Sinovac Biotech Ltd (SVA) 2015 Q3 法說會逐字稿

Greetings and welcome to the Sinovac Biotech third quarter 2015 earnings conference call. (Operator Instructions). As a reminder, the conference is being recorded.

歡迎參加科興生物2015年第三季財報電話會議。 （操作說明）提醒各位，本次會議正在錄音。

It is now my pleasure to introduce your host, Bill Zima of ICR. Thank you. You may begin.

現在我榮幸地向大家介紹主持人，來自ICR的Bill Zima。謝謝。您可以開始了。

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 US Private Securities Litigation Reform Act of 1995.

謝謝接線生。大家好。在會議開始前，我想提醒大家，本次電話會議包含前瞻性陳述。這些陳述均符合1995年美國《私人證券訴訟改革法案》的安全港條款。

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 are not historical facts, including statements about Sinovac's beliefs and expectations that are forward-looking statements.

這些前瞻性陳述可以透過「將」、「預期」、「預計」、「未來」、「打算」、「計劃」、「相信」、「估計」等詞語或短語以及類似表述來識別。這些陳述並非歷史事實，包括關於科興生物的信念和預期的前瞻性陳述。

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in forward-looking statements. Sinovac does not undertake any obligation to update any forward-looking statements, except as required under applicable laws.

前瞻性陳述涉及固有風險和不確定性。諸多重要因素可能導致實際結果與前瞻性陳述中所包含的結果有重大差異。除適用法律另有規定外，科興生物不承擔更新任何前瞻性聲明的義務。

On the call today, we have Mr. Weidong Yin, CEO; Ms. Nan Wang, Chief Financial Officer; Ms. Helen Yang, Investor Relations Director; and Mr. Shuo He, Finance Director.

今天參加電話會議的有：執行長尹衛東先生；財務長王楠女士；投資者關係總監楊海倫女士；以及財務總監何碩先生。

I will now turn the call over to Helen Yang. Helen, please begin.

現在我將把電話交給海倫楊。海倫，請開始。

Thank you, Bill. Hello, everyone, and thank you for joining us today. On today's conference call, I will provide an update on Sinovac's business and operations during the third quarter of 2015. Then, I will review our financial results for the third quarter and first nine months of this year, on behalf of our CEO and CFO.

謝謝比爾。大家好，感謝各位今天參加我們的電話會議。在今天的會議上，我將報告科興生物2015年第三季的業務和營運。之後，我將代表我們的執行長和財務官，回顧我們今年第三季和前九個月的財務業績。

In the third quarter, we recorded sales of $16.8 million, a slight decrease from our sales in the third quarter last year, primarily due to a depreciation of the renminbi against US dollar. If we look at our sales in terms of renminbi, the numbers are actually very close, which is in line with our strategy to maintain the sales of our core products, while we prepare for the launch of our new EV71 vaccine, which we expect to serve as a catalyst for the future growth.

第三季度，我們錄得銷售額1,680萬美元，較去年同期略有下降，主要原因是人民幣對美元貶值。但如果以人民幣計價，實際數字非常接近，這符合我們的策略，即在為即將推出的新型EV71疫苗做準備的同時，維持核心產品的銷售。我們預計EV71疫苗將成為未來成長的催化劑。

The broader vaccine market in China has remained has remained stable over the past few quarters, which we expect to continue. However, over the longer term, we expect China's recent relaxation of the one-child policy to be a distinct driver for the growth in the market in the coming years.

過去幾個季度，中國疫苗市場整體保持穩定，我們預計這種穩定局面將持續。然而，從長遠來看，我們預期中國近期放寬獨生子女政策將成為未來幾年市場成長的重要驅動力。

Some estimates we have seen indicate that there will likely be around 8 million additional births per year, or an increase of 7%, as a result of this policy. As more families apply to have second children, the market for pediatric vaccines will expand, creating meaningful growth potential for Sinovac, as children are targeted population for our vaccine portfolio.

我們看到的一些估計表明，這項政策可能會使每年新增約800萬新生兒，增幅達7%。隨著更多家庭申請生育二胎，兒科疫苗市場將擴大，為科興生物創造可觀的成長潛力，因為兒童正是我們疫苗產品組合的目標族群。

Now, I would like turning to our research and development milestones in this quarter.

現在，我想談談我們本季在研發方面取得的里程碑式進展。

For EV71, the site inspection and GMP inspection of our production facility have been completed, and the vaccine samples have passed the required testing by the CFDA. We expect to receive final approval by early 2016, at which point we will be able to begin commercial production of our vaccine. It will take up to approximately four months to complete the production and get product released to the market.

對於EV71疫苗，我們生產設施的現場檢查和GMP檢查已經完成，疫苗樣本也已通過國家食品藥物監督管理總局（CFDA）的各項檢測。我們預計在2016年初獲得最終批准，屆時即可開始疫苗的商業化生產。從生產到產品上市，大約需要四個月的時間。

As we have discussed previously, we estimate the target market in China for EV71 to be about 80 million children, with each child requiring two doses. Thus, we expect this vaccine to be a meaningful growth driver for the Company, once it's brought to the market.

正如我們之前討論過的，我們估計EV71在中國的目標市場約為8000萬兒童，每個兒童需要接種兩劑。因此，我們預計一旦疫苗上市，將成為該公司重要的成長動力。

As we announced last month, our subsidiary, Sinovac Dalian, obtained approval from the CFDA to begin human clinical trials on our varicella vaccine candidate. We are currently preparing for the clinical trials, which we expect to be able to complete by 2017.

正如我們上個月宣布的那樣，我們的子公司大連科興生物已獲得國家食品藥物監督管理總局（CFDA）的批准，可以進行水痘疫苗候選藥物的人體臨床試驗。我們目前正在為臨床試驗做準備，預計2017年完成。

We anticipate being able to commercialize our varicella vaccine in 2019. In addition, we are planning to use the varicella vaccine as a component in the a measles, mumps, rubella and varicella, or MMRV, combination vaccination, which is currently in our development pipeline.

我們預計在 2019 年能夠將水痘疫苗商業化。此外，我們計劃將水痘疫苗作為麻疹、腮腺炎、德國麻疹和水痘（MMRV）聯合疫苗的組成部分，目前正在我們的研發管線中。

As for the other component vaccines, we have licensed a [mumps] vaccine for sales in China. We have already obtained clinical trial approval for our internally developed rubella vaccine, and we plan to begin developing a measles vaccine.

至於其他成分疫苗，我們已獲得腮腺炎疫苗在中國的銷售許可。我們自主研發的德國麻疹疫苗已獲得臨床試驗批准，我們計劃開始研發麻疹疫苗。

We will also plan to develop MMR combination vaccine to address significant demand in the public pay market in China while, at the same time, both the varicella vaccine and the MMRV combo will be supplied to the private pay market in China, which is continuing to grow.

我們也計劃開發麻疹、腮腺炎、德國麻疹聯合疫苗，以滿足中國公共付費市場的巨大需求；同時，水痘疫苗和麻疹、腮腺炎、德國麻疹聯合疫苗也將供應給中國不斷增長的私人付費市場。

With that, I would now like to review our unaudited financial results for the third quarter and first nine months of 2015.

接下來，我想回顧我們2015年第三季和前九個月未經審計的財務表現。

As I mentioned, total sales in the third quarter were $16.8 million, a decrease of 2% compared to $17.1 million in the same period of last year. The slight decrease is attributable to the depreciation of Chinese renminbi against the US dollar.

正如我之前提到的，第三季總銷售額為1,680萬美元，較去年同期的1,710萬美元下降了2%。這一小幅下降主要是由於人民幣對美元貶值造成的。

Gross profit was $11.2 million in the third quarter, compared to $12.2 million in the prior year period. Gross margin decreased to 66.4% from 70.9% in the prior year period. The decrease is primarily due to a lower utilization rate of our production facility, as compared to the third quarter last year.

第三季毛利為1,120萬美元，去年同期為1,220萬美元。毛利率從去年同期的70.9%下降至66.4%。毛利率下降的主要原因是與去年第三季相比，我們生產設施的使用率降低。

Additionally, in the third quarter of 2015, we delivered more Healive to the public pay market, as opposed to the private pay market, which resulted in a lower average selling price for the quarter compared to the prior year period.

此外，在 2015 年第三季度，我們向公共付費市場交付了更多的 Healive 產品，而不是向私人付費市場交付的產品，這導致該季度的平均售價比去年同期有所下降。

Selling, general and administrative expenses in the third quarter of 2015 were $10.1 million, compared to $8.5 million in the same period of last year. The increase was mainly due to the increased G&A expenses associated with the trial production of the EV71 vaccine for the site inspection.

2015年第三季銷售、一般及行政費用為1,010萬美元，去年同期為850萬美元。成長的主因是為現場檢查而進行的EV71疫苗試驗生產相關的一般及行政費用增加。

R&D expenses in the third quarter of 2015 were $2.2 million, compared to $2.5 million in the same period of 2014.

2015 年第三季的研發費用為 220 萬美元，而 2014 年同期為 250 萬美元。

Net loss attributable to common shareholders for the third quarter of 2015 was $1.6 million or $0.03 per basic and diluted share, compared to a net income attributable to common shareholders of $89,000 or $0.00 per basic and diluted share in the same period last year.

2015 年第三季歸屬於普通股股東的淨虧損為 160 萬美元，即每股基本及攤薄虧損 0.03 美元，而去年同期歸屬於普通股股東的淨利潤為 8.9 萬美元，即每股基本及攤薄收益 0.00 美元。

And now, turning to our results for the first nine months. Total sales in the first nine months of 2015 were $44.6 million, an increase of 4.2% from $42.8 million in the same period of 2014. The increase is primarily due to increase of sales of Healive into the public market, and increased the sales of Bilive into the private pay market.

現在，讓我們來看看前九個月的業績。 2015年前九個月的總銷售額為4,460萬美元，比2014年同期的4,280萬美元成長了4.2%。成長的主要原因是Healive在公開市場的銷售增加，以及Bilive在自費市場的銷售額增加。

Gross profit was $33.1 million, an increase of 5.1% from $31.5 million in the same period of 2014. Gross margin was 74.2%, compared to 73.6% in the same period of 2014.

毛利為 3,310 萬美元，比 2014 年同期的 3,150 萬美元成長了 5.1%。毛利率為 74.2%，而 2014 年同期為 73.6%。

Selling, general and administrative expenses in the first nine months were $26.2 million, compared to $24.9 million in the same period of 2014. The increase was primarily due to increased G&A expenses associated with the trial production of the EV71 vaccine, as I mentioned.

前九個月的銷售、一般及行政費用為 2,620 萬美元，而 2014 年同期為 2,490 萬美元。正如我之前提到的，成長的主要原因是與 EV71 疫苗試驗生產相關的一般及行政費用增加。

R&D expenses were $6.6 million, compared to $7.5 million in the same period of 2014.

研發費用為 660 萬美元，而 2014 年同期為 750 萬美元。

Net loss attributable to common shareholders in the first nine months of 2015 was $1.6 million, or $0.03 per basic and diluted share, compared to a net loss of $2.2 million, or $0.04 per basic and diluted share, in the same period of 2014.

2015 年頭九個月歸屬於普通股股東的淨虧損為 160 萬美元，即每股基本及攤薄虧損 0.03 美元，而 2014 年同期淨虧損為 220 萬美元，即每股基本及攤薄虧損 0.04 美元。

As of September 30, 2015 cash and cash equivalent totaled $54.4 million, compared to $91.5 million as of December 31, 2014. In the first nine months of 2015, net cash used in operating activity was $11 million. Net cash used in investing activities was $3.4 million, which was for the payment of property, plant and equipment.

截至2015年9月30日，現金及現金等價物總額為5,440萬美元，而截至2014年12月31日為9,150萬美元。 2015年前九個月，經營活動所用現金淨額為1,100萬美元。投資活動所用現金淨額為340萬美元，用於支付固定資產款項。

Net cash used in the financing activities was $21.9 million, including loan proceeds of $14.4 million and loan repayments of $37.2 million. As of September 30, 2015 Sinovac had $24.9 million of bank loans due within one year. We expect that our current cash position will be able to support our operations for the next 12 months. We will seek new commercial bank loans to finance the operation and commercialization of our pipeline products.

融資活動所用現金淨額為2,190萬美元，其中包括貸款所得1,440萬美元和貸款償還3,720萬美元。截至2015年9月30日，科興生物有2,490萬美元的銀行貸款將於一年內到期。我們預計目前的現金狀況足以支持未來12個月的營運。我們將尋求新的商業銀行貸款，為在研產品的營運和商業化提供資金。

With that, I would like to turn the call back to the operator for questions. Operator.

那麼，我將把電話轉回給接線員，以便回答問題。接線生。

(Operator Instructions). [Christina Yao, Morgan Stanley].

（操作說明）[Christina Yao，摩根士丹利]

I may ask you some questions on behalf of my analyst, Isabella Zhao. My first question is, what is the business outlook for 2016 in terms of sales and profit growth?

我可能會代表我的分析師趙女士向您提問。我的第一個問題是，2016年貴公司的銷售和利潤成長前景如何？

My second question is, if EV71 gets approval in early 2016, when do we expect to contribute to top line and how much revenue contribution in 2016 and 2017?

我的第二個問題是，如果 EV71 在 2016 年初獲得批准，我們預計何時能為公司營收做出貢獻，以及在 2016 年和 2017 年能貢獻多少營收？

Okay, I will translate it into Chinese (spoken in Chinese).

好的，我會把它翻譯成中文（用中文說）。

(interpreted) This is a very good question, and actually one we are looking at 2016. As you asked, EV71 is very important for us and as you know that EV71 vaccine approval is right now at a final stage.

（翻譯）這是一個很好的問題，實際上也是我們在2016年正在關注的問題。正如您所問，EV71對我們來說非常重要，而且您也知道，EV71疫苗的批准目前正處於最後階段。

CFDA is currently reviewing some clinical data and now we're getting closer to the obtaining of the NDA production lines then, after that, there will be a GMP license. And as we explained in the script that we're looking into next year for commercializing EV71 and it's very difficult to predict what time we can actually receive the approval.

國家食品藥物監督管理總局（CFDA）目前正在審查一些臨床數據，我們距離獲得新藥申請（NDA）批准、生產線建設以及GMP許可證都越來越近了。正如我們在腳本中所述，我們正在考慮明年將EV71商業化，但很難預測何時能夠真正獲得批准。

In order to receive the CFDA inspection for the production facility, we conduct a trial production of over 1 million doses, and all these inspections have been conducted pretty well. Vaccine samples have been taken by CFDA, and our vaccine candidate passed all the tests.

為了通過國家食品藥品監督管理總局（CFDA）對生產設施的檢查，我們進行了超過100萬劑的試生產，所有檢查都進行得很順利。 CFDA已抽取疫苗樣品，我們的候選疫苗通過了所有測試。

Therefore, that we're confident for the stable of our vaccine production processes and, as you may know, that the production of these vaccines may take about three months, plus the [lot] release processes. So once we obtain the new drug certificate, and GMP license, it will be easier to predict when the vaccine can be commercialized on the market.

因此，我們對疫苗生產流程的穩定性充滿信心。您也知道，這些疫苗的生產大約需要三個月，再加上批次放行流程。所以，一旦我們拿到新藥證書和GMP許可證，就能更容易預測疫苗何時能夠上市銷售。

We would expect that the gross margin of EV71 will be higher than the gross margin of our existing vaccines.

我們預計 EV71 的毛利率將高於我們現有疫苗的毛利率。

Right now, the sales team are still conducting their final preparation for commercializing these vaccines, including team training, organizational restructuring, customer interactions. However, at this moment, the pricing of this vaccine is not finalized, and also the timing of receiving the approval is still pending; therefore, at this moment, we're not able to give a revenue projection.

目前，銷售團隊仍在進行疫苗商業化的最後準備工作，包括團隊培訓、組織架構調整和客戶溝通。然而，目前疫苗定價尚未最終確定，審批時間也尚未確定；因此，我們目前無法給出收入預測。

Is that okay?

這樣可以嗎？

Yes. Thank you.

是的，謝謝。

(Operator Instructions). [Peter Halesworth, Heng Ren].

（操作說明）[彼得·黑爾斯沃思，恆仁]。

Congratulations on being on the verge of the final approval of EV71; it's been a long wait and we are hoping for the best. I just wanted to ask very quickly about the G&A expenses associated with the trial production.

恭喜EV71即將獲得最終批准；我們等了很久，希望一切順利。我只是想快速問一下試生產相關的管理費用。

You just stated that there were about 1 million doses made during the trial production, and I saw in the press release that the G&A costs in the quarter were up about $1.5 million. So is it fair to say that the cost per dose is about $1.50 each? And then I have another question.

您剛才提到試生產期間大約生產了100萬劑，而我在新聞稿中看到，該季度的管理費用增加了約150萬美元。那麼，每劑疫苗的成本大約是1.5美元，這個說法合理嗎？我還有一個問題。

Peter, we are translating your question.

Peter，我們正在翻譯你的問題。

Thank you.

謝謝。

(interpreted) Actually, it is not reasonable to predict the costs of EV71 through this kind of calculation because for the G&A the Company policy are different from the cost of sales. Therefore, that this is not accurate calculation for EV71. And also I believe that for the trial production, the cost level will be different from that we do the official commercial production.

（譯者註）實際上，透過這種計算方法預測EV71的成本並不合理，因為公司對一般及行政費用的政策與銷售成本不同。因此，這種方法無法準確計算EV71的成本。而且我認為，試生產的成本水準與正式商業化生產的成本水準也會有所不同。

Okay. Is there any estimate on the cost of production per dose?

好的。請問每劑的生產成本有估算嗎？

(interpreted) Right now, we think that for EV71 it will be depending on the size of scale of production that we are going to do for next year, that will have a direct impact on the level of cost.

（翻譯）目前，我們認為 EV71 的成本水準將取決於我們明年的生產規模。

Therefore, I want to everyone understand that no matter what our production quantity we're going to make for next year, overall we believe that the gross margin will be improved for the Company after EV71 is commercialized.

因此，我想讓大家明白，無論我們明年的產量是多少，我們相信，EV71商業化後，公司的毛利率整體上都會提高。

Okay. And just a quick follow-up question. I understand that the timing is difficult to predict in terms of the commercial production, but how long would it take you, do you believe, to get to the 20 million dose production capacity that you currently have? How many months would that take?

好的。還有一個後續問題。我知道商業化生產的時間很難預測，但您認為需要多久才能達到目前2000萬劑的產能？大概要幾個月？

So for 20 million doses, that is an estimated production capacity, I believe that on the first day of production that we will start from conservative approach, I believe at a mature level we will definitely meet the 20 million doses, but definitely not for the first year. Plans for the first year, next year is not going to be a full year sales.

所以，2000萬劑的預計產能，我相信在投產第一天，我們會採取保守的做法，我相信在成熟階段，我們肯定能達到2000萬劑的產量，但肯定無法在第一年就實現。這是第一年的計劃，明年不會是全年銷售。

Okay. And then just two quick follow-ups. One is on the discussions with the CFDA; has pricing been a consideration in your discussions with them, and is there any range available in terms of the possible pricing on EV71, even just a range?

好的。還有兩個後續問題。一個是關於與中國時裝設計院（CFDA）的討論；定價是否是你們討論的考慮因素？ EV71的定價是否有任何範圍，即使只是價格區間？

Actually, the CFDA is a national authority for reviewing and approving new products. They are not relate to the decision of pricing because our expectation is that EV71 will be provided to private pay market. Based on the existing policy the manufacturer has the right to fix the final price, and [make a calling] with the related government.

實際上，國家食品藥品監督管理總局（CFDA）是負責審查和批准新產品的國家機構，與定價決策無關，因為我們預期EV71將面向自費市場。根據現行政策，製造商有權確定最終價格，並與相關政府部門協商。

Okay. And then lastly, I'd just like to re-extend a long-standing invitation to Chairman Yin to visit the States and maybe meet with US investors. I think it would be an opportune time, especially if, and when, the final approval comes through for EV71. I think investors would very much appreciate meeting the Chairman and hearing his perspective.

好的。最後，我想再次向尹董事長發出長久以來的邀請，歡迎他訪問美國，或許可以與美國投資者會面。我認為這將是一個絕佳的時機，尤其是在EV71最終獲得批准之後。我相信投資者們會非常樂意與董事長會面，並聽取他的見解。

Thank you.

謝謝。

Thank you. We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

謝謝。目前我們沒有其他問題。現在我想把發言權交還給管理階層，請他們做總結陳詞。

Thank you. Once again, we want to thank you all to joining us on the call, and we're looking forward to meeting you and talking to you in the next few months, and hope we are all together to celebrating the commercialization of EV71 vaccine. Thank you.

謝謝大家。再次感謝各位參加本次電話會議，我們期待在接下來的幾個月與大家見面交流，並希望屆時我們能夠共同慶祝EV71疫苗的商業化。謝謝。

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

女士們、先生們，今天的電話會議到此結束。您可以掛斷電話了。感謝您的參與，祝您有美好的一天。

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.

本記錄中標示「（已翻譯）」的部分由現場電話會議的口譯員提供。該口譯員由本次活動的贊助公司提供。