Q2 2019 Earnings Call
Good day.
Welcome to the CBPO second quarter 2019 earnings conference call.
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Oh, no I like to turn the conference over to Sam Morton from Vodafone Group. Please go ahead.
Thank you operator, Hello, everyone and welcome and thank you for joining us on today's call.
China Biologic announced its second quarter 2019 financial result.
On August six 2019 after the market close.
An earnings release is available on the company's website.
Today, you have to China, Biologics chairman and CEO .
Mr. Jos a child Pugh a stall the cool with a review of the company's basic operating results on reports recently about a month for the company.
He will be followed by Miss the menu.
Senior Vice President of China, Biologic, who will give a detailed account of the company's financial results.
China Biologics C. I, probably missed the mini and will be available during the Q and a session. Following the prepared remarks.
Before we proceed I would like to remind you of our safe Harbor statement.
Today's conference call May include forward looking statements made under the Safe Harbor provisions.
Of the private Securities Litigation Reform Act of 1995.
Although he believes the expectations reflected and all forward looking statements are reasonable as of today.
These statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected.
That can be no assurance that those expectations will prove to be correct.
Information about the risks associated with investing in China Biologic is included in our filings with the Securities and Exchange Commission wish you and we encourage you to review before making an investment decision.
The company does not assume any obligation to update any forward looking statements as a result, new information future events changes in market conditions or otherwise.
Except as required by law.
The company will also discuss non-GAAP measures, which are more thoroughly explained and reconciled to the most comparable measures reported under generally accepted accounting principles in the company's earnings release and filings with the FCC.
You are reminded that such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measures and that non-GAAP measures are not uniformly defined by all companies, including those in the biopharmaceutical industry.
No I'm pleased to present Mr. Joseph child.
Gentlemen, and see a China biologic.
Thank you Sam.
Hello, everyone and welcome to try to biologics second quarter talking 19 conference call.
We are pleased to report.
Part of the biologic again achieved solid financial results in the second quarter.
Driven primarily by higher then surely sales volumes for all the money on the hype roles in sales volume for certain high pretty Mona immunoglobulins products.
However, as mentioned last quarter the challenges we face to assist.
This quarter sales I mean AG remained sluggish and there was a slowdown in all women sales growth.
With this in mind, we continue to closely monitor the impact of changes in China's health care policy and market environment.
And we will change our outlook for the year.
Guidance for the full year 20, 129 team remains at bottom line growth of 4% to six msas in RMB terms on a year over year basis.
[noise] well so volume all women were again higher than expected this quarter.
We witnessed a deceleration on the album and sells gross compared to the first quarter.
This is what we had anticipated.
Given that the imports the imports constraints on all women impose the audio problems all 2019.
Pat which have caused a temporary shortage of Oliver to supply the market have now been relaxed.
An analysis of law release data shows that the volume all the important element and the market recovers.
During the second quarter.
We anticipate a further decline in our album in sales gross.
As a result of a relatively similar levels of annual production for all of them and the large bought them all of them and which was oversold and the first half of the yeah.
Sales of IB Agee, who are again below expectations this quarter.
This reflects the continued in package policy controls over high unit cost prescription drugs and the fact that I'd Archie is still listed in the southern regions as a.
Actually that the truck.
Making it subject to either more stringent controls of prescriptions.
As a result of these challenges our inventory position in <unk> is skewed significantly above normal levels.
Well sales of coagulation products and some hyper you mono immuno globally the products grew faster than the second quarter.
In the second quarter.
We still feel we're still fell short of our growth expectations.
Well tested Tate significant headwind in our second you know our placenta polypeptide product in the second half all 2019.
Although our P. P products was not included in the first set of National key truck lust for monitoring and prescription control, which was previously expected to be a core deep.
You wouldn't draw close issued by the Chinese National Health Commission in early July .
There is a high probability that it will be included in the future.
Wed anticipate those would have a further negative impact on the products sales.
We have recently commenced a comprehensive internal strategic review that he intends to identify our operational deficiencies and generate new yield value, creating opportunities within our business.
Along with these strategic review process.
We have already implemented a reorganization on our sales and the marketing operation and the second quarter.
We believe our newly established sales and marketing organization with a stable and experienced team in place. We will continue to execute our prior said medical marketing strategies focusing on medical practitioners educations.
In addition, due to the increase of our accounts receivable turnover days relative to industry peers and the last two quarters.
We have decided to begin a comprehensive re evaluation of our existing credit sales policies regarding pricing and try to ourselves and to increase collection efforts to reassure all credit exposure is within the limits of our risk tolerance level.
These measures could potentially lead to a certain temporary negative impact with regard to our sales and the near future.
And the second half of the yes.
We may further reorganize our operating functions such as R&D.
Production plus my resource management.
Although the strategic review process is still ongoing we believe the final outcome of these exercise.
Well provide us a clear set of strategic recommendations on future Roadmaps for our business [laughter] Chaucer, its course and enable improved at a sustainable performance for the next two years.
We're pleased to share some of our operational highlights for the second quarter.
We commenced human clinical trials, all the new product human Bob Willey, Brent to factor all beat.
W F.
I'm sure we all 10.
Approval from the China National Medical products administration in June .
VW that isnt intended to be used for the treatment of bleeding episodes, including surgical bleeding in patients with vault.
Well it bad disease.
We expect clinical trials will take approximately three years to be completed.
We're also pleased to report that in the late July we received the operating permit far knew when China plasma collection station in height, and Providence and immediately commenced commercial operations.
[noise] although.
Another significant development this quarter was the acquisition of the remaining 20% interest intention.
Which was completed in early August .
The acquisition is that changing for US no indirectly wholly owned subsidiary of China biologic.
Allowing us to fully capture the growth potential thus leading player in the regenerate is medical bio material industry.
The Moon means we can now better utilized synergies between changing foods business, and China, Biologics, Hi, N. coagulation factor business.
I received the full benefit as an earnings accretion from the existing on future catching food products.
Additionally.
You may have seen in the release.
Popped age off our share repurchases made under the share repurchase program. The board of directors authorized it Mike under which the company may repurchase up 250 million U.S. dollars worth of shares over a 12 month period.
As of June searches 29 team. The company has repurchased 121852 shares at a total of $11 million under this program.
Finally, as you may have seen in the release the board of directors appointed me as the CEO of the company on August subs.
After the departure of our former CEO and made our search committee conducted a vigorous search for suitable candidates to fill the company's CEO position and evaluated multiple internal and external candidates. The search Committee eventually recommended me and the board approved my appointment.
I'm thankful for the confidence and trust. The board has placed in me and look forward to working with the management employees and partners to redevelop the future Roadmaps for business to ensure long term and sustainable growth for the company.
This concludes my prepared remarks, I will now turn the call over to Mr., meaning in our senior Vice President to review financial results for the second quarter of 2019 ring. Please go ahead.
Thank you Joseph and Hello, everyone now I'll walk you through the key planned for the second quarter 2019 total sales in the second quarter 2019 increased by 20.4% RMB terms for 12.7% in U.S. dollar term too.
1% to $35.7 million from $120.4 million in the same quarter of 2018.
Total sales for power pharmaceutical products increased by 21.6% in RMB terms or 14% in U.S. dollar terms to $122.3 million from $107.3 million on a same quarter 2018.
This was a result of increased tells our human albumin products certain high premium products and the Cogs inflation factor products and was partially offset by decreased cells transcends the pallet polypeptide products.
For plasma products total cells Inc. second quarter 2019 increased by 31.2% in RMB terms or 22.8% in U.S. dollar term to $111 million from $90.3 million seeing same quarter of 2018.
Total sales for all mature products in the second quarter of 2019 increased by 9.9% the RMB terms.
Or 3.1% in U.S. dollar turned to $13.4 million from $30 million during the same quarter 2018.
As a result of a higher salaries concentration pump.
Our unit price artificial dura matter products.
During the second quarter 2019, human albumin and Ivig products remained our largest sales contributors revenue from human albumin increased by 36.9% in RMB terms or 20.3% in U.S. dollar terms from $38.1 billion in second quarter 2000, $18 million to $48.9 million in the second quarter 2019.
Revenue from Ivy I'd products increased by 4% in RMB terms or decreased by 2.5% in U.S. dollar terms <unk> from $28.1 million in the second quarter 2000, $18 million to $27.4 million or second quarter of 2019 as percentage of total cells cells from human albumin and Ivig products were 636% and a 20.2% respectively in the second quarter 2019.
Sales volume of human albumin products increased by 38.2% for second quarter 2019.
Primarily due to increased sales volume.
In dispute or and the pharmacy channels supplemented by increased direct sales to hospital and localization centers the cells Whoa volume of IB allergy products increased by 5.3% for second quarter 2019, as a result of increased sell through direct sales channel.
The average price for him albumin and Ivig products decreased by 0.9% and a 1.2% respectively. In RMB terms <unk> second quarter 2019, compared to same quarter 2018, because I'm a higher sales volume in distributor channel and a lower price to certain distributors, reflecting intensified market competition for major plasma products.
In U.S. dollar terms, the average price for human albumin, and Ivig products decreased by 7.2% and 7.5%, respectively, Inc. second quarter 2019 compared to same quarter 2018.
Revenue from other immunoglobulin products increased by 31.9% in RMB terms or 23.5% in U.S. dollar terms Inc. second quarter 2019, compared to same quarter 2018.
Reaching 14% of total sales as compared to 12.8% of total Salix in same quarter of 2018.
The revenue increase was mainly attributable to increased sales volume of human.
Rabies immunoglobulin products and human tetanus immunoglobulin products.
Revenue from other plants were products, including human coagulation factor eight children personally comps last concentrate and the human fibrinogen products increased by 92.7% in RMB terms or 80.5% in U.S. dollar terms.
In the second quarter 2019, compared to the same quarter 2018, representing 11.5% of total cells in second quarter of 2019.
The gross many came from increased sell through.
Disappeared or channel revenue from please send I'll call. It popped up products decreased by 29% in RMB terms or 33.5% in U.S. dollar terms for the second quarter 2019, as compared to the same quarter 2018.
This accounted for 8.3% of total sales compared to 14.1% of total sales in the second quarter 2018 minute nine waste the decreased sales volume as a result of the inclusion of a plane sent a part a paper products in regional Andrew and drive a less which put downward pressure on their prescription volume.
Cost of sales increased by 19.1% to $44.8 million Inc. second quarter 2019 from $37.6 million in the same quarter 2018.
As a percentage of total sales cost of sales increased to 33% from 31.2% in the same quarter 2018. This was mainly due to decreased sales price for most of our plasma products and increased plasma collection cost.
Gross profit increased by 9.9% to $90.9 million in the second quarter 2019 from $82.7 million in the same quarter 2018.
Gross margin was 67% and 68.7% in the second quarter 2019, and 2018, respectively.
Total operating expense in the second quarter, 2019 decreased by $4.2 million or 9% to $42.7 million from $46.9 million in same quarter of 2018.
This peak, whereas many consist of a decrease of $5.9 million in general and administrative expense.
Partially offset by an increase of $1.2 million in Sunny expense and the zero point $5 million in research and development expense.
As a percentage of total sales total operating expense decreased to 31.5% in the second quarter of 2019 from 39% in the same quarter of 2018.
Selling expense in the second quarter of 2019 increased by $1.2 million or 4.9% to $25.6 million from.
$24.4 million for second quarter 2009.
The increase is primarily due to increased stunning spends for plasma products and a bar mature products, which is partially partly offset by decrease in marketing and promotion expense related to place and I'll, probably pepper products.
As a percentage of total cells signing spend decreased to 18.9% for second quarter 2019 from 20.3% in the same quarter of 2018.
General and administrative expense in second quarter, 2019 decreased by $5.9 million or 20, 628.6% to $14.7 million from $20.6 million in same quarter 2018.
As a percentage of total sales general and administrative expense decreased to 10.8%.
For the second quarter 2019 from 17.1% for the same quarter 2018.
The decrease in general and administrative expense was mainly because of the decrease a decrease in share based compensation expense and a reversal of allowance for doubtful accounts receivable.
Research and development expense in the second quarter 2019 increased by zero point $5 million or 26.3% to $2.4 million from $1.9 million in the same quarter in 2018.
As a percentage of total sales research and development expense increased to 1.8% from 1.6% same quarter 2018.
Income from operations in the second quarter 2019 increased by 43.4% RMB terms or 34.3% in us dollar terms to $48.2 million from $35.9 million same quarter 2018.
Operating margin increased to 35.5% in the second quarter 2009, two from 29.8% in the second quarter 2013 income tax expense.
In the second quarter 2009, two increased by 22.4% you.
$8.2 million from $6.7 million in the same period of 2018.
The effective income tax rate was 14.4% in the 16.5% for second quarter, 2019, and 2018, respectively.
Net income attributable to the company increased by 55.2% in RMB terms or 45.5% in US dollar terms to $41.6 million in the second quarter 2019 from $28.6 million in the same period of 2018.
Net margin increased to 30.7% in the second quarter 2019 from 23.8% in the same period of 2018.
Diluted net earnings per share increased to one dollar six cents in the second quarter 2019, compared to 83 cents in the same period of 2018.
non-GAAP adjusted income from operations increased by 23.1% in RMB terms or 15.2% in Gastar terms to $56.7 million in second quarter 2019 from $49.2 million in same pure 2018.
non-GAAP adjusted net income attributable to the company increased by 29.1% in RMB terms and 21.1% in U.S. dollar terms to $48.7 million in the second quarter 2019 from $40.2 million in same pure 2018, non-GAAP net margin increased to 35.9% in second quarter 2019 from 33.4% links impure touches on the 18 non-GAAP adjusted net income per diluted share increased to $1.24 cents Inc. second quarter 2019 from dollar 17 cents in same period of 2018.
non-GAAP adjusted income from operations for second quarter 2019 excludes.
$6.5 million noncash employee share based compensation expense and $2 million in amortization expense of intangible assets and the nine use rights related to the acquisition options you food.
non-GAAP adjusted net income and diluted earnings per share for second quarter 2019 exclude.
$5.6 million in noncash employee share based compensation expense and $1.4 million amortization expense.
Of intangible assets and land use rights related to acquisition of cashing for.
As of June 32019, we had $202.5 billion in cash on hand and demand fathers.
$523.9 million in time deposits and $191.1 billion in short term investments.
Net cash provided by operating activities for first quarter first half 2019 was $94.2 million as compared to $45.5 million for the same period 2018.
The $48.7 million increase in net cash provided by operating activities.
Was a combined result of an increase in net income and the slow down the increase in accounts receivable and inventories compared to the first half 2018.
Accounts receivable increased by $14.2 million during the first half 2019 as compared to $30.3 million. During the same period 2018, the accounts receivable turnover days for plasma products increased to 102 days during the first half 2019 from 88 days during the same period of 2018.
This reflects longer credit terms to hospital as a result of a national implementation of health care reform matters and intensify the competition in distributor channel.
Inventory increased by $4.3 million in first half 2019.
Which was milder than the increase of $21.4 million being same period of 2018.
This reflects a lower level of album inventory attributable to higher than expected our living cells, which was partially offset by higher than higher ideology inventory due to sluggish ourselves.
No cash using investing activities for the first half 2019 was $117.5 million as compared to $168.9 million for Sempra 2018. During the first half 2019, we paid $15.1 million for acquisition of property plant equipment intangible assets and not use rights.
And also we also purchased current deposit short term investment in.
The amount of.
1260 $5 million this was partly offset by 1162 coming from.
Billion dollars from mature.
The maturity all the time deposit short term investments net cash using investing activities in the first half 2018 many consist of.
$529.6 million payment for purchase of client deposits and short term investments and 19.
On $1 billion for acquisition option of property plant equipment and intangible assets and then use rights. This was partially offset by $97.7 million cash receive upon acquisition on potential and maturity of $282.1 million time deposits and short term investments.
Net cash using financing activities for the first half 2019 was $414.9 million and compared to the net cash provided by financing activities, while out zero point $8 million for the same period 2018.
In the first half 2019, we remitted $110 million investment bank for unsecured previously approved share repurchase program on our behalf.
During this period.
While our 100.
Congress 100.
Well aren't 1 million 160, and 96 to 122 shares were repurchased.
At the total amount of $111 million net cash provided by financing activities in the first half 2018 represented cease all through their point $8 million from our start ups options exercised.
That concludes our prepared remarks, operator, we're now ready to take some questions.
Thank you.
We will now begin the question and answer session.
To answer your question you moved from Star then one on your Touchtone phone.
If you are using a speaker phone we ask that you. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
And today's first question comes from Joe Blondo Hugh of Morgan Stanley . Please go ahead.
Hi, Thanks for taking my question My first question.
As the Chief Executive Officer, and have left the company will there be any change on the sales line.
Gee business.
Or any change one how you calibrate distributors to clean up the hygienic lunchmeat.
Oh, you said one question, so you're getting the data that flows with without.
I'd be inside of it will be the red meat, you really still bearish on the outlook.
Okay last question for Mr. Zhao.
You were pointing out as the new CEO and local one interesting. Thanks.
Oh.
Yes, Justin.
Completed major funds meeting Tomorrow why did you make such assumption you took off with how long do you plan to see was it will be 100% dedicated to the business.
Thank you.
Thank you.
Now I will turn to the.
I'm sorry, your first a couple of questions and I will leave the hours CEO Mitch our two drugs the third question.
So the first question regarding our Cebos resignation I think you are it is just the opposite.
For the disclosure that missed a hurts reservations due to his personal reason and.
As our CEO mentioned earlier, our recent initiative to reorganize our sales marketing strategy you know strategy.
We're not a big impact by any single managements members departure.
Actually the the strategy to reorganize ourselves or marketing.
What's beep was in place before MS Horse was point to this position and also here how to being only working for the company for very very shorter duration.
Therefore, his departure or had a negligible operational impact to our sales and marketing activities.
And we point, our internal sales and marketing shop, who has been working for the company for more than 20 years in the interim to replace Miss Claire.
And we're also in the process to expand our sales and marketing team, especially Maarten medical marketing payments.
In the future, we my recruited more them appointed industry veterans, including certain senior level people to ensure the security are contaminated strategists.
And just want to give you some highlights on our.
The sales marketing the initiative that were not to be impacted by those cbls the departure.
And as our the CEO Ms. child, just just stay that we started an initiative to reorganized our sales marketing function.
And specifically, where you have a rig group the cells George George Geographic divisions, we're integrating the sales function from subsidiary level to have quarter.
We have to redefine the work scope and to redevelop or the strategic focus among each of those sales marketing function areas such as building more dedicated product promotion team was or folks IBG Ana Hi, Ana correlation effect upon us.
And we're in the process recruiting.
More experienced sales force with medical and clinical backgrounds. In addition, we're also plan to implement or few a new performance evaluation system to better incentivize our sales marketing.
Team based on the broader performance matrix system.
And I think Thats my.
Answer to your first question second question regarding the market all of those I think you already.
See our results for the IB ISLG for the for the for the Florida for the second quarter stood behind the the expectation.
And from volume first perspective, the only we only grow 5% year over year in second quarter.
And for the remainder of the year.
As our chairman and CEO as stated earlier the overall the how to win.
The pressure persist.
And.
And we are we are in the process to.
True to reorganize ourselves marketing team and hopefully we can make some initiative to.
To change the.
Hi, Joe uncertain, the or the high end or collaboration products. The weak sales performance, but I think the overall the visibility for the short term, we can turn around the Ivy I G and a certain.
Collaboration product, especially five fiber engine.
The visibility is not very high.
But we believe our effort to reorganize the sales marketing the function in the long term will drive up the demand for this product, but it ends up in the short term.
We we still think the visibility of the market the environment.
The debate is a low and the cells the.
Performance for AG and the third hot hiring of combination products in the second half 2019 to achieve over the beginning of 2000 Nineteens budget target is still a challenge at this moment.
So hopefully that answer your question Youre on.
Yes. Thank you.
And ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one.
This time.
Once again, a little pause momentarily to assemble our roster.
[noise] Oh.
Oh gosh.
[noise].
Hello, Hello, Yes, Sir I'm not showing any further questions at this time.
Yeah, No I [laughter].
Okay.
I I think utilization.
It looks like we do have a few more questions joining the queue Sir.
So I know whole hotel quota.
Uh huh.
And then he will end up from Morgan Stanley has one question, particularly directed at me or my asking.
Why I left Centurion just after its successful close of as fund raising.
Uh huh.
Okay, Let me put it this way okay I see.
They centurion partner and myself, we started this company about three years ago.
And made tremendous a progressive stride in the setting up of the fund.
And ER I took a lot of pride and in my effort even.
But baking that.
A reality.
Having said that CBPO is also a great organization, if I have to draw a comparison I would say probably at this point in time site Centurion as a Porsche.
And CVP hope P.P. or it's a ferrari he needs of minor repair and major remodeling.
But he has great potential for value creation at because of that I have decided I need to devote all my time and concentration to make this company as great as it can be.
That explains my motive why I come here. In addition to that as you guys are aware and CBPO is one of the major portfolio companies of Santorum as well and I have resigned from all the positions from Si Centurion. So that we are in solid ground to help company it and take it to next level I hope that addresses your question. Thank you Linda.
And ladies and gentlemen, our next question comes from Johnny Wong of Jefferies.
Hi, Thank you for management for taking my question and congratulations on.
We expect the sale. My question is about the we're trying to rein in our credit term and you mentioned that the short term sales may be affected I was wondering if we have a target as to how much we want to bring in and how much what the balance is between sales growth and also the the credit days. Thank you.
Okay I'll take this question. This is chosen charge in and as we indicated in our press release.
We are currently in the process of reevaluating, our credit terms to to figure out a proper balance between growth and accessible credit exposure given the general macro environment.
And does the review is still in progress and we noticed a noticeable increase in our account receivable days relative to our peers.
And Jay given the the market conditions I think it is time for us.
To take a second look where we are and I.
Especially some companies that are that turnover days.
Are really becoming long and we might have to tighten the credit control, even though they are pretty solid and very good customers for a long time and a great hospitals, but we want to.
Maintain our sales policy in that in that we have a proper control of our potential losses and that partially explains why we are being cautious in terms of whether upgrading our profit the earnings guidance or not because we realized if we do that they might be temporary impact on the sales of the next quarter and yet, but we believe this is the right thing to do we have some internal generate internal matrix.
But it has not been finalized and again as I said as we implement these corrective actions our remedies I I'm not saying, we did something wrong with these remedies.
Yeah, we'll see how it progressed and.
If in case, we find more visibility and if we think we need to revise our earning guidance. We will do so in the appropriate time I hope that answers your question.
Yes, just a follow up question.
When would we expect to.
New credit policy to be implemented.
We have put into a certain measures a into the operation systems, and we hope to see tangible results.
In the next two to three months.
Thank you very much.
The results come back as we expected we might.
Change our earnings outlook.
Thank you.
Our next question comes from Jonathan.
Yes. Please go ahead.
Yes.
Thanks, Joseph Thanks management.
I have several questions in terms of the operational metrics first could you. Please disclose the current plus total plasma collection volume.
For the full year 19.
And the second is.
The all booming demand so how do you see the current.
China total demand for the upcoming product. So you mentioned that in the first half you have already.
Actually the.
The majority of the supply so how.
In general you try to balance the.
Half year half year operation because this is quite quite quite difficult for investors to understand from an operational perspective.
And the second thing is in terms of the IP I'd application. So things are early this year, China launch of the often Joc list could you. Please disclose along the terminal destroyed distribution of the specific departments Ivy I G usage in terms of the like neurology or some acute care or some other departments. So how do you try to.
Stimuli your internal sales and marketing team to position for the IB I G.
Distribution.
[laughter].
[noise], Yeah, I'm trying to.
Andrew question on that if a if I don't have a additional comments. He again jumping later, so I think those are companies or the prior practice, we don't do that for your collection tonnage you know.
Yeah. So so hopefully you all understand so we have to be.
Consistent with our prior practice and the second question regarding the element.
I think you know the overall the.
The ellman situation hopefully you understand this year. The production arrangement is actually because we have a very strong the lower base in the 2018, where where our Shandong facility was launch and after Chinese new year. So majority of the products come on nine is in the second half and this year. The specifically, we actually took some advantage with import volumes that a shortage in the in the 2019, the first quarter. So the element I think the overall, we had a greater you know Dan.
Or the better than expected.
First two quarters in 2019, I don't think that war directly.
Okay indicated as the future albumin demand in China will be.
This this demand so sustainable because I think in China I think the situation is a we don't actually have a fool the the external data to support you know the usage between.
Pharmacies between the <unk> and also the the hospitals so that actually were very difficult to give you a provide provide you a clear cut answer for the future element.
The.
Demand grows so hopefully you understand that for the IB I G. I think you know the Oh I understand youre.
My question relates to specific really the Ivy I G. The the consumption among the different the departments within hospitals again, I think you know we don't actually have that data to provide to share, but I can't give you a general sense, how or fuel you know the energy usage in the in our customers because we have about 40% of IB I'd you directly sells for hospitals in the past, we do actually have a capability to assess the hospitals usage data, but I think the new regulation prevent us to go into the hospital to to take a look how the hospital to use our strategy across the different departments, but our historical experience is most or ideology used in China, especially in our target hospitals are prominent in the actual disease, especially the trading areas such as I see you.
Or the the.
The.
In the <unk> compared with the in the in the Western countries. Most of ideology was in treating their chronic disease like like those are new logical.
Related to like a.
See I D. P P I'd disease, but I in China, I think 6% in our prior experiences 60% of usage was going to the IC and another 40% its claws a different departments and ER pediatrics is one of the major D.
I'd be energy consumption the department within hospitals, so hopefully that answers your question.
I'll just add one more point I think to clarify it from an operation perspective.
By the industry on average.
Hi, the at the time it takes.
Full plasma collected to become prouder wouldn't and go to market. It took roughly it take roughly nine month.
So whatever is being sold in the market was typically.
Plasma clocked it that produced into different shed a products way back and there you go through they batch based approval process and so that means you need to have a long cycle, even planning your production schedule and all that stuff.
And Dave.
Due to the only expected slowdown or a shortage of supply of all of it in the market place as a result of some other.
Extra ordinary circumstances by our.
Competitors say, especially the international competitors, so we fall on a.
Shortage in the marketplace and we happily took it.
And does that create certain issue in the sense that said, even if we ramp up production it won't hit the market.
Before a rounds is due course in the meantime asset our competitors resume the supply of their products and Jay then there could be a rebalancing we happy to keep the market share we grab from that but that's just reality if I have more product I'd be happy to sell them and our albumin inventory is relatively low. So that's why we tend to be cautious on our production.
On our forecast right now so I I think I just want to hammer home the point.
Thanks.
Thanks.
And ladies and gentlemen, as a reminder, if you would like to ask a question. Please press Star then one.
Hi.
Once again, we will pause momentarily to assemble our roster.
And today's next question.
Comes from.
Xie Chen of Goldman Sachs. Please go ahead.
Thanks for taking my question, Paul I'll ask one.
No more macro question about the industry and for the CBPO sell outlook in the over next few years.
Because what could be the key bottleneck for the company's growth bigger well it will be like.
It could be plasma collection capability some of the regulations on plus set up new plasma centers or.
The promotion the patient education physician education for.
I.
Some of the newer products or the technology that.
We need to harbored to develop more different plasma products or the sales marketing strategy.
Because I think in the whole market now internship the end demand at hospitals.
It's probably under some kind of pressure and.
And also most of the company says.
Particularly those plasma leaders in China have relative similar product portfolio in the space. So I'm trying to understand what would be the priority for you guys to gross to be appealed bigger in the market and how to how how how to become more competitive.
Not only in China, but also in our big skull.
Plus mine also non plasma product. Thank you.
Okay.
Hi to answer your question.
In a way we can and today.
As you mentioned other than the usual suspects.
In terms of driving the company into the next level like plasma collection or that you know for us.
There are a couple of areas that I think is going to be critical.
He is helping us reaching the next stage of our development and that's why we have.
Started this strategic planning process at this stage.
Some of the things we're focusing on one is too.
Restructure our current sales and marketing supply marketing operation.
In the past due to the market conditions, we were positioned in a way just to stay with the market as the market the plan a supply and demand gradually move into equilibrium or even slightly over supply is certain product segment.
We need to be prepared.
To take the lead in improved promoting them pushing our market that's one thing.
Relative to the other industry, they plasma industry is well protected and it used to be easy to sell the products and I think a relative to the first.
Prescription drugs and other things I think the overall outlook remain the same in the fourth foreseeable future, but the competition will intensify.
So we need we've prepared the.
The changes in National Health care policy presented some unique challenges to this particular business because these policy changes are not targeted at this particular that industry.
And so for US this is a challenge, but this is also a opportunity and Jay.
Oh.
The participant in the mass market, we're not all created equal those who can better utilize and taking advantage of the challenges to win big market share. That's the second point the third point is a product mix.
In certain product line.
The demand the supply is reaching equilibrium.
But there are other markets the other product lines that are.
Fuel.
Not there yet the day that in the current state of the fair.
You know that the market needs application.
Hi.
If you look at to China's market versus international peers. There is huge potential out there you just need to make sure people understand be aware of the benefits of these products and given the large large population size and given the penetration reasonable comparison between China and its oversea market. There is a major growth out there. So in terms of priority we're doing the.
Sales and marketing reorder in restructuring. In addition, we're refocusing on the new product development 30, as we always do you focus on increasing our collection.
Of plasma in this business right now is still more resource is still dependent by new technologies, and new product will come into market may substitute and.
And even replace certain product class. So we're on a constant outlook on what's happening on the horizon and that's why we need to do the long term strategic plan.
That's what we're doing right now and the process still ongoing and Jay.
We hold probably in the next quarter, earning we might have a clearer picture to share with you guys.
Thank you that's my answer.
Sure great. Thank you so much great. Thank you so much.
And ladies and gentlemen, as a reminder, if you would like to ask a question. Please press Star then one.
Hi.
Once more we will fall from a horse we will hold for questions.
And ladies and gentlemen, I'm showing no further questions at this time I'd like to turn the conference back over to the management team for any final remarks.
Well. Thank you for so much for participating in our conference call and we look we're looking forward to staying engaged.
With the investment community out there. Thank you it has been a great honor and pleasure.
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