Sinovac Reports Unaudited Third Quarter 2019 Financial Results

Reports Unaudited Third Quarter 2019 Financial Results

China, Novermber 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 third quarter

ended September 30, 2019.

Quarter and First Nine Months of 2019 Financial Summary

Weidong Yin, Chairman, President, and CEO of Sinovac, commented, "We delivered sales growth this quarter despite facing challenges

from market demand for some of our vaccines and a lack of supply of certain products. We are pleased to report that during the

quarter, Anflu, the seasonal influenza vaccine, was relaunched to the market after a one-year absence due to the manufacturing

disruption orchestrated by the minority shareholder of our Beijing operation last year."

"We have made strong

progress in our pipeline development in 2019, and we expect the commercial launches of varicella, sIPV, and QIV in 2020. We also

welcome the implementation of the new vaccine legislation, which will ultimately benefit high-quality vaccine manufacturers such

as Sinovac as well as public health in China," Mr. Yin concluded.

-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 site inspection by

the NMPA in July 2019 was successfully passed. The Company expects the license to be issued in early 2020.

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. The technical review by NMPA was completed at the end of September and

a notice of site inspection was issued to the Company. The on-site inspection is currently being prepared. The Company expects

the license to be issued in 2021.

influenza vaccine (or QIV) - The Company filed an application with the NMPA for a production license for the QIV vaccine

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 for the sIPV vaccine 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. The Company expects the license to be issued in 2020.

Financial Results for the Third Quarter of 2019

Summary of sales and gross profit

Sales for the third quarter of 2019 were $64.3

million, an increase of 19.3% from $53.9 million in the prior year period. The increase was due to higher sales of influenza vaccines.

lack of Bilive sales is still attributed to the suspended production

of the product, which was due to a lack of supply of the hepatitis B vaccine from the Company's sole supplier.

profit in the third quarter of 2019 was $54.0 million compared to gross profit of $49.3 million in the prior year period. Gross

margin was 83.9% compared to 91.4% in the prior year period. The decrease of gross margin was due to a change of sales mix, primarily

caused by increased sales of the lower-margin influenza vaccine.

general and administrative expenses in the third quarter of 2019 were $34.4 million compared to $28.5 million in the prior year

period. The Company incurred higher selling expenses in the third quarter of 2019 due to higher sales and marketing activities.

expenses in the third quarter of 2019 were $5.7 million, compared to $4.7 million in the prior year period, as the Company continued

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

income in the third quarter of 2019 was $11.7 million compared to $13.2 million in the prior year period. Net income decreased

as a higher proportion of revenue was generated from the lower-margin influenza vaccines.

income attributable to common shareholders was $6.3 million, or $0.06 per basic and diluted share, compared to net income attributable

to common shareholders of $8.9 million, or $0.12 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 implementation of the Rights Agreement and the newly issued common and preferred shares, basic and diluted earnings

per share for the third quarter of 2019 would be $0.11.

adjusted EBITDA was $15.8 million in the third quarter of 2019 compared to $18.4 million in the prior year period. Non-GAAP net

income in the third quarter of 2019 was $12.5 million compared to $14.9 million in the prior year period. Non-GAAP diluted earnings

per share in the third quarter of 2019 were $0.07 per share compared to $0.14 per share in the prior year period. Non-GAAP diluted

earnings per share in the third quarter of 2019 excluding the implementation of the Rights Agreement and the newly issued common

and preferred shares would be $0.12 per share. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are

included at the end of this earnings announcement.

Financial Results for the Nine Months Ended September 30, 2019

Summary of sales and gross profit

Sales for the nine months ended September 30,

2019, were $164.9 million, a decrease of 6.5% from $176.4 million in the prior year period. The decrease was due to zero sales

of Bilive and lower sales in Inlive .

The sales decrease was partly offset by sales increases in Healive ,

the influenza vaccine, and the mumps vaccine. In addition, $8.9 million of the decline in sales for the first nine months of 2019

were attributable to the depreciation of the Chinese renminbi against the U.S. dollar.

profit in the nine months ended September 30, 2019, was $144.7 million compared to gross profit of $158.4 million in the prior

year period. Gross margin was 87.7% compared to 89.8% in the prior year period. The decrease of gross margin was due to a change

in sales mix, with a higher proportion of sales of the influenza vaccine, which has a lower profit margin.

general and administrative expenses in the nine months ended September 30, 2019, were $88.2 million compared to $96.3 million in

the prior year period. The Company incurred lower legal and consulting fees associated with the Company's ongoing litigation

matters in the 2019 period.

expenses in the nine months ended September 30, 2019, were $16.5 million compared to $14.8 million in the prior year period.

income in the nine months ended September 30, 2019, was $32.4 million compared to $35.8 million in the prior year period. Net income

decreased primarily due to lower revenue.

income attributable to common shareholders was $18.1 million, or $0.19 per basic and diluted share, compared to net income attributable

to common shareholders of $22.9 million, or $0.37 per basic and $0.36 per diluted share, in the prior year period.

the implementation of the Rights Agreement, as described above, and the newly issued common and preferred shares, basic and diluted

earnings per share for the nine months ended September 30, 2019, would be $0.31 and $0.30, respectively.

adjusted EBITDA was $45.6 million in the nine months ended September 30, 2019, compared to $52.6 million in the prior year period.

Non-GAAP net income in the nine months ended September 30, 2019, was $34.5 million compared to $38.9 million in the prior year

period. Non-GAAP diluted earnings per share in the nine months ended September 30, 2019, were $0.21 per share compared to $0.41

per share in the prior year period. Non-GAAP diluted earnings per share in the nine months ended September 30, 2019, excluding

the implementation of the Rights Agreement and the newly issued common and preferred shares, would be $0.32 per share. Reconciliations

of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

of September 30, 2019, cash and cash equivalents totaled $156.7 million compared to $158.2 million as of December 31, 2018. In

the nine months ended September 30, 2019, net cash provided by operating activities was $12.6 million, net cash used in investing

activities was $10.2 million, and net cash used in financing activities was $1.0 million, including loan repayment of $3.3 million.

As of September 30, 2019, the Company had $3.7 million in 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

Company in the Antigua Court. The trial of the matter took place from December 3 to 5, 2018. On December 19, 2018, the Antigua

judge handed down his judgment (the "Antigua Judgment"), finding in the Company's favor in full, dismissing 1Globe's

claim and declaring that the Rights Agreement was validly adopted as a matter of Antigua law. On January 29, 2019, 1Globe filed

a Notice of Appeal against the Antigua Judgment. On March 4, 2019, 1Globe filed an application for urgent interim relief, seeking

an injunction to prevent the Company from continuing to implement its Rights Agreement until the resolution of the appeal. This

application was heard on April 4, 2019, at which the Court of Appeal issued an order restraining the Company from operating the

Rights Agreement in any way that affects 1Globe's rights or shareholding or otherwise distributing the exchange shares to

the Company's shareholders who did not trigger the Rights Plan until after the determination of the appeal (the "Exchange

Shares"). 1Globe's appeal against the Antigua Judgment was heard in the week of September 16, 2019, and the appeal