Guizhou Provincial Health Department issues 'Revised Plan' for blood collection stations

Jul 16 2011

China Biologic Products, Inc. (NASDAQ: CBPO) ("China Biologic," or the "Company"), a leading plasma-based biopharmaceutical company in China, today announced that the Guizhou Provincial Health Department has issued the revised "Plan for Guizhou Provincial Blood Collection Institutional Setting (2011-2014)" (the "Revised Plan"). The Revised Plan reduces the number of counties that are permitted to set up plasma collection stations from the originally proposed 10 counties to 4 counties.

The Revised Plan, in the relevant part, states that "in accordance with the demographic distribution, economic development condition, disease prevalence, and actual situation of plasma supply for the manufacturing of blood-based products, plasma collection stations will be set up in 4 counties, including Kai Yang, Du Shan, Pu Ding, Huang Ping, etc."

Currently, there are 18 plasma collection stations, in 18 separate counties, operating in Guizhou Province. China Biologic's 54% indirectly owned subsidiary, Guizhou Taibang Biological Technologies Co., Ltd., currently has 6 active plasma collection stations in the Guizhou Province. Among the 6 active plasma collection stations, 2 are located in the counties included in the Revised Plan (Pu Ding and Huang Ping) and are currently expected not to be affected directly by the Revised Plan.

Based on the Company's preliminary understanding of the Revised Plan, subject to further clarifications from Guizhou Provincial government regarding the implementation of the Revised Plan, the Company currently anticipates the licenses of its 4 other plasma collection stations in Dan Zhai, Wei Ning, San Sui, and Na Yong counties may not be renewed (until at least 2014) after their respective plasma collection permits expire at the end of July 2011.

The Company's 4 stations in Dan Zhai, Wei Ning, San Sui, and Na Yong counties together accounted for approximately 34.1% of China Biologic's total plasma collection by volume in 2010. In addition, 1 inactive plasma collection station that the Company purchased from the government is unlikely to be licensed as planned, because it is in Zhengyuan County, a location not included in the Revised Plan.

The 2 active plasma stations in the counties included in the Revised Plan that are expected to continue operating are scheduled for relicensing before the end of July. The relicensing will require inspection of the plasma collection stations by provincial and other government officials. While the Company believes it meets or exceeds all inspection requirements at those stations, it is not yet clear what influence on the inspections the Revised Plan may have, if any.

The Company is currently evaluating the effect of the Revised Plan and the anticipated closing of the 4 active plasma collection stations including, among other items, the potential reduction in China Biologic's previously issued financial guidance for the year 2011, potential reduction in its business operations and financial performance in current and future periods, potential assets impairments associated with these plasma collection stations and the 1 inactive station, and other possible effects.

In a bid to mitigate the reductions from the anticipated closing of the 4 plasma collection stations in Guizhou, the Company is exploring alternative solutions and opportunities, but no assurance can be given that it will be successful in doing so. Among all of the Company's efforts, the Company is (1) requesting that the Guizhou Provincial government to reconsider the implementation of the Revised Plan, (2) contemplating new regions to apply for establishing new plasma stations, (3) minimizing the writing off of already collected plasma within the required 90-day quarantine period that potentially may be affected by the Revised Plan, and (4) creating the contingency plan for moving assets and paying severance to employees related to the 4 plasma collection stations affected by the Revised Plan, if the anticipated closures happen.