China Biologic's Q3: Still Going Strong

| About: China Biologic (CBPO)

China Biologic Products (NASDAQ:CBPO), enjoying higher prices for its products and lower operating expenses, reported a very substantial 54% rise in Q3 revenues to $13.8 million. Net income climbed an even larger 98% to $4.5 million, which works out to 21 cents per share, fully diluted.

Prices for China Biologic’s plasma-centered portfolio increased 22% during the period, a major factor in the company’s success. China Biologic’s results would have been even better except that supply constraints caused declines in sales of human tetanus immunoglobulin and human rabies immunoglobulin products. Raw material costs rose as well. Also, the company paid taxes at the 25% corporate rate, though it is applying for status as a high-tech company, which would lower its taxes to a 15% rate.

Netting all that out, China Biologic undeniably remains a very profitable company and one whose financial results are on an upswing. Its income from operations jumped 97% to $7.0 million during Q3, an operating margin of 51%. The company said comparisons with the year-earlier quarter were helped because China Biologic spent heavily on advertising in 2007. However, China Biologic said it also upped its marketing efforts in 2008 to increase donations of plasma.

In its Q3 announcement, China Biologic reiterated its guidance that full-year 2008 will see revenues of $48 to $50 million and net income of around $10 million. In its first nine months, the company booked revenues of $33.6 million and net income of $8.8 million, showing that the targets are well within reach. China Biologic ended Q3 with $14.6 million in cash.

Because of two recent acquisitions, China Biologic projects it can double its financial results next year, if the two deals close in the latter part of 2008, as expected. China Biologic also says that the acquisitions will make it the largest non-state-owned entity in the plasma field with a 15% share of the sector. Now that its new facilities are GMP certified, China Biologic has the capacity to produce 700 tonnes of product annually.

Besides the acquisitions, the company’s other major business initiative is a clinical trial of Human Coagulation Factor VIII. The SFDA recently gave China Biologic the go-ahead to begin the test. China Biologic said results are due in the middle of 2009, and the company could begin production early in 2010, if the SFDA approves the product.

Following the earnings announcement, China Biologic rose 15 cents to $1.65, a 10% jump. The company has 21.5 million shares outstanding (fully diluted), giving China Biologic a market capitalization of $35.5 million.

Disclosure: none.