Sinovac Reports Unaudited Second Quarter 2019 Financial Results

Reports Unaudited Second Quarter 2019 Financial Results

China, August 15, 2019 /Business Wire/ -- Sinovac Biotech Ltd. (NASDAQ: SVA) ("Sinovac" or the "Company"),

a leading provider of biopharmaceutical products in China, announced today its unaudited financial results for the second quarter

ended June 30, 2019.

Quarter and First Half of 2019 Financial Summary

June 30, 2019, the Vaccine Administration Law of the People's Republic of China, China's first legislation dedicated

to vaccine management, was formally passed by the Chinese central government and will become effective on December 1, 2019. This

legislation will implement stringent supervision of the entire process of vaccine development, production, delivery, and inoculation.

The legislation mandates both government oversight and the duty of manufacturers to report compliance in all substantial aspects.

Sanctions and penalties for producing and selling fake or substandard vaccines have been significantly increased. The new legislation

is expected to raise the barriers to entry in the Chinese vaccine industry.

-The Company filed an application for a production license for its varicella vaccine with the National Medical Products Administration

("NMPA"), previously known as the China State Food and Drug Administration, in November 2017. The NMPA issued a Notice

of Site Inspection to the Company on May 24, 2019 and the Site Inspection began in late July. The Company expects the license to

Pneumococcal polysaccharide vaccine (or PPV-23) - The Company submitted its application for a production license in 2017.

In 2018, the NMPA requested a supplementary submission, which has been completed. The NMPA is currently conducting a review of

the Company's submission.

influenza vaccine (or QIV) - The Company filed an application for a production license with the NMPA in March 2019. Preliminary

questions and answers have been submitted. Sinovac's application is currently under review and the Company expects the production

license to be issued in 2020.

Inactivated Polio vaccine (or sIPV) - The production license application was accepted by the NMPA in January 2019. In

March 2019, given the high demand for effective polio vaccines, the application was granted fast track review. Currently, the application

is under review and additional tests are to be performed.

Weidong Yin, Chairman, President and CEO of the Sinovac commented, "We delivered strong net earnings this quarter while facing

challenges from the external market environment and a lack of supply of certain products due to the production disruption in 2018

caused by the minority shareholder of our Beijing operating company."

Yin continued, "We continue to make progress on our pipeline development. We expect the commercial launches of both varicella

and QIV in 2020. In addition, we welcome the implementation of new vaccine legislation that will ultimately benefit high quality

vaccine manufactures such as Sinovac as well as public health in China."

Financial Results for the Second Quarter of 2019

Summary of sales and gross profit

for the second quarter of 2019 were $64.0 million, a decrease of 14.8% from $75.2 million in the prior year period. The decrease

was caused by zero sales of Bilive and lower sales in Healive

and Inlive . The sales decrease

was partly offset by a sales increase in the mumps vaccine. Depreciation of the Chinese renminbi against the U.S. dollar accounted

for $4.4 million of the decrease in 2019 second quarter revenue.

lack of Bilive sales is still attributed to the suspended production

of the product, which was the result of a lack of supply of the hepatitis B vaccine from the sole supplier.

decrease in Healive sales was due to a product shortage caused by

production suspension and disruptions resulting from actions of the minority shareholder of the Company's subsidiary, Sinovac

Biotech Co., Ltd, in Beijing in 2018. Production has returned to normal, and future sales are not expected to be adversely affected

by product shortages. The decrease of Inlive sales was in line with

the general market trends.

profit in the second quarter of 2019 was $58.0 million, compared to gross profit of $64.6 million in the prior year period. Gross

margin was 90.5%, compared to 86.0% in the prior year period. In the second quarter of 2018, the Company had to write off all influenza

vaccines and some hepatitis vaccines due to the production disruption caused by the minority shareholder of the Company's

subsidiary in Beijing, which negatively impacted gross profit by $3.1 million.

general and administrative expenses in the second quarter of 2019 were $30.2 million, compared to $44.5 million in the prior year

period. The Company incurred lower selling expenses in the second quarter of 2019 due to a difference in the timing of sales and

marketing activities, and a lower general and administrative expenses were caused by reduced legal and consulting fees associated

with the Company's ongoing litigation matters.

expenses in the second quarter of 2019 were $6.3 million, compared to $5.9 million in the prior year period, as the Company continued

to invest in its pipeline of product candidates, including the sIPV, PPV and varicella vaccines.

income in the second quarter of 2019 was $17.1 million, compared to $10.4 million in the prior year period. Net income increased

due to decreases in selling, general and administrative expenses.

income attributable to common shareholders was $10.7 million, or $0.11 per basic and diluted share, compared to net income attributable

to common shareholders of $5.7 million, or $0.10 per basic and diluted share, in the prior year period.

the Company announced on February 22, 2019, the Company's Board of Directors determined that certain shareholders became

"Acquiring Persons," as defined in the Company's Rights Agreement ("Rights Agreement"), and a "Trigger

Event" occurred under the Rights Agreement. As a result, new common and preferred shares of the Company were issued. Without

the effect of the "Trigger Event" and the newly issued common and preferred shares, basic and diluted earnings per

share for the second quarter of 2019 would be $0.17.

adjusted EBITDA was $23.0 million in the second quarter of 2019, compared to $17.5 million in the prior year period. Non-GAAP net

income in the second quarter of 2019 was $18.0 million, compared to $13.1 million in the prior year period. Non-GAAP diluted earnings

per share in the second quarter of 2019 were $0.12, compared to $0.15 per share in the prior year period. Non-GAAP diluted earnings

per share in the second quarter of 2019 without the effect of the "Trigger Event" and the newly issued common and preferred

shares would be $0.18 Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this

earnings announcement.

Financial Results for the First Half of 2019

Summary of sales and gross profit

for the first half of 2019 were $100.6 million, a decrease of 17.9% from $122.5 million in the prior year period. The factors for

this decrease in revenue are the same as those discussed above for the second quarter of 2019. Depreciation of the Chinese renminbi

against the U.S. dollar accounted for $6.6 million of the decrease in 2019 first half revenue.

profit in the first half of 2019 was $90.7 million, compared to gross profit of $109.2 million in the prior year period. Gross

margin was 90.2%, comparable to 89.1% in the prior year period.

general and administrative expenses in the first half of 2019 were $53.8 million, compared to $67.8 million in the prior year period.

The Company incurred lower selling expenses in the second quarter of 2019 due to market changes, and incurred lower legal and consulting

fees associated with the Company's ongoing litigation matters.

expenses in the first half of 2019 were $10.8 million, comparable to $10.1 million in the prior year period.

income in the first half of 2019 was $20.7 million, compared to $22.6 million in the prior year period. Net income decreased due

income attributable to common shareholders was $11.8 million, or $0.13 per basic and diluted share, compared to net income attributable

to common shareholders of $14.1 million, or $0.24 per basic and diluted share, in the prior year period.

the effect of the "Trigger Event" under the Rights Agreement, as described above, and the newly issued common and preferred

shares, basic and diluted earnings per share for the first half of 2019 would be $0.20.

adjusted EBITDA was $29.8 million in the first half of 2019, compared to $34.2 million in the prior year period. Non-GAAP net income

in the first half of 2019 was $21.9 million, compared to $24.0 million in the prior year period. Non-GAAP diluted earnings per

share in the first half of 2019 were $0.14, compared to $0.26 per share in the prior year period. Non-GAAP diluted earnings per

share in the first half of 2019 without the effect of the "Trigger Event" and the newly issued common and preferred

shares would be $0.21. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of

this earnings announcement.

of June 30, 2019, cash and cash equivalents totaled $151.7 million, compared to $158.2 million as of December 31, 2018. In the

first half of 2019, net cash provided by operating activities was $1.0 million, net cash used in investing activities was $6.3

million, and net cash used in financing activities was $1.1 million, including loan repayment of $1.3 million. As of June 30, 2019,

the Company had $5.9 million of bank loans due within one year. The Company expects that its current cash position will be able

to support its operations for at least the next 12 months.

Company's Interim Financial Statements are prepared and presented in accordance with U.S. GAAP. However, the Interim Financial

Statements have not been audited or reviewed by the Company's independent registered accounting firm.

previously disclosed by the Company, on March 13, 2018, 1Globe Capital LLC ("1Globe") filed a complaint against the