China Biologic Continues Its Growth Spurt

| About: China Biologic (CBPO)

China Biologic Products, Inc. (NASDAQ:CBPO), a plasma-based pharmaceutical company, was pleased to announce that 2008 revenues climbed 44% to $46.8 million, a record, and net income increased 47% to $12 million, equivalent to 56 cents per share.

The company has been able to prosper in part because supply constraints have caused higher prices. Effective July 1, 2008, China established a 90-day quarantine for plasma raw material, putting pressure on already tight supply and causing further price increases. China Biologic said its unit volume was lower in 2008, but the price increases more than made up for the shortfall. For most of its products, prices rose between 30% and 228%. China Biologic forthrightly admits that a beneficial foreign exchange translation was responsible for another 12.5% in the increase.

To continue its growth, China Biologic has been on an acquisition spree. Two of the deals are about to close, the company says. They are the 35% stake in Xi'an Huitian Blood Products Co., Ltd. and the 90% interest in Chongqing Dalin Biologic Technologies Co., Ltd., which owns 54% of Qianfeng Biological Products Co., Ltd. On the sales side, China Biologic signed an agreement with a distributor in India to sell its products there.

China Biologic said human albumin products accounted for 58% of 2008 revenues, down slightly from the year before. Unit sales in this category declined 7%, but revenues were 30% higher. Human immunoglobulin for IV contributed 22% of sales, more than double its 2007 performance. Sales volume rose 39% while average selling price jumped 103%. Human hepatitis B immunoglobulin constituted 7% of revenues in 2008, up from 5% in 2007, even though unit volume dropped 42%.

The company ended the year with $8.8 million in cash, $6.3 million in working capital and a current ratio of 1.3. China Biologic generated $20 million in net cash from operating activities in 2008.

China Biologic issued guidance for 2009, saying that, assuming full-year consolidation of its two acquisitions, revenues will be in the range of $90 million to $100 million and net income between $18 million and $22 million, excluding stock based compensation.

As a wrap-up of its position in the industry, China Biologic describes itself as the only approved manufacturer of plasma-based biopharmaceuticals in Shandong Province, with a population of 93 million. The company currently produces about 200 tons of plasma-based products per year, though it has 700 tons of annual production capacity. Its acquisition strategy is aimed at making China Biologic the largest non-state-owned producer of plasma-based products in China.

Following the earnings announcement, China Biologic moved up 20 cents to $2.45, an increase of 9%. With 21.5 million shares outstanding, the company has a market capitalization of $52.7 million.

Disclosure: none.

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Tagged: , Biotechnology, China, Earnings
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