Net income for the first quarter of 2010 included $124,000 of interest and financing expenses, $493,000 of interest and other expenses and $269,000 of income tax recovery. Net income for the same period of 2009 included $126,000 of interest and financing expenses, $93,000 of interest and other income, and $482,000 of income tax expenses. Net loss attributable to shareholders for first quarter of 2010 was $307,000, or $0.01 loss per diluted share, as compared to net income attributable to shareholders of $25,000, or $0.00 per diluted share, in the same period of 2009.

As of March 31, 2010, Sinovac's cash and cash equivalents totaled $118.9 million, compared to $75.0 million as of December 31, 2009. The increase in cash and cash equivalents primarily reflects the contribution of approximately $62.0 million in net proceeds from the public offering of common shares, which closed in February 2010.

Recent Developments

Sinovac's 30%-owned joint venture, Sinovac Dalian, submitted an application to the SFDA to commence human clinical trials for its mumps vaccine. The proprietary mumps vaccine developed by Sinovac Dalian represents not only the first live attenuated vaccine for which Sinovac has filed a clinical trial application, but also the first candidate from the joint venture's pipeline for which a clinical trial application has been submitted to and accepted by the SFDA since the formation of the joint venture in January 2010.

After receiving regulatory approval from China's State Administration of Foreign Exchange, Sinovac Biotech, through its wholly owned subsidiary Sinovac Biotech (Hong Kong) Ltd, made an initial cash contribution of 60 million RMB, or approximately $8.8 million, to Sinovac Dalian. Dalian Jin Gang Group, the other party, made an asset contribution, inclusive of its manufacturing facilities, production lines and land use rights, with an appraised value of 140 million RMB, or approximately $20.5 million. Equity interest is currently divided 30% and 70% between Sinovac and Dalian Jin Gang Group, respectively. Pursuant to the agreement executed between Sinovac and Dalian Jin Gang Group, Sinovac intends to increase its equity shares to 55%, in exchange for a cash contribution of 50 million RMB, or approximately $7.3 million, on or before December 31, 2010.

2010 Guidance

Sinovac anticipates that the impact of the unfounded Shanxi media reports on the vaccine industry will gradually diminish as the SFDA has clarified that the fatalities were not connected to the vaccines; however it may take some time for public perceptions of vaccine safety to recover. As such, the Company has adjusted its total 2010 sales expectations to the range of approximately $60.0 million to $67.0 million. It is anticipated that the 2.15 million doses of Panflu.1 purchased by the government will be delivered to the local CDC and the remaining 8.74 million doses of Panflu.1 will be stockpiled by the government in the Company's warehouse facility in 2010. The revenue from the 2.15 million H1N1 vaccine doses, which are expected to be delivered this year, is included in the 2010 sales guidance. The Company expects that the revenue from the 8.74 million H1N1 vaccine doses will be recognized in 2011, if they have not been delivered before the shelf life of the vaccine expires.

In 2010, the Company expects to advance the clinical development of its pipeline products as follows: (i) to commence clinical trials in China for its enterovirus 71 (EV 71) vaccine and Japanese encephalitis vaccine upon receiving approval of its clinical trial applications from SFDA; (ii) to file the clinical trial application with the SFDA for its pneumococcal conjugate vaccine; and (iii) to commence clinical trials in China for the mumps vaccine under development at Sinovac Dalian upon receiving approval for its clinical trial application from the SFDA The Company intends to continue executing its business plan at the Sinovac Dalian and the Changping facilities to increase production capacity of its commercialized vaccines and prepare for the commercialization of its pipeline products.

SOURCE Sinovac Biotech Ltd.