Sinovac Q2 Revenues Climb 73%

Sinovac Biotech Ltd. (SVA) reported that its revenues in Q2 rose 73% to $16.5 million. The increase was partly due to a $4.6 million government order for the company’s vaccines following the May 2008 Sichuan earthquake. Without the government order, Sinovac’s revenues would have been higher by only 25%. Sinovac’s main revenue driver is Healive, a vaccine for hepatitis A. The company also makes and markets Bilive, a combination hepatitis A and B vaccine, though the latter product’s contribution to revenues is relatively small.

The company’s Q2 net income of $3.3 million almost equaled its 2007 first half (six months) profit of $3.5 million. Sinovac did not break out the Q2 net profit figure from last year. Sinovac did say that it sold 2.72 million doses of Healive, an increase of 55%, and 180,000 doses of Bilive. The Bilive increase was huge, rising from only 13,000 doses of its dual vaccine in Q2 of 2007.

Sinovac paid taxes at the rate of 25% in Q2. It is applying to be approved for status as a High and New Technology Enterprise, which would qualify the company for a 15% tax rate. It paid $1.6 million in taxes during the quarter, so the lower tax rate would save the company $640,000.

Expenses in the quarter went up in all categories, though the company maintained its high 84% gross profit margin. SG&A costs, for example, climbed to $6 million from $3.5 million in 2007’s Q2. Given that the earthquake caused a large increase in revenues, investors have reason to worry that expenses are rising faster than revenues in “normal” quarters.

The company spent a gross amount of $794,000 on R&D in Q2, which was reduced to a net amount of $667,000 after government grants. The majority of its R&D expenditures were spent to advance the company’s Japanese encephalitis and pandemic influenza vaccines. Last year, after government grants, Sinovac actually had a small surplus in its R&D category.

At the end of the quarter, Sinovac reported $18.8 million of cash, up from $17.1 million on December 31, 2007. Sinovac closed a $9.8 million secondary offering in January 2008.

Sinovac’s stock reacted to the news by falling 3.5%. It dropped 13 cents to $3.62. The company has a market capitalization of $151 million. Sinovac has a trailing 12-month Price/Earnings ratio of 17.

Disclosure: none.