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China Biologic Products Inc (CBPO) Q2 2019 Earnings Call Transcript

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China Biologic Products Inc (NASDAQ: CBPO)
Q2 2019 Earnings Call
Aug 6, 2019, 7:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the CBPO Second Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Sam Martin from the Foote Group. Please, go ahead.

Samuel Martin -- Account Executive

Thank you, operator. Hello, everyone, and thank you for joining us on today's call. China Biologic announced its second quarter 2019 financial results on August 5, 2019, after the market closed. An earnings release is available on the company's website. Today, you will hear from China Biologic's Chairman and CEO, Mr. Joseph Chow, who will start off the call with a review of the company's basic operating results and report recent developments for the company.

He will be followed by Mr. Ming Yang, Senior Vice President of China Biologic, who will give a detailed account of the company's financial results. China Biologic's CFO, Mr. Ming Yang will be available during the Q&A session following the prepared remarks. Before we proceed, I would like to remind you of our safe harbor statement. Our conference call may include forward-looking statements made under the Safe Harbor Provisions Act of the Private Securities Litigation Reform Act of 1995.

Although we believe 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 in our filings with the Securities and Exchange Commission, which we encourage you to review before making 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 are reminded that such non-GAAP measures should not be reviewed 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 biopharmaceutical industry.

Now I'm pleased to present Mr. Joseph Chow, Chairman and CEO of China Biologic.

Joseph Chow -- Chairman and Chief Executive Officer

Thank you, Sam. Hello, everyone, and welcome to China Biologic's second quarter 2019 conference call. We are pleased to report China Biologic again achieved solid financial results in the second quarter driven primarily by higher-than-usual sales volumes for albumin and a high growth in sales volume for certain hyper-immunoglobulin products. However, as mentioned last quarter, the challenges we face persist. This quarter, sales of IVIG remained sluggish, and there was a slowdown in albumin sales growth.

With this in mind, we continue to closely monitor the impact of changes in China's healthcare policy and market environment, and we maintain our outlook for the year. Guidance for the full year 2019 remains at bottom line growth of 4% to 6% in RMB terms on a year-over-year basis. While sales volume of albumin were again higher than expected this quarter, we witnessed a deceleration of albumin sales growth compared to the first quarter. This is what we had anticipated given that can import -- the import constraints of albumin imposed in the earlier months of 2019 had -- which had caused a temporary shortage of albumin supply in the market have now been relaxed, and an analysis of lot release data shows that the volume of imported albumin in the market recovered in the second quarter.

We anticipate a further decline in our albumin sales growth as a result of our relatively fixed levels of annual production for albumin and a large volume of albumin, which was oversold in the first half of the year. Sales of IVIG were again below expectations this quarter. This reflects the continued impact of policy controls over high-unit cost prescription drugs and the fact that IVIG is still listed in some regions as an adjuvant drug, making it subject to even more stringent controls of prescriptions. As a result of these challenges, our inventory position in IVIG is still significantly above normal levels.

While sales of coagulation products and some hyper-immunoglobulin products grew faster than the second quarter -- in the second quarter, we still feel -- we still fell short of our growth expectations. We anticipate significant headwind in our second -- in our placenta polypeptide product in the second half of 2019. Although, our PP product was not included in the first set of national key drug list for monitoring and prescription control, which was previously expected, to include the adjuvant drug list issued by the Chinese National Health Commission in early July, there is a high probability that it will be included in the future. We anticipate this will have a further negative impact on the product sales. We have recently commenced a comprehensive internal strategic review that intends to identify our operational deficiencies and generate new value-creating opportunities within our business.

Along with this strategic review process, we have already implemented reorganization on our sales and the marketing operation in the second quarter. We believe our newly established sales and marketing organization, with a stable and experienced team in place, will continue to execute our prior set medical marketing strategies focusing on medical practitioners' educations. In addition, due to the increase of our accounts receivable turnover days relative to industry peers in the last 2 quarters, we have decided to begin a comprehensive reevaluation of our existing credit sales policies regarding pricing and credit terms and to increase collection efforts to ensure our credit exposure is within the limits of our risk tolerance level.

These measures could potentially lead to a certain temporary negative impact with regards to our sales in the near future. In the second half of the year, we may further reorganize our operating functions, such as R&D, production and plasma resource management. Although, the strategic review process is still ongoing, we believe the final outcome of this exercise will provide us a clearer set of strategic recommendations and future roadmap for our business that charts its course and enable improved and sustainable performance for the next few years. We are pleased to share some of our operational highlights for the second quarter. We commenced human clinical trials on a new product, Human von Willebrand Factor, or VWF, after we obtained approval from the China National Medical Products Administration in June. VWF is intended to be used for the treatment of bleeding episodes, including surgical bleeding in patients with von Willebrand disease.

We expect clinical trials will take approximately 3 years to be completed. We're also pleased to report that in late July, we received the operating permit for our new Wenchang plasma collection station in Hainan Province and immediately commenced commercial operations. Although -- another significant development this quarter was the acquisition of the remaining 20% interest in TianXinFu, which was completed in early August. The acquisition means that TianXinFu is now an indirectly wholly owned subsidiary of China Biologic, allowing us to fully capture the growth potential of this leading player in the regenerative medical biomaterial industry. The move means we can now better utilize synergies between TianXinFu's business and China Biologic's high-end coagulation factor business and receive the full benefits and earning accretion from the existing and future TianXinFu products.

Additionally, you may have seen in the release an update of our share repurchase -- may have entered a share repurchase program the Board of Directors authorized in May, under which the company may repurchase up to USD 150 million worth of shares over a 12-month period. As of June 30, 2019, the company has repurchased 121,852 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 5. After the departure of our former CEO in May, 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 roadmap for our 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. Ming Yang, our Senior Vice President, to review financial results for the second quarter of 2019. Ming, please go ahead.

Ming Yang -- Chief Financial Officer

Thank you, Joseph, and hello, everyone. Now I'll walk you through the key P&L items for the second quarter 2019. Total sales in the second quarter 2019 increased by 20.4% in RMB terms or 12.7% in U.S. dollar term to $135.7 million from $120.4 million in the same quarter of 2018. Total sales for biopharmaceutical products increased by 21.6% in RMB terms or 14% in U.S. dollar terms to $122.3 million from $107.3 million in the same quarter 2018. This was a result of increased sales of human albumin products, certain hyper-immune products and the coagulation factor products, and was partly offset by decreased sales of placenta polypeptide products.

For plasma products, total sales in the 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 in the same quarter of 2018. Total sales for biomaterial products in the second quarter of 2019 increased by 9.9% in RMB terms or 3.1% in U.S. dollar term to $13.4 million from $13 million in the same quarter of 2018 as a result of a higher sales concentration of higher-unit priced artificial dura meter 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 28.3% in U.S. dollar terms from $38.1 million in second quarter 2018 to $48.9 million in second quarter 2019.

Revenue from IVIG products increased by 4% in RMB terms or decreased by 2.5% in U.S. dollar terms from $28.1 million in second quarter 2018 to $27.4 million in the second quarter of 2019. As a percentage of total sales, sales from human albumin and IVIG products were 36% and 20.2%, respectively, in the second quarter of 2019. Sales volume of human albumin products increased by 38.2% for the second quarter 2019 primarily due to increased sales volume in distributor and pharmacy channels, supplemented by increased direct sales to hospital and inoculation centers.

The sales volume of IVIG products increased by 5.3% for second quarter 2019 as a result of an increased sales through direct sales channel. The average price for human albumin and IVIG products decreased by 0.9% and 1.2%, respectively, in RMB terms in second quarter 2019 compared to the same quarter 2018 because of 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, in 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 in the second quarter 2019 compared to same quarter 2018, reaching 14% of total sales as compared to 12.8% of total sales in the 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 plasma products, including Human Coagulation Factor VIII, human prothrombin complex 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 sales in the second quarter of 2019. The growth mainly came from increased sales through the distributor channel. Revenue from placenta polypeptide 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 second quarter 2018, mainly in line with the decreased sales volume as a result of the inclusion of placenta polypeptide products in regional adjuvant drug list, which put a downward pressure on their prescription volume. Cost of sales increased by 19.1% to $44.8 million in 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 an 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 second quarter 2019 decreased by $4.2 million or 9% to $42.7 million from $46.9 million in the same quarter of 2018. This decrease mainly consist of a decrease of $5.9 million in general and administrative expense, partially offset by increase of $1.2 million in selling expense and a $0.5 million in research and development expense. As a percentage of total sales, total operating expense decreased to 31.5% in second quarter of 2019 from 39% in the same quarter of 2018. Selling expense in the second quarter 2019 increased by $1.2 million or 4.9% to $25.6 million from $24.4 million for second quarter 2019.

The increase is primarily due to increased selling expense for plasma products and biomaterial products, which is partially -- partly offset by decrease in marketing and promotion expense related to placenta polypeptide products. As a percentage of total sales, selling expense 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 28.6% to $14.7 million from $20.6 million in the 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 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 $0.5 million or 26.3% to $2.4 million from $1.9 million in the same quarter 2018.

As a percentage of total sales, research and development expense increased to 1.8% from 1.6% in the same quarter 2018. Income from operations in the second quarter 2019 increased by 43.4% in RMB terms or 34.3% in U.S. dollar terms to $48.2 million from $35.9 million in the same quarter 2018. Operating margin increased to 35.5% in the second quarter 2019 from 29.8% in the second quarter 2018. Income tax expense in the second quarter 2019 increased by 22.4% to $8.2 million from $6.7 million in the same period of 2018. The effective income tax rate was 14.4% and 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 U.S. 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 $1.06 in the second quarter 2019 compared to $0.83 in the same period of 2018. Non-GAAP adjusted income from operations increased by 23.1% in RMB terms or 15.2% in U.S. dollar terms to $56.7 million in second quarter 2019 from $49.2 million in the same period of 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 the same period of 2018. Non-GAAP net margin increased to 35.9% in the second quarter 2019 from 33.4% in the same period of 2018. Non-GAAP adjusted net income per diluted share increased to $1.24 in the second quarter 2019 from $1.17 in the same period of 2018.

Non-GAAP adjusted income from operations for second quarter 2019 excludes $6.5 million in noncash employee share-based compensation expense and $2 million in amortization expense of intangible assets and land use rights related to the acquisition of TianXinFu. Non-GAAP adjusted net income and diluted earnings per share for the second quarter 2019 exclude $5.6 million in noncash employee share-based compensation expense and $1.4 million in amortization expense of intangible assets and land use rights related to the acquisition of TianXinFu. As of the June 30, 2019, we had $202.5 million in cash on hand and demand deposits, $523.9 million in time deposits and $191.1 million in short-term investments. Net cash provided by operating activities for first half 2019 was $94.2 million as compared to $45.5 million for 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 a slowdown of increase in the accounts receivable and inventories compared to the first half 2018. Accounts receivable increased by $15.2 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 national implementation of healthcare reform measures and intensified competition in distributor channel. Inventory increased by $4.3 million in first half 2019, which was milder than the increase of $21.4 million in same period of 2018.

This reflects a lower level of albumin inventory attributable to higher-than-expected albumin sales, which was partially offset by higher than -- higher IVIG inventory due to sluggish IVIG sales. Net cash used in investing activities for first half 2019 was $117.5 million as compared to $168.9 million for same period 2018. During the first half 2019, we paid $15.1 million for acquisition of property, plant and equipment, intangible assets and land use rights. And also we also purchased time deposit and short-term investment in the amount of $1,265 million. This was partly offset by $1,162.7 million from maturity of time deposit and short-term investments. Net cash used in investing activities in the first half 2018 mainly consist of $529.6 million payment for purchase of time deposits and short-term investment and $19.1 million for acquisition of property, plant and equipment and intangible assets and land use rights.

This was partly offset by $97.7 million cash received upon acquisition of TianXinFu and a maturity of $282.1 million time deposit and short-term investment. Net cash used in financing activities for the first half 2019 was $114.9 million and compared to the net cash provided by financing activities of $0.8 million for the same period 2018. In the first half of 2019, we remitted $110 million to an investment bank to execute the previously approved share repurchase program on our behalf. During this period, 1,196,222 shares were repurchased at a total amount of $111 million. Net cash provided by financing activities in the first half 2018 represented proceeds of $0.8 million from our stock options excised.

That concludes our prepared remarks. Operator, we are now ready to take some questions.

Questions and Answers:

Operator

[Operator Instructions] And today's first question comes from Yolanda Hu of Morgan Stanley. Please go ahead

Yolanda Hu -- Morgan Stanley -- Analyst

Hi, Thanks for taking my questions. My first question is as the Chief Business Officer have left the company, will there be any change on the sales and marketing strategy of the plasma business, or any change on how you collaborate with distributors to claim of the IVIG inventory? Second question, so you didn't raise guidance out of strong first half results. And the [indecipherable] will be very weak. Are you really still bullish on the outlook? Last question is for Mr. Chow. You were appointed as the new CEO and no longer hold any interest in Centurium Capital, which just completed major fund raising. So why did you switch essentially to corporate? How long do you plan to stay with the company? Will you be 100% dedicated to the business?

Ming Yang -- Chief Financial Officer

I will turn the -- answer your first couple of questions, and I will leave the -- our CEO, Mr. Chow, to address the third question. So the first question regarding the CBO's resignation, I think you already saw our disclosure that Mr. He's resignation is due to his personal reason. And as our CEO mentioned earlier, our recent initiative to reorganize our sales and marketing strategy will not be impacted by any single management's member's departure. Actually, the strategy to reorganize our sales and marketing was in place before Mr. He was appointed to this position.

And also he had been only working for the company for a very, very shorter duration. Therefore, his departure had a negligible operational impact to our sales and marketing activities. And we appoint our internal sales and marketing head who has been working for the company for more than 20 years in the interim to replace Mr. He. And we're also in the process to expand our sales and marketing team, especially medical marketing payments. In the future, we might recruit more than 20 industry veterans, including some senior level people to ensure the full execution of our contemplated strategies. And just want to give you some highlights on our -- the sales and marketing, the initiative that will not be impacted by the CBO's departure. And as our -- the CEO, Mr. Chow just stated, we started the initiative to reorganize our sales and marketing function. And specifically, we have regrouped the sales geographic divisions.

We are integrating the sales function from subsidiary level to headquarter. We have redefined the work scope and redeveloped the strategic focus among each of those sales marketing function areas, such as building more dedicated product promotion team with a focus on IVIG and high-end coagulation factor products. And we're in the process of recruiting more experienced sales force with medical and the clinical backgrounds. In addition, we also plan to implement a few -- a new performance evaluation system to better incentivize our sales and marketing team based on a broader performance metrics system. And I think that's my answer to your first question. Second question regarding the market, all of -- I think you already see our results for the IVIG for the second quarter still behind the expectation.

And from volume perspective, the -- we only grew 5% year-over-year in the second quarter. And for the remaining of the year, as our Chairman and the CEO stated earlier, the overall, the headwind, the pressure persist. And we are in the process to reorganize our sales and marketing team. And hopefully, we can make some initiative to change the IVIG and, certainly, the high-end coagulation products, the weak sales performance. But I think the overall visibility for the short term, we can turn around the IVIG and certain coagulation product, especially fibrinogen. The variance is not very high. But we believe our effort to reorganize the sales and marketing function in the long term will drive up the demand for this product. But in the short term, we still think the visibility of the market environment, visibility is low. And the sales, the performance for IG and certain high-end coagulation products in the second half 2019 to achieve our -- the beginning of the 2019's budget target is still a challenge at this moment. So hopefully, that answer your question, Yolanda.

Yolanda Hu -- Morgan Stanley -- Analyst

Yes thank you.

Operator

[Operator Instructions] I'm not showing any further questions at this time. It looks like we do have a few more questions in the queue, sir.

Joseph Chow -- Chairman and Chief Executive Officer

No, no. Hold on, hold on. I think Yolanda from Morgan Stanley has one question particularly directed at me asking why I left Centurium just after its successful close of its fund raising. Okay, let me put it this way. Okay. I -- the Centurium partner and myself, we started this company about 3 years ago and made tremendous progressive strike in setting up the fund. And I took a lot of pride in my asset in making 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, Centurium is a Porsche and CBPO is a Ferrari. It needs minor repair and major remodeling, but it has great potential for value creation. 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, CBPO is one of the major "accomplice" of Centurium as well. And I have resigned from all the positions from Centurium, so that we are in solid ground to help the company and take it to the next level. I hope that addressed your question. Thank you, Yolanda.

Operator

Our next question comes from Johnny Wong of Jefferies.

Johnny Wong -- Jefferies -- Analyst

Hi. Thank you for taking my question. And congratulations on better-than-expected sales. 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 rein in and how much -- what the balance is between sales growth and also the credit base.

Joseph Chow -- Chairman and Chief Executive Officer

Okay. I'll take this question. This is Joseph Chow again. And as we indicated in our press release, we are currently in the process of reevaluating our credit terms to figure out a proper balance between growth and accessible credit exposure given the general macro environment. And the review is still in progress. And we noticed a noticeable increase in our account receivable days relative to our peers. And given the market conditions, I think it is time for us to take a second look where we are. And 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 great hospitals. But we want to maintain our sales policy in that we have a proper control of our potential losses.

And that partially explains why we're being cautious in terms of its effects whether operating our profit -- earnings guidance or not because we realized if we do that, there might be temporary impact on the sales of the next quarter. And -- but we believe this is the right thing to do. We have some general internal metrics, but it has not been finalized. And again, as I said, as we implement these corrective actions or remedies, I'm not saying we did something wrong, but these remedies, we'll see how it progress. 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.

Johnny Wong -- Jefferies -- Analyst

Yes, it does. And just a follow-up question. When would we expect to -- this new credit policy to be implemented?

Joseph Chow -- Chairman and Chief Executive Officer

We have put into certain measures into the operation systems, and we hope to see tangible results in the next 2 to 3 month. If the results come back as we expected, we might change our earning outlook.

Johnny Wong -- Jefferies -- Analyst

Thank you.

Operator

Our next question comes from Jonathan [Phonetic] of UBS. Please go ahead.

Unidentified Participant

Thanks Joseph. Thanks management. I have several questions in terms of the operational metrics. First, could you please disclose the current -- total plasma collection volume for the full year '19? And second is on the albumin demand. So how do you see the current China total demand for the albumin product? Since you mentioned that in the first half you have already exceeded the majority of the supply, so how, in general, you try to balance the half-year operation because this is quite difficult for the investors to understand from an operational perspective? And the second question is in terms of the IVIG application. So since early this year, China launched the open drug list. Could you please disclose the terminal distribution of the specific departments of IVIG usage in terms of the, like, neurology or some acute care or some other departments? So how do you try to streamline your internal sales and marketing team to positioning for the IVIG distribution?

Ming Yang -- Chief Financial Officer

Yes. I'm trying to answer your question, and if I Joe have additional comments, he can jump in later. So I think as our companies, the prior practice, we don't do the full-year collection tonnage. The -- so hopefully, you understand. So we have to be consistent with our prior practice. And the second question regarding the albumin, I think the overall -- the albumin situation, hopefully, you understand, this year, the production arrangement, it's actually because we have the lower base in the 2018, where our Shandong facility was launched in -- after Chinese New Year. So majority of the products come online is in the second half.

And this year, specifically, we actually took some advantage with import volumes, the shortage in the 2019 in the first quarter. So the albumin, I think the overall, we had a greater than -- or the better-than-expected first 2 quarters in 2019. I don't think that were directly can indicate as the future albumin demand in China will be -- this demand is sustainable because, I think, in China, I think, the situation is we don't actually have a full -- the external data to support the usage between pharmacies, between the -- and also the hospitals. So that actually, we're very difficult to give you -- provide you a clear-cut answer for the future albumin demand growth. So hopefully, you understand that. For the IVIG, I think the -- I understand your question. It relates to specifically the IVIG, the consumption among the different departments within the hospitals.

Again, I think we don't actually have that data to provide, to share. But I can give you a general sense how our view, the IVIG usage in the -- in our customers because we have about 40% of our IVIG direct to sales for hospitals. In the past, we do actually have a capability to assess the hospital's usage data. But I think the new regulation prevent us to go into the hospital to take a look how the hospital to use IVIG across the different departments. But our historical experience is most IVIG used in China, especially in our target hospitals, are primarily in the acute disease, especially the treating areas, such as ICU or the -- in the -- compared with the -- in the Western countries, most of IVIG was in treating the chronic disease, like those neurological related, like CIDP, PID disease. But in China, I think 60% -- in our prior experiences, 60% of usage was going to the ICU and another 40% across the different departments. And pediatric is one of the major, the IVIG consumption, the department within the hospitals. So hopefully, that answer your question.

Joseph Chow -- Chairman and Chief Executive Officer

I'll just add one more point, I think, to clarify it. From an operation perspective, the industry, on average, the time it takes for plasma collected to become product and go to market, it took roughly -- it take roughly 9 month. So whatever is being sold in the market was typically plasma clocked and produced into different products way back. And then you go through the batch-based approval process. And so that means you need to have a long cycle in planning your production schedule and all that stuff. And due to the unexpected slowdown or shortage of supply of albumin in the marketplace as a result of some other actual ordinary circumstances by our competitors, especially the international competitors, so we found a shortage in the marketplace and we happily took it. And that create certain issue in the sense that even if we ramp up production, it won't hit the market before it runs its due course. In the meantime, as our competitors resume the supply of their products and then there could be a rebalancing. We're happy to keep the market share we grabbed from them, 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 think I just want to hammer home the point.

Unidentified Participant

Thanks.

Operator

[Operator Instructions] And today's next question comes from Ziyi Chen of Goldman Sachs. Please go ahead.

Ziyi Chen -- Goldman Sachs -- Analyst

Thanks for taking my question. Probably, I'll ask one more macro question about the industry and for the CBPO's outlook and over next few years because what could be the key bottleneck for the company's grow bigger. Well, it will be -- it could be plasma collection capability, some of the regulations and plasma -- set up new plasma centers or the promotion, the patient education, physician education for IVIG and some of the newer products or the technology that we need to have to develop more different plasma products or the sales and marketing strategy because I think the whole market now, in terms of the end demand at hospitals, is probably under some kind of pressure. And also most of the companies that -- 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 grow to CBPO bigger in the market and how to become more competitive not only in China, but also in a bigger scope plasma and also non-plasma products. Thank you.

Joseph Chow -- Chairman and Chief Executive Officer

Okay. I'll try to answer your question in a way we can. And as you mentioned, other than the usual suspects in terms of driving the company into the next level, like plasma collection, all that stuff, for us, there are a couple of areas that, I think, is going to be critical in helping us reaching the next stage of our development. And that's why we have started this strategic planning process. And at this stage, some of the things we're focusing on, one is to 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 supply and demand gradually move into an equilibrium or even slightly oversupply in certain product segment, we need to be prepared to take the lead in promoting and pushing our market. That's one thing. Relative to the other industry, the plasma industry is well protected, and it used to be easy to sell the products. And I think, relative to the prescription drugs and other things, I think the overall outlook remain the same in the foreseeable future, but the competition will intensify. So we need to be prepared. The changes in national healthcare policy presents unique challenges to this particular business because these policy changes are not targeted at this particular industry. And so for us, this is a challenge, but this is also an opportunity. And the participant in the markets were not all created equal. Those who can better utilize and taking an advantage of the challenges can win big market share. That's the second point.

The third point is product mix. In certain product line, the demand and supply is reaching equilibrium. But there are other markets -- there are other product lines that are still not there yet. The -- in the current state of the affair, the market needs education. If you look at China's market versus its international peers, there are huge potentials out there. You just need to make sure people understand. Be aware of the benefits of these products. And given the large population size and given the penetration and regional comparison between China and its overseas market, there's major growth out there. So in terms of priority, we're doing the sales and marketing reorder and restructuring. In addition, we're refocusing on the new product development strategy as we always do focus on increasing our collection of plasma.

In this business, right now, it's still more resources dependent by new technologies, and new product will come into market may substitute 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 planning. That's what we're doing right now. And the process is still ongoing. And we hope, probably in next quarter earning, we might have a clearer picture to share with you guys. Thank you. That's my answer.

Ziyi Chen -- Goldman Sachs -- Analyst

Sure. Great. Thank you so much.

Operator

[Operator Instructions] 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.

Joseph Chow -- Chairman and Chief Executive Officer

Well, thank you so much for participating in our conference call, and we -- we're looking forward to staying engaged with the investment community out there. Thank you. It has been a great honor and pleasure.

Operator

[Operator Closing Remarks]

Duration: 55 minutes

Call participants:

Samuel Martin -- Account Executive

Joseph Chow -- Chairman and Chief Executive Officer

Ming Yang -- Chief Financial Officer

Yolanda Hu -- Morgan Stanley -- Analyst

Johnny Wong -- Jefferies -- Analyst

Unidentified Participant

Ziyi Chen -- Goldman Sachs -- Analyst


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