Q4 2016 Real-Time Call Brief

Highlights

ZADAXIN's volume growth continues outperform the growth rate of the China pharmaceuticals market underscoring its strength as the leading brand in the time in market with the 17% volume share in more than 40% value share.

We're pleased to again this quarter to see continued strong growth in our oncology portfolio as reflected in the 19% overall increase year-over-year in our Pfizer and Baxter oncology business.

Our pricing has remained quire favorable in the range of RMB18,000 to RMB20,000 which makes us highly competitive We expect the China Pharma market growth rate of 6% to 8% continues to outpace that our Western markets.

For the year ended December 31, 2016, revenues were $160.1 million, compared to revenues compared to revenues of $157.3 million last year.

ZADAXIN revenues were $150.1 million for the year-end December 31, 2016, a $4 million of 3% increase compared to $146.1 million for the same period in 2015.

The 3% increase was the result of 13% volume growth offset by a combination of average price decrease of 4% compared to the prior year and Foreign exchange impact of 6%.

Promotion services revenues were $4.2 million for the year ended December 31, 2016 compared to $2.9 million for the year-end December 31, 2015, a $1.2 million or 42% increase year-over-year reflecting overall high demand for our promotion services oncology portfolio.

On a GAAP basis, our net income for the year-end December 31, 2016 was $30.7 million compared with net income of $29.5 million for the same period in the prior year or $0.61 and $0.58 per share on a basic and diluted basis respectively for the year ended December 31, 2016 compared to a $0.51 and $0.56 per share on a basic and diluted basis respective for the same period in 2015.

Our non-GAAP net income for the year ended December 31, 2016 was $43.8 million, compared with non-GAAP net income of $52.3 million for the same period in the prior year, or $0.87 and $0.83 per share on a basic and diluted basis respectively for the year ended December 31, 2016, compared with non-GAAP net income of $1.05 and $1 per share on a basic and diluted basis respectively for the full year and 2015.

Sales and marketing expenses were $54.7 million, compared with $54 million for the same period last year.

For the year ended December 31, 2016, R&D expenses were $15.1 million, compared with $12.3 million for the same period last year, driven by additional in-licensing deals.

For the year ended December 31, 2016, G&A expenses was $34.2 million, compared with $27.9 million for the same period last year.

For the year ended December 31, 2016 income tax expense was $3.4 million compare to $0.8 million for the same period last year which included a $1.3 million on certain tax provision for our operations.

As for December 31, 2016 cash and cash equivalents totaled $134.4 million compare to $101.4 million as of December 31, 2015 excluding the $12.8 million of restricted cash grow as of December 31, 2015 or the SEC settlement which was released in February 2016.

We project our 2017 revenue to be in the range of revenues will be in the range of between $170 million and $175 million driven by ZADAXIN revenues and our non-GAAP diluted earnings per share will be in the range of between $0.60 and $0.64.