China Biologic Products Holdings Inc
Q1 2016 Earnings Call Transcript

Published: 7 May 2016

[Bill Zima:]

Hello, everyone, and thank you for joining us on today's call. China Biologic announced its Financial Results for the First Quarter of 2016 on May 4, 2016 after the market closed. The earnings release is now available on the company's website. Today you will hear from China Biologic's Chairman and CEO Mr. David Gao, who will start off the call with a review of the company's recent developments, strategies and basic operating results, followed by the company's Senior Vice President, Mr. Ming Yin, who will address financial results in more detail. The CFO, Mr. Ming Yang is also on the call and will be available during the Q&A session that follows the prepared remarks. Before we proceed I would like to remind you all of our Safe Harbor statement. Our conference call may include forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in our forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in China Biologic is included with our filings with the SEC, which 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 of 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 SEC. You're reminded that such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure and that non-GAAP measures are not uniformly defined by all companies, including those in the biopharma industry. Now, with that said, I'm pleased to present Mr. David Gao, Chairman and CEO of China Biologic Products. David, please go ahead.

[David Gao:]

Thank you, Bill. Hello, everyone, and welcome to China Biologic's first quarter 2016 conference call. We are pleased to achieve strong results for the first quarter of 2016, with both sales and net income growth exceeding our expectations, despite the negative impact of approximately 8 percentage points from foreign currency conversion. Our better than expected sales growth was mainly attributable to greater sales volume of products made from our purchased plasma, supplemented by modest product price increases, improved product mix and ongoing penetration into Tier 1 markets. We achieved a 26% increase in albumin sales growth for the first quarter compared to the same quarter of 2015. As anticipated, IVIG sales growth was slower, for two reasons. First, we sold higher than average volume in the first quarter last year, given our large pre-reserved plasma paste stockpile, which gradually depleted over the past year. Second, we allocated a higher proportion of our production capacity to hyper-immunoglobulin over IVIG in the first quarter this year to capitalize on favorable price increases, since the Government price ceilings were removed last year. We also continued to expand the sales and increase the market shares of human coagulation factor VIII and human prothrombin complex concentrate. As for operational developments, the plasma collection from Xinjiang Deyuan stations remains on track. We are confident the contractual volume of 120 tonnes of plasma scheduled for delivery to us during the course of the year will be achieved. The new Huitian facility in Zhejiang [ph] province, in which we have a minority average interest received its GMP certification in February and resumed production. The first batch of approved products from this facility is expected to be delivered to the market in the second half of this year. In addition, we increased our equity interest in Guizhou Taibang to 85% during the reporting quarter through a series of capital injections. Despite the stronger than expected first-quarter performance, we reiterate our full year financial forecast from last quarter. This is because we based the prior guidance on relatively elastic full-year production arrangements, and also factored in modest product price increases. In the recent weeks we have witnessed an increase in albumin imports and experienced a slower tendering process at the provincial level, which had the effect of constraining the potential for near-term increases in product pricing. For these reasons we are maintaining our outlook of full-year sales growth of 21% to 23% and adjusted net income growth of 24% to 26% over the prior year. Finally, as you are aware, Warburg Pincus liquidated some of their stock in the first quarter, selling approximately 4.3 million shares of our common stock in March. It has been an ongoing goal of ours to further diversify our shareholder structure and improve our stock liquidity to further increase shareholder value and recognize our long-term growth potential. That concludes my part. I will now turn the call over to Ming Yin, our Senior Vice President, to review the full year financial results. Ming, please go ahead.

[Ming Yin:]

Thank you, David, and hello, everyone. Let me first review key P&L items for the first quarter 2016. Total sales increased by 29.4% in RMB terms or 21.6% in US dollar terms, to $85.6 million, primarily driven by increasing sales volume of major plasma-based and the human tetanus immunoglobulin products. During the first quarter of 2016 human albumin and IVIG products remained our largest two sales contributors. As a percentage of total sales, sales from human albumin products and the IVIG products accounted for 38.1% and 39.9% respectively in the first quarter 2016. The sales volume of these two products increased by 25.6% and 7.6% respectively and the average price increased by approximately 2.8% and 2.7% respectively in RMB terms in the first quarter of 2016 compared to the same period in 2015. Cost of sales was $34.1 million in first quarter 2016 compared to $24.5 million in the same quarter 2015. Cost of sales as percentage of total sales was 39.8% compared to 34.8% in the same quarter of 2015. The increase in the cost of sales was mainly due to the higher cost products made from purchased raw plasma. Gross profit increased by 12.2% to $51.5 million in first quarter of 2016. Gross margin was 60.2% and 65.2% in the first quarter 2016 and 2015 respectively, mainly due to higher cost of products made from purchased raw plasma. Selling expenses in the first quarter 2016 decreased by 40% to $1.2 million and, as a percentage of total sales, were 1.4%; down from 2.8% in the first quarter 2015, mainly because we incurred smaller marketing expenses related to human rabies immunoglobulin products in the first quarter of 2016 when compared with same period of the prior year. G&A expenses increased by 43% to $11.3 million in the first quarter 2016, mainly due to the increase in share-based compensation expenses. Excluding the impact of the share-based compensation expenses, general and administrative expenses were 7.9% and 8.4% as a percentage total sales in first quarter 2016 and 2015 respectively. Research and development expenses in first quarter 2016 were $1.1 million compared to $1.3 million in the same period of 2015. During the first quarter 2016 we received the government grants totaling $0.1 million and recognized them as reduction of the research and development expenses. Income from operations was $37.9 million, representing increase of 9.2% over the same period of 2005. Operating margin was 44.3% in the first quarter of 2016 compared to 49.4% in the first quarter 2015. Net income attributable to the company increased by 12.9% to $26.2 million in first quarter 2016 from $23.2 million in the same quarter of 2015. Fully diluted net income per share was $0.94 compared to $0.87 in the first quarter 2015. Non-GAAP adjusted net income attributable to the Company was $30.4 million or $1.09 per diluted share in first quarter 2016, representing an increase of 29.8% in RMB terms or 21.6% in US dollar terms over the same period of last year. Non-GAAP adjusted net income and diluted earnings per share excluded $4.2 million of non-cash employee share-based compensation expenses. Now I would like to address the selective balance sheet and cash flow items. We had $180.1 million in cash and cash equivalents as of March 31, 2016, primarily consisting of cash on hand and demand deposits. For the first quarter 2016 net cash provided by operating activities was $24.2 million; an increase of $7.7 million compared with same period of last year, largely consistent with improvements in our results of operations, the speed-up of accounts receivable collection and the increase of net non-cash operating expenses, partially offset by increase in inventories in the first quarter 2016. The accounts receivable turnover days for plasma products decreased to 33 days during the three months ended at March 31, 2016 from 38 days during the same period in 2015, mainly because we no longer offered the long credit term policy to human rabies immunoglobulin distributors as we did in the prior-year period to gain market share. Inventories increased by $3.9 million in first three months ended at March 31, 2016, primarily due to the increase of source plasma from collection stations of Xinjiang Deyuan. Net cash used in investing activities was $19.9 million, which included $14.6 million payment for acquisition of property, plant and equipment, intangible assets and land-use rights and a $6.3 million loan to Xinjiang Deyuan pursuant to a cooperation agreement in August 2015. Net cash provided by financing activities in first quarter 2016 was $29.8 million, mainly consisting of proceeds of $37.8 million from maturity of deposits used as security for bank loans, partially offset by dividend payment of $7.9 million paid by Shandong Taibang to its minority shareholders. Our working capital as at March 31, 2016 was $316.7 million and our current ratio was 6.6. Total shareholders' equity was $504.2 million as of March 31, 2016 compared with $467 million as of March 31, 2015. Turning to our full-year 2016 guidance, we reiterate our outlook of total sales growth 21% to 23% in RMB terms and non-GAAP adjusted net income growth of 24% to 26% in RMB terms, over 2015 financial results. This guidance does not factor in any potential foreign currency translation impact. We previously adopted exchange rate of approximately RMB6.21 to $1, based on weighted average quarterly exchange rate in 2015 in translating 2015 financial results. We expect that total sales and non-GAAP adjustment income in US dollar terms in 2016 will be adversely affected by foreign currency translation impact. This guidance assumes only organic growth and excludes acquisitions and necessarily assumes no significant adverse price changes during 2016. This guidance reflects Company's current and preliminary views, which are subject to change. That concludes our prepared remarks. We will now take questions. Operator, we are now ready to take questions.

[Operator:]

Thank you. Our first question today comes from Grace Chau of Credit Suisse. Please go ahead.

[Unidentified Analyst:]

Hi. This is Iris from Credit Suisse. I have two questions for the management. Thank you very much for taking my questions. The first one is I think you have an excellent first quarter with 30% bottom-line growth. Why do you still maintain the previous guidance, which seems conservative to me? And secondly, I understand you will be relocating to the new production facilities in Shandong. Would there be any disruption in your production?

[Ming Yin:]

Let me try and answer your first question. As David mentioned earlier, although we had a stronger than expected first-quarter performance and we reiterate our full-year financial forecast unchanged, our higher than expected growth rate in the first quarter should not translate into similar level growth over the full year. I will try and address this question from the two perspectives

[Unidentified Analyst:]

Thank you.

[Operator:]

And our next question comes from Jessica Li of Bank of America Merrill Lynch. Please go ahead.

[Unidentified Analyst:]

Hey. Good evening. Thank you for taking my questions. This is Lillian from BofA Merrill Lynch. I am reading question on behalf of Jessica Li. First of all, congratulations on your strong first quarter. I have two questions here. Firstly is on the gross margin trend. We understand that gross margin in this quarter declined quite a little bit, due to the Xinjiang Deyuan plasma, but how should we think about the gross margin trend going forward, like in the following several quarters? And my second question is on your pipeline progress. So have you submitted the application for the hepatitis B candidate? And how do you think about the launch timeline? And also would you also provide more color on the development status of your new generation of IVIG? That's all my questions, thank you.

[Ming Yin:]

The first question you mentioned on the gross margin, yes, the first quarter we only recorded a gross margin 60.2%. But this margin is within the range of previous guidance we provided on the last earning call. Our gross margin was impacted by the combination of several factors, including the cost of external purchased plasma, the increased cost of internal plasma collection, product pricing and the product mix. Compared with the first quarter 2015 the gross margin at 65.2%, the reporting quarter's margin erosion was mainly impacted by the higher sales concentration from higher cost of external purchased plasma, which is about 500 base points negative impact. Specifically, approximately 50% of our products made from the 140 tonnes plasma purchased last year was sold in the reporting quarter, which represents about 90% of Guizhou Taibang's plasma product sales for the quarter. If we sold all the products made from our own collected plasma, our margin this quarter should be very comparable to the gross margin at the last year the same quarter. On the other hand, the positive impact for price increase for the major products like albumin IG about 2.7%, 2.8%, the price increase was pretty much offset by the increased costs of our internal collected plasma. As we mentioned in the last earnings call, our gross margin will be impacted by the sales concentration of the products made from the higher cost external plasma and the availability of finished products generated through our own collected plasma. In the coming few quarters in this year it seems the ratio between internal plasma and external plasma to put into production will vary. So, therefore, our gross margin will fluctuate over the next few quarters. But, for the full year, our preliminary view for the gross margin for the full year will be in the range of 60% to 65%. Your second question is regarding the R&D development. Unfortunately, this quarter we don't have any specific positive progress to share with everybody. Recently, there's a vaccine incident happened in China further delayed the CFDA approval process as certain government officials are involved in the investigation relating to the vaccine incident. As a result, the new drug review and progress has been delayed. For the product you mentioned for hepatitis B immunoglobulin for intravenous injection, we currently have no update for you on this product. We're still communicating with the CFDA and hospital conducting the clinical study to evaluate the timeline and suitability of resubmitting the registration application. For the new generation IVIG, given the massive amount of drug registration application withdrawals at the request of the CFDA, hospitals have been overall reluctant to accept the new drug candidates to commence clinical studies. Therefore, it is currently difficult for us to identify suitable hospitals to accept and carry out the clinical study for this product. We have not commenced the clinical trials for this product yet. But, in the meantime, we're in the process of developing another new generation IVIG with higher concentration. We're exploring the best possible approach to combine the two products' clinical launch time in a cost-effective manner. I think it might be worthwhile to share some color on the product you didn't mention for fibrinogen, which is currently in the late stage of a clinical trial. We mentioned in the last earnings call we were close to completing the clinical trial. We should actually have completed the clinical trial if the CFDA had not raised additional rounds of more stringent self-inspection requests. In March we have concluded our clinical study. But in early April CFDA issued a drug clinical self-inspection list, which included our fibrinogen product in the list. Because of that we have to rework with hospitals to do a self-evaluation for the product's compliance, accuracy and efficacy for the clinical trials. This process might delay our clinical data submission for CFDA review at least one to two quarters. Due to this delay, we now expect this product launch time the earliest will be the first half 2017. And for the commercial launch time for the IVIG, because of the same reason, since we haven't commenced the clinical study for the new-generation IVIG. And, hopefully, we can concurrently launch the new-generation IVIG with our higher concentration IVIG product, which we aim to file with the CFDA in 2017. Thus the product's commercial launch time will also be delayed accordingly and at this moment we don't actually have a specific launch time at this moment.

[Unidentified Analyst:]

Okay. Thank you. Very helpful.

[Operator:]

And our next question comes from Jack Hu of Deutsche Bank. Please go ahead.

[Jack Hu:]

Thank you for taking my questions. I have three here. The first one is actually on IVIG. We had a few quarters of the under growth of IVIG versus albumin. Can you maybe share with us on the middle and long-term IVIG growth trend? That's my first question. My second question is on the plasma collection from Xinjiang. So there is basically two questions here on the supply side. First, that 142 tonnes, what's the status right now? How much you have fractionated and how much you've sold? And then how soon should we expect all the 142 tonnes will be sold? The second question here is on the plasma collection in Xinjiang province. Can you remind us what was your original expectation, and how does the actual plasma collection track with your original expectation? My last question is on, actually the two ticket system and the tax reform, which is sales tax to a VAT tax reform? Thank you.

[Ming Yin:]

The first question, as David mentioned earlier, yes, we do actually see some deceleration in IVIG growth in the quarter because of the two reasons he mentioned earlier. Number one, we have a relatively high comparison base in first quarter 2015, when we processed previously reserved plasma pastes to produce more IVIG in order to pursue the regular market penetration into Tier 1 cities. And, as a reminder, during the 2015 first quarter our IVIG sales volume growth approximately 57% year over year, while albumin only increased 13%. And the remaining reserved for the paste has pretty much been used up since the middle of 2015. And secondly, the regular IVIG growth seems only have a single digit, 7%, in the reporting quarter but if we look at it from the other perspective, on the combined base, our regular IVIG combined with special IVIG or hyper-immune products rose. By taking these two products, combining the two products' growth together, this quarter the growth for the regular IVIG and hyper-immune IVIG, the growth stood close to 20%. So the rationale for producing more special IVIG is because, David mentioned earlier, the price for tetanus immunoglobulin increased much faster than the regular IVIG, since the Government removed the price cap last June. So we are trying to capture the high profit opportunity to produce more additional hyper-immune products. And over the last year we began immunization preparation to collect more specialty plasma. And this year we do actually allocate a more proportion of our IVIG production capability to produce hyper-immune plasma products. And so that's the reason our regular IVIG seems to slow down compared with last year. For the remainder of the year, especially for the second quarter, we will expect the trend to continue. So for the second quarter we think the IVIG growth will be continuing to decelerate compared with the same period in last year because of the same reason as I mentioned. That's for the midterm. But for the long term, I think it really depends on the pricing, the condition for the regular IVIG and the hyper-immune IVIG pricing. Because certain hyper-immune products, because of the market, the demand is very limited. So in the future, in the long term, if everybody is trying to supply these products, the price might come down. So at that time we might switch back to produce more regular IVIG. But I'm just trying to say on the combined base, the regular IVIG and the hyper-immunoglobulins, the two products, the growth rate will pretty much mimic our plasma collection growth. The second question, Jack, you mentioned for the Xinjiang plasma. I think I mentioned in the first question we sold about 50% of the first batch of plasma, 142 tonnes we purchased last year, in the first quarter 2016. And the last quarter of 2015 we sold about 40%. So we have a remaining 10% made from the purchased plasma for that 140 tonnes that's left to be sold in the second quarter. So, hopefully, that addresses your question. For the Xinjiang plasma, according to the contract -- we have a three-year contact with Xinjiang Deyuan and the first year contract is between August 2015 to August 2016. And we have a contract volume about 120 tonnes plasma Xinjiang Deyuan should collect and ship to us. By end of the first quarter we were pretty satisfied with the collection status. And I can say majority part of first-year contract volume has been collected. And we have received this plasma as well. And, just to remind you, Xinjiang Deyuan have five collection stations in operation. And recently they just opened another station. So we're pretty comfortable the 500 metric tonnes, the contract for the three years, should be well executed, Jack. And that's the second question. Third question, you mentioned the two-receipt system. I think, just trying to give a quick background for those who might not be very familiar with the recent Chinese government new system, the Chinese government recently proposed a national level system in 2016 healthcare reform goals, trying to adopt a two receipt or two invoice system in the pharma supply chain, which are from production to distribution, one invoice and from the distribution to hospital or other end users, such as CDC, another invoice. By doing so, the government seeks to stabilize drug price by enhancing the transparency. Our preliminary take to the policy change is that the policy might have a very limited impact on our plasma products, as the majority of products are sold directly to hospitals and others, primarily to larger distributors. As such, we have already been in compliance with this two-invoice system but we do believe the regulation change represents positive market control over the gray market in the long term. Before the product took place and the polypeptides, we have already begun preparation for anticipated regulatory change by seeking to implement a new sales model to eliminate the multi level distributors, who will closely monitor the regulation implementation progress and adjust our sales approach to minimize any negative impact to our sales model, if there's any. And we're still evaluating the impact caused by this anticipated regulatory change and are not in the position to quantify any potential size of impact. And we don't believe we have any impact for those VAT type changes to any of our operations, Jack.

[Jack Hu:]

Thank you.

[Operator:]

And our next question comes from Yolanda Hu of Morgan Stanley. Please go ahead.

[Yolanda Hu:]

Thanks for taking my call and congratulations on a great quarter. I have three questions so I ask them one by one. First on the albumin sales, so albumin grew very fast in 1Q. Can you tell us how much percentage exactly of the growth was from the US? I also notice that your government release date has shown a very strong trend. Can you give us some updates on the market share year to date? Also if possible, can you tell us what the industry growth for local and imported products respectively in 1Q? This is my first question.

[Ming Yin:]

For albumin, yes, I'm trying to give you a quick update on the industry perspective and, according to the most updated batch approval data, which might be supplemented by certain data pending publication from certain institute in the future, because some of the institutions have not published their data yet, in the first quarter of 2016 the overall albumin market supply in China increased by 21% compared with the same period in 2015. The imported element plays a very dominant role in this albumin market. The imported albumin grew close to 40%; actually it's 39% compared with the first quarter 2015. The average growth rate for imported albumin year-over-year growth in 2015 was about 12%. On the domestic size, the albumin supply remains stable compared with the same period in 2015. And I just want to give you the big picture on CBPOs [ph] albumin, the batch approval data. So we grow close to 60% year over year from the batch approval data and we still rank the first among the domestic albumin suppliers. We have the largest market share, around 20%. And if you are counting the multi-national companies, our market share in albumin is above 7%. So for the Deyuan,, I think the Deyuan contributed over one-quarter of the overall - our production in the first quarter, so represents one-quarter of our supply.

[Yolanda Hu:]

Okay. Secondly, for IVIG the batch approval data seems quite strong, despite weak reported sales. Can you also share with us the market share for IVIG? And does it mean maybe potentially better IVIG sales in the rest of year?

[Ming Yin:]

I'm sorry, I didn't hear what you said. Can you repeat?

[Yolanda Hu:]

For IVIG, the law release data seems quite strong, but your reported data were a bit weak. So can you share with us the market share for IVIG? And did the strong law release data potentially indicate better IVIG sales in the rest of the year?

[Ming Yin:]

Actually I don't know which data you're looking at, but from the data we examined actually for the first quarter the country's IVIG supply increased only about 6% in the first quarter, which is decreased about 3% compared with the last quarter in 2015. And this growth is also much slower than the 2015 average growth, 20%. And the CBPO's market share in IVIG in the first quarter 2016, even with decreased supply and the production, but we still remain the number one in the market share. We have about 19% of market share. So I think we don't know in the coming quarters whether overall the albumin supply will come up but we do observe a trend. Certain manufacturers start to allocate regular IVIG production, convert it to certain hyper-immunoglobulin products like tetanus. So that's probably the reason the regular IVIG sales slow down. And this trend might continue in the rest of the year. But I think for us, even we have decreased our IVIG production, but we actually did a lot of strategic planning work trying to ensure the important hospital clients and certain Tier 1 cities, the biggest hospitals, supply would not have been impacted at all. Just give you a quick update. For the first quarter the Tier 1 cities channel, IVIG, grew about 50% compared with 2015, even we have only about 7% IVIG growth overall. And for the direct sales channel, we do ship to certain smaller hospitals, non-performing hospitals IVIG supply to those important AAA hospitals and about 30% in the first quarter 2016, 30% of the direct sales customer are AAA hospitals, and those hospitals contribute about 70% of our total direct sales. So we're actually in the good control to ensure our market share will not be eroded, even with our supply of IVIG at the slower growth rate.

[Yolanda Hu:]

Okay. So last question. It would be great if you can tell us the latest status of the two stations in Harbin [ph] Thank you.

[Ming Yin:]

Yes, so the - at the beginning of the year, we finished the construction for one station in Xinglong County. So the construction for the station and all the nurses' preparation, including staff movements and training, has been completed by our end. It has been already inspected by the street level government at the beginning of the year as well. However, the final approval process has been delayed due to certain key personnel change at the provincial regulator. So currently we're still communicating with provincial government and awaiting their final approval, our estimate to obtain the operation permit probably in the later part of 2016. For another station, located in Daming County, the construction is behind our previous expectation because the local government has proposed a number of additional requests, which delayed anticipated timeframe for construction. As a result, we only recently obtained the land-use right from the county government, which took us about two years to receive the land-use right. So after securing the land, we will commence construction in due course. We expect to complete construction for this station before end of this year and trying to obtain the operation permit in the first half of 2017.

[Yolanda Hu:]

Okay. Thank you. Operator And our next question comes from Milo Liu of China Merchants Securities. Please go ahead.

[Milo Liu:]

Yes, congratulations on yet another great result. I have three questions here. The first one, we saw the selling cost actually came down quite a bit in first quarter. So would you mind sharing a little bit of color on this? And the second question is regarding the Warburg Pincus exit plan. If there is anything that -- if there is any news that maybe we should know on their future exit strategy. And third question is, I think it's a follow-up question on the law release on volume trend for the human albumin products. So I just wanted to know that do you think the trend is going to stay this high for the future? The reason why I'm asking this is because fiscal year '15, 2015, the whole year figures were just the single digits, if I remember correctly. Thank you. Just those three questions. Thanks.

[Ming Yin:]

Hi, Milo. Yes, the first question regarding the selling cost, the selling expense for first quarter, yes, we do actually have about 40% drop. It was as a result of changing the hyper-immune products' production arrangement and changing our sales model. In the early last year we aimed to expand our rabies immunoglobulin products sales in CDC. So we collaborated with certain qualified distributors by granting them long credit terms and giving them certain promotion expenses. However, this product market was oversupplied at the end of last year. So we decreased the production of this product and instead increased production for tetanus immunoglobulin this year. So sales of rabies immunoglobulin as a percentage of total revenue dropped significantly in this quarter compared with the same period last year. Therefore, the related marketing and promotion expenses also decreased in the first quarter of 2016. But, if we look forward for the next few quarters, we believe the selling expense as a percentage of the sales might go up, besides the routine marketing and promotion activities for existing products like prothrombin complex to continue to carry on the routine base. The recent vaccine incident, which occurred recently, might cause certain modification in our sales model and drug shipment. According to certain guidelines issued in certain provinces, CDC might not be permitted to purchase drugs, such as rabies immunoglobulin, through distributors. And, instead, we may have to deal directly with CDC. Therefore, the relevant expenses might increase. On the other hand, the Government has strengthened control and supervision on the coaching logistics, so our products coaching shipment expenses might increase accordingly in the future. So the second question regarding the Warburg Pincus exit plan, we're actually not in the position to comment. Warburg has been a substantial shareholder for this stock for many years. And, yes, recently they did sell close to 4.1 million shares, because we're not directly involved in their decision-making process to sell the stock, so we don't actually have anything further to share with you on their timeline or whether they will sell in the future. But we do believe the recent sale of Warburg shares enhances our stock liquidity and it brings more diverse buying, and search investor to our shareholder base. And the third question regarding the albumin importation trend, I think we don't know the trend whether it will continue in the coming year because in the first quarter we do observe certain multinational companies had over 100% increase for the following quarter. Hopefully, this trend was not going to continue but we don't actually have any information to judge whether this trend will continue or not. But we just want to reserve the possibility in the midterm. Maybe the supply, if they continue this high level of importation level, it might have actually have certain negative impact to the product pricing. Milo, back to you.

[Milo Liu:]

Okay, great. Thank you so much. Thanks.

[David Gao:]

Thank you for your participation and ongoing support for China Biologic. We look forward to providing you with updates on our business in the weeks and the months ahead. Have a good day.