Sinovac Biotech's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Sinovac Biotech Ltd. (SVA)

Q2 2012 Earnings Call

August 15, 2012 8:00 a.m. ET

Executives

Stephanie Carrington - Investor Relations, The Ruth Group

Weidong Yin - Chief Executive Officer

Danny Chung - Chief Financial Officer

Helen Yang - Investor Relations Manager

Chris Lee - Officer, Investor Relations

Analysts

Christopher Lui - Morgan Stanley

Presentation

Operator

Greetings and welcome to the Sinovac Biotech Limited’s Second Quarter 2012 Earnings Conference Cal. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Stephanie Carrington of The Ruth Group. Thank you. Ms. Carrington, you may begin.

Stephanie Carrington

Thank you, operator. Good day, everyone. Before we begin, I would like to remind everyone that this conference call contains 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 words or phrases such as will, expect, anticipate, future, intends, plans, believes, estimates, and similar statements. These statements that are not historical facts, including statements about Sinovac's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Sinovac does not undertake any obligation to update any forward-looking statements except as required under applicable laws.

On the call today from management we have Dr. Weidong Yin, CEO; Mr. Danny Chung, Sinovac's Chief Financial Officer; Ms. Helen Yang, Investor Relations Manager; and Ms. Chris Lee, Officer, Investor Relations. I will now turn over the line to Helen Yang. Go ahead, Helen.

Helen Yang

Hello, everyone. Thank you for joining us on this conference call. On the call today, as Stephanie mentioned, our Chairman, President and CEO Mr. Yin, and our CFO Mr. Danny Chung. And I will give you an update on the business on Mr. Yin behalf, and Danny will discuss about the financials afterwards. Maybe let me start by providing you with a general business update for the quarter.

We are actually very pleased to see a continuous strong sales of our hepatitis vaccine in the second quarter, especially for Bilive. And this product actually grow year-over-year for the quarter with about 28%. And also for the six-month sales number, the realized sales growth even stronger, which brings a growth rate with about 26% compared to the first half of last year.

And these results clearly demonstrate that our continuous success in expanding our hepatitis vaccines in the private sector of Chinese vaccine market. And as we announced earlier today, Sinovac also had successfully won a tender in Gansu province to supply over 700,000 doses of Healive, which is the company's inactivated hepatitis A vaccine. And this vaccine will be administered within this year as part of the booster vaccination campaign in that area with a high incidence rate of hepatitis A. And the total value of this bid is about close to RMB 23 million which is about US$3.6 million. And we indicated that the vaccine delivery will commence in the fourth quarter of this year.

And we also have seen that overseas sales contributed higher percentage to the total sales, which in this quarter is about 4%. We believe that our activities, training and investment for the sales and marketing team can improve our capabilities and expanding our presence in vaccine market give us an opportunity that we can leverage the platform and the team’s experience to successfully commercialize our EV71 vaccine which is in the Phase III clinical study at the moment.

And now I would like to turn to our update on these programs. We actually have committed advancing the development of our EV71 vaccine. As all of you may know that it’s currently in the Phase III study. At the Phase III study, the endpoint is to evaluate efficacy of the vaccine and we discussed earlier we registered a trial early this year and we completed dosing and broad question and now it’s the center for disease control to work with the local laboratory on collecting the EV71 positive cases. These data that will be finally included in the statistical invoices for finally evaluating the efficacy profile of this vaccine.

And also in this quarter, we expect a visit and inspection by SFDA experts and the results are very positive and also grant us the opportunity to have a simultaneous communication between the healthcare workers related to the trial with the SFDA experts in order to allow the SFDA officials to have a interim review of the progress we made, in order to see that the process for regulatory approval of this vaccine.

And in general that this program is still being on schedule and everyone is working actively to be inline with our predicted target. And also in parallel, we are also very actively establishing the production plan for EV71. Currently in our Changping site, we have completed the installation of the equipment and right now we are in the validation process. And the GMP inspection for this site will be in line with our progress made with Phase III trial.

And our ultimate goals is to launch the vaccine, are to get a license of vaccine without any delay, meaning that we will have the facility prepared in parallel with the research. And also I would like to take a moment to provide you some detail about the current hand, foot and mouth disease epidemic in China. And there has been over 1.5 million hand, foot and mouth disease cases recorded in China, which is about 50% increase year-over-year growth. And this is very serious situation and that also gives a lot more pressure that we should move closely with the trial in order to provide the vaccine to help all the population as soon as we can. And also this citation from the government as well.

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