are providing physician

education programs to drive growth in the private pay market. We continue to collaborate with our local

distribution partners to obtain requisite approvals in targeted international

markets, including India, Mexico and the Philippines.

Mr. Yin continued, Given our long term expectations for

increasing demand for our vaccines products, initiatives are underway to bring

on additional capacity that will enable us to both expand production of our

commercialized vaccines and commence production of our pipeline vaccines in a

condensed timeframe upon receipt of production licenses. At our 300,000 square foot production facility

in the Changping District, Beijing, we are targeting completion of the

build-out of two new production lines in the second half of 2010. These new production lines will have a

combined annual capacity of approximately 40 million doses and will be utilized

to manufacture our currently marketed flu vaccines and our pipeline EV71

vaccine. At Sinovac Dalian s 200,000

square foot production facility, two vaccine production lines are operational

one for animal cell cultured vaccines and one for live attenuated vaccines.

concluded, Advancing our research and development pipeline of proprietary

vaccines continues to be a critical component of our growth strategy. Through our Sinovac Dalian joint venture, we

have already submitted a clinical trial application for the mumps vaccine to the

SFDA, exemplifying our commitment to building our pipeline and expanding our

portfolio of commercialized vaccines.

During the quarter, we further strengthened our R&D team, adding

specialists both at our headquarters and at our joint venture Through our in-house development and in

collaboration with domestic and international partners, we are advancing our

robust pre-clinical development pipeline that encompasses pneumococcal

conjugated vaccine, rabies vaccine, HIB vaccine, meningitis vaccine, chickenpox

(varicella) vaccine, and rubella vaccine.

Financial Review for Three Months Ended March 31, 2010

First quarter 2010 results included the consolidation of the

financial results from the 30%-owned joint venture, Sinovac Dalian, following

its formation in January 2010.

Sales for the first quarter of 2010 were $4.4 million, down 32%

from $6.6 million for the first quarter of 2009. The lower sales in the first quarter 2010

were attributable to the lower demand in the private pay market based on

concerns over product safety given the recent media reports linking the

improper storage of vaccines by a distributor to a few cases of serious adverse

events in China s Shanxi province. The

media reports, which were not related to Sinovac and its products, impacted the

entire vaccine industry in China and were subsequently proven to be unfounded

based on the government s investigation.

Sinovac s sales breakdown by product was as follows.

of the Panflu.1 (H1N1) vaccine represented 29.96% of total sales for the three

months ended March 31, 2010. The H1N1 vaccine was sold to the Chinese

government in accordance with the government purchase program.

profit for the first quarter of 2010 was $3.6 million, with a gross margin of

80%, compared to $5.1 million and a gross margin of 78% for the same period of

2009. The gross margin for the first quarter

of 2010 increased due to the product mix during the current year quarter.

Selling, general and administrative expenses for the first

quarter of 2010 were $3.1 million, compared to $3.5 million in the same period

of 2009. SG&A expenses as a percentage of first quarter 2010 sales were 70%,

compared to 54% during the first quarter of the prior year. The higher SG&A expenses as a

percentage of revenue resulted from the additional G&A expenses associated

with the 30%-owned joint venture, partly offsetting the lower selling costs

associated with the first quarter 2010 revenues.

Net research and development expenses for the first quarter 2010

were $908,000, compared to $759,000 in the same period of 2009. The increased

R&D expenses in the first quarter of 2010 were primarily related to the

continued development of EV71 vaccine, pneumococcal conjugated vaccine, rabies

vaccines for human and animals, along with the mumps vaccine, which is

currently under development at Sinovac Dalian.

Depreciation of property, plant and equipment and amortization of