UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q

(Mark One)

☒x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September~~June 30, ~~2016~~2017

☐¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 001-34566

CHINA BIOLOGIC PRODUCTS HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

~~Delaware~~Cayman		75-2308816
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

18th Floor, Jialong International Building

19 Chaoyang Park Road
Chaoyang District, Beijing 100125
People’s Republic of China

(Address of principal executive offices, Zip Code)

(+86) 10-6598-3111

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒x NoNo☐¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒x NoNo☐¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☒x	Accelerated filer☐¨
Non-accelerated filer☐¨~~(Do~~ (Do not check if a smaller reporting company)	Smaller reporting company☐¨
	Emerging growth company¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐¨ NoNo☒x

The number of shares outstanding of each of the issuer’s classes of ~~common stock,~~ordinary share, as of ~~November 02, 2016~~August 2, 2017 is as follows:

Class of Securities		Shares Outstanding
~~Common Stock,~~Ordinary Share*, $0.0001 par value		~~27,137,825~~27,238,357

*Explanatory Note

This quarterly report on Form 10-Q is being filed by ChinaBiologic Products Holdings, Inc., an exempted company incorporated under the laws of the Cayman Islands (the “Successor”), as successor issuer to China Biologic Products, Inc., a Delaware corporation (the “Predecessor”), with respect to the Predecessor’s reporting obligation for its fiscal quarter ended June 30, 2017. The Successor succeeded to the interests of the Predecessor following a redomicile merger pursuant to an agreement and plan of merger dated as of April 28, 2017 (the “Merger Agreement”) between the Successor and the Predecessor. On July 21, 2017, pursuant to the Merger Agreement, the Predecessor merged with and into the Successor, with the Successor surviving the merger and each issued and outstanding shares of the Predecessor’s common stock being converted into the right to receive one ordinary share of the Successor.

Quarterly Report on Form 10-Q

Three ~~and Nine~~ Months Ended ~~September~~June 30, ~~2016~~

2017

TABLE OF CONTENTS

~~PART I~~

~~FINANCIAL INFORMATION~~

PART I FINANCIAL INFORMATION

Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1312
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2321
Item 4. Controls and Procedures	2422

~~PART II~~

~~OTHER INFORMATION~~


PART II OTHER INFORMATION

Item 1. Legal Proceedings	24
Item 1A. Risk Factors	2624
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2624
Item 3. Defaults Upon Senior Securities	2624
Item 4. Mine Safety Disclosures	2624
Item 5. Other Information	2624
Item 6. Exhibits	2724

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contents	Page
Unaudited Condensed Consolidated Balance Sheets	1
Unaudited Condensed Consolidated Statements of Comprehensive Income	2
Unaudited Condensed Consolidated Statements of Cash Flows	3
Notes to the Unaudited Condensed Consolidated Financial Statements	5

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

Note June 30, 2017 December 31, 2016
USD USD
ASSETS
Current Assets
Cash and cash equivalents 223,243,489 183,765,533
Accounts receivable, net of allowance for doubtful accounts 2 61,146,341 33,918,796
Inventories 3 183,258,799 156,412,674
Prepayments and other current assets, net of allowance for doubtful accounts 17,644,030 15,320,913
Total Current Assets 485,292,659 389,417,916

Property, plant and equipment, net 4 145,410,658 132,091,923
Land use rights, net 24,180,767 23,389,384
Equity method investment 12,780,120 10,614,755
Loan receivable 5 44,283,000 43,245,000
Other non-current assets 6,256,555 6,198,531
Total Assets 718,203,759 604,957,509

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Short-term bank loans 6 14,465,780 -
Accounts payable 6,340,255 6,158,601
Income tax payable 8,191,264 7,484,366
Other payables and accrued expenses 7 64,096,628 59,798,145
Total Current Liabilities 93,093,927 73,441,112

Deferred income 3,599,654 3,755,648
Other liabilities 6,586,692 6,623,926
Total Liabilities 103,280,273 83,820,686

Stockholders’ Equity
Common stock:
par value $0.0001;
100,000,000 shares authorized;
29,493,061 and 29,427,609 shares issued at June 30, 2017 and December 31, 2016, respectively;
27,238,357 and 27,172,905 shares outstanding at June 30, 2017 and December 31, 2016, respectively 2,949 2,943
Additional paid-in capital 122,167,032 105,459,610
Treasury stock: 2,254,704 shares at June 30, 2017 and December 31, 2016, at cost (56,425,094 ) (56,425,094 )
Retained earnings 499,505,734 438,483,401
Accumulated other comprehensive loss (13,264,788 ) (25,320,271 )
Total equity attributable to China Biologic Products, Inc. 551,985,833 462,200,589

Noncontrolling interest 62,937,653 58,936,234

Total Stockholders’ Equity 614,923,486 521,136,823

Commitments and contingencies 12 - -

Total Liabilities and Stockholders’ Equity 718,203,759 604,957,509

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.
1

Note September 30, 2016 December 31, 2015
USD USD
ASSETS
Current Assets
Cash and cash equivalents 203,203,969 144,937,893
Time deposits - 38,032,593
Accounts receivable, net of allowance for doubtful accounts 2 40,188,813 25,144,969
Inventories 3 146,936,115 126,395,312
Prepayments and other current assets, net of allowance for doubtful accounts 11 37,516,102 24,545,597
Loan receivable-current 6 5,990,000 -
Deposits related to land use rights, current portion 5 1,038,403 10,056,200
Total Current Assets 434,873,402 369,112,564

Property, plant and equipment, net 4 134,424,469 105,364,251
Land use rights, net 24,196,851 23,576,300
Equity method investment 9,615,421 8,718,133
Loan receivable-non current 6 44,925,000 39,834,173
Other non-current assets 2,210,485 4,861,075
Total Assets �� 650,245,628 551,466,496

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable 7,154,609 9,681,835
Other payables and accrued expenses 11 54,753,124 57,462,563
Income tax payable 10,489,807 4,510,986
Total Current Liabilities 72,397,540 71,655,384

Deferred income 4,026,403 4,525,867
Other liabilities 6,859,244 8,323,446
Total Liabilities 83,283,187 84,504,697

Stockholders’ Equity
Common stock:
par value $0.0001;
100,000,000 shares authorized; 1
29,392,529 and 28,835,053 shares issued at September 30, 2016 and December 31, 2015, respectively;
27,137,825 and 26,580,349 shares outstanding at September 30, 2016 and December 31, 2015, respectively 2,939 2,884
Additional paid-in capital 125,123,106 105,079,845
Treasury stock: 2,254,704 shares at September 30, 2016 and December 31, 2015, at cost (56,425,094 ) (56,425,094 )
Retained earnings 419,045,745 333,704,094
Accumulated other comprehensive income (11,801,219 ) (18,605 )
Total equity attributable to China Biologic Products, Inc. 475,945,477 382,343,124

Noncontrolling interest 91,016,964 84,618,675

Total Stockholders’ Equity 566,962,441 466,961,799

Commitments and contingencies 11 - -

Total Liabilities and Stockholders’ Equity 650,245,628 551,466,496

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended For the Six Months Ended
Note June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
USD USD USD USD
Sales 11 89,277,897 91,421,155 180,731,009 177,008,866
Cost of sales 30,110,272 31,482,146 62,325,745 65,525,581
Gross profit 59,167,625 59,939,009 118,405,264 111,483,285

Operating expenses
Selling expenses 3,577,599 3,026,457 7,385,151 4,254,127
General and administrative expenses 14,264,476 12,573,683 29,521,242 23,901,696
Research and development expenses 1,924,671 1,303,815 3,282,034 2,398,538
Income from operations 39,400,879 43,035,054 78,216,837 80,928,924

Other income (expenses)
Equity in income of an equity method investee 972,359 259,850 1,884,102 43,535
Interest expense (286,358 ) (88,528 ) (348,868 ) (177,078 )
Interest income 1,617,054 1,292,069 3,240,893 3,043,209
Total other income, net 2,303,055 1,463,391 4,776,127 2,909,666

Income before income tax expense 41,703,934 44,498,445 82,992,964 83,838,590

Income tax expense 8 6,867,434 7,006,764 13,817,973 13,613,867

Net income 34,836,500 37,491,681 69,174,991 70,224,723

Less: Net income attributable to noncontrolling interest 3,806,016 6,738,646 8,152,658 13,274,433

Net income attributable to China Biologic Products, Inc. 31,030,484 30,753,035 61,022,333 56,950,290

Earnings per share of common stock: 13
Basic 1.10 1.12 2.17 2.08
Diluted 1.09 1.10 2.15 2.05
Weighted average shares used in computation: 13
Basic 27,213,984 26,698,996 27,199,011 26,642,461
Diluted 27,478,935 27,152,560 27,472,301 27,145,470

Net income 34,836,500 37,491,681 69,174,991 70,224,723

Other comprehensive income:
Foreign currency translation adjustment, net of nil income taxes 10,692,318 (13,267,360 ) 13,413,286 (10,697,608 )

Comprehensive income 45,528,818 24,224,321 82,588,277 59,527,115

Less: Comprehensive income attributable to noncontrolling interest 4,859,899 4,468,767 9,510,461 11,447,450

Comprehensive income attributable to China Biologic Products, Inc. 40,668,919 19,755,554 73,077,816 48,079,665

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

2
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME~~CASH FLOWS

For the Six Months Ended
June 30, June 30,
2017 2016
USD USD
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 69,174,991 70,224,723
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 6,043,854 4,590,028
Amortization 683,276 438,916
Loss on sale of property, plant and equipment 119,557 115,075
Allowance for doubtful accounts - accounts receivable, net 23,783 6,604
Allowance for doubtful accounts - other non-current assets - 1,225,200
Write-down of obsolete inventories - 61,497
Deferred tax benefit (166,369 ) (1,584,958 )
Share-based compensation 16,201,189 9,307,099
Equity in income of an equity method investee (1,884,102 ) (43,535 )
Change in operating assets and liabilities:
Accounts receivable (26,068,071 ) (13,856,209 )
Inventories (22,769,252 ) (12,522,807 )
Prepayments and other current assets (1,862,700 ) 2,433,998
Accounts payable 33,359 (3,001,361 )
Income tax payable 519,895 4,339,536
Other payables and accrued expenses (2,910,237 ) (4,465,594 )
Deferred income (242,713 ) (255,394 )
Net cash provided by operating activities 36,896,460 57,012,818

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for property, plant and equipment (15,975,643 ) (25,222,545 )
Payment for intangible assets and land use rights (667,068 ) (1,351,789 )
Refund of deposits related to land use right - 6,461,924
Proceeds from sale of property, plant and equipment 24,674 100,424
Long-term loan lent to a third party - (6,331,518 )
Net cash used in investing activities (16,618,037 ) (26,343,504 )

For the Three Months Ended For the Nine Months Ended
Note September 30,
2016 September 30,
2015 September 30,
2016 September 30,
2015
USD USD USD USD
Sales 10 86,525,885 78,750,577 263,534,751 228,173,360
Cost of sales 27,647,338 27,944,878 93,172,919 79,461,079
Gross profit 58,878,547 50,805,699 170,361,832 148,712,281

Operating expenses
   Selling expenses 3,017,184 2,674,434 7,271,311 7,229,782
   General and administrative expenses 15,095,872 11,510,981 38,997,568 27,485,566
   Research and development expenses 1,042,806 1,595,140 3,441,344 3,984,447
Income from operations 39,722,685 35,025,144 120,651,609 110,012,486

Other income (expenses)
Equity in income (loss) of an equity method investee 1,097,338 (376,260 ) 1,140,873 (1,137,560 )
Interest expense (57,661 ) (101,290 ) (234,739 ) (1,533,971 )
Interest income 1,865,805 1,383,142 4,909,014 4,227,124
Loss from disposal of a subsidiary (75,891 ) - (75,891 ) -
Total other income, net 2,829,591 905,592 5,739,257 1,555,593

Earnings before income tax expense 42,552,276 35,930,736 126,390,866 111,568,079

Income tax expense 7 7,163,708 6,052,353 20,777,575 17,792,164

Net income 35,388,568 29,878,383 105,613,291 93,775,915

Less: Net income attributable to noncontrolling interest 6,997,207 7,001,833 20,271,640 21,012,934

Net income attributable to China Biologic Products, Inc. 28,391,361 22,876,550 85,341,651 72,762,981

Net income per share of common stock: 12
      Basic 1.02 0.86 3.10 2.81
      Diluted 1.01 0.82 3.05 2.68
Weighted average shares used in computation: 12
      Basic 26,957,205 25,992,776 26,748,141 25,280,538
      Diluted 27,297,118 27,056,215 27,193,108 26,488,730

Net income 35,388,568 29,878,383 105,613,291 93,775,915

Other comprehensive income:
Foreign currency translation adjustment, net of nil income taxes (3,543,648 ) (15,704,961 ) (14,241,256 ) (15,095,718 )

Comprehensive income 31,844,920 14,173,422 91,372,035 78,680,197

Less: Comprehensive income attributable to noncontrolling interest 6,365,548 4,015,428 17,812,998 18,302,111

Comprehensive income attributable to China Biologic Products, Inc. 25,479,372 10,157,994 73,559,037 60,378,086

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

3

~~CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES~~
~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~
For the Nine Months Ended
September 30, September 30,
2016 2015
USD USD
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 105,613,291 93,775,915
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 6,946,084 6,103,812
Amortization 678,981 637,301
Loss on sale of property, plant and equipment and land use rights 215,778 363,857
Allowance for doubtful accounts - accounts receivable, net 120,535 35,162
Allowance for doubtful accounts - other receivables and prepayments 45,537 793
Impairment for other non-current assets
1,225,200 -
Write-down of obsolete inventories 90,202 16,650
Deferred tax benefit (1,710,855 ) (55,232 )
Share-based compensation 16,315,667 7,640,894
Equity in (income) loss of an equity method investee (1,140,873 ) 1,137,560
Loss from disposal of a subsidiary 75,891 -
Excess tax benefits from share-based compensation arrangements - (288,681 )
Change in operating assets and liabilities:
Accounts receivable (16,104,694 ) (16,229,405 )
Prepayment and other current assets (497,812 ) 742,586
Inventories (24,493,697 ) (26,058,886 )
Accounts payable (2,295,197 ) 659,077
Other payables and accrued expenses (3,553,823 ) 4,240,643
Deferred income (411,765 ) (284,053 )
Income tax payable 6,198,276 (170,407 )
Net cash provided by operating activities 87,316,726 72,267,586

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for property, plant and equipment (40,955,964 ) (26,310,114 )
Payment for intangible assets and land use rights (1,572,919 ) (4,199,308 )
Refund of deposits related to land use right 10,297,893 -
Proceeds from sale of property, plant and equipment and land use rights 351,524 741,980
Loans lent to a third party (12,332,718 ) (28,450,202 )
Proceeds from disposal of a subsidiary 128,654 -
Receipt of government grants related to property and equipment - 2,452,864
Net cash used in investing activities (44,083,530 ) (55,764,780 )
~~See accompanying notes to Unaudited Condensed Consolidated Financial Statements.~~

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Nine Months Ended
September 30, September 30,
2016 2015
USD USD
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock option exercised 3,214,253 7,220,483
Repayment of bank loans - (97,910,360 )
Maturity of deposit as security for bank loans 37,756,405 63,152,258
Excess tax benefits from share-based compensation arrangements - 288,681
Dividend paid by subsidiaries to noncontrolling interest shareholders (7,921,952 ) -
Payment to noncontrolling interest shareholders in connection with their capital withdrawal
(13,502,700 ) -
Net proceeds from reissuance of treasury stock - 80,583,959
Dividend to the trial court to be held in escrow as to dispute with Jie’an - (3,690,814 )
Net cash provided by financing activities 19,546,006 49,644,207

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH (4,513,126 ) (4,306,828 )

NET INCREASE  IN CASH AND CASH EQUIVALENTS 58,266,076 61,840,185

Cash and cash equivalents at beginning of period 144,937,893 80,820,224

Cash and cash equivalents at end of period 203,203,969 142,660,409

Supplemental cash flow information
Cash paid for income taxes 16,305,759 18,073,863
Cash paid for interest expense - 1,426,883
Noncash investing and financing activities:
Acquisition of property, plant and equipment included in payables 5,512,453 1,990,043
For the Six Months Ended
June 30, June 30,
2017 2016
USD USD
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock option exercised 506,239 2,364,952
Proceeds from short-term bank loans 23,009,280 -
Repayment of short-term bank loan (8,715,000 ) -
Maturity of deposit as security for bank loans - 37,756,405
Dividend paid by subsidiaries to noncontrolling interest shareholders - (7,921,952 )
Net cash provided by financing activities 14,800,519 32,199,405

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 4,399,014 (3,772,623 )

NET INCREASE  IN CASH AND CASH EQUIVALENTS 39,477,956 59,096,096

Cash and cash equivalents at beginning of period 183,765,533 144,937,893

Cash and cash equivalents at end of period 223,243,489 204,033,989

Supplemental cash flow information
Cash paid for income taxes 13,621,188 10,841,209
Noncash investing and financing activities:
Acquisition of property, plant and equipment included in payables 4,202,934 9,312,476

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

4
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~September~~JUNE 30, ~~2016~~2017 AND ~~2015~~2016

NOTE 1 – BASIS OF PRESENTATION, SIGNIFICANT CONCENTRATION AND RISKS

~~(a)~~   ~~Basis of Presentation~~
(a) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The December 31, ~~2015~~2016 consolidated balance sheet was derived from the audited consolidated financial statements of China Biologic Products, Inc. (the “Company”). The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the December 31, ~~2015~~2016 audited consolidated financial statements of the Company included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2015.~~2016.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of ~~September~~June 30, ~~2016,~~2017, the results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016 and cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, have been made. ~~All significant intercompany transactions and balances are eliminated on consolidation.~~

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, ~~and intangibles with definite lives,~~ the allowances for doubtful accounts, the fair value determinations of stock compensation awards, the realizability of deferred tax assets and inventories, the recoverability of intangible assets, land use rights, property, plant and equipment, equity method investment and loan receivable, and accruals for income tax uncertainties and other contingencies.

~~(b)~~ ~~Explanatory Note~~
For the reasons discussed below, the Company has corrected the number of the authorized shares of common stock from 1,000,000,000, as disclosed in the unaudited condensed consolidated balance sheets for the quarterly period ended June 30, 2016, to 100,000,000.Recently Adopted Accounting Pronouncements

~~In connection with the 2016 annual meeting of stockholders (the “Annual Meeting”),~~Effective January 1, 2017, on a retrospective basis, the Company ~~filed~~adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740). This update required that deferred tax assets and liabilities be classified as noncurrent. As a ~~definitive proxy statement on Schedule 14A on April 29, 2016 that included a proposal to amend the Company’s certificate~~result of ~~incorporation to increase the number~~adoption of authorized shares of common stock from 100,000,000 to 1,000,000,000. Such definitive proxy statement indicated that the approval of a majority of the quorum of stockholders present in person or by proxy at the Annual Meeting was necessary to approve the proposal to amend the Company’s certificate of incorporation. However, under Section 242 of the Delaware General Corporation Law, the approval of a majority of outstanding shares is required to amend the Company’s certificate of incorporation. At the Annual Meeting,this guidance, the Company ~~received~~reclassified current deferred income tax assets in the ~~vote~~amount of ~~a majority~~$4,625,996, which had been included in prepayments and other current assets, to other noncurrent assets as of the quorum in favor of the proposal, but not the required majority of outstanding shares. The Company did not receive the approval required under the Delaware General Corporation Law and therefore the number of authorized shares of common stock remains at 100,000,000.
~~The Company considers such revision to be immaterial and the revision had~~December 31, 2016. There was no impact on ~~the unaudited condensed consolidated financial statements other than disclosure of the number of shares authorized on the face of the balance sheets.~~
~~(c)~~   ~~Significant Concentration and Risks~~
The Company’s operations are carried out in the People’s Republic of China (the “PRC”) and are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. Accordingly, the Company’s business, financial condition and results of operations ~~may be influenced by~~or cash flows as a result of the ~~political, economic~~adoption of this guidance.
Effective January 1, 2017, the Company adopted the FASB ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The standard simplified certain aspects of the accounting for share-based payment transactions, including recognition of excess tax benefits and ~~legal environment~~deficiencies, classification of awards and classification in the ~~PRC,~~statement of cash flows. As a result of adoption, the Company elected to adopt the change regarding income taxes on a prospective basis to recognize excess tax benefits and bydeficiencies from stock-based compensation as a discrete item in income tax expense, which were historically recorded as additional paid-in-capital. In addition, the ~~general state~~Company elected to apply the change regarding classification in the statement of cash flows prospectively to record excess tax benefits from stock-based compensation from cash flows from financing activities to cash flows from operating activities.The adoption of this standard in the ~~PRC economy. The~~first quarter of this year had no material impact on the Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other matters.financial statements.
5
(b) Significant Concentration and Risks

The Company maintains cash and deposit balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for its bank accounts located in the United States or may exceed Hong Kong Deposit Protection Board insured limits for its bank accounts located in Hong Kong or may exceed the insured limits for its bank accounts in China established by China Deposit Insurance Fund Management Institution.

Total cash at banks and deposits as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 amounted to ~~$202,109,273~~$222,475,614 and ~~$182,291,723,~~$183,078,440, respectively, of which ~~$2,461,610~~$2,434,242 and ~~$3,020,569~~$2,744,704 are insured, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts.

As of June 30, 2017 and December 31, 2016, the Company maintained cash and cash equivalents at banks in the following locations:
June 30, 2017 December 31, 2016
USD USD
PRC, excluding Hong Kong 212,009,195 171,539,309
U.S. 10,466,419 11,539,131
Total 222,475,614 183,078,440
The Company’s two major products are human albumin and human immunoglobulin for intravenous injection (“IVIG”). Human albumin accounted for ~~37.0%~~36.3% and ~~38.7%~~41.2% of the total sales for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~38.9%~~38.3% and ~~37.5%~~39.7% of the total sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. IVIG accounted for ~~33.1%~~33.3% and ~~41.4%~~33.6% of the total sales for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~35.5%~~34.0% and ~~43.6%~~36.6% of the total sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. If the market demands for human albumin and IVIG cannot be sustained in the future or the price of human albumin and IVIG decreases, the Company’s operating results could be adversely affected.

Substantially all of the Company’s customers are located in the PRC. There were no customers that individually comprised 10% or more of the total sales during the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~September 30, 2015. There was no~~2016. No individual customer represented 10% or more ~~than 10%~~ of accounts receivables as at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers.

There was one supplier, namely, Xinjiang Deyuan Bioengineering Co., Ltd. (“Xinjiang Deyuan”), that comprised 10% or more of the total purchases for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~September 30, 2015, respectively. There was no supplier that~~2016. Chongqing Sanda Great Exploit Pharmaceutical Co, Ltd. represented more than 10% of accounts payables as at ~~September~~June 30, ~~2016. There was one supplier that represented more than 10% of accounts payables as at~~2017 and December 31, ~~2015.~~2016.

NOTE 2 – ACCOUNTS RECEIVABLE

Accounts receivable at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 consisted of the following:

September 30,
2016 December 31,
2015 June 30, 2017 December 31, 2016
USD USD USD USD
Accounts receivable 40,740,371 25,588,593 61,716,363 34,452,392
Less: Allowance for doubtful accounts (551,558 ) (443,624 ) (570,022 ) (533,596 )
Total 40,188,813 25,144,969 61,146,341 33,918,796
6

The activity in the allowance for doubtful accounts-accounts receivable for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 are as follows:

For the Nine Months Ended For the Six Months Ended
September 30,
2016 September 30,
2015 June 30,
2017 June 30,
2016
USD USD USD USD
Beginning balance 443,624 433,948 533,596 443,624
Provisions 120,535 35,162 23,783 6,604
Recoveries - -
Write-offs - -
Foreign currency translation adjustment (12,601 ) (16,268 ) 12,643 (9,320 )
Ending balance 551,558 452,842 570,022 440,908

NOTE 3 – INVENTORIES

Inventories at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 consisted of the following:

September 30,
2016 December 31,
2015 June 30, 2017 December 31, 2016
USD USD USD USD
Raw materials 76,193,306 57,418,230 97,602,529 80,781,903
Work-in-process 31,160,904 27,401,062 33,790,504 24,994,839
Finished goods 39,581,905 41,576,020 51,865,766 50,635,932
Total 146,936,115 126,395,312 183,258,799 156,412,674

AnProvisions to write-down the carrying amount of obsolete inventory ~~write-down of $28,705 was recorded~~to its estimated net realizable value amounted to nil and $1,937 during the three months ended ~~September~~June 30, ~~2016. No inventory write-down~~2017 and 2016, respectively, and provisions of nil and $61,497 was recorded during the ~~three~~six months ended ~~September~~June 30, ~~2015. An inventory write-down~~2017 and 2016, respectively, which were recorded as cost of ~~$90,202 and $16,650 was recorded during~~sales in the ~~nine months ended September 30, 2016 and 2015, respectively.~~unaudited condensed consolidated statements of comprehensive income.

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 consisted of the following:

September 30,
2016 December 31,
2015 June 30,
2017 December 31,
2016
USD USD USD USD
Buildings 35,370,056 31,505,133 36,815,470 34,131,032
Machinery and equipment 54,051,332 54,640,502 56,603,923 52,467,764
Furniture, fixtures, office equipment and vehicles 7,880,888 7,859,951 8,400,694 7,843,567
Total property, plant and equipment, gross 97,302,276 94,005,586 101,820,087 94,442,363
Accumulated depreciation (36,235,207 ) (31,521,859 ) (46,159,164 ) (39,315,011 )
Total property, plant and equipment, net 61,067,069 62,483,727 55,660,923 55,127,352
Construction in progress 58,324,131 26,115,927 80,953,387 61,825,470
Prepayment for property, plant and equipment 15,033,269 16,764,597 8,796,348 15,139,101
Property, plant and equipment, net 134,424,469 105,364,251 145,410,658 132,091,923

Depreciation expense for the three months ended ~~September~~June 30, 2017 and 2016 was $2,991,721 and ~~2015 was $2,356,056 and $1,980,213,~~$2,322,405, respectively. Depreciation expense for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016 was $6,043,854 and ~~2015 was $6,946,084~~$4,590,028, respectively. No interest expenses were capitalized into construction in progress for the three and ~~$6,103,812, respectively.~~six months ended June 30, 2017 and 2016.
7

NOTE 5 – ~~DEPOSITS RELATED TO LAND USE RIGHTS~~
In 2012, Guizhou Taibang made a refundable payment of RMB83,400,000 (approximately $12,489,150) to the local government in connection with the public bidding for a land use right in Guizhou Province. Given the decrease of the land area to be provided by the local government, RMB13,000,000 (approximately $1,946,750) and RMB10,000,000 (approximately $1,497,500) was refunded by the local government in December 2013 and January 2014, respectively. Guizhou Taibang completed the bidding and purchased the land use right in December 2015. For the nine months ended September 30, 2016, RMB59,665,759 (approximately $8,934,947) was refunded by the local government. The remaining deposit is expected to be refunded in 2017.
~~NOTE 6 –~~ LOAN RECEIVABLE
~~(a)~~ ~~Current~~
In June 2016, the Company entered into a RMB40,000,000 (approximately $5,990,000) loan agreement with Xinjiang Deyuan. Pursuant to the agreement, Guizhou Taibang agreed to provide Xinjiang Deyuan with interest-bearing loans at an interest rate of 6% per annum. The loan is unsecured and due on the earlier of 1) within five days after Xinjiang Deyuan obtaining other loans from financial institutions, or 2) September 20, 2016. Interest will be paid on the last day of each month. On July 1, 2016, RMB40,000,000 (approximately $5,990,000) was lent to Xinjiang Deyuan.
On October 18, 2016, the Company entered into a supplemental agreement to the loan agreement with Xinjiang Deyuan, pursuant to which the principal of the loan was agreed to offset purchase payment of plasma from Xinjiang Deyuan in two installments, with the remaining principal of the loan, if any, being repaid by Xinjiang Deyuan no later than December 20, 2016. The Company has the right to charge an interest rate of 9% per annum for any overdue loan since September 21, 2016 according to loan agreement.
Interest income of $79,906 was accrued by Guizhou Taibang for the three months and nine months period ended September 30, 2016 and $60,012 was received by Guizhou Taibang for the three months and nine months period ended September 30, 2016.
~~(b)~~ ~~Non-current~~

In August 2015, the Company entered into a cooperation agreement with Xinjiang Deyuan and the controlling shareholder of Xinjiang Deyuan. Pursuant to the agreement, Guizhou Taibang agreed to provide Xinjiang Deyuan with an interest-bearing ~~loans~~loan at an interest rate of 6% per annum with an aggregate principal amount of RMB300,000,000 (approximately ~~$44,925,000)~~$47,160,000). The ~~loans are~~loan is due July 31, 2018 and secured by a pledge of Deyuan Shareholder’s 58.02% equity interest in Xinjiang Deyuan. Interest will be paid on the 20th day of the last month of each quarter. For the year ended December 31, 2015, RMB258,663,461 (approximately $38,734,853) was lent to Xinjiang Deyuan. The remaining RMB41,336,539 (approximately $6,190,147) was lent during the three months period ended March 31, 2016.

Interest income of ~~$638,622~~$624,306 and ~~$1,985,767~~$694,839 was ~~accrued~~recognized and received by Guizhou Taibang for the three months ended June 30, 2017 and ~~nine~~2016, respectively, and interest income of $1,232,486 and $1,347,145 was recognized and received by Guizhou Taibang for the six months ~~period~~ ended ~~September~~June 30, ~~2016.~~2017 and 2016, respectively.

NOTE 76 – ~~INCOME TAX~~SHORT-TERM BANK LOANS

In ~~October 2014, Shandong provincial government granted Shandong Taibang~~March 2017, the ~~High and New Technology Enterprise certificate. This certificate entitled Shandong Taibang to enjoy~~Company obtained a ~~preferential income tax~~one-year unsecured loan of RMB60,000,000 (approximately $8,715,000) from Bank of China (Taishan Branch) at an interest rate of ~~15% for a period~~4.5675% per annum. The loan is due on March 21, 2018 and interest will be paid on the 21th day of ~~three years from 2014 to 2016.~~each month. In May 2017, the Company repaid the loan before maturity date.

~~According to Cai Shui [2011] No. 58 dated July 27, 2011, Guizhou Taibang, being~~In April 2017, the Company obtained a ~~qualified enterprise located in the western region~~one-year unsecured loan of ~~PRC, enjoys a preferential income tax~~RMB98,000,000 (approximately $14,465,780) from China Everbright Bank at an interest rate of ~~15% effective retroactively from January 1, 2011 to~~4.35% per annum. The loan is due on March 31, 2018 and interest will be paid on the 20th day of each month.
NOTE 7–OTHER PAYABLES AND ACCRUED EXPENSES
Other payables and accrued expenses at June 30, 2017 and December 31, ~~2020.~~2016 consisted of the following:
June 30, 2017 December 31, 2016
USD USD
Payables to a potential investor⁽¹⁾ 8,250,391 7,941,013
Salaries and bonuses payable 14,261,633 16,740,846
Accruals for sales commission and promotion fee 7,089,649 4,391,160
Dividends payable to noncontrolling interest⁽²⁾ 13,741,901 7,952,467
Payables for construction in progress 5,771,753 5,364,441
Other tax payables 3,081,560 1,918,248
Advance from customers 1,675,967 3,976,832
Deposits received 5,149,605 4,640,244
Others 5,074,169 6,872,894
Total 64,096,628 59,798,145
(1) The payables to a potential investor comprises deposits received from a potential investor of $5,042,358 and $4,924,164 as of June 30, 2017 and December 31, 2016, respectively, and related interest plus penalty on these deposits totaling $3,208,033 and $3,016,849 as of June 30, 2017 and December 31, 2016, respectively.
(2) On March 2, 2017, Shandong Taibang declared a cash dividend distribution amounting RMB220,000,000 (approximately $31,955,000), of which RMB37,928,000 (approximately $5,509,042) represented the dividends payable to a noncontrolling interest shareholder.
NOTE 8 – INCOME TAX

The Company’s effective income tax rates were 17% and ~~17%~~16% for the three months ended ~~September~~June 30, 2017 and 2016, ~~and 2015.~~respectively. The Company’s effective income tax rates were ~~16%~~17% and 16% for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively.

8
The difference between the effective income tax rates and statutory income tax rate of 25% for the three and six months ended June 30, 2017 and 2016 was primarily due to preferential tax rate of 15% applicable to both Guizhou Taibang and Shandong Taibang in 2017 and 2016, which was partially offset by valuation allowances against the deferred tax assets of China Biologic in the U.S. relating to operating losses.
As of and for the three and six months ended ~~September~~June 30, ~~2016,~~2017, the Company did not have any unrecognized tax benefits and thus no interest and penalties related to unrecognized tax benefits were recorded. In addition, the Company does not expect that the amount of unrecognized tax benefits to change significantly within the next 12 months.

NOTE 89 – OPTIONS AND NONVESTED SHARES

Options

A summary of stock options activity for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 is as follow:

Number of Options Weighted
Average Exercise
Price Weighted Average
Remaining
Contractual Term
in Years Aggregate
Intrinsic
Value
USD USD
Outstanding at December 31, 2015 651,897 10.44 5.24 86,064,461
Granted -
Exercised (304,826 ) 10.54 (31,741,472 )
Forfeited and expired -
Outstanding at September 30, 2016 347,071 10.35 4.23 39,612,865

Vested 347,071 10.35 4.23 39,612,865
Exercisable at September 30, 2016 347,071 10.35 4.23 39,612,865
Number of
Options Weighted
Average
Exercise Price Weighted
Average
Remaining
Contractual
Term in Years Aggregate
Intrinsic
Value
USD USD
Outstanding as of December 31, 2016 314,491 10.32 3.84 30,568,083
Granted -
Exercised (46,880 ) 10.80 (4,672,851 )
Forfeited and expired -
Outstanding as of June 30, 2017 267,611 10.24 3.21 27,527,053

Vested as of June 30, 2017 267,611 10.24 3.21 27,527,053
Exercisable as of June 30, 2017 267,611 10.24 3.21 27,527,053

For the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recorded stock compensation expense with respect to stock options of ~~$162,047~~nil and $243,578, respectively, in general and administrative expenses. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recorded stock compensation expense with respect to stock options of ~~$649,203~~nil and ~~$874,413,~~$487,156, respectively, in general and administrative expenses.

Nonvested shares

A summary of nonvested shares activity for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 is as follows:

Number of
nonvested shares Grant date weighted
average fair value Number of
nonvested
shares Grant date
weighted average
fair value
USD USD
Outstanding at December 31, 2015 669,100 77.49
Outstanding at December 31, 2016 912,650 104.51
Granted 511,200 119.75 25,800 98.20
Vested (252,650 ) 66.10 (18,572 ) 79.48
Forfeited (12,500 ) 66.74 - -
Outstanding at September 30, 2016 915,150 104.39
Outstanding at June 30, 2017 919,878 104.84
9

For the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recorded stock compensation expense with respect to nonvested shares of ~~$6,846,521~~$8,129,124 and ~~$3,363,835~~$4,494,126, respectively, in general and administrative expenses. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recorded stock compensation expense with respect to nonvested shares of ~~$15,666,464~~$16,201,189 and ~~$6,766,481~~$8,819,943, respectively, in general and administrative expenses.

At ~~September~~June 30, ~~2016,~~2017, approximately ~~$89,756,842~~$67,999,368 of stock compensation expense with respect to nonvested shares is expected to be recognized over weighted average period of approximately ~~2.98~~2.52 years.

NOTE 910 – FAIR VALUE MEASUREMENTS

Management used the following methods and assumptions to estimate the fair value of financial instruments at the relevant balance sheet dates:

•Short-term financial instruments (including cash and cash equivalents, ~~time deposits,~~ accounts receivable, other receivables, ~~loan receivable-current,~~ accounts payable, short-term bank loans and other payables and accrued expenses) – The carrying amounts of the short-term financial instruments approximate their fair values because of the short maturity of these instruments.

•Loan ~~receivable-non current~~receivable – The carrying amounts of loan ~~receivable-non current~~receivable approximate their fair value. The fair value is estimated using discounted cash flow analysis based on the ~~Company’s incremental~~ borrowing rates for similar borrowing.

NOTE 1011 – SALES

The Company’s sales ~~are primarily derived from the manufacture and sale of Human Albumin and Immunoglobulin products. The Company’s sales~~ by ~~significant types of product~~products for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 are as follows:

For the Three Months Ended For the Three Months Ended
September 30,
2016 September 30,
2015 June 30,
2017 June 30,
2016
USD USD USD USD
Human Albumin 32,050,728 30,442,931 32,375,022 37,707,805
Immunoglobulin products:
Human Immunoglobulin for Intravenous Injection 28,608,129 32,610,967 29,663,496 30,673,660
Other Immunoglobulin products 13,449,552 4,951,787 12,709,939 8,205,752
Placenta Polypeptide 8,124,774 7,594,093 9,225,786 10,890,493
Others 4,292,702 3,150,799 5,303,654 3,943,445
Total 86,525,885 78,750,577 89,277,897 91,421,155

The Company’s sales by ~~significant types of product~~products for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 are as follows:

For the Nine Months Ended For the Six Months Ended
September 30,
2016 September 30,
2015 June 30,
2017 June 30,
2016
USD USD USD USD
Human Albumin 102,387,387 85,538,413 69,233,313 70,336,659
Immunoglobulin products:
Human Immunoglobulin for Intravenous Injection 93,439,551 99,552,008 61,416,482 64,831,422
Other Immunoglobulin products 30,555,619 15,936,561 21,003,606 17,106,067
Placenta Polypeptide 24,723,672 19,882,127 19,472,755 16,598,897
Others 12,428,522 7,264,251 9,604,853 8,135,821
Total 263,534,751 228,173,360 180,731,009 177,008,866
10

NOTE 1112 – COMMITMENTS AND CONTINGENCIES

Commitments

As of ~~September~~June 30, ~~2016,~~2017, commitments outstanding for operating lease approximated $0.8 million.
As of June 30, 2017, commitments outstanding for the purchase of property, plant and equipment approximated ~~$27.8~~$23.0 million.

As of ~~September~~June 30, ~~2016,~~2017, commitments outstanding for the purchase of plasma from ~~2016~~July 1, 2017 to 2018 approximated ~~$57.2~~$25.1 million.

~~Legal proceedings~~
~~Dispute with Jie’an over Certain Capital Injection into Guizhou Taibang~~
In May 2007, a 91% majority of Guizhou Taibang’s shareholders approved a plan to raise additional capital from qualified strategic investors through the issuance of an additional 20,000,000 shares of Guizhou Taibang. The plan required all existing Guizhou Taibang shareholders to waive their rights of first refusal to subscribe for the additional shares. The remaining 9% minority shareholder of Guizhou Taibang’s shares, Guizhou Jie’an Company, or Jie’an, did not support the plan and did not waive its right of first refusal. In May 2007, Guizhou Taibang signed an Equity Purchase Agreement with certain alleged strategic investors (who concealed their background), pursuant to which such investors agreed to invest an aggregate of RMB50,960,000 (approximately $7,631,260) in exchange for 21.4% of Guizhou Taibang’s equity interests. Such Equity Purchase Agreement was not approved or ratified by over two-thirds supermajority of Guizhou Taibang’s shareholders, which approval or ratification is required under the PRC Company Law. At the same time, as an existing shareholder, Jie’an also subscribed for 1,800,000 shares, representing its pro rata share of the 20,000,000 shares being offered. In total, Guizhou Taibang received RMB50,960,000 (approximately $7,631,260) from the investors and RMB6,480,000 (approximately $970,380) from Jie’an.

In June 2007, Jie’an brought a lawsuit against Guizhou Taibang, alleging that it had a right to acquire the 18,200,000 shares offered to the investors under the Equity Purchase Agreement. The trial court denied Jie’an’s request, and the PRC Supreme Court ultimately sustained the original ruling in May 2009 and denied the rights of first refusal of Jie’an over the 18,200,000 shares.
During the second quarter of 2010, Jie’an requested that Guizhou Taibang register its 1.8 million shares of additional capital injection with the local administration of industry and commerce, or AIC. Guizhou Taibang’s board of directors withheld its required ratification of Jie’an’s request, pending the outcome of the ongoing litigation. In March 2012, Jie’an brought another lawsuit against Guizhou Taibang for refusing to register the shares. In July 2013, the trial court dismissed the lawsuit for lack of jurisdiction. Jie’an did not appeal the dismissal.
In December 2013, Jie’an brought a third lawsuit against Guizhou Taibang, requesting Guizhou Taibang to register 1.8 million shares under its name with the local AIC. In July 2014, the trial court denied Jie’an’s request to register such shares. Despite the denial of Jie’an’s share registration request, the trial court, however, in its ruling, ordered Guizhou Taibang to pay accumulated dividends of RMB13,809,197 (approximately $2,067,927) associated with these shares and the related interest expenses to Jie’an. Guizhou Taibang and Jie’an subsequently filed a cross-appeal. In December 2014, the appellate court ruled in favor of Jie’an supporting its request to register 1.8 million shares and ordered Guizhou Taibang to pay Jie’an its share of accumulated dividends of RMB18,339,227 (approximately $2,746,299) associated with these shares plus the related interest expenses to Jie’an. In the first half of 2015, Guizhou Taibang paid an aggregate of RMB22,639,227 (approximately $3,390,224) to the trial court held in escrow pending further appeal of this case. In June 2015, Guizhou Taibang appealed to the High Court of Guizhou, which overruled the decision of the appellate court and remanded the case to the trial court for retrial in September 2015. In August 2016, the trial court granted Jie’an’s petition to withdraw the lawsuit as Jie’an sought to withdraw its capital contribution in Guizhou Taibang pursuant to an agreement dated July 31, 2016. The funds held in escrow will be credited to the consideration payable to Jie’an for the capital withdrawal.
In November 2013, Guizhou Taibang held a shareholders meeting and the shareholders passed resolutions, or the November 2013 Resolutions, that, inter alia, (i) determined that it was no longer necessary for Guizhou Taibang to obtain additional capital from investors; (ii) rejected Jie’an’s request that Jie’an subscribe for additional shares of Guizhou Taibang alone and one or more other shareholders reduce their shareholding in Guizhou Taibang; and (iii) approved the issuance of a total of 20,000,000 new shares to all existing shareholders on a pro rata basis. Jie’an subsequently filed a fourth lawsuit against Guizhou Taibang in December 2013, requesting that the court declare the November 2013 Resolutions void. Both the trial court and the appellate court denied Jie’an’s request.
In March 2014, Guizhou Taibang held another shareholders meeting and the shareholders passed resolutions, or the March 2014 Resolutions, that, inter alia, re-calculated the ownership percentage in Guizhou Taibang based on the November 2013 Resolutions and the additional capital injections from existing shareholders. Guizhou Taibang subsequently updated the registration with the local AIC regarding the additional capital injections in August 2014. In September 2014, Jie’an and Shenzhen Yigong Shengda Technology Co., Ltd., or Yigong Shengda, another minority shareholder of Guizhou Taibang filed a lawsuit against Guizhou Taibang, requesting that the court declare both the November 2013 Resolutions and the March 2014 Resolutions void and instruct Guizhou Taibang to withdraw the AIC registration. In November 2014, the trial court suspended this case pending the final outcome of the third lawsuit filed by Jie’an. In October 2015, the trial court denied their request. In May 2016, the appellate court vacated the trial court’s decision to uphold Guizhou Taibang’s shareholders resolution, and remanded the case for retrial. In August 2016, the trial court granted the petitions by Jie’an and Yigong Shengda to withdraw the lawsuit as Jie’an and Yigong Shengda sought to withdraw their respective capital contributions in Guizhou Taibang pursuant to an agreement dated July 31, 2016.
On July 31, 2016, Guiyang Dalin Biologic Technologies Co., Ltd., or Guiyang Dalin, Guizhou Taibang, Jie’an and Yigong Shengda entered into an agreement, pursuant to which Jie’an and Yigong Shengda agreed to withdraw their respective capital contributions in Guizhou Taibang for an aggregate consideration of RMB415,000,000 (approximately $62,146,250). In August 2016, Guizhou Taibang paid the first installment of RMB90,000,000 (approximately $13,502,700) of the consideration to Jie’an and Yigong Shengda. Guizhou Taibang completed the AIC registration for the foregoing capital withdrawal in October 2016 and will pay the balance of the consideration to Jie’an and Yigong Shengda in accordance with the agreement. As a result of the capital withdrawal, Guiyang Dalin has become the sole shareholder of Guizhou Taibang.
As of September 30, 2016, Guizhou Taibang had maintained, on its balance sheet, payables to Jie’an in the amounts of RMB5,040,000 (approximately $754,740) as received funds in respect of the 1.8 million shares in dispute, RMB1,440,000 (approximately $215,640) for the over-paid subscription price paid by Jie’an and RMB3,913,734 (approximately $586,082) for the accrued interest.

~~Dispute with Certain Individual Investor over Certain Capital Injection into Guizhou Taibang~~
In part due to the invalidity of the Equity Purchase Agreement with certain alleged strategic investors in May 2007, which was never approved or ratified by Guizhou Taibang’s shareholders, such investors’ equity ownership in Guizhou Taibang and the related increase in registered capital of Guizhou Taibang have never been registered with the local AIC. In January 2010, one individual among such investors brought a lawsuit against Guizhou Taibang requesting to register his 14.35% ownership interest in Guizhou Taibang with the local AIC and seeking the distribution of his share of Guizhou Taibang’s dividends declared since 2007.
In October 2010, the trial court denied such individual investor’s right as shareholder of Guizhou Taibang and his entitlement to share the dividends, which ruling was reaffirmed after a re-trial by the same trial court in December 2012. After such ruling, Guizhou Taibang attempted to return the originally received fund of RMB34,160,000 (approximately $5,115,460) to such investor by wiring the fund back to his bank account but was unable to do so due to the closure of his bank account. Another investor, however, accepted the returned fund of RMB11,200,000 (approximately $1,677,200) from Guizhou Taibang in November 2010. In 2013, the same individual investor appealed the case to the PRC Supreme Court, which also denied his claims for shareholder status in Guizhou Taibang and the related dividend distribution and accrued interest in September 2013. Such investor subsequently attempted to seek a re-trial by the PRC Supreme Court, which request was denied by the PRC Supreme Court in January 2014. He then applied to the PRC Supreme Procuratorate to request for a review of the PRC Supreme Court’s decision and seek an appeal by the PRC Supreme Procuratorate to the PRC Supreme Court for an ultimate re-trial on his behalf. In July 2015, the PRC Supreme Procuratorate rejected his request for review.
As of September 30, 2016, Guizhou Taibang had maintained, on its balance sheet, payables to the investors of RMB34,160,000 (approximately $5,115,460) as originally received funds from such individual investor in respect of the shares in dispute, RMB18,895,852 (approximately $2,829,654) for the interest expenses, and RMB341,600 (approximately $51,155) for the 1% penalty imposed by the Equity Purchase Agreement for any breach in the event that Guizhou Taibang is required to return the original investment amount to such investor.
NOTE 1213 - ~~NET INCOME~~EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted ~~net income~~earnings per share for the periods indicated:

For the Three Months Ended
September 30, 2016 September 30, 2015
USD USD

Net income attributable to China Biologic Products, Inc. 28,391,361 22,876,550
Earnings allocated to participating nonvested shares (888,528 ) (572,297 )
Net income used in basic/diluted net income per common stock 27,502,833 22,304,253

Weighted average shares used in computing basic net income per common stock 26,957,205 25,992,776
Diluted effect of stock options 339,913 1,063,439
Weighted average shares used in computing diluted net income per common stock 27,297,118 27,056,215

Net income per common stock – basic 1.02 0.86
Net income per common stock – diluted 1.01 0.82
For the Three Months Ended
June 30, 2017 June 30, 2016
USD USD

Net income attributable to China Biologic Products, Inc. 31,030,484 30,753,035
Earnings allocated to participating nonvested shares (1,026,685 ) (775,050 )
Net income used in basic/diluted earnings per common stock 30,003,799 29,977,985

Weighted average shares used in computing basic earnings per common stock 27,213,984 26,698,996
Dilutive effect of outstanding stock options 264,951 453,564
Weighted average shares used in computing diluted earnings per common stock 27,478,935 27,152,560

Basic earnings per common stock 1.10 1.12
Diluted earnings per common stock 1.09 1.10

During the three months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ no ~~option was antidilutive or~~potential ordinary shares outstanding were excluded from the calculation of diluted ~~net income~~earnings per common stock.

The following table sets forth the computation of basic and diluted ~~net income~~earnings per share for the periods indicated:

For the Nine Months Ended
September 30, 2016 September 30, 2015
USD USD

Net income attributable to China Biologic Products, Inc. 85,341,651 72,762,981
Earnings allocated to participating nonvested shares (2,314,921 ) (1,656,974 )
Net income used in basic/diluted net income per common stock 83,026,730 71,106,007

Weighted average shares used in computing basic net income per common stock 26,748,141 25,280,538
Diluted effect of stock options 444,967 1,208,192
Weighted average shares used in computing diluted net income per common stock 27,193,108 26,488,730

Net income per common stock – basic 3.10 2.81
Net income per common stock – diluted 3.05 2.68
For the Six Months Ended
June 30, 2017 June 30, 2016
USD USD

Net income attributable to China Biologic Products, Inc. 61,022,333 56,950,290
Earnings allocated to participating nonvested shares (2,009,186 ) (1,422,528 )
Net income used in basic/diluted earnings per common stock 59,013,147 55,527,762

Weighted average shares used in computing basic earnings per common stock 27,199,011 26,642,461
Dilutive effect of outstanding stock options 273,290 503,009
Weighted average shares used in computing diluted earnings per common stock 27,472,301 27,145,470

Basic earnings per common stock 2.17 2.08
Diluted earnings per common stock 2.15 2.05

During the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ no ~~option was antidilutive or~~potential ordinary shares outstanding were excluded from the calculation of diluted ~~net income~~earnings per common stock.

NOTE ~~13 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~14 - SUBSEQUENT EVENT

~~In February 2016,~~On July 21, 2017, China Biologic Products Holdings, Inc. (the “Successor”) succeeded to the ~~Financial Accounting Standards Board (“FASB”~~interests of China Biologic Products, Inc. (the “Predecessor”) following a redomicile merger pursuant to an agreement and plan of merger dated as of April 28, 2017 (the “Merger Agreement”) between the Successor and the Predecessor. Pursuant to the Merger Agreement, the Predecessor merged with and into the Successor, with the Successor surviving the merger and each issued ~~Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which modified lease accounting for both lessees~~ and ~~lessors~~outstanding shares of Predecessor's common stock being converted into the right to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements.~~ASU 2016-02 is effective for public companies for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted.~~ ~~The Company is currently evaluating~~receive one ordinary share of the ~~impact of adopting ASU 2016-02 on its consolidated financial statements.~~
Successor.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplified certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification in the statement of cash flows.~~This standard will be effective for public companies for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.~~ ~~The Company is currently evaluating the impact of adopting ASU 2016-09 on its consolidated financial statements.~~
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In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addressed and provided guidance for each of eight specific cash flow issues with the objective of reducing the existing diversity in practice. This standard will be effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-15 on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This standard required that companies recognize the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs. Current guidance prohibits companies from recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This standard will be effective for public companies for annual periods beginning after December 15, 2017, including interim periods within that reporting period. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry growth and demand and acceptance of new and existing products; expectations regarding governmental approvals of our new products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015,~~2016, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:

· “China Biologic,” “we,” “us,” the “Company” or “our” are (i) before July 21, 2017, to ~~the combined business of~~ China Biologic Products, Inc., a Delaware corporation, and ~~its~~(ii) after July 21, 2017, to China Biologic Products Holdings, Inc., an exempted company incorporated under the laws of the Cayman Islands, and, in each case, unless the context requires otherwise, the applicable company’s direct and indirect subsidiaries;
· “China” or “PRC” are to the People’s Republic of China, excluding, for the purposes of this report only, Taiwan and the special administrative regions of Hong Kong and Macau;
· “Exchange Act” are to the Securities Exchange Act of 1934, as amended;
· “Guizhou Taibang” are to ~~our majority owned subsidiary~~ Guizhou Taibang Biological Products Co., Ltd., a PRC company ~~which became our~~indirectly wholly owned ~~subsidiary in October 2016;~~by us;
· “Huitian” are to Xi’an Huitian Blood Products Co., Ltd., a PRC company in which we hold aan indirect minority equity interest;
· “RMB” are to the legal currency of China;
· “SEC” are to the Securities and Exchange Commission;
· “Securities Act” are to the Securities Act of 1933, as amended;
· “Shandong Taibang” are to ~~our majority owned subsidiary~~ Shandong Taibang Biological Products Co. Ltd., a PRC ~~company;~~company indirectly majority owned by us; and
· “U.S. dollars,” “USD” and “$” are to the legal currency of the United States of America.

Overview of Our Business

We are a biopharmaceutical company principally engaged in the research, development, manufacturing and sales of human plasma-based biopharmaceutical products, or plasma products, in China. We operate our business through ~~two~~a majority owned ~~subsidiaries,~~subsidiary, Shandong Taibang, a company based in Tai’an, Shandong Province and a wholly owned subsidiary, Guizhou Taibang, a company based in Guiyang, Guizhou Province. We also hold a minority equity interest in Huitian, a plasma products company based in Xi’an, Shaanxi Province.

We have a strong product portfolio with over 20 different dosage forms of plasma products and other biopharmaceutical products across nine categories. All of our products are prescription medicines administered in the form of injections. Our principal products are human albumin and immunoglobulin for intravenous injection, or IVIG. Albumin has been used for almost 50 years to treat critically ill patients by assisting the maintenance of adequate blood volume and pressure. IVIG is used for certain disease prevention and treatment by enhancing specific immunity. These products use human plasma as their principal raw material. Sales of human albumin products represented approximately ~~37.0%~~36.3% and ~~38.7%~~41.2% of our total sales for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~38.9%~~38.3% and ~~37.5%~~39.7% of our total sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Sales of IVIG products represented approximately ~~33.1%~~33.3% and ~~41.4%~~33.6% of our total sales for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~35.5%~~34.0% and ~~43.6%~~36.6% of our total sales for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ respectively. ~~All of our products are prescription medicines administered in the form of injections.~~
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Our sales model focuses on direct sales to hospitals and inoculation centers and is complemented by distributor sales. For the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, our top five customers accounted for approximately ~~15.6%~~16.4% and ~~13.9%~~16.7%, respectively, of our total sales. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, our top five customers accounted for approximately ~~16.1%~~18.0% and ~~12.7%~~16.4%, respectively, of our total sales.

We operate and manage our business as aone single segment. We do not account for the results of our operations on a geographic or other basis.

Our principal executive offices are located at 18^th18th Floor, Jialong International Building, 19 Chaoyang Park Road, Chaoyang District, Beijing 100125, People’s Republic of China. Our corporate telephone number is (8610) 6598-3111 and our fax number is (8610) 6598-3222. We maintain a website athttp://www.chinabiologic.com that contains information about ~~the Company,~~our company, but that information is not part of this report or incorporated by reference herein.

Recent Developments

~~In October 2016, Guizhou Taibang completed~~Completion of Redomicile Merger
On July 21, 2017, China Biologic Products Holdings, Inc. (the “Successor”) succeeded to the ~~registration with the local administration~~interests of ~~industry and commerce in connection with the capital withdrawal by two former minority shareholders of Guizhou Taibang for an aggregate consideration of RMB415.0 million (approximately $62.1 million)~~China Biologic Products, Inc. (the “Predecessor”) following a redomicile merger pursuant to an agreement and plan of merger dated ~~July 31, 2016. As part~~as of April 28, 2017 (the “Merger Agreement”) between the Successor and the Predecessor. Pursuant to the Merger Agreement, the Predecessor merged with and into the Successor, with the Successor surviving the merger and each issued and outstanding shares of Predecessor’s common stock being converted into the right to receive one ordinary share of the capital withdrawal plan, such minority shareholders also withdrew their existing lawsuits involving Guizhou Taibang. Guizhou Taibang paid the first installment of RMB90 million (approximately US$13.5 million) of the consideration to such former minority shareholders in August 2016 and will pay the balance of the consideration in accordance with the agreement. As a result of the capital withdrawal, Guizhou Taibang has become a wholly owned subsidiary of the Company.Successor.

~~Third~~Second Quarter Financial Performance Highlights

The following are some financial highlights for the three months ended ~~September~~June 30, ~~2016:~~2017:

· Sales: Sales ~~increased~~decreased by ~~$7.7~~$2.1 million, or ~~9.8%~~2.3%, to ~~$86.5~~$89.3 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$78.8~~$91.4 million for the same period in ~~2015.~~2016.

· Gross profit: Gross profit ~~increased~~decreased by ~~$8.1~~$0.7 million, or ~~15.9%~~1.2%, to ~~$58.9~~$59.2 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$50.8~~$59.9 million for the same period in ~~2015.~~2016.

· Income from operations: Income from operations ~~increased~~decreased by ~~$4.7million,~~$3.6 million, or ~~13.4%~~8.4%, to ~~$39.7~~$39.4 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$35.0~~$43.0 million for the same period in ~~2015.~~2016.

· Net income attributable to ~~the Company~~our company: Net income increased by ~~$5.5~~$0.2 million, or ~~24.0%~~0.6%, to ~~$28.4~~$31.0 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$22.9~~$30.8 million for the same period in ~~2015.~~2016.

· Diluted ~~net income~~earnings per share: Diluted ~~net income~~earnings per share was ~~$1.01~~$1.09 for the three months ended ~~September~~June 30, ~~2016,~~2017, as compared to ~~$0.82~~$1.10 for the same period in ~~2015.~~2016.
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Results of Operations

Comparison of Three Months Ended ~~September~~June 30, ~~2016~~2017 and ~~September~~June 30, ~~2015~~2016

The following table sets forth key components of our results of operations in thousands of U.S. dollars for the periods indicated.

For the Three Months Ended September 30, For the Three Months Ended June 30,
2016 2015 2017 2016
Amount % of Total Sales Amount % of Total Sales Amount % of
Total
Sales Amount % of
Total
Sales
(U.S. dollars in thousands, except percentage and per share data) (U.S. dollars in thousands, except percentage and per share data)
Sales 86,526 100.0 78,751 100.0 89,278 100.0 91,421 100.0
Cost of sales 27,647 31.9 27,945 35.5 30,110 33.7 31,482 34.4
Gross margin 58,879 68.1 50,806 64.5
Gross profit 59,168 66.3 59,939 65.6
Operating expenses:
Selling expenses 3,017 3.5 2,675 3.4 3,578 4.0 3,026 3.3
General and administrative expenses 15,096 17.5 11,511 14.6 14,264 16.0 12,574 13.8
Research and development expenses 1,043 1.2 1,595 2.0 1,925 2.2 1,304 1.4
Total operating expenses 19,156 22.2 15,781 20.2 19,767 22.2 16,904 18.5
Income from operations 39,723 45.9 35,025 44.5 39,401 44.1 43,035 47.1
Other income (expenses):
Equity in income (loss) of an equity method investee 1,097 1.3 (376 ) (0.5 )
Equity in income of an equity method investee 972 1.1 260 0.3
Interest expense (58 ) (0.1 ) (101 ) (0.1 ) (286 ) (0.3 ) (89 ) (0.1 )
Interest income 1,866 2.2 1,383 1.8 1,617 1.8 1,292 1.4
Loss from disposal of a subsidiary (76 ) (0.1 ) - 0.0
Total other income, net 2,829 3.3 906 1.2 2,303 2.6 1,463 1.6
Earnings before income tax expense 42,552 49.2 35,931 45.6
Income before income tax expense 41,704 46.7 44,498 48.7
Income tax expense 7,164 8.3 6,052 7.7 6,867 7.7 7,007 7.7
Net income 35,388 40.9 29,879 37.9 34,837 39.0 37,491 41.0
Less: Net income attributable to noncontrolling interest 6,997 8.1 7,002 8.9 3,806 4.2 6,738 7.4
Net income attributable to the Company 28,391 32.8 22,877 29.0
Net income per share of common stock
Net income attributable to our company 31,031 34.8 30,753 33.6
Earnings per share of common stock
Basic 1.02 0.86 1.10 1.12
Diluted 1.01 0.82 1.09 1.10

Sales

Our sales ~~increased~~decreased by ~~$7.7~~$2.1 million, or ~~9.8%~~2.3%, to ~~$86.5~~$89.3 million for the three months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$78.8~~$91.4 million for the same period in ~~2015.~~2016. In RMB terms, our total sales ~~would have~~ increased by ~~17.3%~~2.5% for the three months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015.~~2016. The increase in sales in RMB terms for the three months ended ~~September~~June 30, ~~2016~~2017 was primarily attributable to the ~~price~~sales increase in hyper-immune products, mainly including human rabies immunoglobulin and human tetanus immunoglobulin, together with the sales increase in human ~~tetanus immunoglobulin products~~coagulation factor VIII and human prothrombin complex concentrate, which was partially offset by the decrease of sales ~~volume increases~~ in human albumin products and ~~human tetanus immunoglobulin products, partially offset by the decrease in sales volume of IVIG products.~~placenta polypeptide.

The following table summarizes the breakdown of sales by ~~significant~~major types of product:

For the Three Months Ended June 30, Change
2017 2016
Amount % Amount % Amount %
(U.S. dollars in millions, except percentage)
Human albumin 32.4 36.3 37.7 41.2 (5.3 ) (14.1 )
Immunoglobulin products:
IVIG 29.7 33.3 30.7 33.6 (1.0 ) (3.3 )
Other immunoglobulin products 12.7 14.2 8.2 9.0 4.5 54.9
Placenta polypeptide 9.2 10.3 10.9 11.9 (1.7 ) (15.6 )
Others 5.3 5.9 3.9 4.3 1.4 35.9
Totals 89.3 100.0 91.4 100.0 (2.1 ) (2.3 )
For the Three Months Ended September 30, Change
2016 2015
Amount % Amount % Amount %
(U.S. dollars in millions, except percentage)
Human albumin 32.1 37.0 30.4 38.7 1.7 5.6
Immunoglobulin products:
  IVIG 28.6 33.1 32.6 41.4 (4.0 ) (12.3 )
  Other immunoglobulin products 13.4 15.5 5.0 6.3 8.4 168.0
Placenta polypeptide 8.1 9.4 7.6 9.6 0.5 6.6
Others 4.3 5.0 3.2 4.0 1.1 34.4
Totals 86.5 100.0 78.8 100.0 7.7 9.8

During the three months ended ~~September~~June 30, ~~2016~~2017 as compared to the three months ended ~~September~~June 30, ~~2015:~~2016:

· the average price for our approved human albumin products, which accounted for ~~37.0%~~36.3% of our total sales for the three months ended ~~September~~June 30, ~~2016, increased~~2017, decreased by ~~0.9%~~2.7% and 7.3% in RMB ~~terms~~term and ~~decreased by 5.5%~~ in USD ~~terms;~~term, respectively, mainly due to the combined effect of both a decrease in price we charged certain distributors reflecting intensified market competition and a lower sales proportion from the higher-unit-price dosages; and

· the average price for our approved IVIG products, which accounted for ~~33.1%~~33.3% of our total sales for the three months ended ~~September~~June 30, ~~2016,~~2017, increased by ~~4.8%~~1.2% in RMB ~~terms~~term and decreased by ~~1.8%~~3.6% in USD ~~terms.~~term mainly due to an increase in price we charged the company’s major distributors.

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The average sales price of our human albumin products and IVIG products increased in RMB terms for the three months ended September 30, 2016 as compared to the same period in 2015 following the removal of the retail price ceiling for drug products effective on June 1, 2015, backed by the market demand.

The sales volume of our products depends on market demand and our production volume. The production volume of our human albumin products and IVIG products depends primarily on the general plasma supply. The production volume of our hyper-immune products, which include human rabies immunoglobulin, human hepatitis B immunoglobulin and human tetanus immunoglobulin products, is subject to the availabilities of specific vaccinated plasma and our production capacity. The supply of specific vaccinated plasma requires several months of lead time. Our production ~~facilities~~facility currently can only accommodate the production of one type of hyper-immune products at any given time and we rotate the production of different types of hyper-immune products from time to time in response to market demand. As such, the sales volume of any given type of hyper-immune products may vary significantly from quarter to quarter.

The sales volume of ~~our~~ human albumin products ~~and IVIG products increased by 11.4% and~~ decreased by ~~10.6%, respectively,~~7.4% for the three months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015.~~ 2016, which largely reflected the inventory control in connection with the production suspension of our Shandong subsidiary in the second half year of 2017, as well as the negative impact of recent changes in market dynamics, including intensified market competition in distribution channels and certain government healthcare reform measures limiting hospitals’ purchase power in the second quarter of 2017.
The sales ~~growth of human albumin products was primarily attributable to the increased production~~ volume ~~at Shandong Taibang and Guizhou Taibang as a result of increased plasma supply volume. The decrease in the sales~~ of IVIG products remained stable for the three months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in 2015 was primarily due to the depletion of IVIG pastes we reserved from prior years that were processed and sold in 2015 and the allocation of more production facilities to human tetanus immunoglobulin products, which had higher margin, in the three months ended September 30, 2016.

~~The sales of~~Revenue from other immunoglobulin products increased ~~significantly~~by 54.9% in USD term for the three months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015. Other~~2016, mainly due to sales increase of human rabies immunoglobulin and human tetanus immunoglobulin, which reflected our enhanced production volume in response to the strong market demand in the second quarter of 2017 compared with the same period last year.
Revenue from placenta polypeptide products ~~accounted~~decreased by 11.1% and 15.6% in RMB term and USD term, respectively, for ~~15.5%~~the three months ended June 30, 2017 as compared to the same period in 2016, attributable to a decrease in sales volume in the second quarter of 2017 following a higher-than-normal product sales volume in the first quarter of 2017, compared with a high comparison base in the same period in 2016.
Revenue from human coagulation factor VIII and ~~6.3%~~human prothrombin complex concentrate, which are included in other plasma products, increased by 47.2% and 40.1% in RMB term and USD term, respectively, for the three months ended June 30, 2017 as compared to the same period in 2016, representing 5.9 % of ~~our~~ total sales for the three months ended ~~September~~June 30, ~~2016 and September 30, 2015, respectively. The increase was mainly attributable to the increase in both sales volume and sales price of human tetanus immunoglobulin products. The sales volume of~~2017. This reflects our human tetanus immunoglobulin increased by 49.3% for the three months ended September 30, 2016 as compared to the same period in 2015. The average sales price of human tetanus immunoglobulin products increased significantly for the three months ended September 30, 2016 as compared to the same period in 2015 due to the significant market supply shortage following the removal of the retail price ceiling for drug products effective on June 1, 2015.
The sales increase of placenta polypeptide for the three months ended September 30, 2016 as compared to the same period in 2015 was mainly in line with the sales volume of placenta polypeptide, which increased by 9.8% for the three months ended September 30, 2016.
The sales increase of other products for the three months ended September 30, 2016 as compared to the same period in 2015 was mainly due to the increase in sales volume of human prothrombin complex concentrate, or PCC and factor VIII. Both our PCC and factor VIII experienced the sales ramp-up for the three months ended September 30, 2016.continued medical marketing activities.

Cost of salesand gross profit
For the Three Months Ended September 30, Change For the Three Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Cost of sales 27.6 28.0 (0.4 ) (1.4 ) 30.1 31.5 (1.4 ) (4.4 )
as a percentage of total sales 31.9 % 35.5 % (3.6 ) 33.7 % 34.4 % (0.7 )
Gross Profit 58.9 50.8 8.1 15.9 59.2 59.9 (0.7 ) (1.2 )
Gross Margin 68.1 % 64.5 % 3.6 66.3 % 65.6 % 0.7

Our cost of sales was ~~$27.6~~$30.1 million, or ~~31.9%~~33.7% of our sales for the three months ended ~~September~~June 30, ~~2016,~~2017, as compared to ~~$28.0~~$31.5 million, or ~~35.5%~~34.4% of our sales for the same period in ~~2015.~~2016. In RMB terms, our cost of sales increased by 0.4% for the three months ended June 30, 2017, as compared to the same period in 2016. Our gross profit was ~~$58.9~~$59.2 million and ~~$50.8~~$59.9 million for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, representing gross margins of ~~68.1%~~66.3% and ~~64.5%~~65.6%, respectively.

Our cost of sales and gross margin are affected by the product pricing, raw material costs, product mix, yields and ~~manufactory~~manufacturing efficiency. In an effort to increase plasma collection volume and expand our donor base, we increased the nutrition fees paid to donors consistent with ~~the~~ industry practice. We ~~expected~~expect the nutrition fees to be paid to donors will continue to increase as a result of improving living standards in China. Consequently, future improvements on profit margins will need to be derived from increases in product pricing, ~~product mix,~~ yields and manufacturing ~~efficiency.~~efficiency, as well as from optimizing the product mix.

The decrease in cost of sales as a percentage of sales for the three months ended ~~September~~June 30, ~~2016 decreased by 1.4% in USD terms, or increased by 5.7% in RMB terms,~~2017 as compared to the same period in ~~2015. The increase of cost of sales in RMB terms~~2016 was mainly due to ~~the increases in the~~a greater proportion of sales ~~volume of human albumin~~derived from hyper-immune products and human tetanus immunoglobulin products, which was partially offset by the decrease in the sales volume of IVIG products. The increase of gross margin for the three months ended September 30, 2016 as compared to the same period in 2015 was mainly due to the increase of average sales price of certain plasma products,with a ~~more profitable product mix and a lower sales contribution from products made from raw materials purchased from Xinjiang Deyuan Bioengineering Co., Ltd., or Xinjiang Deyuan, whose cost is moderately~~ higher ~~than plasma from our own collection stations.~~profit margin.

Operating expenses

For the Three Months Ended September 30, Change For the Three Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Operating expenses 19.1 15.8 3.3 20.9 19.8 16.9 2.9 17.2
as a percentage of total sales 22.2 % 20.0 % 2.2 22.2 % 18.5 % 3.7

15

Our total operating expenses increased by ~~$3.3~~$2.9 million, or ~~20.9%~~17.2%, to ~~$19.1~~$19.8 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$15.8~~$16.9 million for the same period in ~~2015.~~2016. As a percentage of sales, total operating expenses increased by ~~2.2%~~3.7% to 22.2% for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~20.0%~~18.5% for the same period in ~~2015.~~2016. The increase of the total operating expenses was mainly due to the increase of general and administrative expenses as discussed below.

Selling expenses

For the Three Months Ended September 30, Change For the Three Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Selling expenses 3.0 2.7 0.3 11.1 3.6 3.0 0.6 20.0
as a percentage of total sales 3.5 % 3.4 % 0.1 4.0 % 3.3 % 0.7

Our selling expenses increased by ~~$0.3~~$0.6 million, or ~~11.1%~~20.0%, to ~~$3.0~~$3.6 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$2.7~~$3.0 million for the same period in ~~2015.~~2016. As a percentage of sales, our selling expenses ~~remained stable~~increased by 0.7% to 4.0% for the three months ended ~~September~~June 30, ~~2016 as compared to~~2017, from 3.3% for the same period in ~~2015. The increase of the selling expenses was mainly in line with the sales growth in the three months ended September 30,~~ 2016 ~~as compared~~primarily due to ~~the same period in 2015.~~higher marketing and promotion costs related to certain hyper-immune products, coagulation factor products and placenta polypeptide products.

General and administrative expenses

For the Three Months Ended September 30, Change
2016 2015 Amount %
(U.S. dollars in millions, except percentage)
General and administrative expenses 15.1 11.5 3.6 31.3
as a percentage of total sales 17.5 % 14.6 % 2.9
For the Three Months Ended June 30, Change
2017 2016 Amount %
(U.S. dollars in millions, except percentage)
General and administrative expenses 14.3 12.6 1.7 13.5
as a percentage of total sales 16.0 % 13.8 % 2.2

Our general and administrative expenses increased by ~~$3.6~~$1.7 million, or ~~31.3%~~13.5%, to ~~$15.1~~$14.3 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$11.5~~$12.6 million for the same period in ~~2015.~~2016. General and administrative expenses as a percentage of sales increased by ~~2.9%~~2.2% to ~~17.5%~~16.0% for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~14.6%~~13.8% for the same period in ~~2015.~~2016. The increase in general and administrative expenses was mainly due to the increase ofin share-based compensation expenses totaling $3.4 million, as well as a prepayment provision of ~~$3.4 million.~~$1.2 million incurred in the second quarter of 2016.

Research and development expenses

For the Three Months Ended September 30, Change For the Three Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Research and development expenses 1.0 1.6 (0.6 ) (37.5 ) 1.9 1.3 0.6 46.2
as a percentage of total sales 1.2 % 2.0 % (0.8 ) 2.2 % 1.4 % 0.8

Our research and development expenses ~~decreased~~increased by $0.6 million, or ~~37.5%~~46.2%, to ~~$1.0~~$1.9 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$1.6~~$1.3 million for the same period in ~~2015. The decrease in research and development expenses was~~2016, mainly due to the ~~completion of~~increased expenditure incurred for certain ~~research and development~~clinical trial programs ~~and approximately $0.5 million in government grant which was recorded as deduction of research and development expenses in~~for the three months period ended ~~September~~June 30, ~~2016.~~
2017.

Income tax
For the Three Months Ended September 30, Change
2016 2015 Amount %
(U.S. dollars in millions, except percentage)
Income tax 7.2 6.0 1.2 20.0
as a percentage of total sales 8.3 % 7.7 % 0.6

For the Three Months Ended June 30, Change
2017 2016 Amount %
(U.S. dollars in millions, except percentage)
Income tax 6.9 7.0 (0.1 ) (1.4 )
as a percentage of total sales 7.7 % 7.7 % - -
Our provision for income ~~tax expenses increased~~taxes decreased by ~~$1.2~~$0.1 million, or ~~20.0%~~1.4%, to ~~$7.2~~$6.9 million for the three months ended ~~September~~June 30, ~~2016,~~2017, from ~~$6.0~~$7.0 million for the same period in ~~2015.~~2016. Our effective income tax rate ~~remained at 16.8%~~was 16.5% and 15.7% for the three months ended ~~September~~June 30, 2017 and 2016, respectively. The difference between the effective income tax rates and ~~2015. The~~ statutory income tax rate ~~applicable~~of 25% for the three months ended June 30, 2017 and 2016 was primarily due to ~~our major operating subsidiaries~~the application of a preferential tax rate of 15% to both Guizhou Taibang and Shandong Taibang in 2017 and 2016, which was partially offset by valuation allowances against the deferred tax assets of China Biologic in the ~~PRC for 2016 and 2015 is 15.0%.~~U.S. relating to operating losses.
16

Comparison of ~~Nine months~~Six Months Ended ~~September~~June 30, ~~2016~~2017 and ~~September~~June 30, ~~2015~~2016

The following table sets forth key components of our results of operations in thousands of U.S. dollars for the periods indicated.

For the Nine Months Ended September 30, For the Six Months Ended June 30,
2016 2015 2017 2016
Amount % of Total Sales Amount % of Total Sales Amount % of
Total
Sales Amount % of
Total
Sales
(U.S. dollars in thousands, except percentage and per share data) (U.S. dollars in thousands, except percentage and per share data)
Sales 263,535 100.0 228,173 100.0 180,731 100.0 177,009 100.0
Cost of sales 93,173 35.4 79,461 34.8 62,326 34.5 65,526 37.0
Gross margin 170,362 64.6 148,712 65.2
Gross profit 118,405 65.5 111,483 63.0
Operating expenses:
Selling expenses 7,271 2.8 7,230 3.2 7,385 4.1 4,254 2.4
General and administrative expenses 38,998 14.8 27,486 12.0 29,521 16.3 23,902 13.5
Research and development expenses 3,441 1.3 3,984 1.7 3,282 1.8 2,399 1.4
Total operating expenses 49,710 18.9 38,700 17.0 40,188 22.2 30,555 17.3
Income from operations 120,652 45.7 110,012 48.2 78,217 43.3 80,928 45.7
Other income (expenses):
Equity in income (loss) of an equity method investee 1,141 0.4 (1,138 ) (0.5 )
Equity in income of an equity method investee 1,884 1.0 44 (0.0 )
Interest expense (235 ) (0.1 ) (1,534 ) (0.7 ) (349 ) (0.2 ) (177 ) (0.1 )
Interest income 4,910 1.9 4,228 1.9 3,241 1.8 3,043 1.8
Loss from disposal of a subsidiary (76 ) 0.0 - 0.0
Total other income, net 5,740 2.2 1,556 0.7 4,776 2.6 2,910 1.7
Earnings before income tax expense 126,392 47.9 111,568 48.9
Income before income tax expense 82,993 45.9 83,838 47.4
Income tax expense 20,778 7.9 17,792 7.8 13,818 7.6 13,614 7.7
Net income 105,614 40.0 93,776 41.1 69,175 38.3 70,224 39.7
Less: Net income attributable to noncontrolling interest 20,272 7.6 21,013 9.2 8,153 4.5 13,274 7.5
Net income attributable to the Company 85,342 32.4 72,763 31.9
Net income per share of common stock
Net income attributable to our company 61,022 33.8 56,950 �� 32.2
Earnings per share of common stock
Basic 3.10 2.81 2.17 2.08
Diluted 3.05 2.68 2.15 2.05

Sales

Our sales increased by ~~$35.3~~$3.7 million, or ~~15.5%~~2.1%, to ~~$263.5~~$180.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~$228.2~~$177.0 million for the same period in ~~2015.~~2016. In RMB terms, our total sales ~~would have~~ increased by ~~23.1%~~7.4% for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015. Such~~2016. The increase ofin sales in RMB terms for the six months ended June 30, 2017 was ~~mainly due~~primarily attributable to the ~~price~~sales increase in ~~human tetanus immunoglobulin~~placenta polypeptide products, certain hyper-immune products and ~~sales volume increases in~~ human ~~albumin products, human tetanus immunoglobulin products and placenta polypeptide products.~~albumin.

The following table summarizes the breakdown of sales by ~~significant~~major types of product:

For the Nine Months Ended September 30, Change
2016 2015
Amount % Amount % Amount %
(U.S. dollars in millions, except percentage)
Human albumin 102.4 38.9 85.5 37.5 16.9 19.8
Immunoglobulin products:
  IVIG 93.4 35.5 99.6 43.6 (6.2 ) (6.2 )
  Other immunoglobulin products 30.6 11.6 15.9 7.0 14.7 92.5
Placenta polypeptide 24.7 9.4 19.9 8.7 4.8 24.1
Others 12.4 4.6 7.3 3.2 5.1 69.9
Totals 263.5 100.0 228.2 100.0 35.3 15.5
For the Six Months Ended June 30, Change
2017 2016
Amount % Amount % Amount %
(U.S. dollars in millions, except percentage)
Human albumin 69.2 38.3 70.3 39.7 (1.1 ) (1.6 )
Immunoglobulin products:
IVIG 61.4 34.0 64.8 36.6 (3.4 ) (5.2 )
Other immunoglobulin products 21.0 11.6 17.1 9.7 3.9 22.8
Placenta polypeptide 19.5 10.8 16.6 9.4 2.9 17.5
Others 9.6 5.3 8.2 4.6 1.4 17.1
Totals 180.7 100.0 177.0 100.0 3.7 2.1

17
During the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2015:~~2016:

· the average price for our approved human albumin products, which accounted for ~~38.9%~~38.3% of our total sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016, increased~~2017, decreased by ~~2.0%~~1.9% and 6.8% in RMB ~~terms~~term and ~~decreased by 4.3%~~ in USD ~~terms , respectively;~~term, respectively, mainly due to the combined effect of both a decrease in price we charged certain distributors reflective of intensified market competition and a lower sales proportion from the higher-unit-price dosages; and

· the average price for our approved IVIG products, which accounted for ~~35.5%~~34.0% of our total sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, increased by ~~3.9%~~2.3% in RMB ~~terms~~term and decreased by ~~2.5%~~2.8% in USD ~~terms, respectively.~~term mainly due to an increase in price we charged the company’s major distributors.

The ~~average~~ sales ~~price~~volume of ~~our~~ human albumin products ~~and IVIG products~~ increased ~~in RMB terms~~by 5.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015 following the removal of the retail price ceiling for drug products effective on June 1, 2015, backed by the market demand.~~
~~The~~2016, primarily due to enhanced production and sales volume of our human albumin products and IVIG products increased by 25.0% and decreased by 3.7%, respectively, for the nine months ended September 30, 2016 as compared to the same period in 2015. The sales growth of human albumin products was primarily attributable to the increased production volume at ~~Shandong Taibang and~~ Guizhou Taibang as a result of increased plasma supply volume. The ~~decrease in the~~ sales volume of IVIG products decreased by 2.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015 was~~2016, primarily due to a high comparison base in the ~~depletion~~six months period ended June 30, 2016 when we sold the IVIG products processed from the approximately 143 tonnes of ~~IVIG~~source plasma and plasma pastes ~~we reserved~~outsourced from ~~prior years that were processed and sold~~Xinjiang Deyuan in ~~2015 and the allocation of more production facilities to human tetanus immunoglobulin~~2015.
Revenue from hyper-immune products, which ~~had higher margin,~~were included in ~~the nine months ended September 30, 2016.~~
~~The sales of~~ other immunoglobulin products, increased by ~~92.5%~~26.1% in USD term for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015. Other~~2016, mainly attributable to an increase in sales of human rabies immunoglobulin, reflecting our enhanced production volume in response to a strong market demand.
Revenue from placenta polypeptide products ~~accounted for 11.6%~~increased by 23.5% and ~~7.0%~~17.5% in RMB term and USD term, respectively, reaching 10.8% of ~~our~~ total sales, for the ~~nine~~six months ended ~~September~~June 30, 2016 and September 30, 2015, respectively. The increase was mainly attributable to the increase in both sales volume and sales price of human tetanus immunoglobulin products. The sales volume of our human tetanus immunoglobulin increased by 64.7% for the nine months ended September 30, 20162017 as compared to the same period in ~~2015. The average~~2016, attributable to higher-than-normal product sales volume in the first quarter of 2017 possibly in anticipation of the nationwide implementation of a two-invoice policy system which will potentially result in a higher billing price offor distributors in the future.
Revenue from human ~~tetanus immunoglobulin~~coagulation factor VIII and human prothrombin complex concentrate, which are included in other plasma products, increased ~~significantly~~by 29.3% and 22.9% in RMB term and USD term, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015 due to the significant market supply shortage following the removal~~2016, reflecting our continued medical marketing activities, representing at 5.3% of ~~the retail price ceiling for drug products effective on June 1, 2015.~~
~~The~~total sales ~~increase of placenta polypeptide~~ for the ~~nine~~six months period ended ~~September~~June 30, 2016 as compared to the same period in 2015 was mainly in line with the sales volume of placenta polypeptide. The sales volume of placenta polypeptide increased by 28.2% for the nine months ended September 30, 2016 primarily because we increased our market penetration into more hospitals through our improved sales capabilities.
The sales increase of other products for the nine months ended September 30, 2016 as compared to the same period in 2015 was mainly due to the increase in sales volume of PCC and factor VIII. Both our PCC and factor VIII experienced the sales ramp-up for the nine months ended September 30, 2016.2017.

Cost of salesand gross profit
For the Nine Months Ended September 30, Change For the Six Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Cost of sales 93.2 79.5 13.7 17.2 62.3 65.5 (3.2 ) (4.9 )
as a percentage of total sales 35.4 % 34.8 % 0.6 34.5 % 37.0 % (2.5 )
Gross Profit 170.3 148.7 21.6 14.5 118.4 111.5 6.9 6.2
Gross Margin 64.6 % 65.2 % (0.6 ) 65.5 % 63.0 % 2.5

Our cost of sales was ~~$93.2~~$62.3 million, or ~~35.4%~~34.5% of our sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, as compared to ~~$79.5~~$65.5 million, or ~~34.8%~~37.0% of our sales for the same period in ~~2015.~~2016. Our gross profit was ~~$170.3~~$118.4 million and ~~$148.7~~$111.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, representing gross margins of ~~64.6%~~65.5% and ~~65.2%~~63.0%, respectively.

The increase in cost of sales for the nine months ended September 30, 2016 as compared to the same period in 2015 was mainly due to the increases in sales volume of human albumin products, human tetanus immunoglobulin products and placenta polypeptide products. The increasedecrease in cost of sales as a percentage of sales ~~increased~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015~~2016 was mainly due to ~~the higher cost~~greater sales proportion of ~~plasma purchased from Xinjiang Deyuan, which was partially offset by the increase in the average sales price of certain plasma~~higher-margin hyper-immune products and ~~a more profitable product mix.~~placenta polypeptide products, as well as lower sales proportion of the high-cost outsourced raw plasma.

For the nine months ended September 30, 2016 and 2015, the sales derived from the raw material purchased from Xinjiang Deyuan, whose cost is moderately higher than plasma from our own collection stations, accounted for 10.8% and 1.3% of total plasma product sales, respectively. Excluding the sales of products made from outsourced raw plasma, our gross margin would have been moderately higher for the nine months ended September 30, 2016 as compared to the same period in 2015, which was mainly attributable to the increase of sales price and a more profitable product mix.

Operating expenses

For the Nine Months Ended September 30, Change For the Six Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Operating expenses 49.7 38.7 11.0 28.4 40.2 30.6 9.6 31.4
as a percentage of total sales 18.9 % 17.0 % 1.9 22.2 % 17.3 % 4.9
18

Our total operating expenses increased by ~~$11.0~~$9.6 million, or ~~28.4%~~31.4%, to ~~$49.7~~$40.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, from ~~$38.7~~$30.6 million for the same period in ~~2015.~~2016. As a percentage of sales, total operating expenses increased by ~~1.9%~~4.9% to ~~18.9%~~22.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, from ~~17.0%~~17.3% for the same period in ~~2015.~~2016. The increase ofin the total operating expenses was mainly ~~in line with~~due to the increase ofin the selling expenses and general and administrative expenses as discussed below.

Selling expenses

For the Nine Months Ended September 30, Change For the Six Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Selling expenses 7.3 7.2 0.1 1.4 7.4 4.3 3.1 72.1
as a percentage of total sales 2.8 % 3.2 % (0.4 ) 4.1 % 2.4 % 1.7

Our selling expenses increased by ~~$0.1~~$3.1 million, or ~~1.4%~~72.1%, to ~~$7.3~~$7.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, from ~~$7.2~~$4.3 million for the same period in ~~2015.~~2016. As a percentage of sales, our selling expenses ~~decreased~~increased by ~~0.4%~~1.7% to ~~2.8%~~4.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, from ~~3.2%~~2.4% for the same period in ~~2015,~~2016, primarily due to ~~the~~higher marketing and promotion ~~activities on human rabies immunoglobulin~~costs related to placenta polypeptide products, ~~we carried out in the nine months ended September 30, 2015.~~coagulation factor products and certain hyper-immune products.

General and administrative expenses

For the Nine Months Ended September 30, Change For the Six Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
General and administrative expenses 39.0 27.5 11.5 41.8 29.5 23.9 5.6 23.4
as a percentage of total sales 14.8 % 12.0 % 2.8 16.3 % 13.5 % 2.8

Our general and administrative expenses increased by ~~$11.5~~$5.6 million, or ~~41.8%~~23.4%, to ~~$39.0~~$29.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, from ~~$27.5~~$23.9 million for the same period in ~~2015.~~2016. General and administrative expenses as a percentage of sales increased by 2.8% to ~~14.8%~~16.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, from ~~12.0%~~13.5% for the same period in ~~2015.~~2016. The increase in general and administrative expenses was mainly due to the increase ofin share-based compensation expenses ~~of $8.7~~totaling $6.9 million, ~~and~~as well as a prepayment ~~impairment~~provision of $1.2 ~~million.~~million incurred in the second quarter of 2016.

Research and development expenses

For the Nine Months Ended September 30, Change For the Six Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Research and development expenses 3.4 4.0 (0.6 ) (15.0 ) 3.3 2.4 0.9 37.5
as a percentage of total sales 1.3 % 1.7 % (0.4 ) 1.8 % 1.4 % 0.4

Our research and development expenses ~~decreased~~increased by ~~$0.6~~$0.9 million, or ~~15.0%~~37.5%, to ~~$3.4~~$3.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, from ~~$4.0~~$2.4 million for the same period in ~~2015. In~~2016, mainly due to the ~~nine~~expenditure incurred for certain clinical trial programs for the six months period ended ~~September~~June 30, ~~2016 and 2015, we received government grants of $0.7 million and $0.9 million, respectively, and recognized the grants as a reduction of research and development expenses for each relevant period.~~2017.

Income tax
For the Nine Months Ended September 30, Change For the Six Months Ended June 30, Change
2016 2015 Amount % 2017 2016 Amount %
(U.S. dollars in millions, except percentage) (U.S. dollars in millions, except percentage)
Income tax 20.8 17.8 3.0 16.9 13.8 13.6 0.2 1.5
as a percentage of total sales 7.9 % 7.8 % 0.1 7.6 % 7.7 % (0.1 )

Our provision for income ~~tax expenses~~taxes increased by ~~$3.0~~$0.2 million, or ~~16.9%~~1.5%, to ~~$20.8~~$13.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, from ~~$17.8~~$13.6 million for the same period in ~~2015.~~2016. Our effective income tax ~~rates were 16.4%~~rate was 16.6% and ~~15.9%~~16.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. The difference between the effective income tax rates and statutory income tax rate ~~applicable~~of 25% for the six months ended June 30, 2017 and 2016 was primarily due to ~~our major operating subsidiaries~~the application of a preferential tax rate of 15% to both Guizhou Taibang and Shandong Taibang in 2017 and 2016, which was partially offset by valuation allowances against the deferred tax assets of China Biologic in the ~~PRC for 2016 and 2015 is 15.0%.~~U.S. relating to operating losses.

~~Foreign Currency Exchange Impact~~
19

As all of our consolidated revenues and consolidated costs of sales and majority of expenses are denominated in RMB, and all of our assets are denominated in RMB, except certain cash balances, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between U.S. dollars, which is our reporting currency, and RMB. For details, see “Item 3. Quantitative and Qualitative Disclosures about Market Risk—Foreign Exchange Risk.”
Given our operations primarily in China, we evaluate certain key items of our financial results on a local currency basis (i.e., in RMB) in addition to the reporting currency (i.e., in USD). The local currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing local currency information on such key items enhances the understanding of our financial results and evaluation of performance in comparison to prior periods. We calculate changes in local currency percentages by comparing financial results denominated in RMB from period to period.

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash flows from operations, ~~augmented~~supplemented by bank borrowings and equity contributions by our ~~stockholders.~~shareholders. As of ~~September~~June 30, ~~2016,~~2017, we had ~~$203.2~~$223.2 million in cash and cash equivalents, primarily consisting of ~~cash on hand and~~ demand deposits.

The following table provides the summary of our cash flows for the periods indicated:

For the Nine Months Ended September 30,
2016 2015
(U.S. dollars in millions)
Net cash provided by operating activities 87.3 72.3
Net cash used in investing activities (44.1 ) (55.8 )
Net cash provided by financing activities 19.6 49.7
Effects of exchange rate change on cash (4.5 ) (4.3 )
Net increase in cash and cash equivalents 58.3 61.9
Cash and cash equivalents at beginning of the period 144.9 80.8
Cash and cash equivalents at end of the period 203.2 142.7
For the Six Months Ended June 30,
2017 2016
(U.S. dollars in millions)
Net cash provided by operating activities 36.9 57.0
Net cash used in investing activities (16.6 ) (26.3 )
Net cash provided by financing activities 14.8 32.2
Effects of exchange rate change on cash 4.3 (3.8 )
Net increase in cash and cash equivalents 39.4 59.1
Cash and cash equivalents at beginning of the period 183.8 144.9
Cash and cash equivalents at end of the period 223.2 204.0

Operating Activities

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$87.3~~$36.9 million, as compared to ~~$72.3~~$57.0 million for the same period in ~~2015.~~2016. The ~~increase~~decrease in net cash provided by operating activities was ~~largely consistent with the improvements in our results of operations and the increase of net non-cash operating expenses for the nine months ended September 30, 2016 as compared~~primarily due to the ~~same period in 2015. Our cash inflows from operating activities are negatively affected by~~ increases in accounts receivable and ~~inventory.~~inventories.

Accounts receivable

~~Our accounts~~Accounts receivable increased by ~~$16.1~~$26.1 million ~~and $16.2 million as of September~~during the six months ended June 30, ~~2016 and 2015, respectively,~~2017, as compared ~~with~~to $13.9 million in the ~~balance as~~same period of ~~December 31, 2015 and 2014, respectively.~~2016. The accounts receivable turnover days for plasma products ~~were 45~~increased to 51 days ~~for~~during the ~~nine months periods ended September 30, 2016~~first half year of 2017 from 35 days in the first half year of 2016. The increased turnover days are combined results of a higher percentage of direct sales and ~~2015. To enhance our business relationship with certain key~~a higher concentration on large hospital customers ~~we granted~~and distributor customers that typically request longer credit terms to certain qualified hospitals during the nine months ended September 30, 2016 and granted special credit term extensions to certain distributors of rabies immunoglobulin products in the same period of 2015.terms.

Inventories

~~Our~~Inventories increased by $22.8 million in the six months period ended June 30, 2017, mainly comprising of outsourced and our self-collected raw material plasma increase. This increase was higher than the inventory ~~cycle slowed down~~increase of $12.5 million in the same quarter of 2016, mainly because we had to stockpile sufficient inventories in preparation for the nine months ended September 30, 2016 as compared to the same period in 2015. The inventory turnover days increased to 398 days for the nine months ended September 30, 2016 from 387 days for the same period in 2015, which was mainly due to an increase inplanned temporary production suspension at our ~~inventory of raw materials purchased from Xinjiang Deyuan as of September 30, 2016 as compared to that balance as of September 30, 2015.~~

~~Net non-cash operating expenses~~
Net non-cash operating expenses increased by $7.3 million during the nine months ended September 30, 2016, as compared to the same period in 2015, primarily due to the increase of share-based compensation expenses totaling $8.7 million.Shandong facility.

Investing Activities

Our use of cash for investing activities iswas primarily for the acquisition of property, plant and equipment and ~~intangibles.~~a long-term loan to a third party.

Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$44.1~~$16.6 million, as compared to ~~$55.8~~$26.3 million for the same period in ~~2015.~~2016. During the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, we paid ~~$42.5~~$16.6 million and ~~$30.5~~$26.6 million, respectively, for the acquisition of property, plant and equipment, ~~intangible assets and~~ land use rights and intangible assets for Shandong Taibang and Guizhou Taibang. ~~During~~In addition, during the ~~nine~~six months ended ~~September 30, 2016 and 2015, we granted loans of $12.3 million and $28.5 million, respectively, to Xinjiang Deyuan. During the nine months ended September~~June 30, 2016, we ~~received~~granted a ~~refund~~loan of ~~$10.3~~$6.3 million ~~from the local government of Guiyang~~to Xinjiang Deyuan pursuant to a cooperation agreement we entered into with ~~respect to deposits of land use rights. During the nine months ended September 30, 2015, we received $2.5 million government grants related to property, plant and equipment.~~Xinjiang Deyuan in August 2015.

Financing Activities

Net cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$19.6~~$14.8 million, as compared to ~~$49.7~~net cash provided by financing activities of $32.2 million for the same period in ~~2015.~~2016. The net cash provided by financing activities in the six months period ended June 30, 2017 mainly consisted of $14.3 million short-term loan net proceeds. The net cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, 2016 mainly consisted of $2.4 million proceeds from the ~~proceeds~~exercise of ~~$3.2 million from~~ stock ~~option exercised~~options and the maturity of a $37.8 million time deposit as a security collateral for a ~~bank~~24-month loan ~~that~~which was fully repaid in June 2015, partially offset by a dividend of $7.9 million paid to the ~~minority~~noncontrolling shareholder by Shandong Taibang and payment of $13.5 million to the former minority shareholders of Guizhou Taibang in connection with their capital withdrawal from Guizhou Taibang. The net cash provided by financing activities for the nine months ended September 30, 2015 mainly consisted of net proceeds of $80.6 million from a follow-on offering of our stock in June 2015, proceeds of $63.2 million from the maturity of deposits used as security for bank loans and proceeds of $7.2 million from stock options exercised, partially offset by repayments of bank loans of $97.9 million and a dividend of $3.7 million held in escrow by a trial court in connection with disputes with a former minority shareholder of Guizhou Taibang.

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The remaining balance of the consideration payable to former minority shareholders of Guizhou Taibang in connection with their capital withdrawal in Guizhou Taibang, will be paid in accordance with the relevant agreement.

~~Our management~~Management believes that ~~we have~~our company has sufficient cash on hand and will continue to have positive cash inflow for ~~our~~its operations from the sale of ~~our~~its products in the PRC market.

Obligations under Material Contracts

The following table sets forth our material contractual obligations as of ~~September~~June 30, ~~2016:~~2017:

Payments Due by Period
Contractual Obligations Total
Less than
one year
One to
three years Three to
five years
More than
five years

(U.S. dollars in millions)
Operating lease commitment 1.2 0.4 0.6 - 0.2
Purchase commitment 57.2 28.6 28.6 - -
Capital commitment 27.8 25.0 2.8 - -
Total 86.2 54.0 32.0 - 0.2
The remaining balance of the consideration payable to former minority shareholders of Guizhou Taibang in connection with their capital withdrawal in Guizhou Taibang, will be paid in accordance with the relevant agreement.
Payments Due by Period
Contractual Obligations Total Less than
one year One to
three years Three to
five years More than
five years
(U.S. dollars in millions)
Operating lease commitment 0.8 0.4 0.3 - 0.1
Purchase commitment 25.1 22.3 2.8 - -
Capital commitment 23.0 20.7 2.3 - -
Total 48.9 43.4 5.4 - 0.1

Seasonality of Our Sales

Our operating results ~~of operations~~ and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

Inflation

Inflation does not materially affect our business or the results of our operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or ~~using~~ different ~~assumptions.~~assumptions being used. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015.~~2016.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our operations are carried out in the PRC and we are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. Our results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Interest Rate Risk

We are exposed to interest rate risk primarily with respect to our bank loans. We have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest expenses may increase due to changes in market interest rates.

Management monitors the banks’ prime rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.

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Foreign Exchange Risk

All of our ~~consolidated~~ revenues and ~~consolidated~~ costs of sales and the majority of expenses are denominated in RMB. All of our assets are denominated in RMB, except certain cash balances. However, our reporting currency is U.S. dollars. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between U.S. dollars and RMB. If RMB depreciates against the U.S. dollars, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and shareholders’ equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in ~~determining~~ other comprehensive income, a component of ~~stockholders’~~shareholders’ equity. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

RMB is currently freely convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment. In addition, beginning in July 2005, China reformed its exchange rate regime by changing to a managed floating exchange rate regime based on market supply and demand with reference to a basket of major foreign currencies. Under the managed floating exchange rate regime, RMB is no longer pegged to U.S. dollars. The People’s Bank of China announces the closing prices of foreign currencies such as U.S. dollars traded against RMB in the inter-bank foreign exchange market after the closing of the market on each business day, and makes such prices the central parity for trading against RMB on the following business day. On May 19, 2007, the People’s Bank of China announced a policy to expand the maximum daily floating range of RMB trading prices against U.S. dollars in the inter-bank spot foreign exchange market from 0.3% to 0.5%. On June 19, 2010, the People’s Bank of China announced that it would proceed further with the reform of the RMB exchange rate regime to enhance the flexibility of the RMB exchange rate and that emphasis would be placed on reflecting market supply and demand with reference to a basket of major foreign currencies. On April 16, 2012, the People’s Bank of China announced a policy to expand the maximum daily floating range of RMB trading prices against U.S. dollars in the inter-bank spot foreign exchange market from 0.5% to 1.0%. On March 17, 2014, the People’s Bank of China announced a policy to further expand the maximum daily floating range of RMB trading prices against U.S. dollars in the inter-bank spot foreign exchange market to 2.0%. In the long term, RMB may appreciate or depreciate more significantly in value against U.S. dollars or other foreign currencies, depending on the market supply and demand with reference to a basket of major foreign currencies. On August 10, 2015, the People’s Bank of China announced that it had changed the calculation method for RMB’s daily central parity exchange rate against U.S. dollars, which resulted in an approximately 2.0% depreciation of RMB on that day. RMB continued to experience an approximately 8%9% depreciation against U.S. dollars throughout the remainder of 2015 and up to the date of this report.

Account Balances

We maintain balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States, Hong Kong Deposit Protection Board insured limits for the banks located in Hong Kong, or China Deposit Insurance Scheme insured limits for the banks located in the PRC. Total cash at banks and ~~restricted cash~~time deposits as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 amounted to ~~$203.2~~$222.5 million and ~~$182.3~~$183.1 million, respectively, ~~$2.5~~$2.4 million and ~~$3.0~~$2.7 million of which are covered by insurance, respectively. We have not experienced any losses in such accounts and we do not believe that we are exposed to any significant risks on our cash at banks and deposits.

Inflation

Inflationary factors such as increases in the cost of our sales and overhead costs may adversely affect our ~~results of operations.~~operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs.

Market for Human Albumin and IVIG

Our two major products, human albumin and IVIG, accounted for ~~38.9%~~38.3% and ~~35.5%~~34.0% of the total sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. If the market demands for human albumin or IVIG cannot be sustained in the future or if there is substantial price decrease in either or both products, our operating results ~~of operations~~ could be materially and adversely affected.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. David (Xiaoying) Gao and our Chief Financial Officer, Mr. Ming Yang, of the effectiveness of the design and operation of our disclosure controls and procedures, as of ~~September~~June 30, ~~2016.~~2017. Based on that evaluation, Mr. Gao and Mr. Yang concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2016.~~2017.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings arising in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. Other than the legal proceedings set forth below, we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or results of operations.None.

~~Dispute with Jie’an over Certain Capital Injection into Guizhou Taibang~~
In May 2007, a 91% majority of Guizhou Taibang’s shareholders approved a plan to raise additional capital from qualified strategic investors through the issuance of an additional 20,000,000 shares of Guizhou Taibang. The plan required all existing Guizhou Taibang shareholders to waive their rights of first refusal to subscribe for the additional shares. The remaining 9% minority shareholder of Guizhou Taibang’s shares, Guizhou Jie’an Company, or Jie’an, did not support the plan and did not waive its right of first refusal. In May 2007, Guizhou Taibang signed an Equity Purchase Agreement with certain alleged strategic investors (who concealed their background), pursuant to which such investors agreed to invest an aggregate of RMB51.0 million (approximately $7.6 million) in exchange for 21.4% of Guizhou Taibang’s equity interests. Such Equity Purchase Agreement was not approved or ratified by over two-thirds supermajority of Guizhou Taibang’s shareholders, which approval or ratification is required under the PRC Company Law. At the same time, as an existing shareholder, Jie’an also subscribed for 1,800,000 shares, representing its pro rata share of the 20,000,000 shares being offered. In total, Guizhou Taibang received RMB51.0 million (approximately $7.6 million) from the investors and RMB6.5 million (approximately $1.0 million) from Jie’an.

In June 2007, Jie’an brought a lawsuit against Guizhou Taibang, alleging that it had a right to acquire the 18,200,000 shares offered to the investors under the Equity Purchase Agreement. The trial court denied Jie’an’s request, and the PRC Supreme Court ultimately sustained the original ruling in May 2009 and denied the rights of first refusal of Jie’an over the 18,200,000 shares.
During the second quarter of 2010, Jie’an requested that Guizhou Taibang register its 1.8 million shares of additional capital injection with the local administration of industry and commerce, or AIC. Guizhou Taibang’s board of directors withheld its required ratification of Jie’an’s request, pending the outcome of the ongoing litigation. In March 2012, Jie’an brought another lawsuit against Guizhou Taibang for refusing to register the shares. In July 2013, the trial court dismissed the lawsuit for lack of jurisdiction. Jie’an did not appeal the dismissal.
In December 2013, Jie’an brought a third lawsuit against Guizhou Taibang, requesting Guizhou Taibang to register 1.8 million shares under its name with the local AIC. In July 2014, the trial court denied Jie’an’s request to register such shares. Despite the denial of Jie’an’s share registration request, the trial court, however, in its ruling, ordered Guizhou Taibang to pay accumulated dividends of RMB13.8 million (approximately $2.1 million) associated with these shares and the related interest expenses to Jie’an. Guizhou Taibang and Jie’an subsequently filed a cross-appeal. In December 2014, the appellate court ruled in favor of Jie’an supporting its request to register 1.8 million shares and ordered Guizhou Taibang to pay Jie’an its share of accumulated dividends of RMB18.3 million (approximately $2.7 million) associated with these shares plus the related interest expenses to Jie’an. In the first half of 2015, Guizhou Taibang paid an aggregate of RMB22.6 million (approximately $3.4 million) to the trial court held in escrow pending further appeal of this case. In June 2015, Guizhou Taibang appealed to the High Court of Guizhou, which overruled the decision of the appellate court and remanded the case to the trial court for retrial in September 2015. In August 2016, the trial court granted Jie’an’s petition to withdraw the lawsuit as Jie’an sought to withdraw its capital contribution in Guizhou Taibang pursuant to an agreement dated July 31, 2016. The funds held in escrow will be credited to the consideration payable to Jie’an for the capital withdrawal.
In November 2013, Guizhou Taibang held a shareholders meeting and the shareholders passed resolutions, or the November 2013 Resolutions, that, inter alia, (i) determined that it was no longer necessary for Guizhou Taibang to obtain additional capital from investors; (ii) rejected Jie’an’s request that Jie’an subscribe for additional shares of Guizhou Taibang alone and one or more other shareholders reduce their shareholding in Guizhou Taibang; and (iii) approved the issuance of a total of 20,000,000 new shares to all existing shareholders on a pro rata basis. Jie’an subsequently filed a fourth lawsuit against Guizhou Taibang in December 2013, requesting that the court declare the November 2013 Resolutions void. Both the trial court and the appellate court denied Jie’an’s request.
In March 2014, Guizhou Taibang held another shareholders meeting and the shareholders passed resolutions, or the March 2014 Resolutions, that, inter alia, re-calculated the ownership percentage in Guizhou Taibang based on the November 2013 Resolutions and the additional capital injections from existing shareholders. Guizhou Taibang subsequently updated the registration with the local AIC regarding the additional capital injections in August 2014. In September 2014, Jie’an and Shenzhen Yigong Shengda Technology Co., Ltd., or Yigong Shengda, another minority shareholder of Guizhou Taibang, filed a lawsuit against Guizhou Taibang, requesting that the court declare both the November 2013 Resolutions and the March 2014 Resolutions void and instruct Guizhou Taibang to withdraw the AIC registration. In November 2014, the trial court suspended this case pending the final outcome of the third lawsuit filed by Jie’an. In October 2015, the trial court denied their request. In May 2016, the appellate court vacated the trial court’s decision to uphold Guizhou Taibang’s shareholders resolution, and remanded the case for retrial. In August 2016, the trial court granted the petitions by Jie’an and Yigong Shengda to withdraw the lawsuit as Jie’an and Yigong Shengda sought to withdraw their respective capital contributions in Guizhou Taibang pursuant to an agreement dated July 31, 2016.
On July 31, 2016, Guiyang Dalin Biologic Technologies Co., Ltd., or Guiyang Dalin, Guizhou Taibang, Jie’an and Yigong Shengda entered into an agreement, pursuant to which Jie’an and Yigong Shengda agreed to withdraw their respective capital contributions in Guizhou Taibang for an aggregate consideration of RMB415.0 million (approximately $62.1 million). In August 2016, Guizhou Taibang paid the first installment of RMB90.0 million (approximately $13.5 million) of the consideration to Jie’an and Yigong Shengda. Guizhou Taibang completed the AIC registration for the foregoing capital withdrawal in October 2016 and will pay the balance of the consideration to Jie’an and Yigong Shengda in accordance with the agreement. As a result of the capital withdrawal, Guiyang Dalin has become the sole shareholder of Guizhou Taibang.
As of September 30, 2016, Guizhou Taibang had maintained, on its balance sheet, payables to Jie’an in the amounts of RMB5.0 million (approximately $0.8 million) as received funds in respect of the 1.8 million shares in dispute, RMB1.4 million (approximately $0.2 million) for the over-paid subscription price paid by Jie’an and RMB3.9 million (approximately $0.6 million) for the accrued interest.
~~Dispute with Certain Individual Investor over Certain Capital Injection into Guizhou Taibang~~
In part due to the invalidity of the Equity Purchase Agreement with certain alleged strategic investors in May 2007, which was never approved or ratified by Guizhou Taibang’s shareholders, such investors’ equity ownership in Guizhou Taibang and the related increase in registered capital of Guizhou Taibang have never been registered with the local AIC. In January 2010, one individual among such investors brought a lawsuit against Guizhou Taibang requesting to register his 14.35% ownership interest in Guizhou Taibang with the local AIC and seeking the distribution of his share of Guizhou Taibang’s dividends declared since 2007.

In October 2010, the trial court denied such individual investor’s right as shareholder of Guizhou Taibang and his entitlement to share the dividends, which ruling was reaffirmed after a re-trial by the same trial court in December 2012. After such ruling, Guizhou Taibang attempted to return the originally received fund of RMB34.2 million (approximately $5.1 million) to such investor by wiring the fund back to his bank account but was unable to do so due to the closure of his bank account. Another investor, however, accepted the returned fund of RMB11.2 million (approximately $1.7 million) from Guizhou Taibang in November 2010. In 2013, the same individual investor appealed the case to the PRC Supreme Court, which also denied his claims for shareholder status in Guizhou Taibang and the related dividend distribution and accrued interest in September 2013. Such investor subsequently attempted to seek a re-trial by the PRC Supreme Court, which request was denied by the PRC Supreme Court in January 2014. He then applied to the PRC Supreme Procuratorate to request for a review of the PRC Supreme Court’s decision and seek an appeal by the PRC Supreme Procuratorate to the PRC Supreme Court for an ultimate re-trial on his behalf. In July 2015, the PRC Supreme Procuratorate rejected his request for review.
As of September 30, 2016, Guizhou Taibang had maintained, on its balance sheet, payables to the investors of RMB34.2 million (approximately $5.1 million) as originally received funds from such individual investor in respect of the shares in dispute, RMB18.9 million (approximately $2.8 million) for the interest expenses, and RMB0.3 million (approximately $51,155) for the 1% penalty imposed by the Equity Purchase Agreement for any breach in the event that Guizhou Taibang is required to return the original investment amount to such investor.
ITEM 1A. RISK FACTORS.

As of the date of this filing, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K ~~for the fiscal year ended December 31, 2015.~~filed on February 23, 2017. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth in the above-referenced Annual Report on Form 10-K may cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events ~~occurs,~~occur, our business, financial condition or results of operations may be adversely affected.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the three months ended ~~September~~June 30, ~~2016~~2017 that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during this period. No repurchases of our common stock were made during the three months ended ~~September~~June 30, ~~2016.~~2017.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

~~Disclosure pursuant to Section 13(r) of the Exchange Act~~None.

Pursuant to Section 13(r) of the Exchange Act, we may be required to disclose in our annual and quarterly reports to the SEC whether we or any of our “affiliates” knowingly engaged in certain activities, transactions or dealings relating to Iran or with certain individuals or entities targeted by U.S. economic sanctions. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law. Because the SEC defines the term “affiliate” broadly, it includes any entity under common “control” with us (and the term “control” is also construed broadly by the SEC).
The description of the activities below has been provided to us by Warburg Pincus LLC, or WP, affiliates of which (i) designated a member of our board of directors, who resigned in August 2016, and (ii) beneficially own more than 10.0% of the equity interests of, and have the right to designate members of the board of directors of Santander Asset Management Investment Holdings Limited, or SAMIH. SAMIH may therefore be deemed to be under common “control” with us; however, this statement is not meant to be an admission that common control exists.

The disclosure below relates solely to activities conducted by SAMIH and its affiliates. The disclosure does not relate to any activities conducted by us or by WP and does not involve our or WP’s management. Neither we nor WP has had any involvement in or control over the disclosed activities, and neither we nor WP has independently verified or participated in the preparation of the disclosure. Neither we nor WP is representing as to the accuracy or completeness of the disclosure nor do we or WP undertake any obligation to correct or update it.
~~We understand that one or more SEC-reporting affiliates of SAMIH intends to disclose in its next annual or quarterly SEC report that:~~
~~(a)~~ Santander UK plc (“Santander UK”) holds two savings accounts and one current account for two customers resident in the United Kingdom (“UK”) who are currently designated by the United States (“US”) under the Specially Designated Global Terrorist (“SDGT”) sanctions program. Revenues and profits generated by Santander UK on these accounts in the nine months ended September 30, 2016 were negligible relative to the overall revenues and profits of Banco Santander SA.
~~(b)~~ Santander UK held a savings account for a customer resident in the UK who is currently designated by the US under the SDGT sanctions program. The savings account was closed on July 26, 2016. Revenue generated by Santander UK on this account in the nine months ended September 30, 2016 was negligible relative to the overall revenues of Banco Santander SA.
~~(c)~~ Santander UK holds two frozen current accounts for two UK nationals who are designated by the US under the SDGT sanctions program. The accounts held by each customer have been frozen since their designation and have remained frozen through the nine months ended September 30, 2016. The accounts are in arrears (£1,844.73 in debit combined) and are currently being managed by Santander UK Collections & Recoveries department. Revenues and profits generated by Santander UK on these accounts in the nine months ended September 30, 2016 were negligible relative to the overall revenues and profits of Banco Santander SA.
~~(d)~~ Santander UK holds three current accounts and a savings account for two customers resident in the UK who are currently designated by the US under the Transnational Criminal Organizations (“TCO”) sanctions program. Revenues and profits generated by Santander UK on these accounts in the nine months ended September 30, 2016 were negligible relative to the overall revenues and profits of Banco Santander SA.
~~(e)~~ In addition, during the nine months ended September 30, 2016, Santander UK had an OFAC match on a power of attorney account. A party listed on the account is currently designated by the US under the SDGT sanctions program and the Iranian Financial Sanctions Regulations. The power of attorney was removed from the account on July 29, 2016. During the nine months ended September 30, 2016, related revenues and profits generated by Santander UK were negligible relative to the overall revenues and profits of Banco Santander SA.
~~Renewed Executive Employment Agreements~~
Effective retrospectively August 31, 2016, the Company entered into a second amended and restated employment agreement dated November 1, 2016 with each of Mr. Ming Yang, the Company’s Chief Financial Officer, and Mr. Ming Yin, the Company’s Senior Vice President, to renew their employment agreements with the Company, which expired on August 31, 2016. The renewed employment agreements have terms substantially identical to the expired agreements except for the increased base salaries as authorized by our board of directors in August 2015. Each of the renewed agreements has a term of one year and allows for an automatic renewal of another year if the parties do not notify each other of their intention to terminate the agreement by August 1, 2017, in which case the agreement will expire on August 31, 2018.
ITEM 6. EXHIBITS.

The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.

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24

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~November~~August 2, ~~2016~~2017 CHINA BIOLOGIC PRODUCTS HOLDINGS, INC.

By: /s/ David (Xiaoying) Gao
David (Xiaoying) Gao, Chief Executive Officer
(Principal Executive Officer)

By: /s/ Ming Yang
Ming Yang, Chief Financial Officer

(Principal Financial Officer and Principal
Accounting Officer)

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25

EXHIBIT INDEX

Exhibit No. Description
3.1 ~~Second~~ Amended and Restated ~~Certificate~~Memorandum and Articles of ~~Incorporation~~Association of China Biologic Products Holdings, Inc. as filed with the Secretary of State of the State of Delaware on June 23, 2014 (incorporated by reference to Amendment No. 1 as filed with the SEC on November 2, 2016 to Form 8-K as filed with the SEC on June 20, 2016).
~~3.1.1~~ Certificate of Correction to Certificate of Incorporation of China Biologic Products, Inc. as filed with the Secretary of State of the State of Delaware on October 31, 2016 (incorporated by reference to Amendment No. 1 as filed with the SEC on November 2, 2016 to Form 8-K as filed with the SEC on June 20, 2016).
~~3.1.2~~ ~~Certificate of Change of Registered Office of China Biologic Products, Inc. as filed with the Secretary of State of the State of Delaware on November 1, 2016.~~
~~10.1~~ ~~Summary English translation of settlement agreement dated July 31, 2016~~ (incorporated by reference to Exhibit ~~10.1 of~~3.2 to the ~~Quarterly Report~~Registration Statement on Form ~~10-Q~~F-4 (Reg. No. 333-217564), filed by ~~the Company~~China Biologic Products Holdings, Inc. on ~~August 4, 2016).~~
~~10.2~~ ~~Summary English translation of guarantee agreement dated July 31, 2016 (incorporated by reference to Exhibit 10.2 of the Quarterly Report~~April 28, 2017 and as amended on ~~Form 10-Q filed by the Company on August 4, 2016).~~
~~10.3~~ ~~Consulting agreement between the Company and David Li dated July 1, 2016 (incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q filed by the Company on August 4, 2016).~~
~~10.4~~ Second amended and restated employment agreement between the Company and David (Xiaoying) Gao dated August 4, 2016 (incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q filed by the Company on August 4, 2016).
~~10.5~~ ~~Second Amended and Restated Employment Agreement between the Company and Ming Yang dated November 1, 2016.~~
~~10.6~~ ~~Second Amended and Restated Employment Agreement between the Company and Ming Yin dated November 1, 2016.~~May 17, 2017)
31.1 Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 Interactive data filed pursuant to Rule 405 of Regulation ~~S-T.~~S-T

26

	Note	June 30, 2017			December 31, 2016
		USD			USD
ASSETS
Current Assets
Cash and cash equivalents			223,243,489			183,765,533
Accounts receivable, net of allowance for doubtful accounts	2		61,146,341			33,918,796
Inventories	3		183,258,799			156,412,674
Prepayments and other current assets, net of allowance for doubtful accounts			17,644,030			15,320,913
Total Current Assets			485,292,659			389,417,916

Property, plant and equipment, net	4		145,410,658			132,091,923
Land use rights, net			24,180,767			23,389,384
Equity method investment			12,780,120			10,614,755
Loan receivable	5		44,283,000			43,245,000
Other non-current assets			6,256,555			6,198,531
Total Assets			718,203,759			604,957,509

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Short-term bank loans	6		14,465,780			-
Accounts payable			6,340,255			6,158,601
Income tax payable			8,191,264			7,484,366
Other payables and accrued expenses	7		64,096,628			59,798,145
Total Current Liabilities			93,093,927			73,441,112

Deferred income			3,599,654			3,755,648
Other liabilities			6,586,692			6,623,926
Total Liabilities			103,280,273			83,820,686

Stockholders’ Equity
Common stock: par value $0.0001; 100,000,000 shares authorized; 29,493,061 and 29,427,609 shares issued at June 30, 2017 and December 31, 2016, respectively; 27,238,357 and 27,172,905 shares outstanding at June 30, 2017 and December 31, 2016, respectively			2,949			2,943
Additional paid-in capital			122,167,032			105,459,610
Treasury stock: 2,254,704 shares at June 30, 2017 and December 31, 2016, at cost			(56,425,094	)		(56,425,094	)
Retained earnings			499,505,734			438,483,401
Accumulated other comprehensive loss			(13,264,788	)		(25,320,271	)
Total equity attributable to China Biologic Products, Inc.			551,985,833			462,200,589

Noncontrolling interest			62,937,653			58,936,234

Total Stockholders’ Equity			614,923,486			521,136,823

Commitments and contingencies	12		-			-

Total Liabilities and Stockholders’ Equity			718,203,759			604,957,509

	Note	September 30, 2016			December 31, 2015
		USD			USD
ASSETS
Current Assets
Cash and cash equivalents			203,203,969			144,937,893
Time deposits			-			38,032,593
Accounts receivable, net of allowance for doubtful accounts	2		40,188,813			25,144,969
Inventories	3		146,936,115			126,395,312
Prepayments and other current assets, net of allowance for doubtful accounts	11		37,516,102			24,545,597
Loan receivable-current	6		5,990,000			-
Deposits related to land use rights, current portion	5		1,038,403			10,056,200
Total Current Assets			434,873,402			369,112,564

Property, plant and equipment, net	4		134,424,469			105,364,251
Land use rights, net			24,196,851			23,576,300
Equity method investment			9,615,421			8,718,133
Loan receivable-non current	6		44,925,000			39,834,173
Other non-current assets			2,210,485			4,861,075
Total Assets	��		650,245,628			551,466,496

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable			7,154,609			9,681,835
Other payables and accrued expenses	11		54,753,124			57,462,563
Income tax payable			10,489,807			4,510,986
Total Current Liabilities			72,397,540			71,655,384

Deferred income			4,026,403			4,525,867
Other liabilities			6,859,244			8,323,446
Total Liabilities			83,283,187			84,504,697

Stockholders’ Equity
Common stock:
par value $0.0001;
100,000,000 shares authorized;	1
29,392,529 and 28,835,053 shares issued at September 30, 2016 and December 31, 2015, respectively;
27,137,825 and 26,580,349 shares outstanding at September 30, 2016 and December 31, 2015, respectively			2,939			2,884
Additional paid-in capital			125,123,106			105,079,845
Treasury stock: 2,254,704 shares at September 30, 2016 and December 31, 2015, at cost			(56,425,094	)		(56,425,094	)
Retained earnings			419,045,745			333,704,094
Accumulated other comprehensive income			(11,801,219	)		(18,605	)
Total equity attributable to China Biologic Products, Inc.			475,945,477			382,343,124

Noncontrolling interest			91,016,964			84,618,675

Total Stockholders’ Equity			566,962,441			466,961,799

Commitments and contingencies	11		-			-

Total Liabilities and Stockholders’ Equity			650,245,628			551,466,496

		For the Three Months Ended						For the Six Months Ended
	Note	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
		USD			USD			USD			USD
Sales	11		89,277,897			91,421,155			180,731,009			177,008,866
Cost of sales			30,110,272			31,482,146			62,325,745			65,525,581
Gross profit			59,167,625			59,939,009			118,405,264			111,483,285

Operating expenses
Selling expenses			3,577,599			3,026,457			7,385,151			4,254,127
General and administrative expenses			14,264,476			12,573,683			29,521,242			23,901,696
Research and development expenses			1,924,671			1,303,815			3,282,034			2,398,538
Income from operations			39,400,879			43,035,054			78,216,837			80,928,924

Other income (expenses)
Equity in income of an equity method investee			972,359			259,850			1,884,102			43,535
Interest expense			(286,358	)		(88,528	)		(348,868	)		(177,078	)
Interest income			1,617,054			1,292,069			3,240,893			3,043,209
Total other income, net			2,303,055			1,463,391			4,776,127			2,909,666

Income before income tax expense			41,703,934			44,498,445			82,992,964			83,838,590

Income tax expense	8		6,867,434			7,006,764			13,817,973			13,613,867

Net income			34,836,500			37,491,681			69,174,991			70,224,723

Less: Net income attributable to noncontrolling interest			3,806,016			6,738,646			8,152,658			13,274,433

Net income attributable to China Biologic Products, Inc.			31,030,484			30,753,035			61,022,333			56,950,290

Earnings per share of common stock:	13
Basic			1.10			1.12			2.17			2.08
Diluted			1.09			1.10			2.15			2.05
Weighted average shares used in computation:	13
Basic			27,213,984			26,698,996			27,199,011			26,642,461
Diluted			27,478,935			27,152,560			27,472,301			27,145,470

Net income			34,836,500			37,491,681			69,174,991			70,224,723

Other comprehensive income:
Foreign currency translation adjustment, net of nil income taxes			10,692,318			(13,267,360	)		13,413,286			(10,697,608	)

Comprehensive income			45,528,818			24,224,321			82,588,277			59,527,115

Less: Comprehensive income attributable to noncontrolling interest			4,859,899			4,468,767			9,510,461			11,447,450

Comprehensive income attributable to China Biologic Products, Inc.			40,668,919			19,755,554			73,077,816			48,079,665

	For the Six Months Ended
	June 30,			June 30,
	2017			2016
	USD			USD
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		69,174,991			70,224,723
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		6,043,854			4,590,028
Amortization		683,276			438,916
Loss on sale of property, plant and equipment		119,557			115,075
Allowance for doubtful accounts - accounts receivable, net		23,783			6,604
Allowance for doubtful accounts - other non-current assets		-			1,225,200
Write-down of obsolete inventories		-			61,497
Deferred tax benefit		(166,369	)		(1,584,958	)
Share-based compensation		16,201,189			9,307,099
Equity in income of an equity method investee		(1,884,102	)		(43,535	)
Change in operating assets and liabilities:
Accounts receivable		(26,068,071	)		(13,856,209	)
Inventories		(22,769,252	)		(12,522,807	)
Prepayments and other current assets		(1,862,700	)		2,433,998
Accounts payable		33,359			(3,001,361	)
Income tax payable		519,895			4,339,536
Other payables and accrued expenses		(2,910,237	)		(4,465,594	)
Deferred income		(242,713	)		(255,394	)
Net cash provided by operating activities		36,896,460			57,012,818

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for property, plant and equipment		(15,975,643	)		(25,222,545	)
Payment for intangible assets and land use rights		(667,068	)		(1,351,789	)
Refund of deposits related to land use right		-			6,461,924
Proceeds from sale of property, plant and equipment		24,674			100,424
Long-term loan lent to a third party		-			(6,331,518	)
Net cash used in investing activities		(16,618,037	)		(26,343,504	)

		For the Three Months Ended						For the Nine Months Ended
	Note	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
		USD			USD			USD			USD
Sales	10		86,525,885			78,750,577			263,534,751			228,173,360
Cost of sales			27,647,338			27,944,878			93,172,919			79,461,079
Gross profit			58,878,547			50,805,699			170,361,832			148,712,281

Operating expenses
Selling expenses			3,017,184			2,674,434			7,271,311			7,229,782
General and administrative expenses			15,095,872			11,510,981			38,997,568			27,485,566
Research and development expenses			1,042,806			1,595,140			3,441,344			3,984,447
Income from operations			39,722,685			35,025,144			120,651,609			110,012,486

Other income (expenses)
Equity in income (loss) of an equity method investee			1,097,338			(376,260	)		1,140,873			(1,137,560	)
Interest expense			(57,661	)		(101,290	)		(234,739	)		(1,533,971	)
Interest income			1,865,805			1,383,142			4,909,014			4,227,124
Loss from disposal of a subsidiary			(75,891	)		-			(75,891	)		-
Total other income, net			2,829,591			905,592			5,739,257			1,555,593

Earnings before income tax expense			42,552,276			35,930,736			126,390,866			111,568,079

Income tax expense	7		7,163,708			6,052,353			20,777,575			17,792,164

Net income			35,388,568			29,878,383			105,613,291			93,775,915

Less: Net income attributable to noncontrolling interest			6,997,207			7,001,833			20,271,640			21,012,934

Net income attributable to China Biologic Products, Inc.			28,391,361			22,876,550			85,341,651			72,762,981

Net income per share of common stock:	12
Basic			1.02			0.86			3.10			2.81
Diluted			1.01			0.82			3.05			2.68
Weighted average shares used in computation:	12
Basic			26,957,205			25,992,776			26,748,141			25,280,538
Diluted			27,297,118			27,056,215			27,193,108			26,488,730

Net income			35,388,568			29,878,383			105,613,291			93,775,915

Other comprehensive income:
Foreign currency translation adjustment, net of nil income taxes			(3,543,648	)		(15,704,961	)		(14,241,256	)		(15,095,718	)

Comprehensive income			31,844,920			14,173,422			91,372,035			78,680,197

Less: Comprehensive income attributable to noncontrolling interest			6,365,548			4,015,428			17,812,998			18,302,111

Comprehensive income attributable to China Biologic Products, Inc.			25,479,372			10,157,994			73,559,037			60,378,086

	For the Nine Months Ended
	September 30,			September 30,
	2016			2015
	USD			USD
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		105,613,291			93,775,915
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		6,946,084			6,103,812
Amortization		678,981			637,301
Loss on sale of property, plant and equipment and land use rights		215,778			363,857
Allowance for doubtful accounts - accounts receivable, net		120,535			35,162
Allowance for doubtful accounts - other receivables and prepayments		45,537			793
Impairment for other non-current assets		1,225,200			-
Write-down of obsolete inventories		90,202			16,650
Deferred tax benefit		(1,710,855	)		(55,232	)
Share-based compensation		16,315,667			7,640,894
Equity in (income) loss of an equity method investee		(1,140,873	)		1,137,560
Loss from disposal of a subsidiary		75,891			-
Excess tax benefits from share-based compensation arrangements		-			(288,681	)
Change in operating assets and liabilities:
Accounts receivable		(16,104,694	)		(16,229,405	)
Prepayment and other current assets		(497,812	)		742,586
Inventories		(24,493,697	)		(26,058,886	)
Accounts payable		(2,295,197	)		659,077
Other payables and accrued expenses		(3,553,823	)		4,240,643
Deferred income		(411,765	)		(284,053	)
Income tax payable		6,198,276			(170,407	)
Net cash provided by operating activities		87,316,726			72,267,586

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for property, plant and equipment		(40,955,964	)		(26,310,114	)
Payment for intangible assets and land use rights		(1,572,919	)		(4,199,308	)
Refund of deposits related to land use right		10,297,893			-
Proceeds from sale of property, plant and equipment and land use rights		351,524			741,980
Loans lent to a third party		(12,332,718	)		(28,450,202	)
Proceeds from disposal of a subsidiary		128,654			-
Receipt of government grants related to property and equipment		-			2,452,864
Net cash used in investing activities		(44,083,530	)		(55,764,780	)

	June 30, 2017		December 31, 2016
	USD		USD
PRC, excluding Hong Kong		212,009,195		171,539,309
U.S.		10,466,419		11,539,131
Total		222,475,614		183,078,440

	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	USD			USD			USD			USD
Accounts receivable		40,740,371			25,588,593			61,716,363			34,452,392
Less: Allowance for doubtful accounts		(551,558	)		(443,624	)		(570,022	)		(533,596	)
Total		40,188,813			25,144,969			61,146,341			33,918,796

	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	USD			USD			USD			USD
Buildings		35,370,056			31,505,133			36,815,470			34,131,032
Machinery and equipment		54,051,332			54,640,502			56,603,923			52,467,764
Furniture, fixtures, office equipment and vehicles		7,880,888			7,859,951			8,400,694			7,843,567
Total property, plant and equipment, gross		97,302,276			94,005,586			101,820,087			94,442,363
Accumulated depreciation		(36,235,207	)		(31,521,859	)		(46,159,164	)		(39,315,011	)
Total property, plant and equipment, net		61,067,069			62,483,727			55,660,923			55,127,352
Construction in progress		58,324,131			26,115,927			80,953,387			61,825,470
Prepayment for property, plant and equipment		15,033,269			16,764,597			8,796,348			15,139,101
Property, plant and equipment, net		134,424,469			105,364,251			145,410,658			132,091,923

	June 30, 2017		December 31, 2016
	USD		USD
Payables to a potential investor⁽¹⁾		8,250,391		7,941,013
Salaries and bonuses payable		14,261,633		16,740,846
Accruals for sales commission and promotion fee		7,089,649		4,391,160
Dividends payable to noncontrolling interest⁽²⁾		13,741,901		7,952,467
Payables for construction in progress		5,771,753		5,364,441
Other tax payables		3,081,560		1,918,248
Advance from customers		1,675,967		3,976,832
Deposits received		5,149,605		4,640,244
Others		5,074,169		6,872,894
Total		64,096,628		59,798,145

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Aggregate Intrinsic Value
				USD				USD
Outstanding at December 31, 2015		651,897			10.44		5.24		86,064,461
Granted		-
Exercised		(304,826	)		10.54				(31,741,472	)
Forfeited and expired		-
Outstanding at September 30, 2016		347,071			10.35		4.23		39,612,865

Vested		347,071			10.35		4.23		39,612,865
Exercisable at September 30, 2016		347,071			10.35		4.23		39,612,865

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Aggregate Intrinsic Value
				USD				USD
Outstanding as of December 31, 2016		314,491			10.32		3.84		30,568,083
Granted		-
Exercised		(46,880	)		10.80				(4,672,851	)
Forfeited and expired		-
Outstanding as of June 30, 2017		267,611			10.24		3.21		27,527,053

Vested as of June 30, 2017		267,611			10.24		3.21		27,527,053
Exercisable as of June 30, 2017		267,611			10.24		3.21		27,527,053

	Number of nonvested shares			Grant date weighted average fair value		Number of nonvested shares			Grant date weighted average fair value
				USD					USD
Outstanding at December 31, 2015		669,100			77.49
Outstanding at December 31, 2016							912,650			104.51
Granted		511,200			119.75		25,800			98.20
Vested		(252,650	)		66.10		(18,572	)		79.48
Forfeited		(12,500	)		66.74		-			-
Outstanding at September 30, 2016		915,150			104.39
Outstanding at June 30, 2017							919,878			104.84

	For the Three Months Ended
	September 30, 2016			September 30, 2015
	USD			USD

Net income attributable to China Biologic Products, Inc.		28,391,361			22,876,550
Earnings allocated to participating nonvested shares		(888,528	)		(572,297	)
Net income used in basic/diluted net income per common stock		27,502,833			22,304,253

Weighted average shares used in computing basic net income per common stock		26,957,205			25,992,776
Diluted effect of stock options		339,913			1,063,439
Weighted average shares used in computing diluted net income per common stock		27,297,118			27,056,215

Net income per common stock – basic		1.02			0.86
Net income per common stock – diluted		1.01			0.82

	For the Three Months Ended September 30,												For the Three Months Ended June 30,
	2016						2015						2017						2016
	Amount			% of Total Sales			Amount			% of Total Sales			Amount			% of Total Sales			Amount			% of Total Sales
	(U.S. dollars in thousands, except percentage and per share data)												(U.S. dollars in thousands, except percentage and per share data)
Sales		86,526			100.0			78,751			100.0			89,278			100.0			91,421			100.0
Cost of sales		27,647			31.9			27,945			35.5			30,110			33.7			31,482			34.4
Gross margin		58,879			68.1			50,806			64.5
Gross profit														59,168			66.3			59,939			65.6
Operating expenses:
Selling expenses		3,017			3.5			2,675			3.4			3,578			4.0			3,026			3.3
General and administrative expenses		15,096			17.5			11,511			14.6			14,264			16.0			12,574			13.8
Research and development expenses		1,043			1.2			1,595			2.0			1,925			2.2			1,304			1.4
Total operating expenses		19,156			22.2			15,781			20.2			19,767			22.2			16,904			18.5
Income from operations		39,723			45.9			35,025			44.5			39,401			44.1			43,035			47.1
Other income (expenses):
Equity in income (loss) of an equity method investee		1,097			1.3			(376	)		(0.5	)
Equity in income of an equity method investee														972			1.1			260			0.3
Interest expense		(58	)		(0.1	)		(101	)		(0.1	)		(286	)		(0.3	)		(89	)		(0.1	)
Interest income		1,866			2.2			1,383			1.8			1,617			1.8			1,292			1.4
Loss from disposal of a subsidiary		(76	)		(0.1	)		-			0.0
Total other income, net		2,829			3.3			906			1.2			2,303			2.6			1,463			1.6
Earnings before income tax expense		42,552			49.2			35,931			45.6
Income before income tax expense														41,704			46.7			44,498			48.7
Income tax expense		7,164			8.3			6,052			7.7			6,867			7.7			7,007			7.7
Net income		35,388			40.9			29,879			37.9			34,837			39.0			37,491			41.0
Less: Net income attributable to noncontrolling interest		6,997			8.1			7,002			8.9			3,806			4.2			6,738			7.4
Net income attributable to the Company		28,391			32.8			22,877			29.0
Net income per share of common stock
Net income attributable to our company														31,031			34.8			30,753			33.6
Earnings per share of common stock
Basic		1.02						0.86						1.10						1.12
Diluted		1.01						0.82						1.09						1.10

	For the Three Months Ended June 30,								Change
	2017				2016
	Amount		%		Amount		%		Amount			%
	(U.S. dollars in millions, except percentage)
Human albumin		32.4		36.3		37.7		41.2		(5.3	)		(14.1	)
Immunoglobulin products:
IVIG		29.7		33.3		30.7		33.6		(1.0	)		(3.3	)
Other immunoglobulin products		12.7		14.2		8.2		9.0		4.5			54.9
Placenta polypeptide		9.2		10.3		10.9		11.9		(1.7	)		(15.6	)
Others		5.3		5.9		3.9		4.3		1.4			35.9
Totals		89.3		100.0		91.4		100.0		(2.1	)		(2.3	)

	For the Nine Months Ended September 30,												For the Six Months Ended June 30,
	2016						2015						2017						2016
	Amount			% of Total Sales			Amount			% of Total Sales			Amount			% of Total Sales			Amount			% of Total Sales
	(U.S. dollars in thousands, except percentage and per share data)												(U.S. dollars in thousands, except percentage and per share data)
Sales		263,535			100.0			228,173			100.0			180,731			100.0			177,009			100.0
Cost of sales		93,173			35.4			79,461			34.8			62,326			34.5			65,526			37.0
Gross margin		170,362			64.6			148,712			65.2
Gross profit														118,405			65.5			111,483			63.0
Operating expenses:
Selling expenses		7,271			2.8			7,230			3.2			7,385			4.1			4,254			2.4
General and administrative expenses		38,998			14.8			27,486			12.0			29,521			16.3			23,902			13.5
Research and development expenses		3,441			1.3			3,984			1.7			3,282			1.8			2,399			1.4
Total operating expenses		49,710			18.9			38,700			17.0			40,188			22.2			30,555			17.3
Income from operations		120,652			45.7			110,012			48.2			78,217			43.3			80,928			45.7
Other income (expenses):
Equity in income (loss) of an equity method investee		1,141			0.4			(1,138	)		(0.5	)
Equity in income of an equity method investee														1,884			1.0			44			(0.0	)
Interest expense		(235	)		(0.1	)		(1,534	)		(0.7	)		(349	)		(0.2	)		(177	)		(0.1	)
Interest income		4,910			1.9			4,228			1.9			3,241			1.8			3,043			1.8
Loss from disposal of a subsidiary		(76	)		0.0			-			0.0
Total other income, net		5,740			2.2			1,556			0.7			4,776			2.6			2,910			1.7
Earnings before income tax expense		126,392			47.9			111,568			48.9
Income before income tax expense														82,993			45.9			83,838			47.4
Income tax expense		20,778			7.9			17,792			7.8			13,818			7.6			13,614			7.7
Net income		105,614			40.0			93,776			41.1			69,175			38.3			70,224			39.7
Less: Net income attributable to noncontrolling interest		20,272			7.6			21,013			9.2			8,153			4.5			13,274			7.5
Net income attributable to the Company		85,342			32.4			72,763			31.9
Net income per share of common stock
Net income attributable to our company														61,022			33.8			56,950		��	32.2
Earnings per share of common stock
Basic		3.10						2.81						2.17						2.08
Diluted		3.05						2.68						2.15						2.05

	Payments Due by Period
Contractual Obligations	Total		Less than one year		One to three years		Three to five years		More than five years
	(U.S. dollars in millions)
Operating lease commitment		1.2		0.4		0.6		-		0.2
Purchase commitment		57.2		28.6		28.6		-		-
Capital commitment		27.8		25.0		2.8		-		-
Total		86.2		54.0		32.0		-		0.2

Date: ~~November~~August 2, ~~2016~~2017	CHINA BIOLOGIC PRODUCTS HOLDINGS, INC.


	By:	/s/ David (Xiaoying) Gao
		David (Xiaoying) Gao, Chief Executive Officer
		(Principal Executive Officer)

Exhibit No.		Description
3.1		~~Second~~ Amended and Restated ~~Certificate~~Memorandum and Articles of ~~Incorporation~~Association of China Biologic Products Holdings, Inc. as filed with the Secretary of State of the State of Delaware on June 23, 2014 (incorporated by reference to Amendment No. 1 as filed with the SEC on November 2, 2016 to Form 8-K as filed with the SEC on June 20, 2016).
~~3.1.1~~		Certificate of Correction to Certificate of Incorporation of China Biologic Products, Inc. as filed with the Secretary of State of the State of Delaware on October 31, 2016 (incorporated by reference to Amendment No. 1 as filed with the SEC on November 2, 2016 to Form 8-K as filed with the SEC on June 20, 2016).
~~3.1.2~~		~~Certificate of Change of Registered Office of China Biologic Products, Inc. as filed with the Secretary of State of the State of Delaware on November 1, 2016.~~
~~10.1~~		~~Summary English translation of settlement agreement dated July 31, 2016~~ (incorporated by reference to Exhibit ~~10.1 of~~3.2 to the ~~Quarterly Report~~Registration Statement on Form ~~10-Q~~F-4 (Reg. No. 333-217564), filed by ~~the Company~~China Biologic Products Holdings, Inc. on ~~August 4, 2016).~~
~~10.2~~		~~Summary English translation of guarantee agreement dated July 31, 2016 (incorporated by reference to Exhibit 10.2 of the Quarterly Report~~April 28, 2017 and as amended on ~~Form 10-Q filed by the Company on August 4, 2016).~~
~~10.3~~		~~Consulting agreement between the Company and David Li dated July 1, 2016 (incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q filed by the Company on August 4, 2016).~~
~~10.4~~		Second amended and restated employment agreement between the Company and David (Xiaoying) Gao dated August 4, 2016 (incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q filed by the Company on August 4, 2016).
~~10.5~~		~~Second Amended and Restated Employment Agreement between the Company and Ming Yang dated November 1, 2016.~~
~~10.6~~		~~Second Amended and Restated Employment Agreement between the Company and Ming Yin dated November 1, 2016.~~May 17, 2017)
31.1		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive data filed pursuant to Rule 405 of Regulation ~~S-T.~~S-T