UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Form 6-K

 

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2020

Commission File Number 001-34566

 

 

 

China Biologic Products Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

18th Floor, Jialong International Building, 19 Chaoyang Park Road

Chaoyang District, Beijing 100125

People’s Republic of China

(+86) 10-6598-3111

(Address of principal executive office)

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F x Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨ 

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨ 

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 

 

Latest Development of Cooperation with Xinjiang Deyuan

 

As disclosed in the annual report on Form 20-F filed by China Biologic Products Holdings, Inc. (the “Company”) with the Securities and Exchange Commission on March 12, 2020, since November 2019, the Company’s cooperation partner Xinjiang Deyuan Bioengineering Co., Ltd. (“Xinjiang Deyuan”) has significantly reduced the plasma volume delivered to the Company due to Xinjiang Deyuan’s operating cash shortfall and its disagreement with the Company regarding payment arrangements for the plasma. Pursuant to the strategic cooperation agreement (the “Cooperation Agreement”) entered into in August 2015 among the Company’s subsidiary Guizhou Taibang Biological Products Co., Ltd. (“Guizhou Taibang”), Xinjiang Deyuan and its controlling shareholder (as supplemented by a supplementary agreement entered into in August 2018), Xinjiang Deyuan has the obligation to supply to Guizhou Taibang no less than 500 tonnes of source plasma over a three year period from August 2018 to August 2021. As of the date hereof, Xinjiang Deyuan has supplied to Guizhou Taibang approximately 308 tonnes of source plasma under the supplementary agreement. As part of the Cooperation Agreement, Guizhou Taibang lent to Xinjiang Deyuan a loan (the “Loan”) with a principal amount of RMB300 million, which was secured by a pledge of 58.02% of the equity interest in Xinjiang Deyuan from its controlling shareholder. As of the date hereof, the outstanding principal amount of the Loan is approximately RMB248 million and the overdue interest owed by Xinjiang Deyuan to Guizhou Taibang amounts to approximately RMB10 million.

 

The Company has been negotiating with Xinjiang Deyuan to try to resolve the disagreement regarding Xinjiang Deyuan’s performance of plasma supply obligations and repayment of the principal and interest under the Loan. In addition, on March 17, 2020, Guizhou Taibang filed two lawsuits against Xinjiang Deyuan in the Beijing Third Intermediate People’s Court and the Beijing Chaoyang People’s Court, respectively. The main claims of Guizhou Taibang in these litigations include (i) a demand for Xinjiang Deyuan to repay the outstanding principal amount and interest under the Loan; (ii) a demand for Xinjiang Deyuan to refund the prepaid deposit Guizhou Taibang previously delivered to Xinjiang Deyuan under the Cooperation Agreement; and (iii) a plead to the court to auction or otherwise sell the pledged shares of Xinjiang Deyuan held by its controlling shareholder and distribute the proceeds to Guizhou Taibang to the extent of the foregoing claims on a priority basis. As of the date hereof, both litigations are at the pretrial stage.

 

After filing the two lawsuits, the Company has recently learned from public sources that Xinjiang Deyuan has designated five of the six plasma collection stations covered by the Cooperation Agreement to supply source plasma to a third party, Southern Shuanglin Bio-Pharmacy Co., Ltd. As a result, these plasma stations could no longer supply source plasma to Guizhou Taibang. The Company views this as a serious breach of the Cooperation Agreement, and the Company issued a press release commenting on it, a copy of which is attached as Exhibit 99.3 to this Form 6-K. The Company will take further legal actions to protect its rights while continuing to litigate the two filed cases vigorously. In the meantime, the Company is continuing out-of-court negotiations with Xinjiang Deyuan and attempting to obtain mutually satisfactory settlement to the extent possible.

 

Safe Harbor Statement

 

This Form 6-K may contain certain “forward-looking statements” relating to the business of China Biologic Products Holdings, Inc. and its subsidiaries. All statements, other than statements of historical fact included herein, are “forward-looking statements.” These forward-looking statements are often identified by the use of forward-looking terminology such as “intend,” “believe,” “expect,” “are expected to,” “will,” or similar expressions, and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they involve assumptions, risks, and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this Form 6-K. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    CHINA BIOLOGIC PRODUCTS HOLDINGS, INC.
Date: May 20, 2020   By: /s/ Joseph Chow
        Name: Joseph Chow
        Title: Chairman of the Board of Directors

 

 

 

 

EXHIBIT INDEX

 

Exhibit Number

Description

99.1 Press release dated May 20, 2020 titled “China Biologic Reports Financial Results for the First Quarter of 2020”
99.2 China Biologic First Quarter 2020 Financial Results
99.3 Press release dated May 20, 2020 titled “China Biologic Comments on the Xinjiang Deyuan and Shuanglin Transaction”

 

 

 

 

Exhibit 99.1

 

China Biologic Reports Financial Results

for the First Quarter of 2020

 

 

BEIJING, China – May 20, 2020 – China Biologic Products Holdings, Inc. (NASDAQ: CBPO, “China Biologic” or the “Company”), a leading fully integrated plasma-based biopharmaceutical company in China, today announced its unaudited financial results for the first quarter of 2020.

 

First Quarter 2020 Financial Highlights

 

·Total sales in the first quarter of 2020 increased by 29.4% in RMB terms and 25.3% in USD terms to $162.6 million from $129.8 million in the same quarter of 2019.
·Gross profit increased by 18.0% to $101.0 million from $85.6 million in the same quarter of 2019. Gross margin decreased to 62.1% from 65.9% in the same quarter of 2019.
·Income from operations increased by 54.5% to $68.0 million from $44.0 million in the same quarter of 2019. Operating margin increased to 41.8% from 33.9% in the same quarter of 2019.
·Non-GAAP adjusted income from operations increased by 52.1% in RMB terms and 47.3% in USD terms to $76.9 million from $52.2 million in the same quarter of 2019.
·Net income attributable to the Company increased by 41.6% to $53.4 million from $37.7 million in the same quarter of 2019. Diluted earnings per share increased to $1.36 compared to $0.94 in the same quarter of 2019.
·Non-GAAP adjusted net income attributable to the Company increased by 42.3% in RMB terms and 38.0% in USD terms to $61.4 million from $44.5 million in the same quarter of 2019. Non-GAAP adjusted earnings per diluted share increased to $1.56 from $1.11 in the same quarter of 2019.

 

NOTE: Detailed financial statements and information are available through this link: https://photos.prnasia.com/prnk/20200520/2809099-1

 

“This quarter’s exceptionally strong performance was mainly driven by a substantial growth in IVIG sales volume due to a rise in demand in connection with the COVID-19 outbreak,” said Joseph Chow, Chairman and CEO of China Biologic. “More than 40% of the IVIG sales growth came from Hubei province, the epicenter of the outbreak and an area in which we prioritized our sales efforts in late 2019 and subsequently brought on key local distributors that had previously worked with our competitors. In addition to IVIG, the sales of most of our other products have been negatively impacted by the outbreak, showing either a decline or only a marginal growth. Our strong operating income growth was also attributable to reduced operating costs in the first quarter as a result of delays in our normal operational activities caused by COVID-19 related quarantine regulations.”

 

“Looking ahead to the rest of 2020, given the limited volume of available plasma inventory and the oversold IVIG in the first quarter, we expect the overall growth rate of IVIG sales will slow down in the remaining quarters of 2020. We will make proactive adjustments to our operational strategies in the face of lower anticipated demand for most of our products, as well as lower-than-expected plasma collection volume and intensified competition.”

 

 

 

 

Financial Outlook

 

The COVID-19 outbreak has impacted various aspects of CBPO’s operations, including plasma collection, production of certain products, and sales and marketing activities. The Company continues to actively evaluate the overall impact of the outbreak on its business and will provide financial guidance for the full year 2020 when it has better visibility.

 

Conference Call

 

The Company will host a conference call at 7:30 am Eastern Time on Thursday, May 21, 2020, which is 7:30 p.m. Beijing Time on May 21, 2020, to discuss its first quarter 2020 results and answer questions from investors. Listeners may access the call by dialing:

 

US: 1 888 346 8982
International: 1 412 902 4272
Hong Kong: 800 905 945
China: 400 120 1203

 

A telephone replay will be available one hour after the conclusion of the conference all through May 28, 2020. The dial-in details are:

 

US: 1 877 344 7529
International: 1 412 317 0088
Passcode: 10144151

 

A live and archived webcast of the conference call will be available through the Company’s investor relations website at http://chinabiologic.investorroom.com.

 

About China Biologic Products Holdings, Inc.

 

China Biologic Products Holdings, Inc. (NASDAQ: CBPO) is a leading fully integrated plasma-based biopharmaceutical company in China. The Company’s products are used as critical therapies during medical emergencies and for the prevention and treatment of life-threatening diseases and immune-deficiency related diseases. China Biologic is headquartered in Beijing and manufactures over 20 different dosage forms of plasma products through its indirect majority-owned subsidiary, Shandong Taibang Biological Products Co., Ltd. and its wholly owned subsidiary, Guizhou Taibang Biological Products Co., Ltd. The Company also has an equity investment in Xi’an Huitian Blood Products Co., Ltd. Since the acquisition of TianXinFu (Beijing) Medical Appliance Co., Ltd. in 2018, China Biologic is also engaged in the sale of medical devices, primarily regenerative medical biomaterial products. The Company sells its products to hospitals, distributors and other healthcare facilities in China. For additional information, please see the Company’s website www.chinabiologic.com.

 

Contact:

 

China Biologic Products Holdings, Inc.

Mr. Ming Yin

Senior Vice President

Email: ir@chinabiologic.com

 

The Foote Group

Mr. Philip Lisio

Phone: +86-135-0116-6560

Email: phil@thefootegroup.com

 

 

 

 

Non-GAAP Disclosure

 

This news release contains non-GAAP financial measures that exclude non-cash compensation expenses related to restricted shares and restricted share units granted to employees and directors under the Company’s Equity Incentive Plans and amortization of acquired intangible assets and land use rights. To supplement the Company’s unaudited consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this release. The Company’s management believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. A reconciliation of the adjustments to GAAP results appears in the table accompanying the detailed financial statements and information available through the link in the notes of this news release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

 

In addition, as the Company evaluates certain key items of its financial results on a local currency basis (i.e., in RMB) in addition to the reporting currency (i.e., in USD), this news release contains local currency information that eliminates the impact of fluctuations in foreign currency exchange rates. The Company believes that, given its operations primarily based in China, providing local currency information on such key items enhances the understanding of its financial results and evaluation of performance in comparison to prior periods. Changes in local currency percentages are calculated by comparing financial results denominated in RMB from period to period.

 

Safe Harbor Statement

 

This news release may contain certain “forward-looking statements” relating to the business of China Biologic Products Holdings, Inc. and its subsidiaries. All statements, other than statements of historical fact included herein, are “forward-looking statements.” These forward-looking statements are often identified by the use of forward-looking terminology such as “intend,” “believe,” “expect,” “are expected to,” “will,” or similar expressions, and involve known and unknown risks and uncertainties. Among other things, the management’s quotations and forecast of the Company’s financial performance in this news release contain forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they involve assumptions, risks, and uncertainties, and these expectations may prove to be incorrect.

 

Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including, without limitation, quality of purchased source plasma, potential delay or failure to complete construction of new collection facilities, potential inability to pass government inspection and certification process for existing and new facilities, potential inability to achieve the designed collection capacities at the new collection facilities, potential inability to achieve the expected operating and financial performance, potential inability to find alternative sources of plasma, potential inability to increase production at permitted sites, potential inability to mitigate the financial consequences of a temporarily reduced raw plasma supply through cost cutting or other efficiencies, and potential additional regulatory restrictions on its operations and those additional risks and uncertainties discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

 

 

 

Exhibit 99.2

 

China Biologic First Quarter 2020 Financial Results

 

First Quarter 2020 Financial Performance

 

Total sales in the first quarter of 2020 increased by 25.3% in USD terms, or 29.4% in RMB terms, to $162.6 million from $129.8 million in the same quarter of 2019.

 

Total sales for biopharmaceutical products increased by 31.3% in USD terms, or 35.7% in RMB terms, to $153.0 million in the first quarter of 2020 from $116.5 million in the same quarter of 2019, mainly because of an increase in sales of IVIG products, which was partly offset by a decrease in sales of albumin and placenta polypeptide products. For plasma products, total sales in the first quarter of 2020 increased by 37.6% in USD terms, or 42.1% in RMB terms, to $149.7 million from $108.8 million in the same quarter of 2019.

 

Revenue from IVIG products increased by 169.7% in USD terms, or 178.2% in RMB terms, from $29.0 million in the first quarter of 2019 to $78.2 million in the first quarter of 2020, mainly due to a temporary substantial growth in demand for IVIG in connection with the COVID-19 outbreak, supported by the Company’s high IVIG inventory that was the result of sluggish sales of the product in previous quarters. The sales volume of IVIG products increased by 188.3% during this quarter over the same period of last year. The average price decreased by 6.6% in USD terms and 3.5% in RMB terms, because of a higher percentage of sales volume in the distributor channel in the first quarter of 2020 compared to the same quarter of 2019.

 

Revenue from human albumin decreased by 26.9% in USD terms, or 24.5% in RMB terms, to $41.5 million in the first quarter of 2020, from the exceptionally high number of $56.8 million in the first quarter of 2019, during which there was a temporary shortage of albumin supply in the market related to a lower import volume. The sales volume of human albumin products decreased by 25.2% in the first quarter of 2020 over same quarter last year. The average price for human albumin increased by 0.9% in RMB terms compared to the same quarter of 2019, because of a higher percentage of sales volume in the direct sales channel. In USD terms, the average price of human albumin decreased by 2.3% in the first quarter of 2020 compared to the same quarter of 2019.

 

In the first quarter of 2020, IVIG and human albumin products remained the Company’s two largest sales contributors. As a percentage of total sales, sales of IVIG and human albumin products were 48.1% and 25.5%, respectively, in the first quarter of 2020.

 

 

 

 

Revenue from other immunoglobulin products increased by 3.8% in USD terms, or 7.0% in RMB terms in the first quarter of 2020 compared to the same quarter of 2019, representing 8.4% of total sales as compared to 10.1% of total sales in the same quarter of 2019.

 

Revenue from other plasma products increased by 66.7% in USD terms, or 72.5% in RMB terms, in the first quarter of 2020 compared to the same quarter of 2019, with a growth in revenue from all the three coagulation factor products, namely human coagulation factor VIII, human prothrombin complex concentrate and human fibrinogen products, reaching 10.1% of total sales in the first quarter of 2020 compared to 7.6% of total sales in the same quarter of 2019.

 

Revenue from placenta polypeptide products decreased by 57.1% in USD terms, or 55.7% in RMB terms in the first quarter of 2020 as compared to the same quarter of 2019, accounting for 2.0% of total sales compared to 5.9% of total sales in the same quarter of 2019. The main reason for this decrease was that this product was included in the drug lists for monitoring and prescription control in many regions, which put a downward pressure on its sales volume.

 

Total sales for biomaterial products in the first quarter of 2020 decreased by 27.8% in USD terms, or 25.7% in RMB terms, to $9.6 million from $13.3 million in the same quarter of 2019, mainly due to a decline in sales of artificial dura mater products in connection with a reduced number of non-urgent surgical operations during the COVID-19 outbreak.

 

Cost of sales increased by 39.4% to $61.6 million in the first quarter of 2020 from $44.2 million in the same quarter of 2019. As a percentage of total sales, cost of sales increased to 37.9% in the first quarter of 2020 from 34.1% in the same quarter of 2019, as a combined result of decreased sales prices for the Company’s major plasma products, lower percentages of higher-margin placenta polypeptide and dura mater products in total sales, and increased plasma collection costs.

 

Gross profit increased by 18.0% to $101.0 million in the first quarter of 2020 from $85.6 million in the same quarter of 2019. Gross margin was 62.1% and 65.9% in the first quarter of 2020 and 2019, respectively.

 

Total operating expenses in the first quarter of 2020 decreased by $8.6 million, or 20.7%, to $33.0 million from $41.6 million in the same quarter of 2019. This decrease consisted of a $4.2 million decrease in selling expenses, a $3.8 million decrease in general and administrative expenses and a $0.6 million decrease in research and development expenses. As a percentage of total sales, total operating expenses decreased to 20.3% in the first quarter of 2020 from 32.0% in the same quarter of 2019.

 

 

 

 

Selling expenses in the first quarter of 2020 decreased by $4.2 million, or 22.5%, to $14.5 million from $18.7 million for the same quarter of 2019. As a percentage of total sales, selling expenses decreased to 8.9% in the first quarter of 2020 from 14.4% in the same quarter of 2019. The decrease was primarily due to a decrease in marketing and promotion expenses related to placenta polypeptide products, whose sales decreased significantly in the first quarter of 2020. The decrease in selling expenses as a percentage of sales was also due to a delay of normal sales and promotional activities during the COVID-19 epidemic because of quarantine regulations.

 

General and administrative expenses decreased by $3.8 million, or 18.4%, to $16.8 million in the first quarter of 2020, from $20.6 million in the same quarter of 2019. The decrease was mainly due to a decrease in allowance for doubtful accounts receivable, reflecting the Company’s effective implementation of earnings quality management, as well as a decrease in consulting service fees. As a percentage of total sales, general and administrative expenses decreased to 10.3% in the first quarter of 2020 compared to 15.9% in the same quarter of 2019.

 

Research and development expenses in the first quarter of 2020 decreased by $0.6 million, or 26.1%, to $1.7 million from $2.3 million in the same quarter of 2019, with some of the clinical trial programs in hospitals and clinics being temporarily halted during the COVID-19 epidemic. As a percentage of total sales, research and development expenses decreased to 1.0% in the first quarter of 2020 from 1.8% in the same quarter of 2019.

 

Income from operations in the first quarter of 2020 increased by 54.5% in USD terms, or 60.1% in RMB terms, to $68.0 million from $44.0 million in the same quarter of 2019. Operating margin increased to 41.8% in the first quarter of 2020 from 33.9% in the same quarter of 2019.

 

Income tax expense in the first quarter of 2020 was $11.6 million, compared to $7.9 million in the same quarter of 2019. The effective income tax rate was 15.7% and 15.0% for the first quarter of 2020 and 2019, respectively.

 

Net income attributable to the Company increased by 41.6% in USD terms, or 46.3% in RMB terms, to $53.4 million in the first quarter of 2020 from $37.7 million in the same quarter of 2019. Net margin increased to 32.8% in the first quarter of 2020 from 29.1% in the same quarter of 2019. Diluted earnings per share increased to $1.36 in the first quarter of 2020 as compared to $0.94 in the same quarter of 2019.

 

Non-GAAP adjusted income from operations increased by 47.3% in USD terms or 52.1% in RMB terms to $76.9 million in the first quarter of 2020 from $52.2 million in the same quarter of 2019.

 

 

 

 

Non-GAAP adjusted net income attributable to the Company increased by 38.0% in USD terms, or 42.3% in RMB terms, to $61.4 million in the first quarter of 2020 from $44.5 million in the same quarter of 2019. Non-GAAP net margin increased to 37.8% in the first quarter of 2020 compared to 34.3% in the same quarter of 2019. Non-GAAP adjusted earnings per diluted share increased to $1.56 in the first quarter of 2020 as compared to $1.11 in the same quarter of 2019.

 

Non-GAAP adjusted income from operations for the first quarter of 2020 excludes $6.9 million in non-cash employee share-based compensation expenses, and $2.0 million in amortization expenses of intangible assets and land use rights related to the acquisition of TianXinFu.

 

Non-GAAP adjusted net income and earnings per diluted share for the first quarter of 2020 exclude $6.3 million in non-cash employee share-based compensation expenses, and $1.7 million in amortization expenses of intangible assets and land use rights related to the acquisition of TianXinFu.

 

As of March 31, 2020, the Company had $122.9 million in cash on hand and demand deposits, $496.1 million in time deposits, and $372.7 million in short term investments.

 

Net cash provided by operating activities for the first quarter of 2020 was $75.7 million as compared to $32.2 million for the same quarter of 2019. The increase of $43.5 million in net cash provided by operating activities was mainly because of a decrease in inventories and an increase in net income compared to the same quarter of 2019, which was partly offset by an increase in accounts receivable.

 

Inventories decreased by $33.0 million in the first quarter of 2020, compared with an increase of $4.0 million in the same quarter of 2019. The decrease of inventory in the first quarter of 2020 was primarily because of the exceptionally high sales volume of IVIG products during this period, which cleaned up the high IVIG inventory as of the end of year 2019. The decrease of inventory in the first quarter of 2020 was also because of a significant decline in raw material plasma collection volume as all plasma collection stations of the Company were closed for over one month during the COVID-19 outbreak to help contain the spread of the virus and the collection volume was still below normal levels after the resumption of collection operations in March 2020.

 

Accounts receivable increased by $35.3 million during the first quarter of 2020 as compared to an increase of $11.6 million during the same quarter of 2019, largely in line with the increase in sales revenue. Accounts receivable turnover days for plasma products were shortened to 78 days during the first quarter of 2020 from 100 days during the same quarter of 2019, reflecting the Company’s ongoing efforts to shorten credit terms of some of its distributors and increased collection efforts to control credit exposure.

 

Net cash used in investing activities for the first quarter of 2020 was $113.4 million as compared to $214.7 million for the same quarter of 2019. During the first quarter of 2020, the Company paid $3.2 million for the acquisition of property, plant and equipment, and intangible assets, and the Company also purchased time deposits and short term investments in an amount of $859.2 million. This was partly offset by the maturity value of time deposits and short term investments of $749.0 million. Net cash used in investing activities in the first quarter of 2019 mainly consisted of payment of $937.4 million for the purchase of time deposits and short term investments, and payment of $7.9 million for the acquisition of property, plant and equipment, intangible assets and land use rights, which was partly offset by the maturity value of $730.6 million of time deposits and short term investments.

 

Net cash used in financing activities for the first quarter of 2020 was nil as compared to $60.0 million for the same quarter of 2019, which mainly represented a remittance of $60.0 million to an investment bank by the Company to execute the previously approved share repurchase program on behalf of the Company.

 

 

 

 

Non-GAAP Disclosure

 

This management’s discussion and analysis of the financial results (this “MD&A”) contains non-GAAP financial measures that exclude non-cash compensation expenses related to restricted shares and restricted share units granted to employees and directors under the Company’s Equity Incentive Plans and amortization of acquired intangible assets and land use rights. To supplement the Company’s unaudited consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this MD&A. The Company’s management believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. A reconciliation of the adjustments to GAAP results appears in the table accompanying this MD&A. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

 

In addition, as the Company evaluates certain key items of its financial results on a local currency basis (i.e., in RMB) in addition to the reporting currency (i.e., in USD), this MD&A contains local currency information that eliminates the impact of fluctuations in foreign currency exchange rates. The Company believes that, given its operations primarily based in China, providing local currency information on such key items enhances the understanding of its financial results and evaluation of performance in comparison to prior periods. Changes in local currency percentages are calculated by comparing financial results denominated in RMB from period to period.

 

(Financial statements on the following pages)

 

 

 

 

CHINA BIOLOGIC PRODUCTS HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

   For the Three Months Ended 
   March 31, 2020   March 31, 2019 
   USD   USD 
Sales:   162,591,393    129,784,067 
           Plasma products:          
                Human Albumin   41,496,784    56,812,789 
                Immunoglobulin products:          
                   Human Immunoglobulin for Intravenous Injection   78,210,029    29,044,180 
                   Other Immunoglobulin products   13,555,014    13,089,220 
                Others   16,477,114    9,870,008 
           Placenta Polypeptide   3,278,965    7,658,990 
                       Biopharmaceutical products   153,017,906    116,475,187 
      Artificial Dura Mater   9,044,415    12,314,033 
      Others   529,072    994,847 
                       Biomaterial products   9,573,487    13,308,880 
           
Cost of sales   61,602,393    44,240,445 
Gross profit   100,989,000    85,543,622 
           
Operating expenses          
      Selling expenses   14,460,110    18,728,259 
      General and administrative expenses   16,761,113    20,597,560 
      Research and development expenses   1,742,542    2,330,825 
Income from operations   68,025,235    43,886,978 
           
Other income (expenses)          
      Equity in (loss)/income of an equity method investee   (786,180)   593,030 
      Interest expense   (104,902)   (63,777)
      Interest income   4,529,001    6,525,839 
      Other income, net   2,194,440    1,600,376 
Total other income, net   5,832,359    8,655,468 
           
Income before income tax expense   73,857,594    52,542,446 
           
Income tax expense   11,622,921    7,918,442 
           
Net income   62,234,673    44,624,004 
           
Less: Net income attributable to noncontrolling interest   8,850,264    6,931,898 
           
Net income attributable to China Biologic Products Holdings, Inc.   53,384,409    37,692,106 
           
Earnings per share of ordinary share:          
       Basic   1.38    0.94 
       Diluted   1.36    0.94 
Weighted average shares used in computation:          
       Basic   38,467,948    39,331,954 
       Diluted   38,928,072    39,412,441 
           
Net income   62,234,673    44,624,004 
           
Other comprehensive (losses)/income:          
Foreign currency translation adjustment, net of nil income taxes   (21,181,477)   24,316,421 
           
Comprehensive income   41,053,196    68,940,425 
           
Less: Comprehensive income attributable to noncontrolling interest   7,716,046    8,752,259 
           
Comprehensive income attributable to China Biologic Products Holdings, Inc.   33,337,150    60,188,166 

 

 

 

 

CHINA BIOLOGIC PRODUCTS HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31, 2020   December 31, 2019 
    USD    USD 
ASSETS          
Current Assets          
Cash and cash equivalents   122,855,872    161,750,425 
Time deposits   496,097,743    497,676,069 
Short term investments   372,680,170    267,830,790 
Accounts receivable, net of allowance for doubtful accounts   132,992,218    100,270,436 
Inventories   214,439,311    250,728,260 
Prepayments and other current assets   20,956,022    21,469,418 
Total Current Assets   1,360,021,336    1,299,725,398 
           
Property, plant and equipment, net   173,329,694    177,596,563 
Intangible assets, net   41,420,541    44,068,061 
Land use rights, net   27,849,346    28,458,944 
Equity method investment   15,695,341    16,725,513 
Long term equity investments   10,812,893    10,812,893 
Loan receivable   35,095,297    35,642,340 
Goodwill   303,774,356    308,509,397 
Other non-current assets   16,726,895    16,319,388 
Total Assets   1,984,725,699    1,937,858,497 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current Liabilities          
Accounts payable   5,749,375    6,262,256 
Income tax payable   21,014,717    13,303,085 
Other payables and accrued expenses   102,594,111    99,743,350 
Total Current Liabilities   129,358,203    119,308,691 
           
Deferred income   2,147,445    2,300,428 
Non-current income tax payable   24,905,728    24,905,728 
Other liabilities   17,843,904    16,491,793 
Total Liabilities   174,255,280    163,006,640 
           
Shareholders’ Equity          
Ordinary share:          
par value $0.0001;          
100,000,000 shares authorized;          
41,931,512 and 41,910,701 shares issued at March 31, 2020 and December 31, 2019, respectively;          
38,480,580 and 38,459,769 shares outstanding at March 31, 2020 and December 31, 2019, respectively   4,193    4,191 
Additional paid-in capital   1,165,205,822    1,158,274,206 
Treasury share: 3,450,932 shares at March 31, 2020 and 3,450,932 at December 31, 2019, respectively, at cost   (167,432,883)   (167,432,883)
Retained earnings   826,674,895    773,290,486 
Accumulated other comprehensive losses   (88,468,667)   (68,421,408)
Total equity attributable to China Biologic Products Holdings, Inc.   1,735,983,360    1,695,714,592 
           
Noncontrolling interest   74,487,059    79,137,265 
           
Total Shareholders’ Equity   1,810,470,419    1,774,851,857 
           
Commitments and contingencies   -    - 
           
Total Liabilities and Shareholders’ Equity   1,984,725,699    1,937,858,497 

 

 

 

 

CHINA BIOLOGIC PRODUCTS HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the Three Months Ended 
   March 31,   March 31, 
   2020   2019 
   USD   USD 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income   62,234,673    44,624,005 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   4,159,957    3,959,985 
Amortization   2,468,349    2,439,384 
Loss on disposal of property, plant and equipment   1,275    37,829 
Fair value changes of short term investments   (681,455)   (836,538)
Allowance for doubtful accounts - accounts receivable   431,676    2,224,200 
Reversal of doubtful accounts – prepayments and other receivables   -    (19,560)
Deferred income tax benefit   (55,051)   (382,896)
Share-based compensation   6,931,618    6,305,967 
Equity in income of an equity method investee   786,180    (593,030)
 Change in operating assets and liabilities:          
Accounts receivable   (35,255,585)   (11,554,181)
Inventories   32,964,705    (3,952,734)
Prepayments and other current assets   867,857    2,996,350 
Accounts payable   (423,618)   (5,544,331)
Income tax payable   8,045,926    1,751,980 
Other payables and accrued expenses   (6,613,342)   (9,167,249)
Deferred income   (119,610)   (123,545)
Net cash provided by operating activities   75,743,555    32,165,636 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of time deposits   (469,926,830)   (743,412,316)
Proceeds from maturity of time deposits   470,473,651    629,307,453 
Purchase of short term investments   (389,307,402)   (193,967,620)
Proceeds from maturity of short term investments   278,556,282    101,281,030 
Payment for property, plant and equipment   (3,234,510)   (5,468,377)
Payment for intangible assets and land use rights   (6,455)   (2,453,524)
Proceeds from disposal of property, plant and equipment and land use rights   994    436 
Net cash used in investing activities   (113,444,270)   (214,712,918)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from stock options exercised   -    3,678 
Payment to an investment bank for share repurchase   -    (60,000,000)
Net cash used in financing activities   -    (59,996,322)
           
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   (1,193,838)   2,677,235 
           
NET DECREASE  IN CASH AND CASH EQUIVALENTS   (38,894,553)   (239,866,369)
           
Cash and cash equivalents at beginning of year   161,750,425    338,880,559 
           
Cash and cash equivalents at end of year   122,855,872    99,014,190 
           
Supplemental cash flow information          
Cash paid for income taxes   3,411,519    6,687,364 
Noncash investing and financing activities:          
Acquisition of property, plant and equipment included in payables   140,047    2,113,697 
Set-off loan receivable against accounts payable   -    1,636,952 
Share repurchase using the prepayment to an investment bank   -    36,780,955 
Land use right acquired with prepayments made in prior periods   -    2,689,467 

 

 

 

 

CHINA BIOLOGIC PRODUCTS HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

 

 

   For the Three Months Ended 
   March 31,   March 31, 
   2020   2019 
   USD   USD 
Income from Operations   68,025,235    43,886,978 
Non-cash employee share-based compensation   6,931,618    6,305,967 
Amortization of acquired intangible assets and land use rights   1,989,573    2,055,032 
Adjusted Income from Operations - Non GAAP   76,946,426    52,247,977 
           
Net Income Attributable to the Company   53,384,409    37,692,106 
Non-cash employee share-based compensation   6,282,793    5,450,091 
Amortization of acquired intangible assets and land use rights   1,691,137    1,397,422 
Adjusted Net Income Attributable to the Company - Non GAAP   61,358,339    44,539,619 
Diluted EPS - Non GAAP   1.56    1.11 
           
Weighted average number of shares used in computation of Non GAAP diluted EPS   38,928,072    39,412,441 

 

 

 

 

 

 

Exhibit 99.3

 

 

FOR RELEASE May 20, 2020

 

China Biologic Comments on the

Xinjiang Deyuan and Shuanglin Transaction

 

BEIJING, China – May 20, 2020 – China Biologic Products Holdings, Inc. (NASDAQ: CBPO, “China Biologic” or the “Company”), a leading fully integrated plasma-based biopharmaceutical company in China, today declared that Xinjiang Deyuan Bioengineering Co., Ltd. (“Xinjiang Deyuan”), China Biologic’s source plasma supplier and cooperation partner, has materially breached its strategic cooperation with China Biologic by entering into plasma supply arrangements with Southern Shuanglin Bio-Pharmacy Co., Ltd. (“Shuanglin”), and that China Biologic will take all necessary measures to protect its rights.

 

The Company has learned from a public announcement issued on May 15, 2020 by Shuanglin, a company listed on the Shenzhen Stock Exchange, that Shuanglin and Xinjiang Deyuan have entered into a cooperation framework agreement regarding expansion of plasma collection stations, pursuant to which Xinjiang Deyuan has entrusted five plasma collection stations to Shuanglin and has begun to supply source plasma to Shuanglin after receiving approval from the Xinjiang Heath Commission for the entrustment arrangement, and Shuanglin has paid an initial deposit of RMB40 million to Xinjiang Deyuan (the “Shuanglin Transaction”).

 

The five plasma collection stations that Xinjiang Deyuan entrusted to Shuanglin are among the six stations that Xinjiang Deyuan entrusted to China Biologic under the strategic cooperation agreement (the “Cooperation Agreement”) entered into in August 2015 among the Company’s subsidiary Guizhou Taibang Biological Products Co., Ltd. (“Guizhou Taibang”), Xinjiang Deyuan and its controlling shareholder (as supplemented by a supplementary agreement entered into in August 2018). Under the Cooperation Agreement, Xinjiang Deyuan has the obligation to supply to Guizhou Taibang no less than 500 tonnes of source plasma over a three year period from August 2018 to August 2021 and as of the date hereof, Xinjiang Deyuan has not fully discharged its plasma supply obligations, with approximately 192 tonnes of source plasma remaining to be supplied to Guizhou Taibang. The entry into the Shuanglin Transaction by Xinjiang Deyuan during the term of the Cooperation Agreement makes the five plasma collection stations entrusted to Shuanglin no longer able to supply source plasma to Guizhou Taibang, which the Company believes constitutes a material violation of the Cooperation Agreement.

 

As previously disclosed in the annual report on Form 20-F filed by the Company with the Securities and Exchange Commission on March 12, 2020, since November 2019, Xinjiang Deyuan has significantly reduced the plasma volume delivered to the Company due to Xinjiang Deyuan’s operating cash shortfall and its disagreement with the Company regarding payment arrangements for the plasma, and China Biologic has been negotiating with Xinjiang Deyuan to try to resolve the disagreement. In addition, as part of the Cooperation Agreement, Guizhou Taibang lent to Xinjiang Deyuan a loan with a principal amount of RMB300 million, and as of the date hereof, the outstanding principal amount of the loan is approximately RMB248 million and the overdue interest amounts to approximately RMB10 million. On March 17, 2020, Guizhou Taibang filed two lawsuits against Xinjiang Deyuan in the Beijing Third Intermediate People’s Court and the Beijing Chaoyang People’s Court, respectively, to demand the repayment of such loan, among other claims. According to Shuanglin’s public announcement, Shuanglin was aware of Xinjiang Deyuan’s ongoing dispute with China Biologic when entering into the Shuanglin Transaction with Xinjiang Deyuan.

 

 

 

 

China Biologic had no knowledge of the Shuanglin Transaction prior to its public announcement by Shuanglin, and Xinjiang Deyuan did not obtain China Biologic’s consent before entering into such transaction. China Biologic views the Shuanglin Transaction as a serious breach of the Cooperation Agreement by Xinjiang Deyuan. The Company will take all necessary measures, including legal actions, to protect its rights and recoup all potential losses due to Xinjiang Deyuan’s breach of the Cooperation Agreement, including but not limited to any revenue loss due to Xinjiang Deyuan’s failure to supply sufficient source plasma to the Company. The Company will also continue to vigorously litigate the two lawsuits filed against Xinjiang Deyuan.

 

About China Biologic Products Holdings, Inc.

 

China Biologic Products Holdings, Inc. (NASDAQ: CBPO) is a leading fully integrated plasma-based biopharmaceutical company in China. The Company’s products are used as critical therapies during medical emergencies and for the prevention and treatment of life-threatening diseases and immune-deficiency related diseases. China Biologic is headquartered in Beijing and manufactures over 20 different dosage forms of plasma products through its indirect majority-owned subsidiary, Shandong Taibang Biological Products Co., Ltd. and its wholly owned subsidiary, Guizhou Taibang Biological Products Co., Ltd. The Company also has an equity investment in Xi’an Huitian Blood Products Co., Ltd. Since the acquisition of TianXinFu (Beijing) Medical Appliance Co., Ltd. in 2018, China Biologic is also engaged in the sale of medical devices, primarily regenerative medical biomaterial products. The Company sells its products to hospitals, distributors and other healthcare facilities in China. For additional information, please see the Company’s website www.chinabiologic.com.

 

Safe Harbor Statement

 

This news release may contain certain “forward-looking statements” relating to the business of China Biologic Products Holdings, Inc. and its subsidiaries. All statements, other than statements of historical fact included herein, are “forward-looking statements.” These forward-looking statements are often identified by the use of forward-looking terminology such as “intend,” “believe,” “expect,” “are expected to,” “will,” or similar expressions, and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they involve assumptions, risks, and uncertainties, and these expectations may prove to be incorrect.

 

 

 

 

Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including, without limitation, quality of purchased source plasma, potential delay or failure to complete construction of new collection facilities, potential inability to pass government inspection and certification process for existing and new facilities, potential inability to achieve the designed collection capacities at the new collection facilities, potential inability to achieve the expected operating and financial performance, potential inability to find alternative sources of plasma, potential inability to increase production at permitted sites, potential inability to mitigate the financial consequences of a temporarily reduced raw plasma supply through cost cutting or other efficiencies, and potential additional regulatory restrictions on its operations and those additional risks and uncertainties discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

 

Contact:

 

China Biologic Products Holdings, Inc.

Mr. Ming Yin

Senior Vice President

Email: ir@chinabiologic.com

 

The Foote Group

Mr. Philip Lisio

Phone: +86-135-0116-6560

Email: phil@thefootegroup.com