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Sinovac Reports Unaudited Fourth Quarter 2020 Financial Results and Files 2020 Annual Report on Form 20-F

BEIJING–(BUSINESS WIRE)–Sinovac Biotech Ltd. (NASDAQ: SVA) (“Sinovac” or the “Company”), a leading provider of biopharmaceutical products in China, has filed its 2020 annual report on Form 20-F with the U.S. Securities and Exchange Commission for the year ended December 31, 2020. The Company also reported its unaudited financial results for the fourth quarter ended December 31, 2020.

Fourth Quarter and Full Year 2020 Financial Summary

Mr. Weidong Yin, Chairman, President, and CEO of Sinovac, commented, “Sinovac experienced an exceptionally strong year in 2020. Despite the unprecedented COVID-19 pandemic, we are pleased with our record financial performance both for the fourth quarter and full fiscal year. We moved quickly to develop an inactivated COVID-19 vaccine, also known as CoronaVac, within a year’s time and without having to sacrifice product quality.”

“We have built production facilities with an annual production capacity of 2 billion doses. At this time, over 200 million doses of our COVID-19 vaccine have been delivered to different countries to support vaccine rollout, and millions of people around the globe have been administered our vaccine. We always strive to achieve low incident rates when developing vaccines, and we are happy to see CoronaVac’s strong performance in the largest real world study in Chile, providing solid, real-life evidence that our vaccine helps to reduce hospitalized cases, ICU admissions, and fatal cases. Our overarching goal is to deliver a safe, effective, and accessible vaccine to the world.”

Mr. Yin added, “As we worked to develop our COVID-19 vaccine, Sinovac also achieved good development progress with its other vaccine products as well. Two of our products, QIV and PPV-23, were granted market authorization in China in 2020, and our existing business segments continued to grow, despite a reduction in vaccination activities in the first half of the year due to the COVID-19 outbreak and lockdown policy.”

Pipeline Development

COVID-19 Vaccine – The Company initiated the development of an inactivated vaccine against COVID-19 (named CoronaVac) on January 28, 2020. The phase I and II human studies on healthy adults aged 18 to 59 and elderly adults aged 60 and above were conducted in China and enrolled 144 participants in the phase I trial and 600 participants in the phase II trial, with 743 participants receiving at least one dose of investigational product. Results from the randomized, double-blind, placebo-controlled phase I/II clinical trial on safety, tolerability and immunogenicity of CoronaVac were published in The Lancet Infectious Diseases on November 17, 2020.

Since September 2020, the Company made rolling submission to China’s National Medical Products Administration (NMPA), which carried out rolling reviews when the submissions were made. NMPA granted a conditional marketing authorization (CMA) to Sinovac for CoronaVac in individuals aged 18 and above on February 5, 2021. As of March 31, 2021, CoronaVac has been granted either emergency approval or conditional marketing authorization by over 30 countries or regions.

Sinovac completed its phase I/II trial on pediatric populations aged 3 to 17 years old. 28 days after second dose, both the middle-dose and low-dose were well tolerated, and the seroconversaion rates were 96.77% and 100%, respectively. The pre-print of the publication named Safety, Tolerability and Immunogenicity of an Inactivated SARS-CoV-2 Vaccine (CoronaVac) in Healthy Children and Adolescents: A Randomised, Double-Blind, and Placebo-Controlled, Phase 1/2 Clinical Trial is available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3820545.

Sabin Inactivated Polio vaccine (sIPV) – The Company submitted an application to NMPA for the product license of sIPV in January 2019. The Company expects the license to be issued in mid-2021.

Unaudited Financial Results for the Fourth Quarter of 2020

Sales for the fourth quarter of 2020 were $327.5 million, an increase from $81.1 million in the prior year period. The increase was due to higher sales of the Company’s influenza products, including the newly launched QIV, and sales of CoronaVac.

Gross profit in the fourth quarter of 2020 was $283.9 million, an increase from $68.9 million in the prior year period. Gross margin was 86.7%, compared to 84.9% in the prior year period. The increase of gross margin was due to a change in sales mix in 2020.

Selling, general and administrative expenses in the fourth quarter of 2020 were $83.1 million, compared to $33.3 million in the prior year period. The increase was mainly due to higher sales and increased marketing dedicated to revenue growth.

R&D expenses in the fourth quarter of 2020 were $2.7 million in 2020, compared to $7.8 million in the prior year period.

Net income in the fourth quarter of 2020 was $172.7 million, compared to $32.8 million in the prior year period, due to an increase in sales.

Net income attributable to common shareholders was $107.3 million, or $1.09 per basic and $0.96 per diluted share, in the fourth quarter of 2020, compared to $21.7 million, or $0.22 per basic and $0.20 per diluted share, in the prior year period.

As 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, the Company issued new common and preferred shares of Sinovac. Without the effect of implementing the Rights Agreement and the newly-issued common and preferred shares, basic and diluted earnings per share for the fourth quarter of 2020 would be $1.53 and $1.27, respectively.

Non-GAAP adjusted EBITDA was $198.9 million in the fourth quarter of 2020, compared to $30.8 million in the prior year period. Non-GAAP net income was $175.3 million in the fourth quarter of 2020, compared to $34.0 million in the prior year period. Non-GAAP diluted earnings per share in the fourth quarter of 2020 was $1.02, compared to earnings of $0.21 per share in the prior year period. Non-GAAP diluted earnings per share in the fourth quarter of 2020, excluding the implementation of the Rights Agreement and the newly-issued common and preferred shares, would be $1.36. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

The Company’s fourth quarter 2020 financial statements are prepared and presented in accordance with U.S. GAAP. However, they have not been audited or reviewed by the Company’s independent registered accounting firm.

Financial Results for the Twelve Months Ended December 31, 2020

Sales in 2020 were $510.6 million, an increase from $246.1 million in the prior year. The increase was due to higher sales of the Company’s influenza products, including the newly launched QIV, and sales of CoronaVac.

Gross profit in 2020 was $443.4 million, compared to gross profit of $213.6 million in the prior year. Gross margin was 86.8%, which is the same compared to the prior year.

Selling, general and administrative expenses in 2020 were $176.5 million, compared to $121.5 million in the prior year. The increase was mainly due to higher sales and increased marketing dedicated to revenue growth.

R&D expenses in 2020 were $48.8 million, compared to $24.3 million in the prior year. The Company continued to invest in the advancement of pipeline vaccines, including sIPV and COVID-19 vaccines.

Net income in 2020 was $185.2 million, compared to $65.2 million in the prior year. Net income increased primarily due to increased sales.

Net income attributable to common shareholders was $104.4 million, or $1.06 per basic and $0.97 per diluted share, compared to net income attributable to common shareholders of $39.8 million, or $0.42 per basic and $0.41 per diluted share, in the prior year.

Excluding the implementation of the Rights Agreement, as described above, and the newly-issued common and preferred shares, basic and diluted earnings per share for 2020 would be $1.55 and $1.29, respectively.

Non-GAAP adjusted EBITDA was $229.9 million in 2020, compared to $76.4 million in the prior year. Non-GAAP net income in 2020 was $197.1 million in 2020, compared to $68.5 million in the prior year. Non-GAAP diluted earnings per share in 2020 was $1.03, compared to earnings of $0.43 per share in the prior year. Non-GAAP diluted earnings per share in 2020, excluding the implementation of the Rights Agreement and the newly-issued common and preferred shares, would be $1.45 per share. Reconciliations of non-GAAP measures to the nearest comparable GAAP measures are included at the end of this earnings announcement.

As of December 31, 2020, cash and cash equivalents totaled $1,041.0 million, compared to $152.7 million as of December 31, 2019. In 2020, net cash provided by operating activities was $479.3 million, net cash used in investing activities was $204.8 million, and net cash provided by financing activities was $592.6 million, including proceeds of $541.0 million from a subsidiary’s financing, loan proceeds of $33.2 million, and loan repayments of $6.0 million. As of December 31, 2020, the Company had $32.9 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.

Legal Proceedings

As 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 the Company fully in favor, 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 on September 18, 2019, and the appeal decision is now pending.

As previously disclosed, on March 5, 2018, the Company filed a lawsuit in the Court of Chancery of the State of Delaware seeking a determination on whether 1Globe, the Chiang Li Family, OrbiMed Advisors, LLC, and certain other shareholders of the Company had triggered the Rights Agreement. On April 12, 2018, 1Globe filed an amended answer to the Company’s complaint, counterclaims, and a third-party complaint against the Company and Mr. Weidong Yin alleging, among other allegations, that the Rights Agreement is not valid. On March 6, 2019, the Delaware Chancery Court entered a status quo order, providing that the Company not distribute any of the Exchange Shares to the Company’s shareholders who did not trigger the Rights Plan until the final disposition of the pending Delaware litigation or further order of the Court. On April 8, 2019, the Delaware Chancery Court stated that the Delaware litigation was pending the outcome of 1Globe’s appeal of the Antigua Judgment.

Separately, Heng Ren Investments LP (“Heng Ren”) filed suits against Sinovac and Weidong Yin on May 31, 2019, in Massachusetts state court, for alleged breach of fiduciary duties and wrongful equity dilution. Sinovac moved the matter from the state court to the United States District Court for the District of Massachusetts. Heng Ren alleged that Mr. Yin breached fiduciary duties owed to minority shareholders, that Sinovac aided and abetted breaches of fiduciary duties, and that both Sinovac and Mr. Yin engaged in wrongful equity dilution. Heng Ren requested damages, attorney fees, and prejudgment interest. On September 14, 2020, Sinovac Antigua filed a motion to dismiss Heng Ren’s claims. The court’s decision on this motion is still pending.

Status of Exchange Shares and Trading in the Company’s Shares

As a result of the pending legal proceedings described above, the Exchange Shares are expected to remain in a trust for the benefit of the Company’s shareholders who did not trigger the Rights Plan until, at least, the conclusion of the appeal against the Antigua Judgement and the final disposition of the Delaware litigation or further order of the Delaware Chancery Court. The Exchange Shares remain issued and outstanding. The Nasdaq Stock Market LLC implemented a halt on trading of the Company’s common shares at the time the Exchange Shares were issued to the trust. The Company is currently unable to estimate when trading will resume, or whether Nasdaq will take any additional action in regards to the trading of the Company’s common shares.

About Sinovac

Sinovac Biotech Ltd. is a China-based biopharmaceutical company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases. Sinovac’s product portfolio includes vaccines against COVID-19, enterovirus71 (EV71), hepatitis A and B, seasonal influenza, 23-Valent pneumococcal polysaccharide (“PPV”), H5N1 pandemic influenza (avian flu), H1N1 influenza (swine flu), varicella vaccine and mumps. Sinovac’s COVID-19 vaccine, CoronaVac, has been granted emergency use approval or conditional marketing authorization by over 30 countries or region worldwide. Healive, the hepatitis A vaccine manufactured by the Company, has passed the assessment under WHO prequalification procedures in 2017. The EV71 vaccine, an innovative vaccine developed by Sinovac against hand foot and mouth disease caused by EV71, was commercialized in China in 2016. In 2009, Sinovac was the first company worldwide to receive approval for its H1N1 influenza vaccine, which it has supplied to the Chinese Government’s vaccination campaign and stockpiling program. The Company is also the only supplier of the H5N1 pandemic influenza vaccine to the government stockpiling program. The Company is developing a number of new products including a Sabin-strain inactivated polio vaccine and combined vaccines. Sinovac primarily sells its vaccines in China, while also exploring growth opportunities in international markets. The Company is seeking market authorization of its products in over 30 countries outside of China. For more information please see the Company’s website at www.sinovac.com.

Safe Harbor Statement

This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. In particular, the outcome of any litigation is uncertain, and the Company cannot predict the potential results of the litigation it filed or filed against it by others. Additionally, the triggering of a shareholder rights plan is nearly unprecedented, and the Company cannot predict the impact on the Company or its stock price as a result of the trigger of the rights plan.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Sinovac uses the following non-GAAP financial measures: non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS. For more information on these non-GAAP financial measures, please refer to the table captioned “Reconciliations of non-GAAP Measures to the Nearest Comparable GAAP Measures” in this results announcement.

Sinovac believes that non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS help identify underlying trends in its business that could otherwise be distorted by the effect of certain income or expenses that Sinovac includes in net income and diluted EPS. Sinovac believes that non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS provide useful information about its core operating results, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. Non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP diluted EPS should not be considered in isolation or construed as an alternative to income from operations, net income, diluted EPS, or any other measure of performance or as an indicator of Sinovac’s operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.

Non-GAAP adjusted EBITDA represents net income and excludes interest and financing expenses, interest income, net other income and income tax benefit (expenses), and certain non-cash expenses, consisting of share-based compensation expenses, amortization and depreciation that Sinovac does not believe are reflective of the core operating performance during the periods presented.

Non-GAAP net income represents net income before share-based compensation expenses and foreign exchange gain or loss.

Non-GAAP diluted EPS represents non-GAAP net income attributable to common shareholders divided by the weighted average number of shares outstanding during the periods on a diluted basis, including accounting for the effect of the assumed conversion of options.

SINOVAC BIOTECH LTD.  
Consolidated Balance sheets  
As of December 31, 2020 and December 31, 2019  
(Expressed in thousands of U.S. Dollars)  
   
December 31, 2020   December 31, 2019
Current assets  
   
Cash and cash equivalents $

1,041,008

  $

152,718

Restricted cash

9,196

 

3,160

Short-term investment

135,248

 

50,274

Accounts receivable – net

253,487

 

113,736

Inventories

105,813

 

27,846

Prepaid expenses and deposits

15,541

 

1,873

Total current assets

1,560,293

 

349,607

   
Property, plant and equipment – net

200,371

 

74,310

Prepaid land lease payments

8,247

 

7,965

Intangible assets – net

1,474

 

Long-term prepaid expenses

25

 

23

Prepayments for acquisition of equipment

20,192

 

2,390

Deferred tax assets

26,891

 

11,368

Right-of-use assets

83,833

 

6,636

Total assets

1,901,326

 

452,299

   
Current liabilities  
Short-term bank loans and current portion of long-term bank loans

32,941

 

5,934

Loan from a non-controlling shareholder

6,155

 

6,607

Accounts payable and accrued liabilities

211,428

 

58,890

Income tax payable

35,262

 

1,904

Deferred revenue

364,005

 

5,462

Deferred government grants

15,159

 

2,738

Dividend payable

11,143

 

5,128

Lease liability

3,517

 

536

Total current liabilities

679,610

 

87,199

   
Deferred government grants

4,229

 

3,986

Long-term bank loans

2,155

 

Deferred tax liability

2,724

 

Loan from a non-controlling shareholder

6,130

 

1,436

Lease liability

85,488

 

5,758

Other non-current liabilities

865

 

1,725

Total long-term liabilities

101,591

 

12,905

   
Total liabilities

781,201

 

100,104

   
Commitments and contingencies  
   
Equity  
Preferred stock

15

 

15

Common stock

99

 

99

Additional paid-in capital

538,924

 

207,962

Subscriptions receivable

(7,109)

 

Accumulated other comprehensive income (loss)

19,925

 

(4,321)

Statutory surplus reserves

50,377

 

33,533

Accumulated earnings

144,241

 

56,731

Total shareholders’ equity

746,472

 

294,019

   
Non-controlling interests

373,653

 

58,176

Total equity

1,120,125

 

352,195

Total liabilities and equity $

1,901,326

  $

452,299

SINOVAC BIOTECH LTD.
Consolidated Statements of Comprehensive Income
For the three and twelve months ended December 31, 2020 and 2019
(Expressed in thousands of U.S. Dollars, except for numbers of shares and per share data)
       

Three months ended December 31

 

 

For the year ended December 31

2020

 

 

2019

 

 

2020

 

 

2019

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

Sales $

327,454

  $

81,111

  $

510,624

  $

246,053

Cost of sales

43,525

  $

12,251

  $

67,180

  $

32,469

Gross profit

283,929

 

68,860

 

443,444

 

213,584

       
Selling, general and administrative expenses

83,051

 

33,299

 

176,534

 

121,468

Provision (recovery) for doubtful accounts

1,191

 

(445)

 

2,640

 

(306)

Research and development expenses

2,661

 

7,758

 

48,760

 

24,254

Loss on disposal of property, plant and equipment

115

 

64

 

163

 

294

Government grants recognized in income

(10)

 

(619)

 

(297)

 

(688)

Total operating expenses

87,008

 

40,057

 

227,800

 

145,022

Operating income

196,921

 

28,803

 

215,644

 

68,562

       
Interest and financing expenses

(328)

 

(159)

 

(1,453)

 

(650)

Interest income

402

 

594

 

1,930

 

1,996

Other income, net

1,371

 

296

 

496

 

912

Income before income taxes

198,366

 

29,534

 

216,617

 

70,820

Income tax benefit (expense)

(25,665)

 

3,286

 

(31,438)

 

(5,605)

Net Income

172,701

 

32,820

 

185,179

 

65,215

Less: Income attributable to non-controlling interests

(63,871)

 

(9,625)

 

(74,810)

 

(20,286)

Net income attributable to shareholders of Sinovac

108,830

 

23,195

 

110,369

 

44,929

Preferred stock dividends

(1,512)

 

(1,512)

 

(6,015)

 

(5,128)

Net income attributable to common shareholders of Sinovac

107,318

 

21,683

 

104,354

 

39,801

       
Net income

172,701

 

32,820

 

185,179

 

65,215

Other comprehensive income, net of tax of nil      
Foreign currency translation adjustments

24,703

 

6,467

 

32,328

 

(2,827)

Comprehensive income

197,404

 

39,287

 

217,507

 

62,388

Less: comprehensive income attributable to non-controlling interests

(70,213)

 

(10,821)

 

(82,892)

 

(19,681)

Comprehensive income attributable to shareholders of Sinovac $

127,191

 

28,466

  $

134,615

 

42,707

       
Earnings per share      
Basic net income per share

1.09

 

0.22

 

1.06

 

0.42

Diluted net income per share

0.96

 

0.20

 

0.97

 

0.41

       
Weighted average number of shares of common stock outstanding      
Basic

98,897,607

 

98,903,406

 

98,897,345

 

94,876,946

Diluted

113,662,163

 

113,715,690

 

113,662,362

 

109,691,959

Contacts

Sinovac Biotech Ltd.
Helen Yang

Tel: +86-10-8279-9871 or

+86-10-5693-1897

Fax: +86-10-6296-6910

Email: ir@sinovac.com

ICR Inc.
Bill Zima

U.S.: 1-646-308-1707

Email: william.zima@icrinc.com

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