3SBio Inc. Announces Unaudited First Quarter 2011 Results

SHENYANG, China, May 11, 2011 /PRNewswire-Asia-FirstCall/ -- 3SBio Inc. (NASDAQ: SSRX) ("3SBio" or "the Company"), a leading China-based biotechnology company focused on researching, developing, manufacturing and marketing biopharmaceutical products, today announced its unaudited financial results for the first quarter ended March 31, 2011.

First Quarter 2011 Financial Highlights:

• Total net revenues increased by 22.7% over the first quarter of 2010 to RMB118.2 million (US$18.1 million), compared to RMB96.4 million (US$14.1 million) in the first quarter of 2010.
• Operating income was RMB24.2 million (US$3.7 million), compared to operating income of RMB28.2 million (US$4.1 million) in the first quarter of 2010.
• Net income was RMB22.2 million (US$3.4 million), compared to net income of RMB26.7 million (US$3.9 million) in the first quarter of 2010.
• Net income per American Depositary Share ("ADS") on a fully-diluted basis was RMB0.99 (US$0.15) compared to net income per ADS on a fully-diluted basis of RMB1.22 (US$0.18) for the first quarter of 2010.
• Cash, cash equivalents and time deposits were RMB711.4 million (US$108.6 million, including restricted cash of RMB0.7 million) at March 31, 2011.

First Quarter 2011 Business Highlights

Operations

• EPIAO, the Company's flagship injectable recombinant human erythropoietin (EPO) product, demonstrated strong growth with net revenue in the first quarter of 2011 rising 20.3% to RMB68.8 million (US$10.5 million), compared to RMB57.2 million (US$8.4 million) in the first quarter of 2010.
• Net revenues for TPIAO, the Company's novel recombinant human thrombopoietin (TPO) product, increased by 25.8% to RMB37.7 million (US$5.8 million) in the first quarter of 2011, compared to RMB30.0 million (US$4.4 million) in the first quarter of 2010.
• Net revenues for Iron Sucrose Supplement increased by 17.9% to RMB4.9 million (US$0.7 million) in the first quarter of 2011, compared to RMB4.1 million (US$0.6 million) in the first quarter of 2010.
• Net export revenues increased by 38.7% to RMB4.2 million (US$0.6 million), accounting for 3.6% of total net revenue in the first quarter of 2011, compared to RMB3.1 million (US$0.4 million), or 3.2% of net revenues in the first quarter of 2010. The increase was partly attributable to increased sales to Egypt and Thailand.

Regulatory

• The Chinese State Food and Drug Administration ("SFDA") granted manufacturing approval in January 2011 for a TPIAO label extension for the treatment of Immune Thrombocytopenia ("ITP"). There are an estimated 260,000 patients suffering from ITP in China, with more than half of these patients resistant to conventional steroid treatment.
• On March 29, 2011 we submitted an application to the SFDA to conduct clinical trials of voclosporin in China, a new generation of calcineurin inhibitors for use in the prevention of organ rejection following transplantation and the treatment of autoimmune disease in Phase III development globally.

Partnerships and Business Development

• We are working with a partner on an application to obtain regulatory approval for EPIAO in Malaysia as our first step to obtaining approval in one of the Pharmaceutical Inspection Cooperation Scheme ("PICS") countries.
• Discussions are ongoing with potential partners regarding the international development of Uricase-PEG20 (pegsiticase), a treatment for refractory gout acquired in the fourth quarter of 2010.

Dr. Jing Lou, chief executive officer of 3SBio, commented: "We remain on track to achieve our key objectives for 2011 and reiterate our full year guidance of 20-30% top line growth. We launched our marketing and educational campaign in key cities for the recently approved TPIAO for ITP indication. We also submitted an application to the SFDA to conduct clinical trials for voclosporin. We are now working with a partner to obtain regulatory approval for EPIAO in Malaysia. If successful, it will be one of the first biosimilar EPO products to be approved in Malaysia, one of the 39 members of the Pharmaceutical Inspection Cooperation Scheme ("PIC/S"). Our export sales efforts continue to focus on forming strong marketing partnerships and seeking regulatory approval in those developed markets where our new state-of-the-art production facility, low production costs and recognized product quality provide us with a commercial edge over our international competitors."

Three Months Ended March 31, 2011 Unaudited Financial Results

Net revenues. Net revenues increased by 22.7% to RMB118.2 million (US$18.1 million) for the first quarter of 2011 from RMB96.4 million (US$14.1 million) for the same period in 2010. This increase was largely due to continued strong sales of EPIAO and TPIAO which grew by 20.3% and 25.8%, respectively, over the same period in 2010. TPIAO remained 3SBio's second largest revenue contributor in the quarter, accounting for an all-time high of 31.9% of total net revenues. Export sales increased by 38.7% year-on-year to RMB4.2 million (US$0.6 million), and revenues from Iron Sucrose rose 17.9% year-on-year to RMB4.9 million (US$0.7 million).

Gross profit. As a result of continued sales growth from key products, gross profit for the first quarter of 2011 increased by 15.9% to RMB102.9 million (US$15.7 million) from RMB88.8 million (US$13.0 million) for the same period in 2010. Gross margins declined 5.0% to 87.1% for the first quarter of 2011 from 92.1% for the same period in 2010. The decline was mainly attributable to new plant depreciation and increased material, labor and energy costs.

Operating expenses. Operating expenses were RMB78.7 million (US$12.0 million) for the first quarter of 2011, representing an increase of 30.0% from RMB60.6 million (US$8.9 million) for the same period in 2010.

• Research and development ("R&D") costs. R&D costs for the first quarter of 2011 were RMB7.8 million (US$1.2 million), or 6.6% of net revenues, compared to RMB4.7 million (US$0.7 million), or 4.9% of net revenues, for the same period in 2010. The increase is attributable to increased labor costs, clinical trials and testing expenses.
• Sales, marketing and distribution expenses. Sales, marketing and distribution expenses for the first quarter of 2011 were RMB55.4 million (US$8.5 million), or 46.8% of net revenues, compared to RMB42.8 million (US$6.3 million), or 44.4% of net revenues, for the same period in 2010. The increase is mainly attributable to increased sales efforts and marketing activities, including the launch of TPIAO's recently approved indication for ITP.
• General and administrative expenses. General and administrative expenses for the first quarter of 2011 were RMB15.6 million (US$2.4 million), or 13.2% of net revenues, compared to RMB13.1 million (US$1.9 million), or 13.5% of net revenues for the same period in 2010.

Operating income. Operating income was RMB24.2 million (US$3.7 million) for the first quarter of 2011, a 14.3% decrease from operating income of RMB28.2 million (US$4.1 million) for the same period in 2010. Operating margin for the first quarter of 2011 was 20.5%, an 8.8% decline from operating margin of 29.3% for the same period in 2010. The decline in operating margin in primarily due to increased depreciation expenses related to the new plant and increased labor costs.

Interest income. Net interest income was RMB3.6 million (US$0.6 million) for the first quarter of 2011, compared to RMB3.1 million (US$0.5 million) for the same period in 2010.

Net income. Net income was RMB22.2 million (US$3.4 million) for the first quarter of 2011, a 16.8% decrease over net income of RMB26.7 million (US$3.9 million) for the same period in 2010. Net income per ADS on a fully-diluted basis for the first quarter of 2011 decreased to RMB0.99 (US$0.15) compared to RMB1.22 (US$0.18) for the same period in 2010. Net margin for the first quarter of 2011 was 18.7%, a 9.0% decrease over net margin of 27.7% for the same period in 2010.

Conference Call

3SBio's senior management will host a conference call at 5:00am (US Pacific) / 8:00am (US Eastern) / 8:00pm (Beijing) on Thursday, May 12, 2011 to discuss its first quarter 2011 unaudited financial results and recent business activity. The conference call may be accessed using the dial-in numbers below:

A telephone replay will be available two hours after the call until May 19, 2011 at:

Webcast

A live webcast of the conference will be available on the investor relations page of 3SBio's website at http://bbs.3sbio.com/en/News/xinvestors.aspx and at http://tinyurl.com/3SBio2011Q1.

A replay of the webcast will be available within one hour after the conclusion of the call.

Statement Regarding Unaudited Financial Information

The unaudited financial information set forth above is preliminary and subject to adjustments and modifications. The audited financial statements and related notes are to be included in the Company's annual report on Form 20-F for the year ending December 31, 2011. Adjustments and modifications to the financial statements may be identified during the course of the audit work, which could result in significant differences from this preliminary unaudited financial information.

Currency Convenience Translation

For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.5483 to US$1.00, the noon buying rate for US dollars in effect on March 31, 2011 as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. A rate of 6.8258 was used for comparative purposes as of March 31, 2010, which was the noon buying rate for US dollars on that date for cable transfers of RMB per US dollar as certified for customs purposes by the Federal Reserve Bank of New York.

About 3SBio Inc.

3SBio is a leading, fully integrated, profitable biotechnology company focused on researching, developing, manufacturing and marketing biopharmaceutical products primarily in China. Its focus is on addressing large markets with significant unmet medical needs in nephrology, oncology, supportive cancer care, inflammation and infectious diseases. With headquarters and GMP-certified manufacturing facilities in Shenyang, PRC, 3SBio employs over 700 people. Shares trade in the form of American Depositary Shares (ADSs) on the NASDAQ stock market under the ticker symbol "SSRX". Please see www.3SBio.com for more information.

Safe Harbor Statement

Certain statements in the disclosures of 3SBio, Inc. ("3SBio") with respect to  the fiscal year 2011 and the first quarter ("Disclosures") that are not purely historical in nature may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Disclosures include the press release, the conference call and any accompanying materials, and any other information issued, released or publicized by 3SBio with respect to the fiscal year 2011 and the first quarter.

These forward-looking statements address activities, events, conditions, or developments that we currently expect may occur in the future, and include, but may not be limited to, discussions and statements regarding revenue guidance, business objectives, dialysis treatment growth, market size as indicated by addressable patients number or disease prevalence rate, product development, clinical trial progress, regulatory approval process, results of collaborations, acquisitions and licensing, exports and new markets expansion, impact of government policies and regulations, production capacity, capital expense, investment portfolio management, and future operations and strategies. Forward-looking statements can be identified by such terminology as "believe," "expect," "plans," "strategy," "potential", "prospects," "forecast," "estimate," "project," "anticipate," "aim," "will" or "would", "may" or "might", and words, phrases, expressions, and usages of similar meaning or substance or the negative of such words, phrases, expressions and usages.

Forward-looking statements are based on management's current assumptions, beliefs, expectations, and projections, in light of the information currently available, and actual results could differ materially from those implied or expressed by the forward-looking statements. Among the factors that could cause 3SBio's actual results to differ from what 3SBio currently anticipates may include: government actions and measures; the ability of 3SBio or any source it relies on to estimate or forecast accurately; competition from other domestic and foreign pharmaceutical companies; the market growth for pharmaceutical products in China; market acceptance of 3SBio products; hospital or patient demand for our products; the completion and results of 3SBio's ongoing clinical trials; receipt and timing of regulatory approvals for 3SBio's new products and indications; risks associated with collaborations, licensing, and acquisitions; regulatory and other requirements in new markets; risks in seeking international certification and approvals; 3SBio's ability to expand its production, sales and distribution network and other aspects of its operations; its ability to effectively protect its intellectual property; changes in the healthcare industry and in the health insurance system in China; and fluctuations in general economic and business conditions in China.

For additional information on factors identified above and other risk factors, uncertainties and assumptions that may affect 3SBio's business, financial conditions and results of operations, please refer to 3SBio's filings with the Securities and Exchange Commission at www.sec.gov, and, in particular, "Introduction – Cautionary Statement concerning Forward Looking Statements", Item 3.D "Risk Factors", Item 5. "Operating and Financial Review and Prospects", and other applicable discussions in 3SBio's annual report on Form 20-F for the year ended December 31, 2009.

All the statements in the Disclosures speak as of the date of the initial release, even if subsequently made available on our website or otherwise. 3SBio undertakes no obligation to update or revise these statements after the date of release, whether as a result of new information, subsequent events or otherwise, except as required by law.

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