Helen Yang
Thank you, Katherine. Hello, everyone and thank you for joining us. On today's conference call I will provide an update on Sinovac's business and operations during the second quarter, and then I will review our financial results for the second quarter and first half of 2015 on behalf of our CEO and CFO. We are very happy with our performance during the second quarter. We experienced strong sales growth and maintained control of our operational expenses resulting in our profitability for the second quarter. Our sales this quarter were $18.5 million, an increase of $6.4 million over the prior year period, which represent a year-over-year growth of about 53%. The sales increase is driven by a number of factors. First, for the private pay market, sales of our Hepatitis A and B combo vaccine Bilive contributed about $2.78 million to the sales growth. As you maybe aware Sinovac is the only supplier of this type of combo vaccine in China. And as China's middle class is growing, the demand for this type of premium products will continue to grow as well as parents are willing to pay a premium to have their children protected [ph] against two viruses with fewer shot. Bilive is well suited to benefit from parents willingness and ability to spend more on children's healthcare. Our sales of Hepatitis A vaccine Healive in the private pay market contributed another $1.59 million to the sales of Hep A growth in a quarter. Healive sales into the private pay market this quarter were primarily to replace government from its Hepatitis A vaccine in provinces for reach the respective provincial government only by Bilive and attenuated vaccine. Many parents in these provinces are willing to pay out of pocket for inactivated Hep A vaccine for their children. Overall, the increase in sales to the private Hep A market is a result of the successful execution of our new sales strategy which is target provinces in Central China which up to now are relatively under penetrated. But for which we have identified clear market opportunities. Additionally, our sales to the public pay market increased as well. The public pay market contributed $1.42 million in sales in dose growth which is due to the timing of product delivery in the second quarter. As we mentioned last quarter, we believe the current vaccine market in China is stable. While market challenges still remain, we are generally very please with our team's ability to adapt their strategy to the market dynamics and execute successfully. We believe we will be able to capitalize on further penetration of the domestic market. Moving on to the pipeline program. As you saw in our earnings release issued yesterday after the CFDA begin its satisfaction of our EV71 manufacturing facilities in July. CFDA inspectors simultaneously conducted the site inspection and GMP inspection both of which were completed last week without any major issue. As we explained in the earnings release, the next step will be sample testing which may take up to two months. Once the results of inspections are available and a sample vaccine has passed the required testing, the CFDA will conduct a comprehensive review of the vaccine. Upon approval the CFDA will then issue the new drug certificate and production and GMP licenses which will allow us to begin commercial production of the vaccine. Our timeline remains the same as we discussed last quarter which is to commercialize the vaccine in 2016.We will continue to keep the market informed of material advancement in this process. With that I'd now like to review our unaudited financial results for the second quarter of 2015. Quarterly sales were $18.5 million, an increase of 53.1% from $12.1 million in the second quarter of 2014. Gross profit was $15.1 million compared to $9.1 million in the second quarter last year. Gross margin increased to 81.6% from 75% in the prior year period. Our gross margin expansion during the second quarter was primarily due to a higher average selling price of our hepatitis vaccines in the private pay market and supported by a lower inventory provision compared to the same quarter last year. Selling, general and administrative expenses for the second quarter were $9.2 million, compared to $8.6 million in the same period of 2014. This increase was primarily due to increased general and administrative expenses associated with the trial production of the EV71 vaccine for site inspection. R&D expenses in the second quarter of 2015 were $2.2 million, compared to $3.3 million in the same period of 2014. This decrease is primarily attributable to an entrance fee incurred for the licensing agreement of our sIPV production technology in the second quarter of last year and the purchase of the virus seeds for this vaccine candidate during the same period. For the second quarter, net income attributable to common shareholders were $2.3 million, or $ 0.04 per basic and diluted share, compared to a net loss attributable to common shareholders of $2.2 million, or $0.04 per basic and diluted share, in the same second quarter last year. For the first half of 2015, total sales were $27.8 million, an increase of 8.4% from $25.6 million in the same period of 2014. Gross profit was $21.9 million, an increase of 13.5% from $19.3 million in the first half of 2014. Gross margin was 79% in the first half of this year compared to 75.4% in the same period last year. Selling, general and administrative expenses in the first half of 2015 were $16.1 million, in line with $16.4 million in the same period last year. R&D expenses in the first half of this year were $4.4 million, compared to $5 million in the same period of 2014. Our R&D expenses thus far this year were primarily associated with phase III clinical trial of our PPV vaccine candidate. Net income attributable to common shareholders in the first half of 2015 was $20,000, or $0.00 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. And now I would like to turn your attention to the balance sheet. As of June 30, 2015, cash and cash equivalents totaled $64.8 million, compared to $91.5 million as of March 31, 2015. Net cash used in operating activities was $7.8 million in the first half of 2015. Net cash used in investing activities was $2.8 million, which was primarily used for the purchase of property, plant and equipment for PPV and varicella production facilities. Net cash used in financing activities was $16.1 million in the first half of 2015, representing loan $28.5 million for repayments of loans partially offset by proceeds from loans of $12 million. As of June 30, 2015, the Sinovac had $32.6 million of bank loans due within one year. Our cash and cash equivalent position of $64.8 million is sufficient to meet both these loan payment obligation and our operational requirement. When appropriate, we plan to seek new commercial bank loans to finance the commercialization of our pipeline products. Before opening up to call to questions, I'd like to mention that management will be traveling to US in September to participate in the Morgan Stanley Global Healthcare Conference, September 16 through 18 in New York City. And if you will like to schedule meeting please contact Morgan Stanley or you can also reach out to myself or ICR. With that I'd like to turn the call back to operator for questions. Operator?
