Sinovac is a China-based biotech company that offers investors a good opportunity to invest in the huge and growing vaccine market, the prospects of which are driven by a large population of 1.3 billion with low vaccination coverage, increasing health consciousness, and the Chinese central government’s commitment to sharply increase spending on the national immunization program. SVA recently announced its financial results for 3Q and nine-months ended September 30, 2007. Total revenue for the 3Q07 increased 141% year-on-year to $10.8 million, while net income surged 2,254% year-on-year to $2.2 million. Both figures were ahead of our expectations and were mainly driven by higher sales of Healive and favorable market response to broad commercial marketing of Anflu. Specifically, volume sales of Anflu at 1.07 million doses in 3Q07 had already exceeded our forecast of 0.9 million doses for the full year 2007 and prompted us to aggressively raise our projections for 2007 and 2008. In addition, overall gross margin at 84.7% in 3Q07 also exceeded our projection, as higher economies of scale in production helped lower production cost per unit. The positive developments in the past few months that Healive and Anflu had been selected by Beijing Centers for Disease Control and Prevention and Beijing Public Health Bureau, respectively, led us to believe that the positive sales momentum of Healive and Anflu will be sustained in 4Q07 and extend well into 2008. Our increased estimates for 2007 and 2008 are discussed in the report.

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