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China Biologic Products Inc (CBPO) Q1 2019 Earnings Call Transcript

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China Biologic Products Inc (NASDAQ: CBPO)
Q1 2019 Earnings Call
May. 13, 2019, 7:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the China Biologic's First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

Now, I'd like to turn the conference over to your host today, Samuel Martin. Please go ahead.

Samuel Martin -- Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us on today's call. China Biologic announced its first quarter 2019 financial results on May 10, 2019 after the market closed. An earnings release is available on the Company's website.

Today, you will hear from China Biologic's Chairman, Mr. Joseph Chow, who will start the call with the review of the Company's basic operating results and recent developments of the Company. He will be followed by Mr. Ming Yin, Senior Vice President of China Biologic, who will then 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 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 those expectations will prove to be correct. Information about the risks associated with investing in China Biologic's is included in our filings with the Securities and Exchange Commission, 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 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 universally defined by all Companies, including those in the biopharmaceutical industry.

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

Joseph Chow -- Chairman and Acting Chief Executive Officer

Thank you. Hello, everyone and welcome to China Biologic's first quarter 2019 conference call. We are pleased to report that China Biologic achieved strong financial results for the first quarter, with operating profit growth exceeding expectations. Despite this welcome news the challenging policy headwinds and heightened competition within the Chinese plasma industry persist and we maintained our overall overlook for the year, with guidance for the full year 2019 remaining at bottom line growth of 4% to 6% in RMB terms on a year-over-year basis. This quarter's strong operating results were largely driven by higher than expected sales of albumin. The higher sales in albumin were primarily because of a temporary shortage of supply in the market due to lower import volumes, combined with our broadened sales coverage in Shandong and Jiangsu provinces and supported by substantially increased plasma fractionation, volume in our new Shandong facility.

The temporary albumin supply shortage may have arise as a result of an incident where a volume of albumin inputs were delayed in the large release process possibly due to the tightened quality standards adopted by the National Medical Products Administration in connection with the Shanghai Xinxing plasma quality investigation. We expect the supply situation will return to normal in the second quarter.

As our human albumin was oversold during the first quarter and our remaining inventory of available albumin as of March 31 was equivalent to just two months of sales. We anticipate lower revenue from albumin sales and the remaining quarters of 2019. Additionally, revenue from albumin may be adversely impacted by the intensified competition and the market and new tendering rules to benchmark to the lowest price nationwide, which put downward pressure on our product pricing.

Sales of IVIG, hybrid immunoglobulin products, as well as certain high unit price coagulation products were below our expectations this quarter. This was due to reduced purchase volume at many regional hospitals as mandated by the government controls on healthcare spending and also impacted by limitations on hospital prescriptions for IVIG following the Shanghai Xinxing quality incident.

Furthermore, in some regions IVIG is still listed as adjuvant drug, making it subject to a stricter control on prescriptions. These factors resulted in our IVIG inventory position continue to be abnormally high, in spite of our increased efforts in sales and marketing and broaden sales channel coverage. In terms of price, due to intensified competition and the average price of our IVIG in the first quarter dropped a further 4%, compared to the same quarter last year. The performance of our placenta polypeptide product was largely in line with expectations. With revenue declining approximately 50% year-over-year. At this point, our PP product has been included on list of adjuvant drug in many regions, and is subject to reregistration with the National Medical Products Administration this year.

For the rest of 2019, we anticipate the performance of our PP product will continue to track down our overall results. Given the more aggressive controls on medical reimbursements for regional adjuvant drug, and the likelihood that PP product will be included in the national list of adjuvant drugs within next few months.

Going forward, our new sales and marketing talent will leverage our expanded sales coverage in various channels to improve prescription volumes at regional hospitals and educate doctors about the benefits of IVIG, PCC and other coagulation product -- coagulation factor products in treating patients across a wide range of clinical indications. We aim to improve the effectiveness of our sales team through the integration of marketing teams across our subsidiaries. We will also work to better allocate resources and optimize sales team relationships with distributors to facilitate the sales of new products. We expect these efforts will help decreased our inventory position both internally and with our distributors.

As reported in previous quarters, we have been actively exploring M&A opportunities to better position in China Biologic for long-term growth. However, the changes to healthcare policies such as the recent introduction of centralized procurement have resulted in drastic price cuts for many drugs, disrupted the competition landscape and brought greater uncertainty in relation to Company valuations. Our evaluation of previously selected targets has negatively impacted by these development and we must therefore take a measure to adjust our process of selection accordingly. We will continue to explore growth opportunities, while factoring in the most recent developments in government policies.

We recently received a Dr. Bing Li resignation as CEO, and also from the Board of Directors, due to personal reasons. We thank Dr. Li for his contribution in helping China Biologic, optimize our sales and marketing team, and improve corporate governance. The Board has formed a search committee comprised of Independent Directors to seek a new CEO, and in the interim has appointed me as the acting CEO. Additionally, we may have seen -- you may have seen in the release that we also announced the completion of the share repurchase program previously authorized by our Board of Directors in 2018, repurchasing 1,074,376 shares at a total of $100 million.

In May 2019, the Board of Directors further authorized a new share repurchase program under which China Biologic may repurchase up to $150 million worth of shares over the next 12 months. This reflects the confidence of the Board in the Company's long term growth prospects as our management team works to improve sales and marketing and to fuel China Biologic's potential to be a world-class biopharmaceutical and biotechnology company.

This concludes my prepared remarks. I will now turn the call over to Mr. Ming Yin, our Senior Vice President to review financial results for the first quarter of 2019. Ming, please go ahead.

Ming Yin -- Senior Vice President

Thank you, Joe and hello everyone. Now I will walk you through the key P&L items for the first quarter 2019. Total sales in the first quarter 2019 increased by 23.3% in RMB terms or 15.4% in US dollar terms to $129.8 million from $112.5 million dollars in the same quarter 2019. Total sales for biopharmaceutical products, including plasma products and placenta polypeptide products increased by 22.2% in RMB terms, or 15.2% in US dollar terms, to $116.5 million from $101.1 million in the same quarter 2018. This was a result of increases in the sales of human albumin products and coagulation factor products, which was partly offset by decreases in the sales of IVIG and placenta polypeptide products.

For plasma products, total sales in the first quarter of 2019 increased by 35.8% in RMB terms, or 28% in US dollar terms, to $108.8 million from $85 million in the same quarter 2018. Total sales for biomaterial products in the first quarter of 2019 increased by 23.8% in RMB terms, or 16.7% in US dollar terms, to $13.3 million from $11.4 million in the same quarter of 2018. This was a result of higher sales concentration in higher unit price artificial dura mater products.

During the first quarter 2019, human albumin and IVIG products remained our two largest sales contributors. Revenue from human albumin increased by 78.2% in RMB terms, or 68% in US dollar terms, from $33.8 million in the first quarter of 2018 to $56.8 million in the first quarter of 2019. Revenue from IVIG product decreased by 3.1% in RMB terms, or 8.8% in US dollar terms, from $31.8 million in the first quarter of 2018 to $29 million in the first quarter of 2019. As a percentage of total sales, sales from human albumin and IVIG products were 43.8% (ph) and 22.4%, respectively, in first quarter 2019.

The sales volume of human albumin products increased by 85.8% for the first quarter of 2019, this was primarily due to increased sales volumes in distributor and pharmacy channels, supplemented by increased direct sales to hospitals and inoculation centers. The sales volume of IVIG products increased by 1.1% for first quarter of 2019 as a result of increased sales through the distributor channel.

The average prices for human albumin and IVIG products decreased by 4.1% and 4.2%, respectively, in RMB terms in the first quarter of 2019 compared to the same quarter of 2018. This was because of a higher sales volume in distributor channel and lower prices to certain distributors reflecting intensified market competition for major plasma products. In US dollar terms, the average price for human albumin and IVIG products decreased by 9.5% and 9.7%, respectively, in the first quarter 2019 compared to the same quarter 2018.

Revenue from other immunoglobulin products increased by 6.6% in RMB terms, or 0.5% in US dollar terms in the first quarter of 2019 compared to the same quarter of 2018, reaching 10.1% of total sales as compared to 11.6% of total sales in the same quarter 2018. The revenue increase was mainly attributable to increased sales volume of human tetanus immunoglobulin products. Revenue from other plasma products, including human coagulation factor VIII, human prothrombin complex concentrate, and human fibrinogen products, increased by 64.2% in RMB terms, or 54.9% in US dollar terms, in the first quarter of 2019 compared to the same quarter of 2018, representing 7.6% of the sales in the first quarter 2019. The growth mainly came from increased sales through the distributor channel.

Revenue from placenta polypeptide products decreased by 52.4% in US dollar terms for the first quarter of 2019 as compared to the same quarter of 2018, accounting for 5.9% of total sales compared to 14.3% of sales in the first quarter of 2018. This was mainly in line with decrease in sales volume as a result of the inclusion of placenta polypeptide products in regional adjuvant drug lists, which put a downward pressure on their prescription volume.

Cost of sales increased by 31.2% to $44.2 million in the first quarter of 2019 from $33.7 million in the same quarter of 2018. As a percentage of total sales, cost of sales increased to 34% -- 34.1% from 30% in the same quarter of 2018. This is largely attributable to decreased sales prices for most of the plasma products, increased plasma collection costs, and increased depreciation expenses due to the launch of new facility in Shandong in February 2018. Gross profit increased by 8.6% to $85.6 million in first quarter 2019 from $78.8 million in the same quarter of 2018. Gross margin was 65.9% and 70% in first quarter 2019 and 2018, respectively.

Total operating expenses in the first quarter 2019 increased by $1.8 million, or 4.5%, to $41.6 million from $39.8 million in the same quarter of 2018. This increase mainly consisted of an increase of $3.2 million in general and administrative expenses, partially offset by a decrease of $2 million in selling expenses. As a percentage of total sales, total operating expenses decreased to 32% in first quarter 2019 from 35.4% in the same quarter 2018.

Selling expenses in first quarter 2019 decreased by $2 million, or 9.7%, to $18.7 million from $20.7 million for first quarter 2018. As a percentage of total sales, selling expenses decreased to 14.4% for the first quarter of 2019 from 18.4% in the same quarter of 2018. The decrease in selling expenses is primarily due to decrease in marketing and promotion expenses related to placenta polypeptide products, which is partly offset by increased selling expenses for plasma products.

General and administrative expenses in first quarter 2019 increased by $3.2 million, or 18.4%, to $20.6 million from $17.4 million in same quarter 2018. As a percentage of total sales, general and administrative expenses increased to 15.9% for the first quarter 2019 from 15.5% for the same quarter 2018. The increase in general and administrative expenses was mainly a combined result of the increased allowance for a doubtful accounts receivable and increased depreciation expenses for Shandong new facility, which was partially offset by decrease in share-based compensation expenses.

Research and development expenses in first quarter 2019 increased by $0.6 million, or 35.3%, to $2.3 million from $1.7 million in the same quarter of 2018. In the first quarter of 2019 and 2018, we received government grants totaling $0.4 million and $0.1 million, respectively, which we recognized as a reduction of research and development expenses. Excluding this impact, our research and development expenses increased by $0.9 million for first quarter 2019 from the same quarter 2018. As a percentage of total sales, our research and development expenses, excluding the impact of these recognized government grants, increased to 2.1% for 2019 from 1.6% compared to the same quarter of 2018.

Income from operations in first quarter 2019 increased by 19.4% in RMB terms, or 12.8% in US dollar terms, to $44 million from $39 million in same quarter 2018. Operating margin decreased to 33.9% in first quarter 2019 from 34.7% in first quarter 2018. Income tax expense in first quarter 2019 increased by $1.2 million, or 17.9%, to $7.9 million from $6.7 million in the same period of 2018. Our effective income tax rate was 15% and 15.1% for the first quarter 2019 and 2018, respectively.

Net income attributable to the Company increased by 26.5% in RMB terms, or 19.3% in US dollar terms, to $37.7 million in the first quarter of 2019 from $31.6 million in the same period of 2018. Net margin increased to 29.1% in the first quarter of 2019 from 28.1% in the same period of 2018. Diluted net earnings per share increased to $0.94 in first quarter 2019 compared to $0.92 in the same period of 2018.

Non-GAAP adjusted income from operations increased by 10.5% in RMB terms, or 4.2% in US dollar terms to $52.2 million in first quarter 2019 from $50.1 million in the same period of 2018. Non-GAAP adjusted net income attributable to the Company increased by 14.3% in RMB terms and 7.7% in US dollar terms, to $44.5 million in the first quarter 2019 from $41.3 million in the same period of 2018. Non-GAAP net margin decreased to 34.3% in the first quarter 2019 from 36.7% in the same period of 2018. Non-GAAP adjusted net income per diluted share decreased to $1.11 in first quarter 2019 from $1.21 in the same period of 2018.

Non-GAAP adjusted income from operations for first quarter 2019 excludes $6.3 million in non-cash employee share-based compensation expenses, and $2.1 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 first quarter 2019 exclude $5.5 million in non-cash employee share-based compensation expenses, and $1.4 million in amortization expense of intangible assets and land use rights related to the acquisition of TianXinFu.

As of March 31, 2019, we had $99 million in cash on hand and demand deposits, $653.8 million in time deposits, and $171.2 million in short-term investments. Net cash provided by operating activities for first quarter 2019 was $32.2 million as compared to $23.3 million for the same period of 2018. The $8.9 million increase in net cash provided by operating activities was combined results of the increase in both net income and non-cash expenses, which mainly including -- include depreciation expenses and allowance for doubtful accounts receivable.

Accounts receivable increased by $11.6 million during the first quarter 2019 as compared to $15.5 million during the same period of 2018. The accounts receivable turnover days for plasma products increased to 100 days during the first quarter of 2019 from 84 days during the same period of 2018, this reflects longer credit terms to hospitals as a result of nationwide implementation of healthcare reform measures and intensified competition in the distributor channel. Inventories increased by $4 million in first quarter 2019, which was milder than the increase of $10.8 million in the same period of 2018, mainly comprised of increased raw material plasma both out sourced and from the own collection stations. Net cash used in investing activities for first quarter of 2018 was $214.7 million as compared to $135.5 million for the same period of 2018.

During the first quarter of 2019, we paid $7.9 million for acquisition of property, plant and equipment, intangible assets and land use rights, and we also purchased time deposits and short-term investments in the amount of $937.4 million. This was partly offset by $730.6 million from maturity of time deposits and short term investments. Net cash used in financing activities for first quarter 2019 was $60.0 million as compared to net cash provided by financing activities of $0.3 million for the same period of 2018.

In the first quarter 2019, we remitted $60.0 million to investment bank to execute the previously approved share repurchase program on behalf. As of March 31, 2019, 415,356 shares had been repurchased at a total amount of $36.8 million with the remaining $23.2 million as down payment to the investment bank for further repurchases.

That concludes our prepared remarks. Operator, we'll now take some questions.

Questions and Answers:

Operator

Yes. Thank you. We will now begin the question-and-answer session. (Operator Instructions) And the first question comes from Yolanda Hu with Morgan Stanley.

Yolanda Hu -- Morgan Stanley -- Analyst

Thanks for taking my questions. My first question is on IVIG. The growth was not very strong in the first quarter, so in terms of sales and marketing, do you have any detailed plan to turn this around, for example though bundled sales with albumin or other plasma products or more aggressive promotions by lowering the prices? Secondly, regarding the resignation of Dr. Bing Li, we understand that Mr. Chow will be the interim CEO. The question is, if I may to Mr. Chow, as a Managing Director at Centurium Capital. How do you plan to allocate your time between your (inaudible) and also CBPO during the transition period? Thank you.

Ming Yin -- Senior Vice President

HI. Yolanda, this is Ming. I'm trying to address your questions. And the first question, I think you're absolutely right. We actually have a very -- I think for the IVIG performance for the first quarter is actually lower than our anticipation and the volume only increased by 1%, compared to the same quarter last year, in which, the sales volume our distributor channel increased, while the direct channel decreased. The direct sales percentage IVIG remained about 40%. I think this reflects continued limitation our prescription IG in most hospital we're serving, especially in the wake of the Xinxing quality incident. And after that incident, there are -- at least in Shanghai, we already see the local government issue a mandate to limit the hospital to use less IG as much as possible, so I think that's one of the factor.

And we think, there are more regional hospitals follow Shanghai's governments mandate trying to limit the IG, I think that's one of the policy headwinds has hit us very badly in the first quarter especially in the direct sales channel. And I think you may already aware in some regions IVIG reasonably list as supplementary drugs, which subject to this trigger of the control on the prescription. I think this -- are the three main reasons in our result in we have the disappointing the IG sales quarter in the first quarter.

I think to answer your question regarding the promotion and the marketing activities, yes, as you remember in the last two quarters was a new sales marketing team on board. We already implemented a serious the marketing activities trying to more focus on the hospital, trying to educate the doctors, we did broaden the channel with Shandong and Guizhou tender completed. We increased the channel coverage. And also we do sign up more distributors, we've engage more distributors.

As of today I think we -- in the first quarter, we did actually engage more I think more than 30 distributors trying to sell the IG for us. But I think those efforts may not be a overnight and can prove -- or like show on the financials have a good return. I think it going to take some times. And to answer your question, why don't we do the bundled. I think particularly, I think we do understand there are pretty decent inventory already in the distributor channel already. So I think it's not possible just easily to do bundled sales. It's not really respectful for the distributor, you trying to just sell them something which they don't need it. I think, we are looking for the long term strategic collaboration with distributors. We're trying to work with them on the long term base that's why, we don't want to step in the inventory too much in the channel and of course, backfire later because you probably already see in the first quarter, we do have a provision for bad debt.

I think the nature for that bad debt is actually related to the IG for one of the distributors which we sold them more than a year ago, but still in the inventory, which close to the shelf life, so -- and I have to either write-off that the accounts receivable or we have to allow the distributor to return the product to us. So I think to the bundled sales, we don't believe that's a rational approach we should take, may be it's a short term. It's good for the financials for the -- looks good on the financials, but it's going to cost back far to our non-time of operation to -- especially with our distributors relationship, that's just our view. So hopefully that answers your questions.

Joseph Chow -- Chairman and Acting Chief Executive Officer

Regarding the third question, Yolanda. My understanding was that your question is how as chairman of the Company and also as a Managing Director of Centurium. How do I avoid potential conflicts of interest? Well, starting from May 8, 2019 I will take what is called a leave of absence from Centurium until such time, when we -- the Company is able to find a permanent CEO before such -- until such time, I will neither participate in any business operation or any decision making process at Centurium during this leave of absence. I hope that they address your question. Thank you.

Yolanda Hu -- Morgan Stanley -- Analyst

Thank you.

Operator

Thank you. (Operator Instructions) And the next question comes from Jack Hu with Deutsche Bank.

Jack Hu -- Deutsche Bank -- Analyst

Thank you for taking my question and congratulations for a fresh start in the quarter, it has been a while. My first question is that why don't you increase your guidance. I do know you mentioned actually several reasons actually already. But when we look at the competitors, they did not mention albumin will go down this year. So my question is actually are you being too cautious here?

My second question is at when do we actually or when do you see the price or the margin we are stabilized for the entire plasma derived therapeutics as an industry. My third question is actually for Joe. Excuse me, I'm going to ask a forward-looking question here. So what are the plans to hire? And what are the key considerations here considering there is a severe lack of talent out there and the industry is a little bit challenging for now? Thank you.

Ming Yin -- Senior Vice President

Jack, I think we missed your third question, can you repeat that.

Jack Hu -- Deutsche Bank -- Analyst

The third question is CEO search, what are the plans to hire and what are the key considerations here?

Ming Yin -- Senior Vice President

Let me try to answer your question one by on. The first question, the guidance I think, yes, we do actually have the solid quarter, first quarter but I think I will address your -- the concern why don't we raise the guidance from the couple of perspective. Number one, I'll talk from the main products, the sales perspective. And there, we are talking from the operating expense perspective.

I think the first quarter's performance you already aware the main driver is superior growth from albumin and this albumin performance is actually definitely better than expected. And we didn't expect this happen, so I think as Chairman just mentioned earlier, so this incident pretty much related to the temporary that importation volume decline year-over-year. So I think just wanted to give that data to show that. So the first quarter, according to the batch approval data, overall albumin decreased 10% year-over-year and import volume decreased close to 40%, so on the year-over-year base.

So that pretty much explained why the albumin we have such phenomenal quarter and because we actually improved the production especially the plasma fractionation and the new Shandong facility since we launched a new plant. So last year -- especially last year and we increased the fractionation capacity close to 70%. That's why we do actually happen to have a large albumin the supply in-house to catch up this opportunity. And -- but we don't think this is the album the shorter condition can last very long because according to our informed source and the importation volume might delay -- incident might be addressed in the very soon possibly in second quarter. So I think in other words there are more volume. Albumin will come to the market. So I think that will definitely change the albumin dynamics or the import delay that volume hit to the market.

And secondly our over sold albumin condition in the first quarter will lead to lower revenue from albumin sales in coming quarters. And as our Chairman just mentioned, we pretty much only have two mouths of sales albumin inventory on hand. And also we have very fixed, the plasma the supply, so we only grow about 10% of plasma collection last year. So 80% of the albumin supply, the increase for the first quarter is definitely not going to be sustainable. So secondly the IG, you guys already seen from our lease has been a drag on the performance and we believe this pretty much will be continuing effect for our coming quarters the overall performance because I just mentioned there are more policy -- negative policy mandate trying to limit the prescription of IG.

And we do see especially just want to share with you some data. From the hospital prescription data. I'm not actually, fully agree with the peer company saying they have a very fantastic IG growth because from the CPA data both first quarter this year the IG in the hospitals shows year-over-year the negative of gross. That means most of the IG are peer companies so pretty much was stuck in the channels, which was not actually became a prescription drugs in the hospital has not been consumed yet. And also we see on other side, we see the IG supply as batch approval continue to grow, so especially for us, we have about eight month of IG inventory at the moment.

So I think to digest that abnormal high inventory will become very challenging for us. Especially for the company like us, we traditionally focus on the direct sales channel, which I would say in the three years ago, we do have a huge benefit with this channel, the advantage because we do sell to the hospitals and we don't encounter any -- engage any third-party with distributor we enjoy high margin. But now the dynamics changed, the hospitals were actually negative impact by governments policy headwinds. So the hospital had less procurement from IG, they have a very conservatively to prescribe IG. So for us, we do actually have a problem with IG sales, at least in the short-term. But I just want to give you data, for first quarter from the CPA data, our IG de-growth in -- or our IG, the sales, the deceleration rate is actually in line with our -- the production order sales volume. So many -- most of IG we sold, do actually go to the hospitals.

And also from the operating perspective, operating expense perspective, as we mentioned earlier, sales marketing expense might go faster, now per our estimate because the market competition gets more intensified in the remaining quarters. We need a more activities, investment in the sales and marketing to promote the products, especially for the IGs. So that's why we incur higher sales and marketing expense.

On the G&A expense perspective, you see -- the first time, we provide or we do a provision for bad debt, that has not occurred for a long time and that not may recur in the future. And also recently, our Board trying to strengthen the Management functions including ours February sales marketing, for which we plan to launch strategic planning project with leading consulting firm and leveraging the existing structure, optimizing our management process, improving the operation efficiency. The strategic planning project is a new initiative, its not including our year -- beginning of a year's budget or assumption for the year guidance.

And the last fact I want to give you the highlights is our equity investment generally from Xi'an Huitian this year will be substantially lower than prior our estimate due to their higher IG inventory level and in efficient the sales marketing capabilities, so that's just a very -- that's just my answer to your question to quick sum up, we don't believe we have significant changes to the assumptions behind our previous disclosed full year forecast. So that's my answer to your first question.

And second question, I think overall the question -- I think is a good question but it's going to be a trick question to all of us. I think one, we all see the time, the margin was stabilized. I think that's, in other worse I don't know what I understand correctly, we can see whether one -- you will see the market recover. In our view, the market has not recovered yet, because I think this especially in the first quarter of this year most of the peer company in China had a good performance, pretty much driven by albumin. I think fairly to say, one, we'received IG growth has been outperformed -- the albumin all like IG has become the growth driver. At that time, we will see, it's time to see the market has been recovered or we can see we -- expect to see our stabilized margin. So Jack hopefully that answer your question.

The third one that CEO candidate, yeah the Board actually just give you the -- what we -- we had a -- recently had a board meeting, so basically the board already adopt or formed a search committee comprised by independent directors to search this. I think at the moment, the search committee will be -- work with those leading or engage a reputable headhunter to help them to do the search process. I think that criteria as always the candidate should be energetic innovative and has sufficient understanding to the industry to the underlying industry.

And we think the candidate should share the same vision with the board to develop and execute the business plan focused not only on short term core business model, but also on the long term growth drivers that will transform CBPO into a world-class leading biopharma and biotech company. So that's my answer to your third question Jack.

Jack Hu -- Deutsche Bank -- Analyst

Thank you.

Operator

Thank you. (Operator Instructions) All right. There are no more questions at the present time. I would like to return the call to Joseph Chow for any closing remarks.

Joseph Chow -- Chairman and Acting Chief Executive Officer

Well, thank you for your participation and ongoing support of China Biologics and we appreciate your continued interest, and have a great day, everyone.

Ming Yin -- Senior Vice President

Thank you.

Operator

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Duration: 48 minutes

Call participants:

Samuel Martin -- Investor Relations

Joseph Chow -- Chairman and Acting Chief Executive Officer

Ming Yin -- Senior Vice President

Yolanda Hu -- Morgan Stanley -- Analyst

Jack Hu -- Deutsche Bank -- Analyst

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