China Biologic Products, Inc.
Annual Report 2015

Plain-text annual report

China Biologic Products, Inc. A leading fully integrated plasma-based biopharmaceutical company in China Creating Miracles in Life 2015 Annual Report Our Mission Grow as a world-class biopharmaceutical company focused on saving lives Core Values Quality / Growth / Innovation / Promise / Focus / Passion / Responsibility Table of Contents 4-5 Chairman’s Letter 6-7 Financial Highlights 8-10 Our Products 11-13 Fight Against Hemophilia An Introduction to Hemophilia Our Social Activities with Hemophilia Patients Story of Tao Guan and the Hemophilia Home of China 14-15 Research & Development 16-18 Board of Directors 19 Corporate Information 20-141 Annual Report (Form 10-K) About China Biologic China Biologic Products, Inc. (NASDAQ: CBPO) is a leading fully integrated plasma-based biopharmaceutical company in China, with the aim of creating miracles in life. We are principally engaged in the integrated process of research, development, manufacture and sales of human plasma-based biopharmaceutical products in China. Our products are used as critical therapies during medical emergencies and for the prevention and treatment of life-threatening diseases and immune-deficiency related diseases. Backed by robust research and development capabilities, we aim to capture substantially all of the value along the plasma products value chain, and to develop our technology to enhance lives and create value for more patients. We have expanded our product portfolio to include eight categories of plasma-based products as well as several other biopharmaceutical products, and we continue to make progress on our new products in our pipeline. Now headquartered in Beijing, we manufacture our products through our two majority-owned subsidiaries in Shandong Province and Guizhou Province, respectively, and our one minority-owned subsidiary in Shaanxi Province. Our well-managed and strategically located plasma collection stations under these subsidiaries secure the raw material to manufacture these products. Our strong sales team helps us promote and sell these products through efficient and effective channels. We are one of the first plasma companies in China to penetrate into the end-user market. Directly serving about 600 hospitals and clinics, we maintain close contact with patients and hospitals to truly understand their needs. After years of dedicated efforts, we have grown into one of the top three domestic plasma product suppliers in China, with approximately 17% market share of plasma products among Chinese domestic manufactures in 2015. Our common stock has been listed on NASDAQ since 2009. Annual Report 2015 3 In 2015, we successfully executed our growth strategy and capitalized on new market opportunities, enabling CBPO to deliver strong financial results that exceeded our raised guidance from the third quarter, despite the negative impact of foreign currency translation. Total sales in 2015 were $297 million, up 23% in RMB terms or 22% in USD terms, from the prior year, while non-GAAP adjusted net income attributable to the Company was over $100 million, increasing by 34% in RMB terms, or 32% in USD terms, from the prior year. Growth was driven by increased plasma supply and production volume, strong market demand, well-managed product pricing following the implementation of the new drug price policy, an optimized product portfolio mix and continued maintaining strict cost-control measures. In June 2015, a new drug price policy was implemented which production, and significantly improved the utilization rate of our removed centralized pricing controls by the government and Guizhou production facility. Through this initial supply agreement, created greater reliance upon tendering mechanisms. The ongoing we laid the foundation for further collaboration, gained the trust round of drug tenders has imposed certain pricing pressure on of our partners and government regulators, and demonstrated the overall pharmaceutical industry in China. However, our plasma our capabilities in maintaining quality control and production products are moderately guarded against this impact due to management. With this foundation in place, we entered into a shortage in supply. For products in significantly short supply, the second collaboration agreement with Xinjiang Deyuan to source removal of restrictive price ceilings presented China Biologic with no less than 500 tonnes of plasma over the next three years for attractive market opportunities. Our foresight allowed us to take our Guizhou Taibang facility. Securing this additional plasma will advantage of such an opportunity by offering additional tetanus contribute to our growth in the years to come. New Fractionation Facility in Shandong Province Scheduled to be opened in 2018 Expand fractionation capacity in Shandong to a minimum of 1,200 metric tons immunoglobulin, a product that had been restricted at a very low price despite a severe supply shortage under the old drug price policy, as we shifted our production plan to manufacture additional tetanus immunoglobulin in the second half of the year. We will continue to carefully monitor market conditions and adjust our supply capabilities to capture any opportunities arising as product pricing adjusts to market forces. Plasma supply continues to be one of the most important factors driving our production growth. We continued to make great strides to increase our supply leading to double digit growth in plasma collection volume for a fourth consecutive year, outpacing average domestic collection growth. In September 2015, we received approval to build another branch collection facility in Shandong province, further strengthening our leadership position in this region. Our new collection facilities, including two new collection stations under construction in Hebei, are expected to contribute to our growth in 2016. Furthermore, we also explored new opportunities to expand our plasma source with third-party suppliers. In April 2015, our Guizhou Taibang facility entered into an agreement with a third-party plasma fractionator, pursuant to which we purchased approximately 140 tonnes of source plasma and plasma pastes for 4 4 With our healthy internal plasma collection organic growth and an external plasma source secured for additional growth, we are able to vastly improve the utilization efficiency of our current manufacturing facilities. We also made great efforts to upgrade our manufacturing capabilities. Our new fractionation facility in Shandong province is currently under construction, which we expect to be operational in 2018. This facility is aimed to double our Shandong facility’s fractionation capacity. Additionally, our minority-owned subsidiary Xi’an Huitian Blood Products Co., Ltd. (“Huitian”) completed construction and obtained its Good Manufacturing Practice (“GMP”) certificate from the China Food and Drug Administration for its new plasma production facility in Shaanxi province. Huitian previously suspended production in 2014 to begin construction on the new facility, and resumed commercial production as of February 2016. As we focus on executing our business plan, we remain committed to you, our stockholders. In January 2015, we retained a two-year stockholder rights plan, to guard against hostile tender offers and We remain very optimistic as we head into 2016 on the strength other coercive tactics to gain control or undue influence of our of our growth strategy and our team, who have proven their company without offering a fair and adequate price and terms to execution capabilities. We plan to continue building out our our shareholders. Early in the second half of 2015, we completed collection and manufacturing facilities in a timely and efficient a follow-on offering together with certain selling shareholders, in manner, carefully monitoring demand and pricing of products which a total of 3.45 million shares of common stock were offered to capture market opportunities, and strengthening our sales at a public offering price of $105 per share. With completion efforts particularly in tier-one cities. We also expect that our own of this offering, we added new institutional investors to our collection stations will continue to deliver high growth in 2016, stockholder base, further improved our stockholder structure supported by the outsourced raw plasma, and that our pipeline and increased the liquidity of our stock. In addition, we used the products will be developed as planned. proceeds from the offering to pay back our USD-denominated loan and gradually release the related RMB deposit from the pledge, Finally, I would like to express our gratitude to the entire CBPO minimizing foreign currency risk and enhancing our ability to seize team for all that we achieved in the past year. I also would like any further investment opportunities in the future. to thank you, our stockholders, for your continued support and We achieved another unique milestone in 2015 as we were added to achieve great things in the years to come. commitment to our company. With your support, we can continue to the NASDAQ Biotechnology Index in their annual re-ranking. Our addition to this index is a testament to our strong, stable track Sincerely, record of growth and further bolsters our company’s visibility in the equity markets. During the year, the devaluation of the renminbi compared to the USD had an adverse impact on our reported earnings, as our reporting currency is in USD. However, we remind our stockholders that our financial results remain strong, as our business is primarily conducted in RMB-denominated transactions. We remain cautious, David Gao Chairman and CEO, China Biologic Products, Inc. however, as further currency volatility remains likely in the coming year. Annual Report 2015 5 Financial Highlights 42.2% IVIG Sales Breakdown By Products 2015 7.6% Hyper-immunoglobulin 9.2% Placenta Polypeptide 37.6% Human albumin 3.4% Others Human albumin and IVIG products have long been our two largest sales contributors, and our market share for these two products rank among the top three domestic suppliers in China as measured by total production volume. Additionally, several other new products launched in recent years, such as Factor VIII and PCC, are also growing fast and growing market share. CBPO 6% Other domestic players Other domestic player 1 Others CBPO 19% Other player 3 CBPO 21% Other domestic player 2 Foreign Player A Other player 2 Other Player 1 Foreign Player E Foreign Player D Foreign Player C Foreign Player B Other Player 2 Other player 1 3rd Largest Domestic Player in China Albumin market (Based on 2015 Sales) Largest Player in China IVIG market (Based on 2015 Sales) 3rd Largest Player in China hFVIII market (Based on 2015 Sales) Source: Company estimates based on the public release of government batch approval data. 6 6 Operating Cash flow and Operating Income and Margin Total Sales ($ In Millions) Non-GAAP Net Income ($ In Millions) Non-GAAP EPS ($ In Millions) CAGR = 18.0% 203.4 184.8 153.1 296.5 243.3 CAGR = 28.7% 100.1 75.6 59.0 48.0 36.5 2.12 1.79 1.37 3.68 2.89 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Operating Cash flow and Operating Income and Margin 170 150 130 110 90 70 50 30 10 -10 40.3% 42.7% 45.7% 44.7% 50.0% 132.6 111.2 109.4 21.0% 71.1 74.5 74.3 86.9 93.5 38.5 32.2 2011 2012 2013 2014 2015 Operating Cash Flow Operating income Operating Margin 40.0% 30.0% 20.0% 10.0% 0.0% Note: The low operating income and margin in 2011 was mainly due to some non- recurring items including impairment loss of goodwill of $8.2 million and loss on abandonment and write-off of long-lived assets of $6.6 million Annual Report 2015 7 Our Products Human Albumin Mainly used in the treatment of shock caused by blood loss trauma or burn, raised intracranial pressure caused by hydrocephalus or trauma, oedema or ascites caused by hepatocirrhosis and nephropathy; prevention and treatment of low-density-lipoproteinemia and Neonatal hyperbilirubinemia. Human Immunoglobulin for Intravenous Injection Mainly used in the treatment of primary immunoglobulin deficiency, such as X chain low immunoglobulin, familiar variable immune deficiency, immunoglobulin G secondary deficiency; secondary immunoglobulin deficiency, such as severe infection, newborn sepsis; and auto-immune deficiency diseases, such as Idiopathic thrombocytopenia purpura or kawasaki disease. Human Hepatitis B Immunoglobulin Mainly used in the prevention of measles and contagious hepatitis. When applied together with antibiotics, its curative effect on certain severe bacteria or virus infection may be improved. Human Tetanus Immunoglobulin Mainly used for the prevention and therapy of tetanus, and is particularly applied to patients who have allergic reactions to tetanus antitoxin. 8 8 Human Rabies Immunoglobulin Mainly for passive immunity from bites or claws by rabies or other infected animals. All patients suspected of being exposed to rabies will be treated with a combined dose of rabies vaccine and human rabies immunoglobulin. Human Immunoglobulin Mainly used in the treatment of primary immunoglobulin deficiency, such as X chain low immunoglobulin, familiar variable immune deficiency, immunoglobulin G secondary deficiency; secondary immunoglobulin deficiency, such as severe infection, newborn sepsis; and auto-immune deficiency diseases, such as Idiopathic thrombocytopenia purpura or kawasaki disease. Human Coagulation Factor VIII Mainly used for correcting the disorder of coagulation due to deficiency of Factor VIII; mainly for prevention and control of bleeding in patients with hemophilia A or acquired Factor VIII deficiency, and for treatment of bleeding caused by operation on these patients. Human Prothrombin Concentrate Complex Mainly used for the treatment of congenital and acquired clotting factor II, VII, IX, X deficiency (single deficiency or combined deficiency), including: the clotting factor II, VII, IX, X deficiency, including Hemophilia B; Excessive anticoagulant, and vitamin K deficiency; the mechanism of coagulation disorders and bleeding caused by liver disease when the patients need to correct blood coagulation dysfunction; a variety of reasons caused by the prothrombin time prolong and the patients intend to go for surgery, but the lack of clotting factor may be rejected; treatment for the bleeding symptoms of Hemophilia A who has produced inhibitor of clotting factor VIII; reversing hemorrhage induced by coumarin anticoagulants. Placenta Polypeptide Mainly used in the treatment of cell immunity deficiency diseases, viral infection and leucopenia caused by various reasons, and assists in postoperative healing. Annual Report 2015 9 1010 Fight Against Hemophilia Hemophilia is a disorder that slows the blood clotting process. Patients with this condition experience prolonged bleeding or oozing following injury or surgery. Severe cases of hemophilia may be life-threatening, as continuous bleeding can occur after minor trauma, even causing internal bleeding that can damage organs and body tissues. The major types of this condition are hemophilia A and hemophilia B, which are also known as factor VIII deficiency and factor IX deficiency, respectively. The main treatment for hemophilia is replacement therapy. Concentrates of clotting factor VIII (for hemophilia A) or clotting factor IX (for hemophilia B) are slowly dripped or injected into a vein, to help replace the missing or insufficient clotting factor. For severe hemophilia, replacement therapy is typically given two or three times a week. This preventive therapy usually begins for patients at a very young age and may require lifelong treatment. Due to the lack of adequate supply of these treatments in China, the majority of hemophilia patients can only be treated when in critical or life-threatening conditions. Furthermore, many hemophilia patients have not been diagnosed properly due to lack education regarding this condition. China Biologic expanded its product portfolio to include factor VIII in 2012, which greatly improved the market supply and the availability of treatment for hemophilia A patients. China Biologic has been collaborating with social organizations and committees to support more hemophilia patients and promote greater knowledge of this disease. deficiencies), including, among others, coagulation disorders, bleeding caused by liver disease, and excessive anticoagulant. China Biologic is dedicated to improving quality of life for patients and promoting social awareness and education to care for these patients. The Company is continually striving to improve the quality and yield of its currently approved products, and also to produce more valuable and effective products for more patients and conditions. The Company also organizes activities and cooperates with social organizations, such as the Beijing Hemophilia Home Care Centre, to connect with more patients to meet their specific needs, educate patients and doctors of the usage of the proper treatments, encourage patients to have more confidence in fighting against the disease, and call for greater social awareness on these In early 2014, China Biologic obtained government approval to conditions and patients. In addition, the Company has established produce another clotting factor product, i.e.,human prothrombin direct sales channels with hospitals and secured a stable supply complex concentrate, or PCC. PCC is a combination of blood clotting of life-saving medication for patients. Nowadays, an increasing factors II, VII, IX and X, as well as protein C and S. It is used not only number of patients with hemophilia have access to a continuous to treat hemophilia B, but also other congenital and acquired clotting supply of China Biologic’s coagulation factor medication and have factor II, VII, IX, X deficiencies (single deficiencies or combined greater opportunities to live a better life. • GLOBALLY, ONE IN 1,000 PEOPLE HAS A BLEEDING DISORDER • CHINA HAS OVER 10,000 REGISTERED HEMOPHILIA PATIENTS • CHINESE HEMOPHILIA PATIENTS ARE ESTIMATED TO EXCEED 50,000 Annual Report 2015 11 In June 2015, China Biologic organized a photography contest To celebrate the Chinese Mid-Autumn Festival in 2015, China for hemophilia patients to encourage them to embrace the Biologic launched an initiative on WeChat whereby we invited beauty of life. The many wonderful photograph submissions children with hemophilia to participate in artistic coloring. Setting reflected their optimistic attitudes towards life and their desire their imaginations free, the children painted in many unique and and determination to defeat the disease. The submissions were charming styles. Some children even added their own illustrations posted on WeChat and other patients and followers were invited to the pictures. We are confident these children will lead highly to vote on the submissions. By promoting social awareness of productive lives with the support of our Factor VIII, and PPC life- hemophilia through this activity, we hope to reach more people saving pharmaceuticals. to encourage them to care for hemophilia patients in any way possible. 1212 Mr. Tao Guan, Chairman of the Hemophilia Home of China, cooperates with China Biologic in fight against hemophilia Mr. Tao Guan was diagnosed with severe hemophilia just seven 5,000 patients are registered members of Hemophilia Home, which months after his birth. As there was no medication available for has become a care center for these patients, providing them with a treating hemophilia in China at that time, a highly expensive platform for treatment, education and psychological care. blood transfusion was the only option for saving his life whenever bleeding occurred. To avoid unexpected bleeding, he was removed China Biologic has been cooperating with the Hemophilia Home from school, but it was still not enough to prevent the occasional to care for these patients through both financial assistance and injury from damaging his body and threatening his life. He has been donations of its life-saving medications, Human Coagulation restricted to a wheelchair since he was twelve years old. Factor VIII and Prothrombin Complex Concentrate (“PCC”). China Biologic has donated over one million RMB worth of medications After receiving human coagulation factor treatment, Tao’s health through the Hemophilia Home platform thus far to treat hemophilia and quality of life have improved drastically. To help more patients patients across the country, particularly those patients living in in the same condition, Tao established a nonprofit organization, the severe conditions or poverty. The Company also cooperates with Hemophilia Home of China, in 2000 with social and government the Hemophilia Home to provide broader public education about support and then officially registered it as the Beijing Hemophilia hemophilia and to call for more people to pay attention and Home Care Centre (“Hemophilia Home”) in 2012. This nonprofit provide necessary assistance to hemophilia patients. Together, organization mainly aims to improve the life quality of hemophilia China Biologic and the Hemophilia Home will further collaborate to patients by building a knowledge base on hemophilia and help hemophilia patients live higher quality, more productive lives. providing financial assistance to poor patients. Nowadays, over Annual Report 2015 13 1414 Research & Development Innovation focuses on: New products through internal R&D and partnership with international players Continue to improve yield for existing products Enhancing product quality through new technologies Continual improvement in production methods Products Currently in Development Treatment / Use Status of Product Stage* Human hepatitis B immunoglobulin Prevention of measles and contagious Withdrew the registration application (pH4) for intravenous injection hepatitis. When applied together with from the CFDA. Commercial production antibiotics, its curative effect on certain severe bacteria or virus infection may be pending for the resubmission of the registration application.(1) improved. Human fibrinogen Treatment for lack of fibrinogen and Substantially completed the clinical trial and increase human fibrinogen concentration. has started the self-inspection on the data of the clinical trial. Commercial production expected in late 2016 or early 2017. Immune Globulin Intravenous Treatment for original immunoglobulin Obtained the approval for clinical trial by (Human), Caprylate/Chromatography deficiency; secondary immunoglobulin the CFDA. Purified and 20 nm virus filtration deficiency and auto-immune deficiency diseases. Human Antithrombin III (concentration) Treatment for (1) hereditary antithrombin Submitted application for clinical trial to III deficiency in connection with the CFDA. Received the notification of drug surgical or obstetrical procedures evaluation consulting session from the and (2) thromboembolism. Center for Drug Evaluation under CFDA. Approval of clinical trials expected in 2017. Human Cytomegalovirus Immunoglobulin Prophylaxis and treatment of CMV Submitted application for clinical trial to infection, especially for the prevention the CFDA. Passed the on-site examination of active virus replication for patients in conducted by the PFDA. Approval of immunosuppression, such as organ clinical trials expected in 2017. transplantation patients. Human coagulation factor IX Use for coagulopathies such as Submitted application for clinical trial to the Hemophilia B. CFDA. Approval of clinical trials expected in 2017. Human Fibrin Sealant Adjunct to hemostasis on patients Completed the official virus inactivation by undergoing surgery in case that traditional the PRC National Institutes for Food and surgical techniques (such as suture, ligature Drug Control. or cautery) are ineffective or impractical. Note : Stage 4: Registration; Stage 3: Clinical trials; Stage 2: Clinical trial application; Stage 1: Pre-clinical research 4 4 3 2 2 2 1 (1) As mandated by a CFDA notice promulgated on July 22, 2015, all pharmaceutical enterprises that are in the process of registration application are required to inspect the data from the clinical trials and report the inspection results to the CFDA and to withdraw the registration application should any deficiency surface from such inspection. We withdrew the registration application for human hepatitis B immunoglobulin (pH4) for intravenous injection as a result of our self-inspection in December 2015. Annual Report 2015 15 Board of Directors Mr. David (Xiaoying) Gao Chairman, CEO & President Mr. Gao has been a member of our Board since October 6, 2011, our Chairman since March 30, 2012 and our CEO since May 10, 2012. From February 2004 until the company’s acquisition by Sanofi in February 2011, Mr. Gao served as the chief executive officer and director of BMP Sunstone Corporation (Nasdaq: BJGP). Following the acquisition, he served as a senior integration advisor for Sanofi from February to August 2011. From February 2002 through February 2004, Mr. Gao served as the chairman of BMP China’s board of directors. Mr. Gao served as the president and a director of Abacus Investments Ltd, a private wealth management company, from August 2003 until June 2004, and as chief executive officer of Abacus from July 2003 to June 2004. From 1989 to 2002, Mr. Gao held various executive positions at Motorola, Inc., including: a director and vice president of the Integrated Electronic System Sector, Asia-Pacific operation, from 1998 to 2002; a Member of Motorola Asia Pacific Management Board, Management Board of Motorola Japan Ltd., from 2000 to 2002; and Motorola China Management Board from 1996 to 2002. Mr. Gao holds a B.S. in Mechanical Engineering from the Beijing Institute of Technology, a M.S. in Mechanical Engineering from Hanover University, Germany, and an M.B.A. from The Massachusetts Institute of Technology. Mr. Sean Shao Independent Director, Chairman of Audit Committee and Compensation Committee Mr. Shao has been a member of our Board since July 24, 2008. In addition to his roles with us, Mr. Shao currently serves as (i) independent director and chairman of the audit committee of: 21Vianet Group, Inc., a leading carrier-neutral internet data center services provider listed on NASD since August 2015; Trina Solar Limited, an integrated solar-power products manufacturer and solar system developer listed on the NYSE since January 2015; Jumei International Holding Ltd., an e-commerce company listed on NYSE since May 2014; LightInTheBox Holdings Co. Ltd., an e-commerce company listed on NYSE since June 2013 and UTStarcom Holdings Corp., a provider of broadband equipment and solutions listed on NASDAQ since October 2012, (ii) independent director and chairman of the nominating committee of Agria Corporation, an agricultural company listed on NYSE since November 2008. He served as the chief financial officer of Trina Solar Limited from 2006 to 2008. In addition, Mr. Shao served from 2004 to 2006 as the chief financial officer of ChinaEdu Corporation, an educational service provider, and of Watchdata Technologies Ltd., a Chinese security software company. Prior to that, Mr. Shao worked at Deloitte Touche Tohmatsu CPA Ltd. for approximately a decade. Mr. Shao received his master’s degree in health care administration from the University of California at Los Angeles in 1988 and his bachelor’s degree in art from East China Normal University in 1982. Mr. Shao is a member of the American Institute of Certified Public Accountants. 1616 Dr. Yungang Lu Independent Director Chairman of Governance Dr. Lu has been a member of our Board since March 19, 2012. Dr. Lu has served as a managing director of Seres Asset Management Limited, an investment manager based in Hong Kong, since August 2009. Dr. Lu also serves as a director of the following listed companies: China Techfaith Wireless Communication Technology Ltd., a handheld device company in China, and China Cord Blood Corporation, a provider of cord blood storage services in China. From 2004 to July 2009, Dr. Lu was a Managing Director of APAC Capital Advisors Limited, a Hong Kong-based investment manager specializing in Greater China equities. Dr. Lu was a research analyst with Credit Suisse First Boston (Hong Kong), a financial services company, from 1998 to 2004, where his last position was the head of China Research. Before moving to Credit Suisse, he worked as an equity analyst focused on regional infrastructure at JP Morgan Securities Asia, a financial services company, in Hong Kong. Dr. Lu received a B.S. in Biology from Peking University, an M.S. in Biochemistry from Brigham Young University and a Ph.D. in Finance from the University of California, Los Angeles. Mr. David Hui Li Director Mr. David Hui Li has been a member of our Board since November 4, 2013. Mr. David Li was an executive director and a managing director at Warburg Pincus Asia LLC (“Warburg Pincus”) from 2002 to January 2016. Prior to joining Warburg Pincus, Mr. Li served as an executive director in the investment banking division of Goldman Sachs from 2001 to 2002 and that of Morgan Stanley from 1994 to 2001. He is also a director of UCAR Inc. and China Advanced Gas Resources (Hong Kong) Limited. Mr. Li received a B.S. in economics from Renmin University of China and an M.B.A. from Yale University School of Management. Prof. Wenfang Liu Independent Director Prof. Wenfang Liu has been a member of our Board since February 27, 2011. From 2007 to 2011, Prof. Liu served as the chief consultant for Sichuan Yuanda Shuyang Pharmaceuticals. Prior to that, he served from 2000 to 2007, in various managerial positions including as the chief engineer and a director of Hualan Biological Engineering, and as a director of blood separating, from 2005 to 2006, at Chengdu Jiaying Medical Product Co. Ltd. Prior to that, Prof. Liu served, from 1998 to 1999, as the chief engineer of Guiyang Qianfeng Biological Products Co. Ltd., and from 1988 to 1998 as the vice chairman of the Institute of Blood Transfusion of Chinese Academy of Medical Sciences. Prof. Liu previously served as a member of the Sichuan CPPCC Standing Committee, the Chinese Society of Blood Transfusion and the China Medical Biotech Association. He holds a Bachelors Degree in Bio-Chemistry from the Chinese Academy of Sciences, Forest and Soil College and was a Ph.D. advisor from 1997 to 1998. Mr. Zhijun Tong Independent Director Mr. Tong has been a member of our Board since April 20, 2012. He has served as the chairman of the board of directors of several corporations, including Spain Qifa Corporation Ltd. since 1996, Hong Kong Tong’s Group since 2007, Sunstone (Qingdao) Plant Oil Co., Ltd. since 2008, Sunstone (Qingdao) Food Co., Ltd. since 2009, Shengda (Zhangjiakou) Pharmaceutical Co., Ltd. since 2011 and Shengda (Qianxi) Chinese Medicine Cultivation Co., Ltd. since 2012. Mr. Tong has also served as a director and a vice president of Spain International Haisitan Group since 1993. From 2007 to 2011, He also served as the president and a director of BMP Sunstone Corporation, a NASDAQ-listed pharmaceutical corporation. Annual Report 2015 17 Mr. Albert (Wai Keung) Yeung Independent Director Mr. Yeung has been a member of our Board since July 29, 2012. Mr. Yeung has been since 2005 a partner of Albert Yeung & Associate Consulting Company, a consulting company providing M&A, leadership and executive coaching services to senior managers and chief executive officers. From August 2006 to February 2011, Mr. Yeung also served as a director of BMP Sunstone Corporation, a company listed on NASDAQ until the company’s acquisition by Sanofi. From April 1, 2015, Mr. Yeung has been an independent director of PharmaMax Corporation. Since September 6, 2015 Mr. Yeung has been an independent director of Beijing Promed Medical Technology Co. Ltd. Prior to retirement, Mr. Yeung had spent more than 30 years in China’s pharmaceutical industry, holding various senior sales, marketing and general management positions with major pharmaceutical corporations in Hong Kong and mainland China, including Johnson & Johnson, Xian-Janssen, Burroughs Wellcome, Bristol Myers-Squibb and GlaxoSmithKline. Mr. Joseph Chow Independent Director Mr. Chow has been a member of our Board since November 3, 2014. Mr. Chow has over 20 years of experience in corporate finance, financial advisory and management and has held senior executive and managerial positions in various public and private companies. Mr. Chow was recently a managing director of Moelis and Company and was previously a managing director at Goldman Sachs (Asia) LLP. Prior to that, he served as an independent financial consultant, as chief financial officer of Harbor Networks Limited, and as chief financial officer of China Netcom (Holdings) Company Limited. Prior to that , Mr. Chow served as the director of strategic planning of Bombardier Capital, Inc., as vice president of international operations of Citigroup and as the corporate auditor of GE Capital. Mr. Chow currently sits on the board as a director for China Lodging Group, Limited, a company listed on NASDAQ; and independent non-executive director for Intime Department Store (Group) Co., Ltd. and CAR. Inc., respectively, both of which are companies listed on the Stock Exchange of Hong Kong. Mr. Chow obtained a Bachelor of Arts degree in political science from Nanjing Institute of International Relations and a Master of Business Administration degree from the University of Maryland at College Park. Mr. Min Fang Director Mr. Fang has been a member of our Board since March 2, 2015. Mr. Fang is a Managing Director at Beijing Warburg Pincus Investment Consulting Company Limited Shanghai Branch (“Warburg Pincus Shanghai”), and a core member of the China healthcare team. In addition to his role with us, Mr. Fang currently serves on the board of several private and public companies including, among others, Beijing Amcare Women’s and Children’s Hospital Co., Ltd. . From March 2010 to July 2011, he was a vice president at Carlyle Asia Private Equity. From July 2007 to February 2010, Mr. Fang was an associate at Warburg Pincus Shanghai. Prior to joining Warburg Pincus Shanghai, he worked at the Boston Consulting Group focusing on management consultancy for pharmaceutical and medical device companies. Mr. Fang received a B.A. in International Finance from Fudan University and an M.B.A. from the Stanford Graduate School of Business. 1818 Corporate Information Legal Counsel Wilson Sonsini Goodrich & Rosati Independent Auditor KPMG IR Agent ICR LLC Bill Zima, Managing Director China: +86 10 6583 7511 U.S.: +1 646 405 5191 William.Zima@icrinc.com China Biologic Products, Inc. Room 1801, 19 Chaoyang Park Road Chaoyang District, Beijing 100125 People’s Republic of China China: +86 10 6598 3099 ir@chinabiologic.com Market Data Exchange: NASDAQ Ticker: CBPO Website www.chinabiologic.com Transfer Agent Securities Transfer Corporation 2591 Dallas Parkway, Suite #102, Frisco, Texas, 75034 Tel: 469-633-0101 19  UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2015 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File No. 001-34566 CHINA BIOLOGIC PRODUCTS, INC. (Exact name of registrant as specified in its charter) Delaware75-2308816(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) (+86) 10-6598-3111 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each classs Name of each exchange on which registeredCommon Stock, par value $0.0001 per share NASDAQ Global Select MarketPreferred Share Purchase Rights NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Exchange Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x 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 1934during 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 filingrequirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files) Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer xAccelerated Filer ¨ Non-Accelerated Filer ¨ (Do not check if a smaller reporting company)Smaller reporting company ¨ Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x The aggregate market value of common stock held by non-affiliates of the registrant, based upon the closing sale price on June 30, 2015 as reported on theNASDAQ Global Select Market, was approximately $1,983 million. There were a total of 26,590,974 shares of the registrant’s common stock outstanding as of February 25, 2016. DOCUMENTS INCORPORATED BY REFERENCESource: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Portions of the registrant’s Proxy Statement for its 2016 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the close ofthe registrant’s fiscal year are incorporated by reference into Part III of this annual report on Form 10-K. Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Annual Report on Form 10-KYear Ended December 31, 2015 TABLE OF CONTENTS PART IItem 1.Business3Item 1A.Risk Factors24Item 1B.Unresolved Staff Comments45Item 2.Properties45Item 3.Legal Proceedings46Item 4.Mine Safety Disclosures48 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities49Item 6.Selected Financial Data50Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations51Item 7A.Quantitative and Qualitative Disclosures about Market Risk66Item 8.Financial Statements and Supplementary Data67Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure68Item 9A.Controls and Procedures68Item 9B.Other Information71 PART III Item 10.Directors, Executive Officers and Corporate Governance72Item 11.Executive Compensation73Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters73Item 13.Certain Relationships and Related Transactions, and Director Independence73Item 14.Principal Accounting fees and Services73 PART IV Item 15.Exhibits, Financial Statement Schedules74 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 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 of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 governmentalapprovals of our new products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies andobjectives 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 futureperformance and involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results ofour company to differ materially from those expressed or implied by such forward-looking statements. Risks and uncertainties that could cause actual resultsto differ materially from those anticipated include risks related to, among others, our ability to overcome competition from local and internationalpharmaceutical enterprises; decrease in the availability, or increase in the cost, of plasma; failure to renew plasma collection permits for plasma stations;failure to meet the GMP standard or other mandatory requirements for any of our facilities; failure to obtain PRC governmental approval to increase retailprices of certain of our biopharmaceutical products; loss of key members of our senior management; and unexpected changes in the PRC government’sregulation of the biopharmaceutical industry in China, or changes in China’s economic situation and legal environment. Additional disclosures regardingfactors that could cause our results and performance to differ from results or performance anticipated by this report are discussed in Item 1A “Risk Factors.” 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 attemptto advise interested parties of the risks and factors that may affect our business, prospects, financial condition and results of operations. The forward-lookingstatements 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 oramendments 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,” “our company,” or “our” are to the combined business of China Biologic Products, Inc., a Delaware corporation, andits 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 administrativeregions of Hong Kong and Macau;·“CFDA” are to China Food and Drug Administration;·“Exchange Act” are to the Securities Exchange Act of 1934, as amended;·“GMP” are to good manufacturing practice;·“Guizhou Taibang” are to our majority owned subsidiary Guizhou Taibang Biological Products Co., Ltd., a PRC company, formerly known asGuiyang Qianfeng Biological Products Co., Ltd.;·“Huitian” are to Xi’an Huitian Blood Products Co., Ltd., a PRC company in which we hold a minority equity interest;·“NDRC” are to the PRC National Development and Reform Commission; 1 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·“NHFPC” are to the PRC National Health and Family Planning Commission, formerly known as the PRC Ministry of Health;·“RMB” are to the legal currency of China;·“PFDA” are PRC provincial food and drug administration;·“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;·“Taibang Biological” are to Taibang Biological Ltd., a British Virgin Islands company, formerly known as Logic Express, Ltd.;·“Taibang Holdings” are to Taibang Holdings (Hong Kong) Limited, a Hong Kong company, formerly known as Logic Holdings (Hong Kong)Limited; and·“U.S. dollars” or “$” are to the legal currency of the United States. 2 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART I ITEM 1. BUSINESS. OVERVIEW We are a biopharmaceutical company principally engaged in the research, development, manufacturing and sales of human plasma-based biopharmaceuticalproducts, or plasma products, in China. We are among the top three producers of plasma products in China in terms of 2015 sales, based on our industryknowledge. We operate our business through two majority owned subsidiaries, Shandong Taibang, a company based in Tai’an, Shandong Province andGuizhou Taibang, a company based in Guiyang, Guizhou Province. We also hold a minority equity interest in Huitian, a plasma products company based inXi’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. Ourprincipal products are human albumin and immunoglobulin for intravenous injection, or IVIG. Albumin has been used for almost 50 years to treat criticallyill patients by assisting the maintenance of adequate blood volume and pressure. IVIG is used for certain disease prevention and treatment by enhancingspecific immunity. These products use human plasma as their principal raw material. Sales of human albumin products represented approximately 37.6%,39.3% and 44.1% of our total sales for 2015, 2014 and 2013, respectively. Sales of IVIG products represented approximately 42.2%, 40.4% and 38.0% of ourtotal sales for 2015, 2014 and 2013, respectively. All of our products are prescription medicines administered in the form of injections. Our sales model focuses on direct sales to hospitals and inoculation centers and is complemented by distributor sales. In 2015, we generated sales of $296.5million, an increase of 21.9% from 2014, and recorded net income attributable to our company of $89.0 million, an increase of 25.5% from 2014. In 2014, wegenerated sales of $243.3 million, an increase of 19.6% from 2013, and recorded net income attributable to our company of $70.9 million, an increase of29.9% from 2013. We operate and manage our business as one single segment. We do not account for the results of our operations on a geographic or other basis. Corporate History and Structure China Biologic Products, Inc. was originally incorporated on December 20, 1989 under the laws of the State of Texas as Shepherd Food Equipment, Inc. OnNovember 20, 2000, Shepherd Food Equipment, Inc. changed its corporate name to Shepherd Food Equipment, Inc. Acquisition Corp., or Shepherd.Shepherd is the survivor of a May 28, 2003 merger between Shepherd and GRC Holdings, Inc., or GRC, a Texas corporation. In the merger, the survivingcorporation adopted the articles of incorporation and bylaws of GRC and changed its corporate name to GRC Holdings, Inc. On January 10, 2007, a plan ofconversion became effective pursuant to which GRC was converted into a Delaware corporation and changed its name to China Biologic Products, Inc. OnJuly 19, 2006, we completed a reverse acquisition with Logic Express Ltd., or Logic Express, a British Virgin Islands company, as a result of which LogicExpress became our wholly owned subsidiary, the former shareholders of Logic Express became our then controlling stockholders, and Logic Express’smajority owned PRC subsidiary, Shandong Taibang, became our majority owned indirect subsidiary. Our common stock was initially quoted on the over-the-counter market maintained by Pink Sheets LLC. On February 29, 2008, our common stock wasapproved for quotation on the Over-The-Counter Bulletin Board under the trading symbol “CBPO.OB.” On November 25, 2009, our common stock wasapproved for listing on the NASDAQ Global Market under the symbol “CBPO” and subsequently approved for listing on the NASDAQ Global Select Marketon December 7, 2010. 3 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following chart reflects our current corporate structure as of the date of this report: (1)Pursuant to an investment entrustment agreement dated September 12, 2008, Shandong Taibang holds the 35.0% equity interest in Huitian as a nomineefor the benefit of Taibang Biological. For further details on the investment entrustment agreement, see our Current Report on Form 8-K filed with theSEC on October 16, 2008.(2)In February 2015, Taibang Holdings transferred its 82.76% equity interest in Shandong Taibang to Taibang Biotech (Shandong) Co., Ltd.(3)In October 2015, Guiyang Dalin Biologic Technologies Co., Ltd. increased its equity interest in Guizhou Taibang to 81.81% following a series of capitalinjections. Corporate Information Our principal executive offices are located at 18th 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 our company, but that information is not part of this report or incorporated by referenceherein. 4 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. INDUSTRY Overview We operate in the plasma industry in China. We derive certain industry-related data from reports and written analysis prepared by The Marketing ResearchBureau, Inc., or MRB, an independent research firm focused on blood and plasma industry data on a global level, including a China-specific report inDecember 2013, a commissioned report in June 2014 and an updated analysis in May 2015. China is the second largest plasma products market in the world, after the United States. According to MRB, China’s plasma products market (excludingrecombinant products) grew from $0.80 billion in 2009 to $2.50 billion in 2014 in terms of sales revenue, representing a compound annual growth rate, orCAGR, of 25.6%. MRB expects the market to reach $6.21 billion in 2019, representing a CAGR of 19.9% from 2014 to 2019. Based on our industryknowledge, human albumin products has dominated China’s plasma products market with a market share of 66.6% in terms of sales revenue in 2015, andIVIG products accounted for 24.4% of the market. Other plasma products, including coagulation factors, accounted for the remaining 9.0% of the market in2015. Compared to more developed countries, China has a lower per capita usage level of plasma products, and China’s plasma products market is significantlydifferent in terms of product composition and range. In more developed countries such as the United States, IVIG products account for a majority of plasmaproduct sales. This difference is mainly due to the maturity levels of the plasma industries in these countries. According to MRB, plasma fractionation cameinto existence in the 1940s in the United States, whereas in China, plasma processing appeared in the 1960s or 1970s. Until the early 1970s, the U.S. plasmaproducts market was dominated by albumin products, as is the case in China’s market presently. The current low per-capita consumption of IVIG products inChina is primarily attributable to a lack of awareness of the benefits of IVIG therapy, especially in medical conditions such as primary immune deficiency orchronic inflammatory demyelinating polyneuropathy, and lower per capita healthcare spending conditions in China. China’s plasma products market isexpected to be increasingly driven by IVIG products in the future as IVIG therapy becomes more widespread as a result of the combined efforts of physicianeducation and product promotion, among other factors. Based on our industry knowledge, China Biologic, China National Biotec Group, or CNBG, and Shanghai RAAS Blood Products Co., Ltd., or RAAS, werethe top three plasma product manufacturers in terms of sales revenue in 2015. Overall Plasma Products Market Trends Compared to more developed countries, China’s plasma products market has distinctive characteristics and trends, including the following: Stringent regulation and high entry barriers. China’s plasma products market is stringently regulated. Because of the public health crises of contaminatedplasma products experienced by China over the past decade, China has continued, and is expected to continue, to maintain stringent regulations for theplasma products industry in the foreseeable future. The PRC State Council has ceased issuing new plasma fractionation licenses since 2001, and there areapproximately 30 licensed producers of plasma products in China, of which only approximately 28 are currently in operation. Nearly all of these producersmake albumin and IVIG products, and only five of them, including China Biologic, make factor VIII products. Furthermore, foreign investment in domesticproducers of plasma products is subject to stringent government approval process. As a result, existing China-based producers with large productioncapacities face limited competition and are well positioned to gain more market share during the industry consolidation phase. 5 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Demand outstripping supply. Due to stringent regulations on the collection of raw plasma from human beings and a lack of plasma donation, China hasexperienced a shortage of plasma products since the 1980s. Plasma product manufacturers sell their products at or near the maximum retail reimbursementprice and generally do not engage in export sales. In the case of factor VIII products, the supply shortage is demonstrated by the growth of recombinantproducts which are sold at three times the price as plasma-derived factor VIII products. In 2010, the NHFPC estimated that China’s market demand for plasmaproducts required 8,000 tonnes of plasma per annum while domestic supply only met approximately half of such demand. The gap between demand andsupply enhances pricing power of the market-leading producers, and such gap is expected to continue in the foreseeable future. Ban on imports. As a measure to prevent a range of viral risks, China strictly prohibits the import of plasma products, except for human albumin andrecombinant factor VIII products. In other market segments, such as IVIG, where import is prohibited, domestic producers are shielded from competition fromtheir multinational peers, and the demand for such products in China has been supplied entirely by domestically-sourced plasma only. Low consumption level and huge growth potential. While China’s plasma products market has experienced rapid growth in recent years, China’s per capitaconsumption of plasma products lags substantially behind more developed countries. The following chart sets forth the comparison of per capitaconsumptions of selected plasma products in China and the United States in 2014: Source: MRB(1)Based on 2014 per capita consumption (kilogram per million inhabitants) in the Unites States divided by 2014 per capita consumption in China.(2)Based on 2014 per capita consumption (kilogram per million inhabitants) in the Unites States divided by 2014 per capita consumption in China. As a result of growing number of patients seeking treatment of plasma products, an increasing awareness of health benefits of plasma products and the risingaffordability of plasma products since the commencement of China’s healthcare reform, China’s plasma products market is expected to continue to havesubstantial growth potential. 6 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Fractionation technologies. In the early years of plasma fractionation in China, technologies used were not as sophisticated as those in the United States,resulting in relatively low yields, and a product portfolio limited to only two or three products (albumin, IVIG and hyper-immune globulin products).Technologies used by and yields from leading domestic manufacturers are, however, on par with international standards, well-positioned to enjoy bettersafety and higher production efficiency compared with other domestic companies. Increasing market concentration of top players. China’s current landscape of plasma products market is relatively fragmented. However, factors such asstringent regulations, tightened quality control and heavy capital expenditure requirements have contributed to increasing industry consolidation in recentyears. For instance, the CFDA issued new GMP requirements to re-certify all the fractionation plants by the end of 2013, which has resulted in the shutdownof smaller fractionation plants that were unable to upgrade their production lines by the deadline. China’s plasma industry has also witnessed multiple mergerand acquisition transactions in recent years. Market leaders with stable plasma supplies complemented by further collection expansion potentials, strongproduct portfolios and robust research and development capabilities are expected to be able to continue to solidify their positions and further gaindevelopment advantages. Albumin Market Trends According to MRB, human albumin products achieved sales revenue of $1.56 billion in 2014, accounting for 62.2% of China’s plasma products market in2014 and representing a CAGR of approximately 31.0% from 2009. MRB expects the market to reach $3.4 billion in 2019, representing a CAGR ofapproximately 16.7% from 2014 to 2019. The robust demand for albumin products in China continued to grow as a result of the high incidence of hypo-albuminemia from liver cirrhosis and hepatitisB. Unlike many other plasma products, albumin products may be imported from other countries due to the acute shortage of albumin products from domesticmanufacturers, and as a result, many multinational plasma product manufacturers are expected to continue to divert a large portion of their albumin productsto China’s market in the future so long as the price in China remains competitive. Based on our industry knowledge, the imported albumin productsaccounted for approximately 57.6% of China’s albumin products market in 2015. CNBG, RAAS and China Biologic were the largest three domestic albuminproduct manufacturers with a combined market share close to 20.5%, and China Biologic ranked the third with a market share of approximately 6.3%, interms of sales revenue in 2015. IVIG Market Trends According to MRB, China’s IVIG products achieved sales revenue of $557.4 million in 2014, representing a CAGR of approximately 13.4% from 2009.MRB expects the market to reach $1,562.6 million in 2019, representing a CAGR approximately 22.9% from 2014 to 2019. Based on our industryknowledge, China Biologic was the market leader in 2015 with a market share of approximately 18.8%. In more developed countries, major applications of IVIG therapy are for chronic diseases such as primary immune deficiency and chronic inflammatorydemyelinating polyneuropathy, which require treatment for a number of years or even lifetime. In contrast, IVIG therapy is only used to treat acute diseasesand infections in China. The substantial growth in China’s IVIG products market in recent years was mainly due to the IVIG therapy for Hand, Foot andMouth Disease, which is rare and less known in more developed countries. Compared with the markets in these countries, China’s IVIG products market is farfrom mature. In 2014, for instance, the per-capita consumption of IVIG products in China was 12.7 grams per 1,000 inhabitants, as compared to over 200grams per 1,000 inhabitants in the United States, according to MRB, and therefore there is tremendous growth potential as China’s IVIG consumption drawscloser to that of the United States. Developing this market requires significant efforts from IVIG manufacturers to educate physicians, the public and thehealth authorities on the benefits of IVIG therapy for a number of medical conditions. In countries with higher per-capita consumption of IVIG products, theefficacy of IVIG therapy in a number of medical conditions was promoted by the following means over the years: clinical trials, anecdotal reports, scientificarticles, educational activities for physicians and medical students, medical conferences and seminars, and promotional campaigns such as advertisements inmedical journals. The role of a specialized sales force was also instrumental in the rapid acceptance of IVIG therapy in North America and Europe. Inaddition, patient organizations, which are largely supported by IVIG manufacturers, have also become increasingly important in recent years, as they are ableto draw physicians’ attention to antibody deficiency tests. All of these factors may be replicated in China as a result of IVIG manufacturers’ educational andpromotional efforts as well as economic development and healthcare spending growth in China. 7 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Factor VIII Market Trends According to MRB, China’s market size for plasma-derived factor VIII was $44.5 million in terms of sales revenue in 2014, representing a CAGR ofapproximately 33.2% from 2009. MRB expects the market to reach $85.0 million in 2019, representing a CAGR of approximately 13.8% from 2014 to 2019,supported by both plasma-derived and recombinant products. Based on our industry knowledge, only five domestic plasma product manufacturers offeredplasma-derived factor VIII in 2015. Green Cross (China) Biological Products Co., Ltd., Hualan Biological Engineering Inc. and China Biologic were thelargest three domestic manufacturers of plasma-derived factor VIII with a combined market share close to 90.6%, and China Biologic ranked the third with amarket share of approximately 21.3%, in terms of sales revenue in 2015. There were over 10,000 registered patients of hemophilia in China as of December 31, 2015, according to China Hemophilia Association, which underpins asignificant market demand for factor VIII products. Due to an acute shortage of plasma-derived coagulation factor concentrates available in China as a resultof limited coagulation factor manufacturers, recombinant factor VIII products have taken a growing role in hemophilia care in China. However, sincerecombinant products are approximately three times more expensive than plasma-derived factor VIII products and not covered by national health insurancefor full reimbursement in China, they are used only in the absence of suitable plasma-derived products. As an increasing number of China-basedmanufacturers, including China Biologic, commercially launched factor VIII products, the supply is expected to increase and lead to overall market growth. Itis unlikely, however, that plasma-derived factor VIII will be able to fully meet the market demand if hemophilia care continues to improve in China. China’smarket for factor VIII products is expected to experience a continued shortage of plasma-derived factor VIII products in the foreseeable future. BUSINESS Our Competitive Strengths We believe that the following competitive strengths enable us to compete effectively in and capitalize on the growth of the plasma products market: Leading producer of plasma products in China with strong growth potential We are one of the top three producers of plasma products in terms of 2015 sales revenue based on our industry knowledge. In the albumin segment, whichaccounts for a majority of the market in China, we are the third largest domestic producers with a market share of approximately 6.3% in terms of 2015 salesrevenue, based on our industry knowledge. In the IVIG segment, which is the second largest segment of the plasma products market in China, we are thelargest producer overall in China with a market share of approximately 18.8% in terms of 2015 sales revenue, based on our industry knowledge. 8 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We have a strong product portfolio with over 20 different dosage forms of plasma products and other biopharmaceutical products across nine categories and arobust near-term product pipeline of seven products. We believe that we are one of the only four plasma products manufacturers in China with the productportfolio comprising at least eight categories of plasma products. Since different types of plasma products utilize different protein components of plasma,different types of plasma products can be produced from the same raw plasma supply with minimal incremental increase in raw material cost. Our broadproduct portfolio, supported by our strong research and development capabilities, therefore, provides us with the benefit of higher comprehensive plasmautilization, which in turn contributes to higher profit margins. We believe product safety and supply stability are the most critical considerations for hospitals and inoculation centers in making purchase decisions onplasma products. We have manufacturing facilities in Shandong Province and Guizhou Province with a production capacity of 1,300 tonnes certifiedpursuant to the new GMP requirements. We implement stringent quality control measures throughout our production process, and have not historicallyexperienced failure to receive pre-sale approval or had a recall with respect to any of our plasma products. As a leading producer of plasma products, we havebeen able to maintain a steady plasma supply volume and sales volume over the years. Our safety record and the stability of our supply, we believe, havestrengthened our business relationship with existing customers and enhanced our ability to acquire new customers. China’s plasma products market is, and will continue to be, subject to stringent government regulation. In recent years, however, PRC regulators have alsotaken initiatives to increase plasma collection volume by approving more new plasma collection stations and expanding plasma collection coverage forexisting plasma collection stations. We are well positioned to benefit from these favorable regulatory trends as we are able to meet the associated qualitycontrol and technology investment requirements. Stable and growing supply of plasma with strategically located collection stations Our ability to secure and expand our supply of plasma, a critical raw material for our operations, is one of our key strengths. Our plasma collection networkconsists of 13 captive plasma stations (including one branch collection facility). In addition, Huitian, a company in which we hold a minority equity interest,operates three plasma stations. In 2015, we were the third largest plasma collector in China in terms of collection volume with approximately 15.0% of thetotal national supply, based on our industry knowledge. We operate nine plasma collection stations (including one branch collection facility) in Shandong Province, two in Guangxi Province and two in GuizhouProvince, covering 32 cities and counties with an aggregate population of approximately 42.2 million. Shandong Province has one of the largest population,and Guangxi Province and Guizhou Province are among the least economically developed regions in China — both favorable characteristics underpinning astrong and stable plasma supply. We continue to seek innovative ways to identify and attract potential donors. We regularly organize a variety of community events to deliver our messagesthat focus on the life-saving and other social contribution aspects of plasma donation. We also regularly review our donor compensation to ensure that itremains competitive. In addition, we actively seek to expand the geographic coverage of our existing collection stations to gain access to additional donorpopulations. As a result of our collection efforts, our average plasma collection volume is greater than the national average by approximately 78.8% in 2015based on our industry knowledge. Our total plasma collection volume increased by approximately 17.2% from 2014 to 2015. 9 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition to increasing our collection volume at existing plasma collection stations, we also seek to build new plasma stations to expand our donor base. InOctober 2014, we received the regulatory approval to build two new plasma collection stations in Hebei Province, an underdeveloped province for plasmacollection that provides convenient and economic transportation to our manufacturing facilities in the adjacent Shandong Province. These new plasmacollection stations were under construction as of the date of this report. In September 2015, we received the regulatory approval to build a new branchcollection facility to operate under our Ningyang plasma collection station in Shandong Province. This new plasma collection facility covers the collectionterritory of Zaozhuang City, which has a population of 3.8 million and offers a reliable source of plasma donors. We obtained the operating permit for thisnew plasma collection facility in October 2015 and commenced plasma collection thereafter. Robust near-term product pipeline to capture full plasma value chain backed by strong research and development capabilities We currently have seven new products under development, with two of them in registration stage and expected to be commercially launched in the secondhalf of 2016 or 2017. We expect our expanding product portfolio to further increase our comprehensive plasma utilization, which will in turn lead to higherprofit margins. With our current and pipeline products, we believe that by the second half of 2016, our product offerings will be able to capture substantiallyall of the value along the plasma products value chain. Benefiting, in part, from our direct sales to hospitals and inoculation centers, our ability to bring new products to market reflects a research and developmentprocess that is designed to be demand-driven and highly responsive to physician feedback and the latest market trends in medicine. To complement ourresearch and development efforts, we also work closely with a number of leading research institutes in China specializing in plasma products. As of December31, 2015, we held 50 patents for plasma products. Leading position in China’s fast-growing IVIG products market We are the largest producer of IVIG products in China in terms of 2015 sales revenue based on our industry knowledge. Our IVIG sales, accounting forapproximately 42.2% of our total sales, increased to $125.1 million in 2015 from $77.3 million in 2013, representing a CAGR of 27.2% between 2013 and2015. We attribute our rapid growth and leading position in the IVIG products market, in part, to our continued efforts to promote IVIG therapy to physiciansin tier one cities. Compared with the markets in more developed countries, China’s IVIG products market is far from mature. In more developed countries, major applications ofIVIG therapy are for chronic diseases, which require treatment for a number of years or even lifetime, while in China, IVIG therapy is only used to treat acutediseases and infections. Also, the per-capita consumption of IVIG products in China is significantly lower than that in the more developed countries, andtherefore there is significant growth potential as China’s IVIG consumption draws closer to that of the more developed countries as a result of growingawareness of IVIG therapy and favorable government reimbursement policies. For details of the IVIG products market comparison, see “Industry — IVIGMarket Trends.” As a leading player in China’s IVIG products market, we are uniquely positioned to benefit from the anticipated increase in demand from thepopularization of IVIG therapy. 10 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Flexible and effective sales and distribution model aimed to maximize penetration We have a flexible sales model that focuses on direct sales to hospitals and inoculation centers and is complemented by distributor sales. Under this salesmodel, our products reach 30 provinces, municipalities and autonomous regions in China. In 2015, 53.5% of sales of our products were generated from direct sales, and in 2015, our direct sales network covered approximately 595 hospitals andinoculation centers. Our sales and marketing team, consisting of 124 employees as of December 31, 2015, is responsible for the sales and marketing efforts toour end customers and provide product educational programs and other sales support directly to doctors and nurses. These efforts are designed to ensureeffective and seamless communications with our end customers, particularly with respect to clinical education, which provide us with first-hand intelligenceon latest industry trends and market demands and enable us to provide better after-sale services and support. For example, our sales and marketing teamactively promotes new IVIG indications that are widely accepted in more developed countries but less known among Chinese physicians. These effortscontributed significantly to the growth of our IVIG sales, which increased by $26.7 million from $98.4 million in 2014 to $125.1 million in 2015. Our direct sales network is complemented by sales through distributors, which accounted for 46.5% of our plasma sales in 2015. We select our distributorsthrough a rigorous process, which focuses on market leadership in the covered region, the degree of control we have to which hospitals our products are sold(i.e., larger and higher tiered hospitals are preferred), and the level of access we have to our customers (i.e., greater access enables us to better track the sales ofour products). We believe that our flexible sales model of focusing on direct sales is cost-effective and has helped us to achieve strong financial performance. Our sellingexpenses as a percentage of sales were 3.4%, 4.4% and 5.2% in 2015, 2014 and 2013, respectively; and our operating margin was 44.7%, 45.7% and 42.7%during these periods, respectively. Experienced and committed management team We have an experienced, dedicated and visionary management team with an in-depth understanding of the pharmaceutical industry in China. Our Chairmanand Chief Executive Officer, Mr. David (Xiaoying) Gao, with more than 13 years of experience in the pharmaceutical industry, was instrumental in thedevelopment and implementation of our business strategy. Before joining our company, Mr. Gao was the chief executive officer of BMP SunstoneCorporation before being acquired by Sanofi. Our Chief Financial Officer, Ming Yang, has more than 18 years of financial management and accountingexperience. Mr. Guangli Pang and Mr. Gang Yang, the general manager of Shandong Taibang and Guizhou Taibang, respectively, have more than 30 and 20years of experience in the plasma products industry in China, respectively. Since our current senior management team was put in place in 2012, we have beencommitted to improving corporate governance and enhancing shareholder value. We believe our management team, with their extensive industrybackground and strong management talent, provides a strong foundation for the execution of our growth strategy and achievement of our goals. Our Business Strategy Our mission is to become a first-class biopharmaceutical enterprise in China. To achieve this objective, we have implemented a business strategy with thefollowing key components: 11 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Securing the supply of plasma Due to the shortage of plasma, we plan to build new plasma collection stations throughout China as well as to expand collection territories of existing plasmastations in order to secure our plasma supply. We currently have a total of 13 plasma stations (including one branch collection facility) in operation, of whichnine are in Shandong Province, two in Guangxi Province and two in Guizhou Province. In October 2014, we received the regulatory approval to build twonew plasma collection stations in Hebei Province. These new plasma collection stations were under construction as of the date of this report. In September2015, we received the regulatory approval to build a new branch collection facility to operate under our Ningyang plasma collection station in ShandongProvince. We obtained the operating permit for this new plasma collection facility in October 2015 and commenced plasma collection thereafter. Meanwhile,we are carrying out various promotional activities to stabilize and expand our donor base for our existing plasma stations. A majority of our plasma stationsrecorded increases in plasma collection volume in 2015 as compared to 2014. Further strengthening of research and development capability We believe that, unlike other more developed countries such as the United States, China’s plasma products are at an early stage of development. There aremany other plasma products that are being used in the United States, which are not currently manufactured or used widely in China. We intend to strengthenour research and development capabilities through in-house development and partnership with leading international players to expand our product line toinclude plasma products that have higher margins and are technologically more advanced. We also intend to continue to improve the yield for our products.As a result of our research and development efforts, we currently have seven products under development, with two of them in registration stage and expectedto be commercially launched in the second half of 2016 or 2017. For further details of our pipeline products, see “— Our Research and Development Efforts”below. We believe that our increased focus on research and development will give us a competitive advantage in China over our competitors. Market development and network expansion Leveraging on the high quality and steady supply of our products, we intend to expand our geographic coverage in China to include markets where weenvision significant growth potential. In particular, we plan to further strengthen our direct sales by growing our sales and marketing team and expanding ourcoverage among hospitals and inoculation centers. We also plan to strengthen our relationships with major distributors in tier-one cities to deepen ourpenetration in those markets and to obtain higher market share. Organic growth complemented by acquisition of competitors and/or other biologic-related companies We have expanded organically by securing sufficient plasma supply and strengthening in-house development efforts. In addition to organic growth,acquisition is an important part of our expansion strategy. Although there are approximately 30 approved plasma-based biopharmaceutical manufacturers inthe market, we believe that there are approximately 28 manufacturers currently in operation in China, only about half of which are competitive. We estimatethat the top five manufacturers in China accounted for more than 70.0% market share (excluding imports) in terms of sales revenue in 2015. Furthermore, webelieve that the regulatory authorities are considering further industry reform and those smaller, less competitive manufacturers will face possible revocationof their manufacturing permits by the regulators due to the compliance cost, making them potential targets for acquisition. If we are presented withappropriate opportunities, we may acquire additional companies, products or technologies in the biologic-related sectors (e.g., medical, pharmaceutical andbiopharmaceutical) to complement our current business operations. 12 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our Products Our principal products are our approved human albumin and IVIG products. Human albumin is principally used to treat critically ill patients by replacing lostfluid and maintaining adequate blood volume and pressure. IVIG products are primarily used to enhance specific immunity, a defense mechanism by whichthe human body generates certain immunoglobulin, or antibodies, against invasion by potentially dangerous substances. In a situation where the humanbody cannot effectively react with these foreign substances, injection of our products will provide sufficient antibodies to neutralize such substances. We arecurrently approved to produce over 20 different dosage forms of plasma products. Approved Products(1)(2) Treatment/UseHuman albumin – 20%/10ml, 20%/25ml, 20%/50ml,10%/100ml, 10%/20ml, 10%/50ml, 25%/50ml and20%/50ml (10g, from factor IV) Shock caused by blood loss trauma or burn; raised intracranial pressure caused by hydrocephalusor trauma; oedema or ascites caused by hepatocirrhosis and nephropathy; prevention and treatmentof low-density-lipoproteinemia; and neonatal hyperbilirubinemia.Human immunoglobulin – 10%/3ml and 10%/1.5ml Original immunoglobulin deficiency, such as X chain low immunoglobulin, familiar variableimmune deficiency, immunoglobulin G secondary deficiency; secondary immunoglobulindeficiency, such as severe infection, newborn sepsis; and auto-immune deficiency diseases, such asoriginal thrombocytopenia purpura or kawasaki disease.IVIG – 5%/25ml, 5%/50ml, 5%/100ml and 5%/200ml Same as above.Human hepatitis B immunoglobulin – 100 IU(3),200IUand 400IU Prevention of measles and contagious hepatitis. When applied together with antibiotics, itscurative effect on certain severe bacteria or virus infection may be improved.Human rabies immunoglobulin – 100IU, 200IU and500IU Mainly for passive immunity from bites or claws by rabies or other infected animals. All patientssuspected of being exposed to rabies are treated with a combined dose of rabies vaccine and humanrabies immunoglobulin.Human tetanus immunoglobulin – 250IU Mainly used for the prevention and therapy of tetanus. Particularly applied to patients who haveallergic reactions to tetanus antitoxin.Placenta polypeptide – 4ml/vial Treatment for cell immunity deficiency diseases, viral infection and leucopenia caused by variousreasons, and assist in postoperative healing.Factor VIII – 200IU and 300IU Treatment for coagulopathies such as hemophilia A and increased concentration of coagulationfactor VIII.Human prothrombin complex concentrate (or PCC) –300IU Treatment for congenital and acquired clotting factor II, VII, IX, X deficiency, such as HemophiliaB, excessive anticoagulant, and vitamin K deficiency, etc. (1)“%” represents the degree of dosage concentration for the product and each product has its own dosage requirement. For example, human albumin20%/10ml means 2g of human albumin is contained in each 10ml packaging and human immunoglobulin 10%/3ml means 300mg of humanimmunoglobulin is contained in each 3ml packaging. Under PRC law, each variation in the packaging, dosage and concentration of medicalproducts requires separate registration and approval by CFDA before it may be commercially available for sale. For example, among our humanalbumin products, only human albumin 20%/10ml, 20%/25ml, 20%/50ml, 10%/100ml, 10%/20ml, 10%/50ml, 25%/50ml and 20%/50ml (10g, fromfactor IV) products are currently approved and are commercially available. (2)“IU” means International Units. IU is a unit used to measure the activity of many vitamins, hormones, enzymes, and drugs. An IU is the amount of asubstance that has a certain biological effect. For each substance there is an international agreement on the biological effect that is expected for 1 IU.In the case of immunoglobulin, it means the number of effective units of antibodies in each package. (3)Tetanus antitoxin is a cheaper injection treatment for tetanus. However it is not widely used because most people are allergic to it. Our approved human albumin, immunoglobulin (including IVIG), factor VIII and PCC products all use human plasma as the primary raw material. All of ourapproved products are prescription medicines administered in the form of injections. 13 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We have two product liability insurance policies covering Shandong Taibang’s and Guizhou Taibang’s products in the amount of RMB20 million(approximately $3.1 million) each. Since our establishment in 2002, we have been subject to four lawsuits filed by patients who were treated with ourproducts and received blood and/or plasma transfusions. See “Risk Factors — Risks Related to Our Business — Product liability claims or product recallsinvolving our products could have a material adverse effect on our business” for further details. We do not expect these four claims to have a material adverseeffect on our company. Raw Materials Plasma from in-house collection Plasma is the principal raw material for our biopharmaceutical products. We currently operate eleven plasma stations (including one branch collectionfacility) through Shandong Taibang and two plasma stations through Guizhou Taibang. In October 2014, we received the regulatory approval to build twonew plasma collection stations in Hebei Province. These new plasma collection stations were under construction as of the date of this report. In September2015, we received the regulatory approval to build a new branch collection facility to operate under our Ningyang plasma collection station in ShandongProvince. We obtained the operating permit for this new plasma collection facility in October 2015 and commenced plasma collection thereafter. We believethat our plasma stations give us a stable source of plasma supply and control over product quality. Also, we believe that we have enjoyed benefits ofeconomies of scale, including sharing certain administration and management expenses across our several plasma stations. We currently maintain sufficientplasma supply for approximately eight months of production. Plasma sourced from Xinjiang Deyuan We purchased approximately 143 tonnes of source plasma and plasma pastes from Xinjiang Deyuan Bioengineering Co., Ltd., or Xinjiang Deyuan, for a totalconsideration of approximately RMB139 million (approximately US$22.6 million). Xinjiang Deyuan delivered these raw materials to us during the secondquarter of 2015 and passed our quality inspection. We expect that the final products made from such raw materials will be fully released to market by the firsthalf of 2016. We entered into a cooperation agreement with Xinjiang Deyuan and its controlling shareholder in August 2015, pursuant to which Xinjiang Deyuan agreedto sell to us no less than 500 tonnes of source plasma in batches over the next three years. As required and approved by the local regulator, all plasma used forproduction must be able to be traced to plasma collection stations, and therefore, we monitor the quality of the plasma collection process at Xinjiang Deyuan.We purchased approximately 19.0 tonnes of source plasma from Xinjiang Deyuan under this cooperation agreement as of the date of this report. Ourtransactions with Xinjiang Deyuan will provide us a significant volume of additional raw material over the next three years and enable us to efficientlyenhance our production capacity utilization and supply more plasma products to satisfy growing market demand. Other raw materials and packaging materials Other raw materials used in the production of our biopharmaceutical products include reagents and consumables such as filters and alcohol. The principalpackaging materials we use include glass bottles for our injection products as well as external packaging and printed instructions for our biopharmaceuticalproducts. We acquire our raw materials and packaging materials from our approved suppliers in China and overseas. We select our suppliers based on quality,consistency, price and delivery of the raw materials which they supply. 14 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our five largest suppliers for other raw materials and packaging materials in the aggregate accounted for approximately 36.2%, 30.2% and 39.3% of our totalprocurement for the years ended December 31, 2015, 2014 and 2013, respectively. We have not experienced any shortage of supply or significant qualityissue with respect to any raw materials and packaging materials. Plasma Collection Our plasma stations purchase, collect, examine and deepfreeze plasma on behalf of Shandong Taibang and Guizhou Taibang and are subject to provincialhealth bureau’s rules, regulations and specifications for quality, packaging and storage. Each station is only allowed to collect plasma from healthy donorswithin its respective districts and in accordance with a time table set by its respective parent company, Shandong Taibang or Guizhou Taibang. The plasmamust be tested negative for HBsAb, HCV and HIV antibodies and the RPR test, contain ALT 25 units (ALT) and plasma protein 55g/l, and contain no viruspollution or visible erythrolysis, lipemia, macroscopic red blood cell or any other irregular finding. The plasma is packaged in 25 to 30 separate 600g bags ineach box and then stored at a temperature of -20°C or lower within limited time after collection to ensure that it will congeal within six hours. Each bag islabeled with a computer-generated tracking code. Shandong Taibang and Guizhou Taibang are responsible for the overall technical and quality supervisionof the plasma collection, packaging and storage at each plasma station. Sales, Marketing and Distribution Because all of our products are prescription drugs, we can only sell to hospitals and inoculation centers directly or through approved distributors. For 2015,2014 and 2013, direct sales to hospitals and inoculation centers represented approximately 59.0%, 65.4% and 66.8%, respectively, of our total plasma sales.Our five largest customers in the aggregate accounted for approximately 13.0%, 14.6% and 11.0% of our total sales for 2015, 2014 and 2013, respectively.Our largest customer accounted for approximately 4.0%, 4.2% and 2.7% of our total sales for 2015, 2014 and 2013, respectively. We select our distributors through a rigorous process, which focuses on market leadership in the covered region, the degree of control we have over to whichhospitals our products are sold (i.e. larger and higher tiered hospitals are preferred), and the level of access we have to our customers (i.e. greater accessenables us to better track the sales of our products). As part of our effort to ensure the quality of our distributors, we also conduct due diligence to verifywhether potential distributors have obtained necessary permits and licenses and facilities (such as cold storage) for the distribution of our biopharmaceuticalproducts and assess their financial condition. Certain of our regional distributors are appointed on an exclusive basis within a specified geographic territory.Our supply contracts set out the quantity and price of products to be supplied by us. For distributors, our contracts also contain guidelines for the sale anddistribution of our products, including restrictions on the geographical territory in which the products may be sold. We provide our distributors with trainingin relation to our products and on sales techniques. We generally require our distributors to pay in advance before we deliver products, with a few exceptionsfor a credit period of no longer than 60 days to major distributors in tier-one cities. For hospitals and clinics, we generally grant a credit period of no longerthan 90 days, with exceptions to certain high credit-worthy customers of up to six months. For 2015, 2014 and 2013, we had not incurred any significant baddebts from our customers. 15 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our largest geographic market is Shandong Province, representing approximately 23.2%, 23.9% and 27.3% of our total sales for 2015, 2014 and 2013,respectively. Jiangsu Province is our second largest geographic market, representing 10.0%, 9.3% and 8.4% of our total sales for 2015, 2014 and 2013,respectively. In addition to Shandong Province and Guizhou Province, we also have sales presence in 28 other provinces, municipalities and autonomousregions. As of December 31, 2015, our marketing and after-sales services department consisted of 124 employees. We believe that due to the nature of our products, the key factors of our competitiveness centers on product safety, steady supply, brand recognition, timelyavailability and pricing. As all of our products are prescription medicines, we are not allowed to advertise our products in the mass media. For 2015, 2014 and2013, total sales and marketing expenses amounted to approximately $10.0 million, $10.7 million and $10.6 million, respectively, representingapproximately 3.4%, 4.4% and 5.2%, respectively, of our total sales. Our Research and Development Efforts Each of Shandong Taibang and Guizhou Taibang has its own research and development department. All of our research and development researchers holddegrees in medicine, pharmacy, biology, biochemistry or other relevant field. Our research and development departments are responsible for the developmentand registration of our products. We also cooperate with a number of leading institutions in China specializing in plasma products to strengthen our researchand development capacity. We employ a market driven approach to initiate research and development projects, including both product and production technique development. Webelieve that the key to our industry’s developments is the safety of products and maximizing the yield per unit volume of plasma. Our research anddevelopment efforts are focused on the following areas: •broaden the breadth and depth of our portfolio of plasma products; •enhance the yield per unit volume of plasma through new collection techniques; •maximize manufacturing efficiency and safety; •promote product safety through implementation of new technologies; and •refine production technology for existing products. All the products we currently manufacture have been developed in-house. The following table outlines our research and development work in progress: Products Currently in Development Treatment/Use Status of Product Development Stage*Human hepatitis B immunoglobulin(pH4) for intravenous injection Prevention of measles and contagious hepatitis. Whenapplied together with antibiotics, its curative effect oncertain severe bacteria or virus infection may be improved. Withdrew the registration applicationfrom the CFDA. Commercial productionpending for the resubmission of theregistration application.(1) 4Human fibrinogen Treatment for lack of fibrinogen and increase humanfibrinogen concentration. Substantially completed the clinical trialand has started the self-inspection on thedata of the clinical trial. Commercialproduction expected in late 2016 or early2017. 4 16 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Immune Globulin Intravenous (Human),Caprylate/Chromatography Purified and20 nm virus filtration Treatment for original immunoglobulin deficiency;secondary immunoglobulin deficiency and auto-immunedeficiency diseases. Obtained the approval for clinical trial bythe CFDA. 3Human Antithrombin III (concentration) Treatment for (1) hereditary antithrombin III deficiency inconnection with surgical or obstetrical procedures and (2)thromboembolism. Submitted application for clinical trial tothe CFDA. Received the notification ofdrug evaluation consulting session fromthe Center for Drug Evaluation underCFDA. Approval of clinical trialsexpected in 2017. 2Human CytomegalovirusImmunoglobulin Prophylaxis and treatment of CMV infection, especially forthe prevention of active virus replication for patients inimmunosuppression, such as organ transplantation patients. Submitted application for clinical trial tothe CFDA. Passed the on-site examinationconducted by the PFDA. Approval ofclinical trials expected in 2017. 2Human coagulation factor IX Use for coagulopathies such as HemophiliaB. Submitted application for clinical trial tothe CFDA. Approval of clinical trialsexpected in 2017. 2Human Fibrin Sealant Adjunct to hemostasis on patients undergoing surgery in casethat traditional surgical techniques (such as suture, ligatureor cautery) are ineffective or impractical. Completed the official virus inactivationby the PRC National Institutes for Foodand Drug Control. 1 *These stages refer to the stages in the regulatory approval process for our products described in “— Regulation.” (1)As mandated by a CFDA notice promulgated on July 22, 2015, all pharmaceutical enterprises that are in the process of registration application arerequired to inspect the data from the clinical trials and report the inspection results to the CFDA and to withdraw the registration application should anydeficiency surface from such inspection. We withdrew the registration application for human hepatitis B immunoglobulin (pH4) for intravenousinjection as a result of our self-inspection in December 2015. See “Risk Factors—Risks Relating to Our Business—Our inability to successfully researchand develop new biopharmaceutical products could have an adverse effect on our future growth.” For 2015, 2014 and 2013, total research and development expenses amounted to approximately $6.0 million, $4.2 million and $4.2 million, respectively,representing approximately 2.0%, 1.7% and 2.1%, respectively, of our total sales. Competition We are subject to intense competition. There are both local and overseas pharmaceutical enterprises that engage in the manufacture and sale of potentialsubstitute or similar biopharmaceutical products as our products in China. These competitors may have more capital, better research and developmentresources, and stronger manufacturing and marketing capabilities than we do. In our industry, we compete based upon product quality, production cost,ability to produce a diverse range of products and logistical capabilities. Our profitability may be adversely affected if competition intensifies, competitors reduce prices, regulators promulgate or strengthen regulations that havethe effect of controlling the prices of our products; or competitors develop new products or product substitutes with comparable medicinal applications ortherapeutic effects that are more effective or less costly than ours. 17 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. There are approximately 30 approved manufacturers of plasma products in China of which approximately 28 are currently in operation. Many of thesemanufacturers are essentially producing the same type of products that we produce, including human albumin and various types of immunoglobulin. Webelieve, however, that it is difficult for new manufacturers to enter into the industry due to current regulatory barrier. We believe that our major competitors inChina include CNBG, RAAS, Hualan Biological Engineering, Inc., Sichuan Yuanda Shuyang Pharmaceutical Co., Ltd., Shanxi Kangbao Biological ProductCo., Ltd., and Jiangxi Boya Bio Pharmaceutical Co., Ltd. In addition, we also face competition from imported products where allowed. China became a member of the World Trade Organization in December 2001and as a result imported biopharmaceutical products enjoy lower tariffs. Since 2009, China has experienced a substantial increase in volume of importedhuman albumin. If the import of human albumin continues to increase, we may face more fierce competition in the domestic human albumin market. Based on our industry knowledge, we are among the top three plasma products manufacturer in China in terms of 2015 sales revenue. To solidify our marketposition, we have also expanded our product portfolio to include factor VIII and human prothrombin complex concentrate, or PCC, in 2012 and 2015respectively. For factor VIII, we obtained the manufacturing approval certificate and the GMP certification for production facility from the CFDA in 2012. ForPCC, we obtained the manufacturing approval certificate in July 2013 and the GMP certification for the production facility in March 2014. We will continue to meet challenges and secure our market position by enhancing our existing products, introducing new products to meet customer demand,delivering quality products to our customers in a timely manner and maintaining our established industry reputation. Our Intellectual Property We held 53 issued patents and 13 pending patent applications in China for certain manufacturing processes and packing designs as of December 31, 2015.We also had eight registered trademarks in China as of December 31, 2015. In addition, we had registered three domain names as of December 31, 2015, namely, www.chinabiologic.com, www.ctbb.com.cn and www.taibanggz.com. Regulation Set forth below is a summary of the major PRC regulations relating to our business. Due to the nature of our products, we are supervised by various levels of the NHFPC and/or CFDA. Such supervision includes the safety standards regulatingour raw material supplies (mainly plasma), our manufacturing process and our finished products. We are also subject to other PRC regulations, including those relating to taxation, foreign currency exchange and dividend distributions. Plasma collection Substantially all plasma donations for commercialized plasma products are done through plasma stations. Plasma donation means donors give only selectedblood components — platelets, plasma, red cells, infection-fighting white cells, or a combination of these, depending on donors blood type and the needs ofthe community. Plasma stations in China are commonly used to collect plasma. In China, current regulations only allow an individual donor to donate bloodin 14-day intervals, with a maximum quantity of 580ml (or about 600 gram) per donation. 18 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following are the general regulatory requirements to establish a plasma station in China: •meet the overall plan in terms of the total number, distribution, and operational scale of plasma stations; •have the required professional health care technicians to operate a station; •have the facility and a hygienic environment to operate a station; •have an identification system to identify donors; •have the equipment to operate a station; and •have the equipment and quality control technicians to ensure the quality of the plasma collected. Plasma stations were historically owned and managed by the PRC health authorities. In March 2006, the NHFPC and other eight central governmentaldepartments of the PRC State Council promulgated the Measures for the Reform of Blood Collection Stations whereby the ownership and management of theplasma stations are required to be transferred to plasma-based biopharmaceutical companies while the regulatory supervision and administrative controlremain with the government. As a result, all plasma stations are now having direct supply relationship with their parent fractionation facilities. Set out below are some of the safety features at China’s plasma stations: •Plasma stations can only source plasma from donors that are the local residents within the assigned district approved by the provincial healthauthorities. •Plasma stations must perform a health check on the donor. Once the donor passes the health check, a “donor permit” is issued to the donor. Thestandards of the health check are established by the health authorities at the PRC State Council level. •The designing and printing of the “donor permit” is administrated by the provincial health authorities, autonomous region or municipalitygovernment, as the case maybe. The “donor permit” cannot be altered, copied or assigned. •Before donors can donate plasma, the station must verify their identities and the validity of their “donor permits.” The donors must pass theverification procedures before they are given a health check and blood test. For those donors who have passed the verification, health check andblood test and whose plasma were donated according to prescribed procedures, the station will set up a record. •Collected plasma which passes quality testing cannot be used to produce plasma products until its donor donates again after a 90-day quarantineperiod and the subsequently donated plasma passes quality testing as well. •All plasma stations are subject to the regulations on the prevention of communicable diseases. They must strictly adhere to the sanitary requirementsand reporting procedures in the event of an epidemic situation. The operation of plasma collection stations is subject to stringent regulations by the PRC government. We estimate that there were approximately 188plasma stations in operation in China as of December 31, 2015. 19 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Importation of blood products According to current PRC regulations, except for human albumin and recombinant factor VIII products, all the plasma products are banned from importationinto China. Production of plasma products The manufacture and sale of plasma products are subject to stringent regulations by the PRC government. Under PRC law, each variation in the packaging,dosage and concentration of medical products requires separate registration and approval by the CFDA before it may be commercially available for sale. Forexample, among our human albumin products, only human albumin 20%/10ml, 20%/25ml, 20%/50ml, 10%/100ml, 10%/20ml, 10%/50ml, 25%/50ml and20%/50ml (10g, from factor IV) products have been approved and are commercially available. All references in this report to our manufacture and sale ofhuman albumin relate to our approved human albumin products. The table below illustrates the PRC approval process for the manufacture and sale of new medicines: Stage Activities1 Pre-clinical Research The pre-clinical research stage mainly involves the following steps: · initiate the research project, study the project feasibility and develop a plan for testing andproducing the new medicine; · develop the scope and the techniques for testing the new medicine in the laboratory; · develop laboratory-scale manufacturing process for the new medicine; · develop the manufacturing process for the new medicine on an expanded basis in the workshop;and · develop the virus inactivation process/techniques, engage qualified institution to assess the virusinactivation process/techniques, and report the related documents to the related governmentauthority for re-assessment. 2 Clinical trial application The clinical trial application stage mainly involves the following steps: · submit required sample products and documents to The PFDA. The PFDA will perform an on-siteexamination on the documents and equipment, and then transfer all the required materials tothe CFDA, who will further review the documents and test the sample products; · submit a draft clinical trial program to the CFDA for the application of the clinical trial; and · obtain approval of the clinical trial. 3 Clinical trials Clinical trials range from Phase I to IV: · Phase I: preliminary trial of clinical pharmacology and human safety evaluation studies. Theprimary objective is to observe the pharmacokinetics and the tolerance level of the humanbody to the new medicine as a basis for ascertaining the appropriate delivery methods ordosage. · Phase II: preliminary exploration on the therapeutic efficacy. The purpose is to assesspreliminarily the efficacy and safety of the new medicine on patients and to provide the basisfor designing dosage tests in phase III. · Phase III: confirm the therapeutic efficacy. The objective is to further verify the efficacy and safetyof the new medicine on patients, to evaluate the benefits and risks and finally to providesufficient experimental evidence to support the registration application of the new medicine. · Phase VI: application research conducted after the launch of a new medicine. The objective is toobserve the efficacy and adverse reaction of the new medicine under extensive use, to performan evaluation of the benefits and risks of the application among ordinary or special group ofpatients, and to ascertain and optimize the appropriate dosage and formula for application. 20 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 4 Registration The registration stage mainly involves the following steps: · submit documents related to pre-clinical and clinical trials to the PFDA, which will perform on-siteinspection on the clinical trials and then transfer the related documents to the CFDA for furtherreview; · receive on-site inspection by the CFDA on three consecutive sample productions at the productionfacilities; · obtain the manufacturing approval certificate following the public notification period; and · obtain the GMP certificate following the public notification period. 5 Production and approval The production and approval for sale stage mainly involves the following steps: for sale · produce the approved products in qualified facilities with requisite GMP certificates; · submit documentation and samples of mass production products to the CFDA for inspection; and · obtain qualification certificate to mass production products for sale on a batch-by-batch basis. New GMP standard All of our production facilities are required to obtain GMP certificates for their pharmaceutical production activities. In February 2011, the CFDA enacted thenew GMP standard, which has significantly increased standards for quality control, documentation, and overall manufacturing processes of blood products,vaccines, injections and other sterile pharmaceutical products. The new GMP standard requires us to, among others, maintain and operate a comprehensiveand effective product quality control system throughout the production process. In addition, it imposes higher standards for our production facilities. Thenew GMP standard became applicable to all of our production facilities at the end of 2013. Following the upgrades on our production facilities, we obtainedthe renewed GMP certificate for Shandong Taibang and Guizhou Taibang in June 2013 and March 2014, respectively. Huitian obtained the GMP certificatefrom the CFDA for its new plasma production facility in February 2016 and started the commercial production thereafter. Pricing Effective on June 1, 2015, the NDRC removed the retail price ceilings for all drug products (except for anesthetics and category I antipsychotics) in China.See “Risk Factors—Risks Relating to Our Business—Significant uncertainties remain with respect to the implementation of the recently announcedderegulation on price controls over drug products, and we may not have discretion to increase the prices of our products until implementation rules are inplace. Our ability to increase the prices of our products is also subject to ongoing government supervision and limited by general market conditions andintense competition.” 21 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Prior to the deregulation of price controls, retail prices of certain pharmaceutical products were subject to various price-related regulations. According to the“Regulations on Controlling Blood Products” promulgated by the PRC State Council in 1996, regional offices of the Pricing Bureau and the NHFPC had theauthority to regulate retail prices for controlled plasma products. In addition, retail prices of pharmaceutical products fully or partially covered under thenational insurance system were also subject to the price ceilings set out in the National (Medical) Insurance Catalog, or the NIC, which may be adjusted bythe NDRC from time to time. The hospitals as participants of the national insurance program could not sell the products to patients at prices exceeding suchretail price ceilings. The provincial governments in turn often establish a tender price ceiling for product tender offer made to hospitals based on, amongother things, the regional living standards, cost of production of the manufacturers and the corresponding retail price ceiling. The ex-factory prices and thedistributor’s wholesale prices could not exceed the tender price ceiling. Seven of our principal products (i.e., human albumin, IVIG, human rabiesimmunoglobulin, human tetanus immunoglobulin, factor VIII, PCC and human immunoglobulin) were included in the NIC and were subject to tender priceceilings. Two other principal products (i.e., placenta polypeptide and human hepatitis B immunoglobulin), although not included in the NIC, were alsosubject to tender price ceilings in certain provinces. Our profit margin for any price-controlled product was effectively controlled by the tender price ceiling.When a tender price ceiling put significant pressure on the profit margin of a given product, we may appeal to the provincial governments for lifting of suchtender price ceiling. Taxation On March 16, 2007, the National People’s Congress of China passed the Enterprise Income Tax Law, or the EIT Law, and on November 28, 2007, the PRCState Council passed its implementation rules, which became effective on January 1, 2008. The EIT Law and its implementation rules impose a unified EIT of25.0% on all domestic-invested enterprises and foreign investment enterprises, or FIEs, unless they qualify under certain limited exceptions. In addition to the changes to the tax structure, under the EIT Law, an enterprise established outside of China with “de facto management bodies” withinChina is considered a resident enterprise and will normally be subject to an EIT of 25.0% on its global income. The implementation rules define the term “defacto management bodies” as “an establishment that exercises, in substance, overall management and control over, among others, the production, business,recruitment and accounting aspects of a Chinese enterprise.” If the PRC tax authorities subsequently determine that we should be classified as a residententerprise, then our global income will be subject to PRC income tax of 25%. For detailed discussion of PRC tax issues related to resident enterprise status,see “Risk Factors—Risks Relating to Doing Business in China—Under the Enterprise Income Tax Law, we may be classified as a “resident enterprise” ofChina. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.” The EIT Law confirmed that qualified high and new technology enterprises may enjoy a preferential income tax rate of 15%, instead of the uniform enterpriseincome tax rate of 25%. The PRC Ministry of Science and Technology, the PRC Ministry of Finance and the State Administration of Taxation, or SAT,jointly promulgated the Measures for Determination of High and New Technology Enterprise on August 14, 2008 to provide the detailed rules for theexamination of qualifications and approval of certificates for high and new technology enterprises. Each high and new technology enterprise certificate isvalid for three years. Shandong Taibang was recognized by Shandong provincial government as a high and new technology enterprise in 2008 and renewedthe certificate in 2011, as a result of which Shandong Taibang was entitled to enjoy a preferential income tax rate of 15.0% until the end of 2013. In October2014, Shandong Taibang renewed the high and new technology enterprise certificate, which entitled it to enjoy a preferential income tax rate of 15.0% for aperiod of three years from 2014 to 2016. Shandong Taibang may apply for a renewal for an additional three years from 2017 to 2019 upon the expiration ofsuch certificate. 22 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. According to Notice on Issues Concerning Relevant Tax Policies in Deepening the Implementation of the Western Development Strategy jointlypromulgated by the PRC Ministry of Finance, the PRC General Administration of Customs and SAT on July 27, 2011, enterprises located in the westernregion of China which have at least 70.0% of their income from the businesses falling within the Category of Encouraged Industries in western region ofChina may enjoy a preferential income tax of 15.0% within the period from January 1, 2011 to December 31, 2020. Guizhou Taibang, being a qualifiedenterprise located in the western region of China, enjoys a preferential income tax rate of 15.0% effective from January 1, 2011 to December 31, 2020. Foreign currency exchange The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended (2008). Underthese rules, RMB is freely convertible for current account items, such as trade and service-related foreign exchange transactions, but not for capital accountitems, such as direct investment, loan or investment in securities outside China unless the prior approval of, and/or registration with, the State Administrationof Foreign Exchange, or SAFE, or its local counterparts (as the case may be) is obtained. Pursuant to the Foreign Currency Administration Rules, FIEs in China may purchase foreign currency without the approval of SAFE for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange (subject toa cap approved by SAFE) to satisfy foreign exchange liabilities or to pay dividends. In addition, if a foreign company acquires a company in China, theacquired company will also become an FIE. However, the relevant PRC government authorities may limit or eliminate the ability of FIEs to purchase andretain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment in securities outside China arestill subject to limitations and require approvals from, and/or registration with, SAFE. Dividend distributions Under applicable PRC regulations, FIEs in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRCaccounting standards and regulations. In addition, an FIE in China is required to set aside at least 10% of its after-tax profit based on PRC accountingstandards each year to its general reserves until the accumulative amount of such reserves reach 50% of its registered capital. These reserves are notdistributable as cash dividends. The board of directors of an FIE also has the discretion to allocate a portion of its after-tax profits to staff welfare and bonusfunds, which may not be distributed to equity owners except in the event of liquidation. In addition, under the EIT law, the Notice of the State Administration of Taxation on Negotiated Reduction of Dividends and Interest Rates, promulgated onJanuary 29, 2008, the Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation andPrevention of Fiscal Evasion, or the Double Taxation Treaty, which became effective on December 8, 2006, and the Notice of the State Administration ofTaxation Regarding Interpretation and Recognition of Beneficial Owners under Tax Treaties, which became effective on October 27, 2009, dividends fromour PRC subsidiary, Taibang Biotech (Shandong) Co., Ltd., paid to us through our Hong Kong subsidiary, Taibang Holdings, may be subject to awithholding tax at a rate of 10%, or at a rate of 5% if Taibang Holdings is considered a “beneficial owner” that is generally engaged in substantial businessactivities in Hong Kong and entitled to treaty benefits under the Double Taxation Treaty. Our Employees As of December 31, 2015, we employed 1,726 full-time employees, of which 59 were seconded to us by the Shandong Institute. 23 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We believe we are in material compliance with all applicable labor and safety laws and regulations in China. We participate in various employee benefitplans that are organized by municipal and provincial governments, including retirement, medical, unemployment, work injury and maternity benefit plansfor our managerial and key employees. In addition, we provide short term insurance plans for certain employees while on duty to cover work relatedaccidents. We believe that we maintain a satisfactory working relationship with our employees and we have not experienced any significant labor disputes orany difficulties in recruiting staff for our operations. ITEM 1A. RISK FACTORS. An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the otherinformation included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition orresults of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Youshould read the section entitled “Special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report. RISKS RELATING TO OUR BUSINESS The biopharmaceutical industry in China is strictly regulated and changes in such regulations, including banning or limiting plasma products, may have amaterial adverse effect on our operations, revenues and profitability. The principal raw material of our existing and planned biopharmaceutical products is human source plasma, which, due to its unique nature, is subject tovarious quality and safety control risks which include, but are not limited to, contaminations and blood-borne diseases. In addition, current technologycannot eliminate entirely the risk of biological hazards inherent in plasma that are not currently known or for which screens are currently commerciallyavailable, which could result in a widespread epidemic due to blood infusion. As a result, the biopharmaceutical industry in China is strictly regulated by thegovernment. The regulatory regime regulates the process of administrative approval of medicine and its production, and includes laws and regulations suchas the PRC Pharmaceutical Law, the Implementation Rules on the PRC Pharmaceutical Law and the Regulations on the Administration of Blood Products.These laws and regulations require entities producing blood products to comply strictly with certain hygienic standards and specifications promulgated bythe government. In the event that human plasma is discovered to be not compliant with the government’s hygienic standards and specifications, the healthdepartment may revoke its approval of the blood product, or otherwise limit the use of such blood product. Changes in these laws and regulations, includingbanning or limiting plasma products, could have a material adverse effect on our operations, revenues and profitability. If the biopharmaceutical products we sell are found to be contaminated, our operation, revenues and profitability would be severely and adversely affectedand we may be subject to civil and criminal liabilities. We currently collect plasma from human donations to our plasma stations in Shandong, Guangxi and Guizhou Provinces. If any of our human donors isinfected with diseases, then the plasma from such donor may be infected. Although we pre-screen all donors in order to ensure that they are not infected withHIV and hepatitis C and have not contracted liver disease, screening tests may fail to identify and exclude from our supply the plasma from infected donorsdue to technical limitation and human errors. If such contaminated plasma is not appropriately screened out, our entire plasma supply for the relevant plasmastation may become contaminated. In 2015, we purchased source plasma and plasma pastes totaling 143 tonnes from Xinjiang Deyuan. We performedscreening tests on the purchased plasma before putting it into production. However, we may fail to identify the contaminated plasma from Xinjiang Deyuandue to the technical limitation and/or human errors. If the plasma from our collection or purchased from Xinjiang Deyuan is found to be contaminated and wesell biopharmaceutical products made from that plasma, we could be subject to civil liability from suits brought by consumers. Further, we may lose ourregistration and have criminal liability if we are found by the government to have been criminally negligent. If this occurs, our business, prospects, results ofoperations and financial condition will be materially and adversely affected. 24 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If our supply of quality plasma is interrupted, our results of operations and profitability will be adversely affected. In addition, if we experience anyshortage of raw materials in the future, we may be unable to proceed with our long-term business plan and we may be forced to curtail or cease ouroperations or further business expansion. The production of plasma products relies on the supply of plasma of suitable quality. For 2015, 2014, and 2013, the cost of plasma we used for productionaccounted for approximately 82.3%, 80.1%, and 74.1%, respectively, of total production cost. The supply and market prices of plasma may be adverselyaffected by factors such as heightened or new regulatory restrictions, higher living standards or outbreaks of diseases, any of which would affect our costs ofproduction. We may not be able to pass on any resulting increase in costs to our customers and therefore any substantial fluctuation in supply or marketprices of plasma may adversely affect our results of operations and profitability. Our production volume, capacity utilization and future expansion are affected by a contraction in the supply of raw materials, especially plasma. In additionto the plasma collected from our own plasma stations, we also outsource plasma from Xinjiang Deyuan pursuant to a cooperation agreement entered into inAugust 2015. Under this cooperation agreement, Xinjiang Deyuan agreed to sell to us no less than 500 tonnes of source plasma in batches over the next threeyears. We cannot assure you, however, that Xinjiang Deyuan will always deliver the source plasma on schedule or such plasma will always pass our qualityinspection. If we experience any shortage of plasma supply or fail to secure sufficient plasma supply for our production, we may not be able to fully utilizeour production capacity or proceed with our expansion plans. We may not be able to carry on our business if we lose any of the required permits and licenses. We and Huitian are required to obtain from various PRC governmental authorities certain permits and licenses, including permits for pharmaceuticalmanufacturing and GMP certificates for each of our plants, as well as pharmaceutical distribution permits. Each of the production facilities operated by us and Huitian is required to obtain a GMP certificate for its pharmaceutical production activities. In February2011, the CFDA enacted the new GMP standard, which has significantly increased standards for quality control, documentation, and overall manufacturingprocesses that applied to each of the production facilities operated by us and Huitian as of December 31, 2013. In order for us to meet the new GMP standard,we have upgraded the related production facilities of Shandong Taibang and Guizhou Taibang, which obtained the renewed GMP certificates and resumedcommercial production of plasma products in June 2013 and March 2014, respectively. Huitian suspended its production in late 2013 and obtained the GMPcertification for its new plasma production facility in Xi’an in February 2016 and commenced commercial production thereafter. We have also obtained permits and licenses and GMP certificates required for the manufacturing and sales of our products. Our permits and licenses aresubject to periodic renewal and/or reassessment by the relevant PRC governmental authorities, and the compliance standards may be subject to change fromtime to time. We intend to apply for the renewal of such permits and licenses when required by applicable laws and regulations. However, we cannotguarantee that we may renew such permits and licenses in a timely manner, or at all. If we are unable to renew our permits and licenses or fail an inspectionwhich would impair our permits and licenses, our business, prospects, financial condition and results of operations may be materially and adversely affected. 25 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition, any changes in compliance standards, or any new laws or regulations that may prohibit or render it more restrictive for us to conduct our businessor increase our compliance costs may adversely affect our operations and profitability. For example, we expect our on-going compliance cost to increaseunder the new GMP standard as compared to the previous standard. As a result, our business and financial condition may be materially and adverselyaffected. We may fail to obtain, maintain or renew required licenses and permits for our plasma stations. In addition, if we fail to adequately monitor our plasmastations, follow proper procedures or comply with safety requirements, we may be subject to sanctions by the government, civil and criminal liability. Anyof these events could have a material adverse effect on our business, reputation and prospects. We currently operate 11 plasma stations (including one branch collection facility) through Shandong Taibang and two plasma stations through GuizhouTaibang. Huitian, a company in which we hold a minority interest, operates three plasma stations in Shaanxi Province. To enable growth in our sales, we areseeking opportunities to build more plasma stations. In October 2014, we received the regulatory approval to build two new plasma collection stations inHebei Province. These new plasma collection stations were under construction as of the date of this report. In September 2015, we received the regulatoryapproval to build a new branch collection facility to operate under our Ningyang plasma collection station in Shandong Province. We obtained the operatingpermit for this new plasma collection facility in October 2015 and commenced plasma collection thereafter. The operation of plasma stations, however, ishighly regulated and we cannot assure you that we will be able to obtain, maintain and renew the required licenses and permits for existing and new plasmastations in desirable locations or in a timely manner, if at all. For example, we have experienced difficulties and delays in obtaining and/or renewing thebusiness licenses and collection permits for a new plasma station in Pu Bei, Guangxi Province and five existing plasma stations we acquired in GuizhouProvince. While we monitor our plasma intake procedures through frequent unscheduled inspections of our stations, there remain risks that our plasmastations may fail to comply with hygiene and procedural requirements for plasma screening, collection, storage and tracking. If we fail to comply with any ofthese requirements, we may lose our plasma collection permits or incur criminal liability if we are found by the government to have been criminallynegligent. In the case of plasma contamination, we may also be subject to civil liability from suits brought by consumers of our biopharmaceutical products.In addition, failure to comply with hygiene and procedural requirements may cause harm to donors, who may contract diseases from other donors, amongother things. Any such incident may subject us to government sanctions, civil or criminal liabilities. If any of these events were to occur, our business,reputation and prospects would be materially and adversely affected. Our operations, sales, profit and cash flow will be adversely affected if our plasma products fail to pass inspection in a timely manner. The PRC government inspects each batch of our plasma products before we can ship it to our customers. The CFDA has quality standards which require theregulators to assess, among other things, the appearance, packing capacity, thermal stability, pH value, protein content and percentage of purity of theproduct. We must strictly comply with relevant rules and regulations throughout the lifecycle of each product including plasma collection, delivery,production and packaging. Government regulators typically take more than a month to inspect one batch of plasma products. The process begins when theregulator randomly selects samples of our products and delivers them to the PRC National Institute for the Control of Pharmaceutical and BiologicalProducts, or NICBPB, for testing, and the process ends when the products are given final approval by NICBPB. In the event that the regulators delay theapproval of or reject our products or change the requirements such that we are unable to comply, our operations, sales, profit and cash flow will be adverselyaffected. 26 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Current or worsening economic conditions may adversely affect our business and financial condition. We currently generate sufficient operating cash flows which provide us with significant working capital. However, any uncertainty arising out of economicconditions may affect our ability to manage normal relationships with our customers, suppliers and creditors and adversely affect our results of operations,cash flows and financial condition, or those of our customers, suppliers and creditors. Current or worsening economic conditions may adversely affect theability of our customers to pay for our products, and curtail their spending on healthcare generally. This could result in a decrease in the demand for ourproducts, declining cash flows, longer sales cycles, slower adoption of new technologies and increased price competition. These conditions may alsoadversely affect certain of our suppliers, which could cause a disruption in our production capacities. Such reductions and disruptions could have a materialadverse effect on our business operations. Our inability to successfully research and develop new biopharmaceutical products could have an adverse effect on our future growth. We believe that the successful development of biopharmaceutical products can be affected by many factors. Products that appear to be promising in the earlyphases of research and development may fail to be commercialized for various reasons, including the failure to obtain the necessary regulatory approvals. Inaddition, the research and development cycle for any new medicine is a relatively lengthy process. In our experience, the process of conducting research andvarious tests on new products before obtaining a new medicine certificate from the CFDA and subsequent procedures may take approximately three to fiveyears. We cannot assure you that our future research and development projects will be successful or that they will be completed within the anticipated timeframe or budget. Also, we cannot guarantee that we will receive the necessary approvals from relevant authorities for the production of our newly developedproducts. Even if such products could be successfully commercialized, we cannot assure you that they will be accepted by the market as anticipated. As mandated by a CFDA notice promulgated on July 22, 2015, all pharmaceutical enterprises that are in the process of registration application are required toinspect the data from the clinical trials and report the inspection results to the CFDA and to withdraw the registration application should any deficiencysurface from such inspection. Since July 22, 2015, a total of 1,184 (including 1,150 withdrawn and 34 rejected) or 81.3% of 1,457 drugs on the self-inspection list for clinical trials have ceased the application process. The three typical reasons for applications withdrawals include: •insufficiency of application documents; •quality issue uncovered from trial data; •voluntary withdrawal to improve the quality of clinical trial data. We withdrew the registration application for human hepatitis B immunoglobulin (pH4) for intravenous injection as a result of our self-inspection inDecember 2015 with the aim to improve the quality of clinical trial data. 27 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Given the uncovered quality issues and rising costs for clinical trials, certain small drug manufacturers may face increased difficulty in submitting newregistration applications, which could accelerate the CFDA’s overall review process. We cannot assure you, however, that our registration applications willbenefit from this new CFDA practice. Our new product launches might be delayed or aborted due to our withdrawal in December 2015 and any forced orvoluntary withdrawal of our other products in the process of registration application in the future should quality issues be uncovered from the inspection ofthe relevant clinical trial data. Such delay or abortion could have a material adverse effect on our results of operations, financial condition and prospects. Significant uncertainties remain with respect to the implementation of the recently announced deregulation on price controls over drug products, and wemay not have discretion to increase the prices of our products until implementation rules are in place. Our ability to increase the prices of our products isalso subject to ongoing government supervision and limited by general market conditions and intense competition. Prior to the deregulation of price controls, retail prices of certain pharmaceutical products were subject to various price-related regulations. In accordancewith these price-related regulations, seven of our principal products (i.e., human albumin, IVIG, human rabies immunoglobulin, human tetanusimmunoglobulin, factor VIII, PCC and human immunoglobulin) were included in the NIC and were subject to tender price ceilings. Two other principalproducts (i.e., placenta polypeptide and human hepatitis B immunoglobulin), although not included in the NIC, were also subject to tender price ceilings incertain PRC provinces. See “Business — Regulation” for further details. Effective on June 1, 2015, the NDRC removed the retail price ceilings for all drug products (except for anesthetics and category I antipsychotics) in China. Asof the date of this report, it remains unclear, however, how and to what extent such deregulation will have a positive impact on our pricing strategies andultimately our revenue and profitability. Until implementation rules are in place to enforce the deregulation, we still may not have discretion to increase theprices we charge hospitals, inoculation centers and distributors for price-controlled products above the relevant controlled tender price ceiling under theformer regulatory regime, which may adversely affect our revenue and profitability. In addition, despite the announced deregulation on price controls, thePRC government continues to closely supervise and monitor drug products pricing. For example, on May 4, 2015, the NDRC issued a notice to localregulators in order to strengthen the supervision of pricing activities in the drug products market. Among other objectives, this NDRC notice aims to monitorprice inflations and fraudulent pricing practices, promote a transparent market pricing system, and establish a multi-tiered supervisory system to maintain anorderly drug products market. Although we believe that the deregulation on price controls should be a favorable policy development for our industry andbusiness in the long term, we cannot assure you that the retail prices of our products will increase in the absence of price ceilings due to such ongoinggovernment supervision and monitoring. In addition, our pricing practices may also be affected by the general market conditions and intense competition. To the extent the demand for our productsdeclines or competition intensifies, we may decide to respond by reducing our prices in order to capture the declining market demand and maintain thecompetitiveness of our products. See also “—We are subject to intense competition and may encounter increased competition from both local and overseaspharmaceutical enterprises if PRC regulators relax the approval process for plasma products or international trade restrictions. A change in our competitiveenvironment could adversely affect our profitability and prospects” below. If the margin of any of our products becomes prohibitively low, we may stopmanufacturing such product, which may further adversely affect our revenue and profitability. 28 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If reimbursement or other payment for our current or future products is reduced or modified in the PRC, including through the implementation ofgovernment-sponsored healthcare reform or other similar actions, cost containment measures, or changes to policies with respect to pricing, then ourbusiness could suffer. Sales of our products depend, in part, on the extent to which the costs of our products are paid by the public payors. These public payors mainly consist oflocal governments which reimburse the medicines covered by the NIC. The local governments update the NIC on a regularly basis and may remove certainmedicines from the NIC. These public payors may also reduce the reimbursement amounts for certain medicines under the NIC. These measures by localgovernments may limit, reduce or eliminate payments for our products and adversely affect both pricing flexibility and demand for our products. Legislation and regulations affecting reimbursement for our products may change at any time and in ways that may be adverse to us. We cannot predict theimpact of these pressures and initiatives, or any negative effects of any additional regulations that may affect our business. Some of our owned or leased properties have title defects or non-compliance, which could adversely affect our business operations. Some of our owned or leased properties have title defects or non-compliance. For example, we use properties built on collectively owned rural land for one ofour plasma collection stations. We are also in the process of obtaining the property ownership certificate for another one of our plasma collection stations.Although such title defects and non-compliance have not adversely affected our business operations, we cannot assure you that we will be able to rectify suchdefects and non-compliance in a timely manner or at reasonable costs, if at all. For example, under PRC laws, collectively owned rural land may not be usedfor commercial purposes and we may be required to vacate and seek other space to house our collection facilities. For the collection station built oncollectively owned rural land, under the lease agreement for the collectively owned rural land among us, the local government and the economic collectivewhich owns the land, the economic collective is required to assist us in securing legal rights to use such land. If the economic collective fails to perform itsobligations under the lease agreement, or the lease agreement is deemed to be void, voidable or otherwise unenforceable, or if ownership disputes or claimsregarding the land otherwise arise, we may be required to relocate our collection station. Any disputes or claims relating to our owned or leased properties orland or any efforts in securing alternative sites and properties could divert our resources and management’s attention from our regular business operations. Inaddition, we may not be able to secure alternative sites and properties, if required, in a timely manner or at reasonable costs, which could adversely affect ourbusiness operations. Our financial position and operations may be materially and adversely affected if our product liability insurance does not sufficiently cover our liabilities. Under current PRC laws, manufacturers and vendors of defective products in China may incur liability for loss and injury caused by such products. Pursuantto the General Principles of the Civil Law of the PRC, or the PRC Civil Law, which became effective in 1987, a defective product that causes propertydamage or physical injury to any person may subject the manufacturer or vendor of such product to civil liability. The Product Quality Law of the PRC, or the Product Quality Law, was enacted in 1993 and revised in 2000. The Product Quality Law was enacted to protectthe rights and interests of end-users and consumers and to strengthen the supervision and control of the quality of products. Under the Product Quality Law,manufacturers who produce defective products may be subject to fines and production suspension, and in severe cases, be subject to criminal liability andmay have their business licenses revoked. 29 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The PRC Law on the Protection of the Rights and Interests of Consumers, or the Consumers’ Rights Law, was enacted in 1993 to further protect the legalrights and interests of consumers in connection with the purchase or use of goods and services. All businesses, including our business, must observe andcomply with the Consumers’ Rights Law. The Tort Liability Law of the PRC was enacted in December 2009, which imposes liability on manufacturers for damages caused by defects in their products.If the defects are caused by third parties such as transporters or storekeepers, manufactures may be entitled to claim for indemnification or contribution fromsuch third parties for making compensation to the consumers. We maintain two product liability insurance policies for sales in China for Shandong Taibang and Guizhou Taibang’s products in the amount of $3.1 million(RMB20 million) each. If our products are found to be defective and our insurance coverage is insufficient to cover a successful claim against us, ourfinancial position and operations may be materially and adversely affected. Product liability claims or product recalls involving our products could have a material adverse effect on our business. Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, distribution and sale of plasma products. Plasma is abiological substance that is capable of transmitting viruses and pathogens, whether known or unknown. Therefore, our plasma and plasma products, if notproperly collected, tested, pathogen-inactivated, processed, stored or transported, could cause serious disease and possibly death to patients. Further, there areviral and other infections of plasma which may escape detection using current testing methods and which are not susceptible to inactivation methods. Anyinfection of disease by persons using our products could result in claims against us. Since our establishment in 2002, we have been subject to four lawsuitsfiled by patients who were treated with our products and received blood and/or plasma transfusions. In three of these cases, we were ordered to contribute aportion of the compensation for the patients even though the courts did not find that our products were defective or caused the patients’ illness. The requiredcontribution by us was immaterial in these three cases. The fourth case is pending in an ongoing litigation, which we vigorously defend. We cannot assureyou that there will be no future claims against us or that we will always succeed in defending against such claims. Furthermore, the presence of a defect in aproduct could require us to carry out a recall of such product. A product liability claim, regardless of merit or eventual outcome, or a product recall could result in substantial financial losses, civil and criminal liabilities,administrative sanctions, revocation of business and product permits and licenses, negative reputational repercussions and an inability to retain customers. Ifour products are found to be defective and our insurance coverage is insufficient to cover a successful claim against us, our financial position and operationsmay be materially and adversely affected. We are subject to intense competition and may encounter increased competition from both local and overseas pharmaceutical enterprises if PRCregulators relax the approval process for plasma products or international trade restrictions. A change in our competitive environment could adverselyaffect our profitability and prospects. We face intense competition from local and foreign entities that manufacture and sell products that compete with ours in China. These competitors may havemore capital, better research and development resources, expanded manufacturing and marketing capabilities and more experience than we do. The plasma-based biopharmaceutical manufacturing industry in China is highly regulated, and although we believe that compliance with the regulatory requirementspose a competitive barrier to enter into the Chinese market, over time, however, there may be new entrants. If the government relaxes these restrictions andallows more competitors to enter into the market, these competitors may have more capital, better research and development resources, more manufacturingand marketing capability and experience than us. Our operating results and financial condition may be adversely affected if competition intensifies,competitors reduce prices to gain market share, or competitors develop new products having comparable medicinal applications or therapeutic effects whichare more effective or less costly than ours. 30 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition, we also face competition from imported products. Since 2009, there has been a substantial increase in volume of imported human albumin inChina, which competes in domestic human albumin market. In addition, we compete with foreign biopharmaceutical manufacturers that set up productionfacilities in China and compete directly with us. The increased supply of both domestic and foreign biopharmaceutical products in China may result in lowersales or lower prices for our products. We cannot assure you that we will remain competitive or that our profitability and prospects will not be adverselyaffected. We depend heavily on key personnel, and turnover of key employees and senior management could harm our business. Our success, to a certain extent, is attributable to the expertise and experience of our senior management and key research and technical personnel who carryout key functions in our operation. If we lose the service of any of our senior management or key research or technical personnel or fail to attract additionalpersonnel with suitable experience and qualification, our business operations and research capability may be adversely affected. We have a secondment agreement with the Shandong Institute, which is expected to terminate upon its future privatization, for certain of our employees. Ifthe secondment agreement is breached or terminated, it could have an adverse effect on our operations and on our financial results. Shandong Institute of Biological Products, or the Shandong Institute, provided us with 59 of our employees, including certain key management personnel,out of our total of approximately 1,726 employees as of December 31, 2015, pursuant to a secondment agreement dated October 28, 2002, between ShandongTaibang and the Shandong Institute. Pursuant to the secondment agreement, we are responsible for the salaries of these employees, as well as for their socialbenefits such as insurance. Our secondment agreement with the Shandong Institute will expire on the earlier of October 2032 or the privatization of theShandong Institute, which was originally scheduled to occur before the end of 2008. However, the privatization of the Shandong Institute has been delayedindefinitely due to delay by the Shandong Department of Health in implementing the privatization plan. Upon expiration or termination of the secondmentagreement, we plan to hire the seconded employees directly. However, we cannot assure you that all of the employees will accept our employment offers atthat time. Guangli Pang, Shandong Taibang’s chief executive officer is employed through the secondment agreement. Although none of our secondedemployees have indicated that they do not plan to continue working for us after the privatization, if the secondment agreement is terminated or expires andwe are unable to hire those employees or their replacements on time, our operations, as well as our financial results, may be materially and adversely affected. Future acquisitions may have an adverse effect on our ability to manage our business. Selective acquisitions form part of our strategy to further expand our business. If we are presented with appropriate opportunities, we may acquire additionalcompanies, products or technologies. Future acquisitions and the subsequent integration of new companies into ours would require significant attention fromour management. The diversion of our management’s attention and any difficulties encountered in any integration process could have an adverse effect onour ability to manage our business. Future acquisitions would expose us to potential risks, including risks associated with the integration of new operations,technologies and personnel, unforeseen or hidden liabilities, the diversion of resources from our existing businesses and technologies, the inability togenerate sufficient revenue to offset the costs and expenses of acquisitions, and potential loss of, or harm to, relationships with employees, customers andsuppliers as a result. 31 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We may lose our competitive advantage and our operations may suffer if we fail to prevent the loss or misappropriation of, or disputes over, ourintellectual property or proprietary information. We regard our intellectual property, particularly our patents and trade secrets, to be of considerable value and importance to our business and our success. Werely on a combination of patent, trademark and trade secret laws, as well as confidentiality agreements to protect our intellectual property rights. Failure toprotect our intellectual property rights could harm our brands and our reputation, and adversely affect our ability to compete effectively. Further, enforcing ordefending our intellectual property rights, including our patents and trade secrets, could result in the expenditure of significant financial and managerialresources. As of December 31, 2015, we held 53 issued patents and had 13 pending patent applications in China for certain manufacturing processes and packagingdesigns. We may not be able to successfully obtain the approval of the PRC authorities for our patent applications. As of December 31, 2015, we also had 8trademarks registered in China. While we are not aware of any infringement on our intellectual property and we have not been notified by any third party that we are infringing on theirintellectual property, our ability to compete successfully and to achieve future revenue growth will depend, in significant part, on our ability to protect ourproprietary technologies and operate without infringing upon the intellectual property rights of others. Policing unauthorized use of proprietary technologiesis difficult and expensive. The steps we have taken may not be adequate to prevent unauthorized use of our intellectual property rights. The legal regime in China for the protection of intellectual property rights is still at its early stage of development. Despite many laws and regulationspromulgated and other efforts made by China over the years to tighten up its regulation and protection of intellectual property rights, private parties may notenjoy intellectual property rights in China to the same extent as they would in many more developed countries, including the United States, and theenforcement of such laws and regulations in China has not achieved the levels reached in those countries. The administrative agencies and the court systemin China are not well-equipped to deal with violations or handle the nuances and complexities between compliant technological innovation andnoncompliant infringement. We also rely on confidentiality agreements with our management and employees to protect our confidential proprietary information. However, the protectionof our intellectual property may be compromised as a result of: •departure of any of our management members or employees in possession of our confidential proprietary information; •breach by such departing management member or employee of his or her confidentiality and non-disclosure undertaking to us; •infringement by others of our proprietary information and intellectual property rights; or •refusal by relevant regulatory authorities to approve our patent or trademark applications. 32 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Any of these events or occurrences may have a material adverse effect on our operations. We cannot assure you that the steps taken by us to protect our intellectual property rights will be adequate or that third parties will not infringe ormisappropriate our patents, trademarks, confidential proprietary information or similar proprietary rights. Litigation may be necessary to enforce ourintellectual property rights and the outcome of any such litigation may not be in our favor. Given the relative unpredictability of China’s legal system andpotential difficulties enforcing a court judgment in China, we cannot guarantee that we would be able to halt any unauthorized use of our intellectualproperty through litigation in a timely manner. Furthermore, we cannot assure you that other parties will not assert infringement claims against us, and we may have to pursue litigation against other partiesto assert our rights. Any such claim or litigation could be costly and we may lack the resources required to defend against such claims. If we are unsuccessfulin defending against such infringement claims, we may be required to pay damages, modify our products or suspend the production and sale of such products.We cannot guarantee that we will be able to modify our products on commercially reasonable terms. Finally, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on ourability to market or sell our brands, and profitably exploit our products. A disruption in the supply of utilities, fire or other calamity at our manufacturing plant would disrupt production of our products and adversely affect oursales. Our products are manufactured at our production facilities located in Tai’an, Shandong Province and Guiyang, Guizhou Province in China. While we havenot in the past experienced any calamities which disrupted production, any disruption in the supply of utilities, in particular, electricity or power supply, orany outbreak of fire, flood or other calamity resulting in significant damage at our facilities would severely affect our production and have a material adverseeffect on our business, financial condition and results of operations. We maintain insurance policies covering losses with respect to damages to our properties and products. We do not have insurance coverage for inventories ofraw materials or business interruption. We cannot assure you that our insurance would be sufficient to cover all of our potential losses. If we do not maintain strong financial controls, investor confidence in us may decline and our stock price may decline as a result. As required by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring every public company to include a management report onsuch company’s internal control over financial reporting in its annual report, which must also contain management’s assessment of the effectiveness of ourcompany’s internal control over financial reporting. In addition, the independent registered public accounting firm auditing the financial statements mustalso attest to the operating effectiveness of our company’s internal controls. 33 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. A report of our management and attestation by our independent registered public accounting firm is included in our Annual Report on Form 10-K for the yearended December 31, 2015. Our management has concluded that our internal controls over financial reporting as of December 31, 2015 were effective. Wehave in the past discovered, and may in the future discover, material weakness in our internal controls. For example, we identified material weaknesses relatedto review controls on the accounting for income taxes and derivative instrument valuation as described under Item 9A of our Annual Report on Form 10-K foryear ended December 31, 2010, which were subsequently remediated in 2011 as described under Item 9A of our Annual Report on Form 10-K for the yearended December 31, 2011. However, we cannot guarantee that these remedies will continue to be effective. Failure to achieve and maintain an effectiveinternal control environment could result in us not being able to accurately report our financial results, prevent or detect fraud or provide timely and reliablefinancial and other information pursuant to the reporting obligations we have as a public company, which could have a material adverse effect on ourbusiness, financial condition and results of operations. This could reduce investors’ confidence in our reported financial information, which in turn couldresult in lawsuits being filed against us by our stockholders, otherwise harm our reputation or negatively affect the trading price of our common stock. Pending disputes regarding Guizhou Taibang’s equity ownership against us, if not resolved in our favor, could result in dilution to our shareholdingpercentage in Guizhou Taibang. Guizhou Jie’an Company, or Jie’an, a minority shareholder of Guizhou Taibang, filed several lawsuits against Guizhou Taibang over the years, seeking to,among other requests, register 1.8 million shares in Guizhou Taibang, approximately 2% of Guizhou Taibang’s registered capital, under Jie’an’s name withthe local Administration of Industry and Commerce, or AIC. Some of these cases were ruled in our favor and others were still pending as of the date of thisreport. See “Item 3—Legal Proceedings—Dispute with Jie’an over Certain Capital Injection into Guizhou Taibang” below for details. In addition, as a resultof the appellate court’s unfavorable ruling in one of the lawsuit with Jie’an in December 2014, Guizhou Taibang paid RMB22.6 million (approximately $3.5million) in 2015 into an escrow held by the trial court pending further appeal for such case. In June 2015, Guizhou Taibang appealed to the High Court ofGuizhou, which overruled the decision of the appellate court and remanded the case to the trial court for retrial in September 2015. Although we, based onour PRC litigation counsel’s assessment, do not expect Jie’an to prevail in these pending litigations, we cannot assure you that the final judgment will be inour favor. If Guizhou Taibang is ordered to register the 1.8 million shares for Jie'an, our ownership interest in Guizhou Taibang will be diluted to 80%, and wemay be required to pay Jie’an accumulated dividends of RMB18.3 million (approximately $2.8 million) and related interest expenses (being its claimedshare of Guizhou Taibang’s accumulated dividend distributions associated with the 1.8 million shares and the accrued interest from the date when Jie’an’scapital contribution was deemed effective till December 31, 2014) from Guizhou Taibang. As of December 31, 2015, Guizhou Taibang had maintained, on itsbalance sheet, payables to Jie’an of RMB5.0 million (approximately $0.8 million) as received funds in respect of the 1.8 million shares in dispute, RMB1.4million (approximately $0.2 million) for the over-paid subscription price paid by Jie’an and RMB3.7 million (approximately $0.6 million) for the accruedinterest. RISKS RELATING TO DOING BUSINESS IN CHINA Changes in China’s political or economic situation could harm us and our operating results. Economic reforms adopted by the PRC government have had a positive effect on the economic development of the country. The reformed economicinfrastructure and legal systems, however, may be subject to abrupt adjustments by the government. These adjustments, especially in the following areas,could either benefit or damage our operations and profitability: •Level of government involvement in the economy; •Control of foreign exchange; •Methods of allocating resources; 34 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. •International trade restrictions; and •International conflict. The PRC economy differs from the economies of most member countries of the Organization for Economic Cooperation and Development, or the OECD, inmany ways. For example, state-owned enterprises still constitute a large portion of the Chinese economy, and weak corporate governance and the lack of aflexible currency exchange policy still prevail in China. As a result of these differences, we may not develop in the same way or at the same rate as might beexpected if the PRC economy was similar to those of the OECD member countries. Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us. We conduct substantially all of our business through our operating subsidiaries in China. Our operating subsidiaries are generally subject to laws andregulations applicable to foreign investments in China and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is based onwritten statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws andregulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal systemcontinues to evolve rapidly, the interpretations of many laws, regulations, and rules are not always uniform, and enforcement of these laws, regulations, andrules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted and result insubstantial costs and diversion of resources and management attention. In addition, most of our executive officers and directors are residents of China and notof the United States, and substantially all the assets of these persons are located outside the United States. As a result, it could be difficult for investors toaffect service of process in the United States or to enforce a judgment obtained in the United States against our PRC operations and subsidiary. You may have difficulty enforcing judgments against us. Most of our assets are located outside of the United States and most of our current operations are conducted in China. In addition, most of our directors andofficers are nationals and residents of countries other than the United States and substantially all the assets of these persons are located outside the UnitedStates. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforcein U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors. There is also uncertainty as to whether the PRC courts would recognize or enforce judgments of U.S. courts. Our counsel as to PRC law has advised us thatalthough recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law, recognition and enforcement of a foreignjudgment by PRC courts depend on treaties or reciprocity between China and the country where the judgment is made. China does not have any treaties orother arrangements with the United States that provide for the reciprocal recognition and enforcement of U.S. judgments. In addition, according to the PRCCivil Procedures Law, PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basicprinciples of PRC law or national sovereignty, security, or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by acourt in the United States. 35 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The PRC government exerts substantial influence over the manner in which we must conduct our business activities. The PRC government has exercised and continues to exercise substantial control over virtually every sector of the PRC economy through regulation andstate ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and exporttariffs, environmental regulations, land use rights, property, and other matters. We believe that our operations in China are in material compliance with allapplicable legal and regulatory requirements. However, the central or local governments of the jurisdictions in which we operate may impose new, stricterregulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with suchregulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrallyplanned economy and any regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions inChina or particular regions thereof and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures. Restrictions on currency exchange may limit our ability to receive and use our sales effectively. Substantially all of our sales are settled in RMB, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB tofund any future business activities outside China or other payments in U.S. dollars. Although the PRC government introduced regulations in 1996 to allowgreater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents at those banks in China authorized to conductforeign exchange business. In addition, conversion of RMB for capital account items, including direct investments and loans, is subject to governmentalapproval and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the PRCregulatory authorities will not impose more stringent restrictions on the convertibility of the RMB. Fluctuations in exchange rates could adversely affect our business and the value of our securities. The value of our common stock will be indirectly affected by the foreign exchange rate between the U.S. dollar and RMB and between those currencies andother currencies in which our sales may be denominated. Appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect ourfinancial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in theexchange rate will also affect the relative value of any dividends we issue that will be exchanged into U.S. dollars, as well as earnings from, and the value of,any U.S. dollar-denominated investments we make in the future. Since July 2005, RMB has no longer been pegged to U.S. dollars. Although the People’s Bank of China regularly intervenes in the foreign exchange marketto prevent significant short-term fluctuations in the exchange rate, RMB may appreciate or depreciate significantly in value against U.S. dollars in themedium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessenintervention in the foreign exchange market. Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedgingtransactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we maynot be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange controlregulations that restrict our ability to convert RMB into foreign currencies. 36 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Currently, some of our raw materials and major equipment are imported. In the event that the U.S. dollars appreciate against RMB, our costs will increase. Ifwe cannot pass the resulting cost increases on to our customers, our profitability and operating results will suffer. In addition, if our sales to internationalcustomers grow, we will be increasingly subject to the risk of foreign currency depreciation. Restrictions under PRC law on our PRC subsidiaries’ ability to make dividends and other distributions could materially and adversely affect our ability togrow, make investments or acquisitions, pay dividends to you and otherwise fund and conduct our business. Substantially all of our profits are earned by our PRC subsidiaries. However, PRC regulations restrict the ability of our PRC subsidiaries to make dividendsand other payments to their offshore parent companies. PRC legal restrictions permit payments of dividends by our PRC subsidiaries only out of theiraccumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required underPRC laws and regulations to allocate at least 10.0% of their annual after-tax profits determined in accordance with PRC generally accepted accountingprinciples to a statutory general reserve fund until the amounts in such fund reaches 50.0% of their registered capital. Allocations to these statutory reservefunds can only be used for specific purposes and are not transferable to us in the form of loans, advances or cash dividends. Any limitations on the ability ofour PRC subsidiaries to transfer funds to us could materially limit our ability to grow, make investments or acquisitions that could be beneficial to ourbusiness, pay dividends and otherwise fund and conduct our business. Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRCresident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit the ability of ourPRC subsidiaries to distribute profits to us or otherwise materially adversely affect us. Pursuant to the Circular on Relevant Issues concerning Foreign Exchange Administration of Overseas Investment and Financing and Return InvestmentsConducted by Domestic Residents through Overseas Special Purpose Vehicle, or Circular 37, which was promulgated by SAFE, and became effective on July4, 2014, (1) a PRC resident must register with the local SAFE branch before he or she contributes assets or equity interests in an overseas special purposevehicle, or an Overseas SPV, that is directly established or controlled by the PRC resident for the purpose of conducting investment or financing; and (2)following the initial registration, the PRC resident is also required to register with the local SAFE branch for any major change, in respect of the OverseasSPV, including, among other things, a change in the Overseas SPV’s PRC resident shareholder, name of the Overseas SPV, term of operation, or any increaseor reduction of the Overseas SPV’s registered capital, share transfer or swap, and merger or division. We have requested the beneficial holders of our stock who are PRC residents to register with the relevant branch of SAFE in connection with their equityinterests in us and our acquisitions of equity interests in our PRC subsidiaries pursuant to Circular 37 or the predecessor regulation of Circular 37, namely theNotice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via OverseasSpecial Purpose Vehicles, as the case may be. As Circular 37 was recently promulgated, it remains unclear how it will be interpreted and implemented, andhow or whether SAFE will apply it to us. Therefore, we cannot predict how it will affect our business operations or future strategies. For example, the abilityof our present and prospective PRC subsidiaries to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 37 by our PRC resident beneficial holders. 37 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 37. We also have little controlover either our present or prospective direct or indirect stockholders or the outcome of such registration procedures. Failure of our present or future PRCresident beneficial holders to comply with Circular 37 could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas orcross-border investment activities, limit the ability of our PRC subsidiaries to make distributions or pay dividends or affect our ownership structure, whichcould adversely affect our business and prospects. We may be unable to complete a business combination transaction efficiently or on favorable terms due to complicated merger and acquisitionregulations. In August 2006, six PRC regulatory agencies, including the China Securities Regulatory Commission, or CSRC, promulgated the Regulation on Mergers andAcquisitions of Domestic Companies by Foreign Investors, or Circular 10, which became effective in September 2006 and was amended in June 2009. Thisregulation, among other things, governs the approval process by which a PRC company may participate in an acquisition of assets or equity interests.Depending on the structure of the transaction, Circular 10 requires the PRC parties to make a series of applications and supplemental applications to thegovernment agencies. In some instances, the application process may require the presentation of economic data concerning a transaction, includingappraisals of the target business and evaluations of the acquirer, which are designed to allow the government to assess the transaction. Government approvalswill have expiration dates by which a transaction must be completed and reported to the government agencies. Compliance with Circular 10 is likely to bemore time-consuming and expensive than in the past and the government can now exert more control over the combination of two businesses. Accordingly,due to Circular 10, our ability to engage in business combination transactions has become significantly more complicated, time consuming and expensive,and we may not be able to negotiate a transaction that is acceptable to our stockholders or sufficiently protect their interests in a transaction. Circular 10 allows PRC government agencies to assess the economic terms of a business combination transaction. Parties to a business combinationtransaction may have to submit to the PRC Ministry of Commerce, or MOFCOM, and other relevant government agencies an appraisal report, an evaluationreport and the acquisition agreement, all of which form part of the application for approval, depending on the structure of the transaction. The regulationsalso prohibit a transaction at an acquisition price obviously lower than the appraised value of the PRC business or assets and in certain transaction structures,require that consideration must be paid within defined periods, generally not in excess of a year. The regulation also limits our ability to negotiate variousterms of the acquisition, including aspects of the initial consideration, contingent consideration, holdback provisions, indemnification provisions andprovisions relating to the assumption and allocation of assets and liabilities. Transaction structures involving trusts, nominees and similar entities areprohibited. Therefore, such regulation may impede our ability to negotiate and complete a business combination transaction on financial terms that satisfyour investors and protect our stockholders’ economic interests. Under the Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable taxconsequences to us and our non-PRC stockholders. The Enterprise Income Tax Law, or the EIT Law, and its implementing rules became effective on January 1, 2008. Under the EIT Law, an enterpriseestablished outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in amanner similar to a PRC enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantialand overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. 38 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On April 22, 2009, SAT issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises IncorporatedOffshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the EIT Law and itsimplementation on non-PRC enterprise or group controlled offshore entities. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction andcontrolled by a PRC enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (1) its senior management in charge ofdaily operations reside or perform their duties mainly in China; (2) its financial or personnel decisions are made or approved by bodies or persons in China;(3) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (4) at least half of itsdirectors with voting rights or senior management often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25.0% onits worldwide income and must pay a withholding tax at a rate of 10.0% when paying dividends to its non-PRC shareholders. However, it remains unclear asto whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person. Nor are detailed measures on imposition of tax fromnon-domestically incorporated resident enterprises are available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts ofeach case. We may be deemed to be a resident enterprise by PRC tax authorities. If the PRC tax authorities determine that we are a “resident enterprise” for PRCenterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of25.0% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as intereston financing proceeds and non-PRC source income would be subject to PRC enterprise income tax at a rate of 25.0%. Second, although under the EIT Lawand its implementing rules dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividendswill not be subject to a 10.0% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issuedguidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes.Finally, it is possible that future guidance issued with respect to the “resident enterprise” classification could result in a situation in which a 10.0%withholding tax is imposed on dividends we pay to our non-PRC stockholders and with respect to gains derived by our non-PRC stockholders fromtransferring our shares. Finally, if we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both the U.S. andChina, and our PRC tax may not be creditable against our U.S. tax. We are actively monitoring the possibility of “resident enterprise” treatment and areevaluating appropriate organizational changes to avoid this treatment, to the extent possible. We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. SAT released a circular on December 15, 2009 that addresses the transfer of shares by nonresident companies, generally referred to as Circular 698. Circular698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest inChina. Circular 698 has the effect of taxing foreign companies on gains derived from the indirect sale of a PRC company. Where a foreign investor indirectlytransfers equity interests in a PRC resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country orjurisdiction that has an effective tax rate less than 12.5% or does not tax foreign income of its residents, the foreign investor must report this indirect transferto the tax authority in charge of that PRC resident enterprise. Using a “substance over form” principle, the PRC tax authority may disregard the existence ofthe overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of avoiding PRC tax. As a result, gains derivedfrom such indirect transfer may be subject to PRC withholding tax at a rate of up to 10.0%. 39 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SAT subsequently released public notices to clarify issues relating to Circular 698, including the Announcement on Several Issues concerning the EnterpriseIncome Tax on the Indirect Transfers of Properties by Non-resident Enterprises, or SAT Notice 7, which became effective on February 3, 2015. SAT Notice 7abolished the compulsive reporting obligations originally set out in Circular 698. Under SAT Notice 7, if a non-resident enterprise transfers its shares in anoverseas holding company, which directly or indirectly owns PRC taxable properties, including shares in a PRC company, via an arrangement withoutreasonable commercial purpose, such transfer shall be deemed as indirect transfer of the underlying PRC taxable properties. Accordingly, the transferee shallbe deemed as a withholding agent with the obligation to withhold and remit the enterprise income tax to the competent PRC tax authorities. Factors that maybe taken into consideration when determining whether there is a “reasonable commercial purpose” include, among other factors, the economic essence of thetransferred shares, the economic essence of the assets held by the overseas holding company, the taxability of the transaction in offshore jurisdictions, andeconomic essence and duration of the offshore structure. SAT Notice 7 also sets out safe harbors for the “reasonable commercial purpose” test. There is little guidance and practical experience regarding the application of Circular 698 and the related SAT notices. For example, while the term“indirectly transfer” is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a widerange of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formallydeclared or stated how to calculate the effective tax rates in foreign tax jurisdictions. As a result, we may become at risk of being taxed under Circular 698and the related SAT notices and we may be required to expend valuable resources to comply with Circular 698 and the related SAT notices or to establishthat we should not be taxed under Circular 698 and the related SAT notices, which could have a material adverse effect on our financial condition and resultsof operations. We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated theselaws could have a material adverse effect on our business. We are subject to the Foreign Corrupt Practice Act, or FCPA, and other U.S. laws that prohibit improper payments or offers of payments to foreigngovernments and their officials and political parties by U.S. persons and issuers as defined by the relevant statute, for the purpose of obtaining or retainingbusiness. We have operations, agreements with third parties, and make most of our sales in China. PRC anti-corruption laws also strictly prohibit bribery ofgovernment officials. Our activities in China create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents, ordistributors, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage these practices by ouremployees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents,or distributors may engage in conduct for which we might be held responsible. Particularly, most of the hospitals and inoculation centers in China are state-owned entities, whose employees may be recognized as foreign government officials for the purpose of FCPA. Therefore, any payments, expensive gifts orother benefits provided to an employee of the state-owned hospital or inoculation center may be deemed violation of FCPA. Violations of FCPA or PRC anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business,prospects, operating results and financial condition. In addition, the U.S. government may seek to hold us liable for successor liability under FCPA violationscommitted by companies in which we invest or that we acquire. 40 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If we become directly subject to the scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significantresources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of yourinvestment in our stock, especially if such matter cannot be addressed and resolved favorably. In recent years, U.S. public companies that have substantially all of their operations in China, particularly companies like us which have completed the“reverse merger” transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatoryagencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, alack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases,allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S.-listed PRC-based companies hassharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits, SECenforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticismand negative publicity will have on us, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegationsare proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will becostly and time consuming and distract our management from growing our company. If such allegations are not proven to be groundless, our company andour business operations will be severely impacted and your investment in our stock could be rendered worthless. The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodiesin China. Accordingly, our public disclosure should be reviewed in light of the fact that no governmental agency that is located in China wheresubstantially all of our operations and business are located have conducted any due diligence on our operations or reviewed or cleared any of ourdisclosure. We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulationspromulgated by the SEC under the Securities Act and the Exchange Act. Unlike public reporting companies whose operations are located primarily in theUnited States, however, substantially all of our operations are located in China. Since substantially all of our operations and business takes place in China, itmay be more difficult for the Staff of the SEC to overcome the geographic and cultural obstacles that are present when reviewing our disclosure. These sameobstacles are not present for similar companies whose operations or business take place entirely or primarily in the United States. Furthermore, our SECreports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosurein our SEC reports and other filings are not subject to the review of the CSRC, a PRC regulator that is tasked with oversight of the capital markets in China.Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that no local regulator has done anydue diligence on our company and with the understanding that none of our SEC reports, other filings or any of our other public pronouncements has beenreviewed or otherwise been scrutinized by any local regulator. Our independent registered public accounting firm may be temporarily suspended from practicing before the SEC if unable to continue to satisfy SECinvestigation requests in the future. If a delay in completion of our audit process occurs as a result, we could be unable to timely file certain reports withthe SEC, which may lead to the delisting of our stock. The vast majority of our sales are to customers in China, and we have all of our operations in China. Certain of our independent registered public accountingfirm’s audit documentation related to their audit reports included in our annual reports may be located in China, and certain audit procedures may take placewithin China’s borders. The Public Company Accounting Oversight Board, or the PCAOB, is currently unable to conduct inspections in China or reviewaudit documentation located within China without the approval of Chinese authorities. Like many U.S. companies with significant operations in China, ourindependent registered public accounting firm may rely on a Chinese member firm for assistance in completing the audit work associated with our operationsin China. 41 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On January 22, 2014, Judge Cameron Elliot, an SEC administrative law judge, issued an initial decision suspending the Chinese member firms of the “BigFour” accounting firms, including our independent registered public accounting firm, from practicing before the SEC for six months. In February 2014, theinitial decision was appealed. While under appeal and in February 2015, the Chinese member firms of “Big Four” accounting firms reached a settlement withthe SEC. As part of the settlement, each of the Chinese member firms of “Big Four” accounting firms agreed to settlement terms that include a censure,undertakings to make a payment to the SEC, procedures and undertakings as to future requests for documents by the SEC, and possible additionalproceedings and remedies should those undertakings not be adhered to. If the settlement terms are not adhered to, Chinese member firms of “Big four” accounting firms may be suspended from practicing before the SEC whichcould in turn delay the timely filing of our financial statements with the SEC. In addition, it could be difficult for us to timely identify and engage anotherqualified independent auditor to replace our independent registered public accounting firm, KPMG Huazhen LLP. A delinquency in our filings with the SECmay result in NASDAQ initiating procedures, which could adversely harm our reputation and have other material adverse effects on our overall growth andprospects. Our independent registered public accounting firm’s audit documentation related to their audit reports included in our Annual Report may include auditdocumentation located in China. PCAOB currently cannot inspect audit documentation located in China and, as such, you may be deprived of the benefitsof such inspection. Our independent registered public accounting firm issued an audit opinion on the financial statements included in our Annual Report filed with the SEC. Asauditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, our auditor is required by the laws of the UnitedStates to undergo regular inspections by the PCAOB. However, work papers located in China are not currently inspected by the PCAOB because the PCAOBis currently unable to conduct inspections without the approval of the PRC authorities. Inspections of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and qualitycontrol procedures, which may be addressed as part of the inspection process to improve future audit quality. However, the PCAOB is currently unable toinspect an auditor’s audit work related to a company’s operations in China and where such documentation of the audit work is located in China. As a result,our investors may be deprived of the benefits of the PCAOB’s oversight of auditors that are located in China through such inspections. The inability of the PCAOB to conduct inspections of an auditor’s work papers in China makes it more difficult to evaluate the effectiveness of any of ourauditor’s audit procedures or quality control procedures that may be located in China as compared to auditors outside of China that are subject to PCAOBinspections. Investors may consequently lose confidence in our reported financial information and procedures and the quality of our financial statements. 42 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. RISKS RELATING TO OUR STOCK The market price of our common stock is volatile, leading to the possibility of its value being depressed at a time when you want to sell your holdings. The market price of our common stock is volatile, and this volatility may continue. Numerous factors, many of which are beyond our control, may cause themarket price of our common stock to fluctuate significantly. These factors include, among others: •our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations offinancial market analysts and investors; •changes in financial estimates by us or by any securities analysts who might cover our stock; •speculation about our business in the press or the investment community, including negative publicity and short seller reports that make allegationsagainst us, even if unfounded; •significant developments relating to our relationships with our customers or suppliers; •stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry; •customer demand for our products; •investor perceptions of our industry in general and our company in particular; •the operating and stock performance of comparable companies; •general economic conditions and trends; •major catastrophic events; •announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures; •changes in accounting standards, policies, guidance, interpretation or principles; •loss of external funding sources; •sales of our common stock, including sales by our directors, officers or significant stockholders; •additions or departures of key personnel; and •investor perception of litigation, investigation or other legal proceedings involving us or certain of our individual stockholders or their familymembers. Securities class action litigation is often instituted against companies following periods of volatility in their stock price. This type of litigation could resultin substantial costs to us and divert our management’s attention and resources. Moreover, securities markets may from time to time experience significantprice and volume fluctuations for reasons unrelated to operating performance of particular companies. For example, in July 2008, the securities markets in theUnited States, China and other jurisdictions experienced the largest decline in share prices since September 2001. These market fluctuations may adverselyaffect the price of our common stock and other interests in our company at a time when you want to sell your interest in us. 43 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The provisions in our currently effective certificate of incorporation and bylaws and our preferred shares rights agreement might discourage, delay orprevent a change of control of our company or changes in our management and, therefore depress the trading price of the common stock. Upon stockholders’ approval on July 20, 2012, we have adopted amended and restated certificate of incorporation and bylaws, which contained provisionsthat are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raiderand to encourage prospective acquirers to negotiate with our board of directors, rather than to attempt a hostile takeover. These provisions include, among others: •the right of our board of directors to issue preferred stock without stockholder approval; •division of our board of directors into three classes with staggered terms; •elimination of the right of our stockholders to act by written consent; •prohibiting stockholders from calling a special meeting of the stockholders; •rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; and •requiring super majority stockholder vote to amend certain provisions of the amended and restated certificate of incorporation and bylaws. Approved on June 20, 2014, our currently-in-effect bylaws authorize our stockholders who hold 25.0% of our entire capital stock issued and outstanding andare entitled to vote to call a special meeting of the stockholders. On January 8, 2015, our board of directors adopted a preferred shares rights agreement between us and the Securities Transfer Corporation, as the rights agent.This agreement provides, among other things, that when specified events occur, our stockholders will be entitled to purchase from us a fraction of a share ofseries A participating preferred stock for each share of common stock they own. Such preferred stock purchase rights are triggered by the earlier to occur of (1)10 business days (or a later date determined by our board of directors before the rights are separated from our common stock) after the public announcementthat a person or group has become an “acquiring person” by acquiring beneficial ownership of 15.0% or more of our outstanding common stock or (2) 10business days (or a later date determined by our board of directors before the rights are separated from our common stock) after a person or group begins atender or exchange offer that, if completed, would result in that person or group becoming an acquiring person. The issuance of preferred stock pursuant tothis preferred shares rights agreement would cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board ofdirectors. Our board of directors had previously adopted a similar preferred shares rights agreement on November 19, 2012, which expired on November 20,2014. We do not intend to pay dividends for the foreseeable future. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying anycash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn aninvestment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends inthe future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions,restrictions imposed by applicable law and other factors our board of directors deems relevant. 44 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Stock prices of companies with business operations primarily in China have fluctuated widely in recent years, and the trading prices of our common stockare likely to be volatile, which could result in substantial losses to investors. The trading prices of our common stock are likely to be volatile and could fluctuate widely in response to factors beyond our control. For example, if one ormore of the industry analysts or ratings agencies who cover us downgrades us or our common stock, or publishes unfavorable research about us, the price ofour common stock may decline. If one or more of these analysts or agencies cease to cover our company or fail to regularly publish reports on us, we couldlose visibility in the financial markets, which could cause the price of our common stock or trading volume to decline. In addition, the performance andfluctuation of the market prices of other China-based, U.S.-listed healthcare companies may affect the volatility in the price of and trading volume for ourcommon stock. In recent years, a number of PRC-based companies have listed their securities, or are in the process of preparing for listing their securities, onU.S. stock markets. Some of these companies have experienced significant volatility, including significant price declines following their initial publicofferings. The trading performances of the securities of these PRC-based companies’ securities at the time of or after their offerings may affect the overallinvestor sentiment towards PRC-based companies listed in the United States and consequently may affect the trading performance of our common stock.These broad market and industry factors may significantly affect the market price and volatility of our common stock, regardless of our actual operatingperformance. In addition to market and industry factors, the price and trading volume for our common stock may be highly volatile for specific business reasons. Any ofthese factors may result in large and sudden changes in the volume and price at which our common stock will trade. We cannot assure you that these factorswill not occur in the future again. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often institutedsecurities class action litigation against that company. If we were involved in a class action lawsuit, it could divert the attention of senior management, and, ifadversely determined, could have a material adverse effect on our business, financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS. We have no outstanding or unresolved comments from the SEC staff. ITEM 2. PROPERTIES. Our company’s corporate offices are leased and located at 18th Floor, Jialong International Building, 19 Chaoyang Park Road, Chaoyang District, Beijing100125, the People’s Republic of China. Business Location Owned/LeasedManufacturing Facilities Taishan District, Tai’an City, Shandong Province, China Owned Gaoxin District, Tai’an City, Shandong Province, China Owned Huaxi District, Guiyang City, Guizhou Province, China Owned Plasma Stations Qihe County, Shandong Province, China Leased Xiajin County, Shandong Province, China Owned Zhangqiu County, Shandong Province, China Owned Yanggu County, Shandong Province, China Owned Yishui County, Shandong Province, China Owned Huanjiang Maonan Autonomous County, Guangxi Zhuang Autonomous Region, China Owned Fangchenggang City, Guangxi Zhuang Autonomous Region, China Owned Yuncheng County, Shandong Province, China Leased Ningyang County, Shandong Province, China Owned Cao County, Shandong Province, China Owned Huangping County, Guizhou Province, China Owned Puding County, Guizhou Province, China Owned Ziyun Miaozu Buyizu autonomous County, Guizhou Province, China Leased 45 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We believe that all of our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business. ITEM 3. 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 issubject 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 legalproceedings 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 ourbusiness, financial condition or operating results. 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 theissuance of an additional 20,000,000 shares of Guizhou Taibang. The plan required all existing Guizhou Taibang shareholders to waive their rights of firstrefusal to subscribe for the additional shares. The remaining 9% minority shareholder of Guizhou Taibang’s shares, Guizhou Jie’an Company, or Jie’an, didnot support the plan and did not waive its right of first refusal. In May 2007, Guizhou Taibang signed an Equity Purchase Agreement with certain allegedstrategic investors (who concealed their background), pursuant to which such investors agreed to invest an aggregate of RMB51.0 million (approximately$7.8 million) in exchange for 21.4% of Guizhou Taibang’s equity interests. Such Equity Purchase Agreement was not approved or ratified by over two-thirdssupermajority of Guizhou Taibang’s shareholders, which approval or ratification is required under the PRC Company Law. At the same time, as an existingshareholder, 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 Taibangreceived RMB51.0 million (approximately $7.8 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 underthe Equity Purchase Agreement. The trial court denied Jie’an’s request, and the PRC Supreme Court ultimately sustained the original ruling in May 2009 anddenied the rights of first refusal of Jie’an over the 18,200,000 shares. 46 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. During the second quarter of 2010, Jie’an requested that Guizhou Taibang register its 1.8 million shares of additional capital injection with the localadministration of industry and commerce, or AIC. Guizhou Taibang’s board of directors withheld its required ratification of Jie’an’s request, pending theoutcome 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 thelocal 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 theseshares and the related interest expenses to Jie’an. Guizhou Taibang and Jie’an subsequently filed a cross-appeal. In December 2014, the appellate court ruledin 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 ofRMB18.3 million (approximately $2.8 million) associated with these shares plus the related interest expenses. In the first half of 2015, Guizhou Taibang paidan aggregate of RMB22.6 million (approximately $3.5 million) to the trial court held in escrow pending further appeal of this case. In June 2015, GuizhouTaibang 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 inSeptember 2015. In November 2013, Guizhou Taibang held a shareholders meeting and the shareholders passed resolutions, or the November 2013 Resolutions, that, interalia, (1) determined that it was no longer necessary for Guizhou Taibang to obtain additional capital from investors; (2) rejected Jie’an’s request that Jie’ansubscribe for additional shares of Guizhou Taibang alone and one or more other shareholders reduce their shareholding in Guizhou Taibang; and (3)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 againstGuizhou Taibang in December 2013, requesting that the court declare the November 2013 Resolutions void. Both the trial court and the appellate courtdenied 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 existingshareholders. Guizhou Taibang subsequently updated the registration with the local AIC regarding the additional capital injections in August 2014. InSeptember 2014, Jie’an and another minority shareholder of Guizhou Taibang filed a lawsuit against Guizhou Taibang, requesting that the court declare boththe 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. If the pending cases with Jie’an are ultimately ruled in Jie’an’s favor, our ownership interest in Guizhou Taibang may be diluted to 80% and Jie’an may beentitled to receive accumulated dividends of RMB18.3 million (approximately $2.8 million), being its claimed share of Guizhou Taibang’s accumulateddividend distributions associated with the 1.8 million shares, and the related interest expenses from Guizhou Taibang. As of December 31, 2015, GuizhouTaibang 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 respectof 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 RMB3.7 million(approximately $0.6 million) for the accrued interest. As these cases are closely interlinked to the outcome of the disputes with certain individual investordescribed below, based on our PRC litigation counsel’s assessment, we do not expect Jie’an to prevail. 47 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 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 byGuizhou Taibang’s shareholders, such investors’ equity ownership in Guizhou Taibang and the related increase in registered capital of Guizhou Taibanghave never been registered with the local AIC. In January 2010, one individual among such investors brought a lawsuit against Guizhou Taibang requestingto register his 14.35% ownership interest in Guizhou Taibang with the local AIC and seeking the distribution of his share of Guizhou Taibang’s dividendsdeclared 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, whichruling was reaffirmed after a re-trial by the same trial court in December 2012. After such ruling, Guizhou Taibang attempted to return the originally receivedfund of RMB34.2 million (approximately $5.3 million) to such investor by wiring the fund back to his bank account but was unable to do so due to theclosure of his bank account. Another investor, however, accepted the returned fund of RMB11.2 million (approximately $1.7 million) from Guizhou Taibangin November 2010. In 2013, the same individual investor appealed the case to the PRC Supreme Court, which also denied his claims for shareholder status inGuizhou Taibang and the related dividend distribution and accrued interest in September 2013. Such investor subsequently attempted to seek a re-trial bythe PRC Supreme Court, which request was denied by the PRC Supreme Court in January 2014. He then applied to the PRC Supreme Procuratorate to requestfor 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 onhis behalf. In July 2015, the PRC Supreme Procuratorate rejected his request for review. As of December 31, 2015, Guizhou Taibang had maintained, on its balance sheet, payables to the investors of RMB34.2 million (approximately $5.3 million)as originally received funds from such individual investor in respect of the shares in dispute, RMB17.7 million (approximately $2.7 million) for the interestexpenses, and RMB0.3 million (approximately $0.1 million) for the 1% penalty imposed by the Equity Purchase Agreement for any breach in the event thatGuizhou Taibang is required to return the original investment amount to such investor. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 48 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES. Market Information Our common stock is traded on the NASDAQ Global Select Market under the symbol “CBPO.” The following table sets forth, for the periods indicated, the high and low closing prices of our common stock. These prices reflect inter-dealer prices, withoutretail mark-up, mark-down or commission, and may not represent actual transactions. Closing Prices(1) High Low USD USD 2015 1st Quarter 95.51 64.98 2nd Quarter 120.85 92.69 3rd Quarter 123.83 82.62 4th Quarter 142.46 89.13 2014 1st Quarter 37.98 26.80 2nd Quarter 48.07 35.73 3rd Quarter 55.84 44.76 4th Quarter 69.50 49.06 (1)The above table sets forth the range of high and low closing prices per share of our common stock as reported by www.quotemedia.com for the periodsindicated. Approximate Number of Holders of Our Common Stock As of February 19, 2016, there were 437 holders of record of our common stock. This number excludes the shares of our common stock owned bystockholders holding stock under nominee security position listings. Dividend Policy We have never declared dividends or paid cash dividends. Any future decisions regarding dividends will be made by our board of directors. We currentlyintend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in theforeseeable future. Our board of directors has complete discretion on whether to pay dividends. Even if our board of directors decides to pay dividends, theform, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractualrestrictions and other factors that the board of directors may deem relevant. Securities Authorized for Issuance under Equity Compensation Plans The following table includes the information as of December 31, 2015 for each category of our equity compensation plan: 49 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Plan category Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights(a) (1) Weighted-averageexercise price ofoutstanding options, warrants and rights(b) Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a))(c) Equity compensation plans approved by security holders - - - Equity compensation plans not approved by securityholders 651,897 $10.44 1,182,945 Total 651,897 $10.44 1,182,945 (1)Excludes shares of restricted stock granted pursuant to our 2008 Equity Incentive Plan. The 669,100 shares of unvested restricted stock at December 31,2015 are issuable without the payment of any cash consideration by the grantee. Effective May 9, 2008, our board of directors adopted the 2008 Equity Incentive Plan, or the 2008 Plan. The 2008 Plan provides for grants of stock options,stock appreciation rights, performance units, restricted stock, restricted stock units and performance shares. A total of five million shares of our common stockmay be issued pursuant to the 2008 Plan. The exercise price per share for the shares to be issued pursuant to an exercise of a stock option will be no less thanthe fair market value per share on the grant date, except that, in the case of an incentive stock option granted to a person who holds more than 10.0% of thetotal combined voting power of all classes of our stock or any of our subsidiaries, the exercise price will be no less than 110.0% of the fair market value pershare on the grant date. As of December 31, 2015, 669,100 shares of restricted stock and options to purchase 651,897 share of our common stock wereoutstanding. No awards may be granted under the 2008 Plan after May 9, 2018, except that any award granted before then may extend beyond that date. Recent Sales of Unregistered Securities We have not sold any equity securities during the 2015 fiscal year that were not previously disclosed in a quarterly report on Form 10-Q or a current report onForm 8-K that was filed during the 2015 fiscal year. ITEM 6. SELECTED FINANCIAL DATA. The selected consolidated statement of comprehensive income data for 2015, 2014 and 2013 and the selected balance sheet data as of December 31, 2015and 2014 are derived from our audited consolidated financial statements included elsewhere in this report. The selected consolidated financial data for 2012and 2011 and the selected balance sheet data as of December 31, 2013, 2012 and 2011 are derived from our audited consolidated financial statements notincluded in this report. The following selected historical financial information should be read in conjunction with our consolidated financial statements and related notes and theinformation contained in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For the Year Ended December 31, 2015 2014 2013 2012 2011 (U.S. dollars in thousands, except per share data) Revenues 296,458 243,252 203,357 184,813 153,092 Income From Operations 132,586 111,159 86,933 74,489 32,217 Net Income attributable to China Biologic Products,Inc. 89,043 70,917 54,602 45,222 18,182 Total Assets 551,466 446,847 403,781 311,047 248,893 Total Current Liabilities 71,655 120,682 63,439 47,719 67,822 Total Long Term Liabilities 12,849 50,904 36,373 5,909 2,029 Total Stockholders' equity attributable to ChinaBiologic Products, Inc. 382,343 212,087 237,692 195,470 135,512 Total Equity 466,962 275,262 303,970 257,419 179,041 Net Income Per Share Basic 3.40 2.85 2.05 1.73 0.73 Diluted 3.27 2.71 1.96 1.62 0.37 50 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the otherfinancial information appearing elsewhere in this report. In addition to historical information, the following discussion contains certain forward-lookinginformation. See “Special Note Regarding Forward Looking Statements” above for certain information concerning those forward looking statements. Ourfinancial statements are prepared in U.S. dollars and in accordance with United States generally accepted accounting principles. Overview We are a biopharmaceutical company principally engaged in the research, development, manufacturing and sales of plasma products in China. We have astrong product portfolio with over 20 different dosage forms of plasma products and other biopharmaceutical products across nine categories. Our principalproducts are human albumin and IVIG. These products use human plasma as their principal raw material. Sales of human albumin products representedapproximately 37.6%, 39.3% and 44.1% of our total sales for 2015, 2014 and 2013, respectively. Sales of IVIG products represented approximately 42.2%,40.4% and 38.0% of our total sales for 2015, 2014 and 2013, respectively. All of our products are prescription medicines administered in the form ofinjections. Our sales model focuses on direct sales to hospitals and inoculation centers and is complemented by distributor sales. In 2015, we generated sales of $296.5million, an increase of 21.9% from 2014, and recorded net income attributable to our company of $89.0 million, an increase of 25.5% from 2014. Recent Developments In February 2016, Huitian obtained the GMP certificate from the CFDA for its new plasma production facility in Xi’an, Shaanxi Province, and commencedcommercial production thereafter. Financial Performance Highlights The following are some financial highlights for 2015: ·Sales: Sales increased by $53.2 million, or 21.9%, to $296.5 million for 2015 from $243.3 million for 2014. ·Gross Profit: Gross profit increased by $26.8 million, or 16.4%, to $190.0 million for 2015 from $163.2 million for 2014. As a percentage of sales,gross profit decrease from 67.1% in 2014 to 64.1% in 2015, respectively. 51 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·Income from operations: Income from operations increased by $21.4 million, or 19.2%, to $132.6 million for 2015 from $111.2 million for 2014. ·Net income attributable to our company: Net income attributable to our company increased by $18.1 million, or 25.5%, to $89.0 million for 2015from $70.9 million for 2014. ·Fully diluted net income per share: Fully diluted net income per share was $3.27 for 2015, as compared to $2.71 for 2014. Principal Factors Affecting our Financial Performance The following are key factors that affect our financial condition and results of operations and we believe them to be important to the understanding of ourbusiness: Raw material supply and prices The primary raw material used in the production of our albumin and immunoglobulin products is human plasma. The collection of human plasma in China isgenerally influenced by a number of factors such as government regulations, geographical locations of plasma collection stations, sanitary conditions ofplasma stations, living standards of the donors, and cultural and religious beliefs. If we experience any shortage of plasma supply, we may not be able to fullyutilize our production capacity. We currently operate 11 plasma collection stations (including one branch collection facility) through Shandong Taibang andtwo plasma stations through Guizhou Taibang. These plasma stations provide us with a stable source of plasma supply. Prices of and demand for our products The demand for our products is largely affected by the general economic conditions in China because the prices of our products are still not affordable tomany patients. A significant improvement in the economic environment in China will likely improve consumer income which in turn would make ourproducts more affordable and consequently increase the demand for our products. We have been able to expand our product range and consumer base byintroducing new products required by customers. We believe that our technical expertise is important in introducing products that are in demand. Production capacity Our sales volume is limited by our annual production capacity. As we grow our business in the future, our ability to fulfill additional and larger orders willdepend on our ability to increase our production capacity. Our plan to expand our production capacity will depend on the availability of capital to meet ourneeds of expansion or upgrading of production lines, and the availability of stable plasma supply. To comply with applicable PRC laws and regulations, wehave maintained permits and licenses necessary for the current operations of our plasma collection stations and production plants, and are required to applyfor such permits and licenses to operate new plasma collection stations and production plants. As a result, our expansion plan also depends on our ability torenew existing permits and licenses and obtain new permits and licenses. Competition We face intense competition from local and foreign entities that manufacture and sell products that compete with ours in the PRC. These competitors mayhave more capital, better research and development resources, expanded manufacturing and marketing capabilities and more experience than we do. In ourindustry, we compete based upon product quality, production cost, ability to produce a diverse range of products and logistical capabilities. 52 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our profitability may be adversely affected if competition intensifies, competitors reduce prices, PRC government requires us to reduce the prices of ourproducts, or competitors develop new products or product substitutes with comparable medicinal applications or therapeutic effects which are more effectiveor less costly than ours. See Item 1, “Business—Competition” for more information. Taxation China Biologic is subject to United States tax at gradual rates of up to 35.0%. No provision for income taxes in the United States has been made as ChinaBiologic has no U.S. taxable income. Taibang Biological was incorporated in the BVI, but is not subject to taxation in that jurisdiction. Taibang Holdings was incorporated in Hong Kong, and under the current laws of Hong Kong, is subject to a Profits Tax of 16.5% on profits arising in HongKong. However, no provision for Hong Kong Profits Tax has been made as Taibang Holdings has no taxable income. According to the PRC government policy, new or high technology companies may enjoy a preferential income tax rate of 15.0%, instead of 25.0% under theEIT Law. In 2011, Shandong Taibang renewed its high and new technology enterprise qualification, which entitled it to the preferential income tax rate of15.0% for a period of three years from 2011 to 2013. In October 2014, Shandong Taibang renewed its high and new technology enterprise qualification,which entitled it to enjoy a preferential income tax rate of 15.0% for a period of three years from 2014 to 2016. Shandong Taibang may apply for a renewalfor an additional three years from 2017 to 2019 upon the expiration of its high and new technology enterprise certificate. According to Notice on IssuesConcerning Relevant Tax Policies in Deepening the Implementation of the Western Development Strategy jointly promulgated by the PRC Ministry ofFinance, the PRC General Administration of Customs and SAT dated July 27, 2011, Guizhou Taibang, being a qualified enterprise located in the westernregion of China, enjoys a preferential income tax rate of 15.0% effective from January 1, 2011 to December 31, 2020. All of our other PRC subsidiaries aresubject to the statutory income tax rate of 25.0%. Results of Operations The following table sets forth a summary of our consolidated statements of comprehensive income for the periods indicated. Our historical results presentedbelow are not necessarily indicative of the results that may be expected for any other future period. 53 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. For the Year Ended December 31, 2015 2014 2013 $ % of Total Sales $ % of Total Sales $ % of Total Sales (U.S. dollars in thousands, except percentage) SALES 296,458 100.0 243,252 100.0 203,357 100.0 COST OF SALES 106,483 35.9 80,026 32.9 65,484 32.2 GROSS MARGIN 189,975 64.1 163,226 67.1 137,873 67.8 OPERATING EXPENSES: Selling expenses 9,973 3.4 10,707 　4.4 10,643 　5.2 General and administrative expenses 41,392 14.0 32,130 13.2 36,074 17.7 Research and development expenses 6,024 2.0 4,162 　1.7 4,223 　2.1 Provision for other receivables in respect of anemployee housing development project - 0.0 5,068 2.1 - - Total operating expenses 57,389 19.4 52,067 21.4 50,940 25.0 INCOME FROM OPERATIONS 132,586 44.7 111,159 45.7 86,933 42.7 OTHER INCOME (EXPENSES): Equity in (loss) income of equity method investee (1,311) (0.4) 8,646 3.6 2,170 　1.1 Interest expense (1,727) (0.6) (3,698) (1.5) (1,135) (0.6)Interest income 5,551 1.9 6,645 2.7 4,433 2.2 Total other income, net 2,513 0.9 11,593 4.8 5,468 2.7 EARNINGS BEFORE INCOME TAX EXPENSE 135,099 45.6 122,752 50.5 92,401 　45.4 INCOME TAX EXPENSE 20,993 7.1 26,639 11.0 15,540 7.6 NET INCOME 114,106 38.5 96,113 39.5 76,861 37.8 Less: Net income attributable to non-controllinginterest 25,063 8.5 25,196 10.3 22,259 10.9 NET INCOME ATTRIBUTABLE TO COMPANY 89,043 30.0 70,917 29.2 54,602 　26.9 NET INCOME PER SHARE OF COMMON STOCK BASIC 3.40 2.85 2.05 DILUTED 3.27 2.71 1.96 Comparison of years ended December 31, 2015 and 2014 Sales Our total sales increased by 21.9%, or $53.2 million, to $296.5 million for 2015, compared to $243.3 million for 2014, primarily due to increases in the salesvolumes of human albumin and IVIG. Excluding the foreign exchange impact resulting from the depreciation of the RMB against the U.S. dollar, our saleswould have increased by 23.4% for 2015 as compared to 2014. Such increase of sales was mainly due to the increase in sales volume in major plasmaproducts. The following table summarizes the breakdown of sales by major types of products: For the Year Ended December 31, Change 2015 2014 $ % $ % Amount % (U.S. dollars in millions, except percentage) Human albumin 111.4 37.6 95.6 39.3 15.8 16.5 Immunoglobulin products: IVIG 125.1 42.2 98.4 40.4 26.7 27.1 Other immunoglobulin products 22.5 7.6 19.7 8.1 2.8 14.2 Placenta polypeptide 27.2 9.2 24.0 9.9 3.2 13.3 Others 10.3 3.4 5.6 2.3 4.7 83.9 Totals 296.5 100.0 243.3 100.0 53.2 21.9 For 2015 as compared to 2014: ·the average price for our approved human albumin products, which represented 37.6% of our total sales, remained stable and, excluding the foreignexchange effect, their average price in RMB increased by approximately 1.3%; and ·the average price for our approved IVIG products, which represented 42.2% of our total sales, remained stable, and excluding the foreign exchangeeffect, their average price in RMB increased by approximately 1.2%. 54 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The average sales price of our human albumin and IVIG products increased in RMB term for 2015 as compared to 2014, as a result of the combined effects ofthe reduced value added tax, or VAT, rate, strong market demand and our sales effort to increase market shares in tier-one cities and new markets. The VATrate on sales of plasma products was reduced from 6.0% to 3.0%, effective on July 1, 2014. The reduction in the VAT rate had a positive impact on our salesprices as our sales are recognized as the invoiced price of the products sold minus VAT. All other factors being equal, the reduction in the VAT rate had theeffect of increasing our sales price of plasma products by 2.9%. Excluding this impact, the average sales price of our human albumin and IVIG products inRMB term would have remained stable in 2015 as compared to 2014. The average sales price of our human albumin and IVIG products increased slightly inRMB term in response to the strong market demand following the removal of the retail price ceilings for drug products, effective on June 1, 2015. Thisincrease is partially offset by our effort to increase the market share of our human albumin products and IVIG products in tier-one cities and new markets in2015, whereby we increased sales to distributors with lower invoiced prices compared to direct sales to hospitals and inoculation centers. The sales volume of our products depends on market demand and our production volume. The production volume of our human albumin products and IVIGproducts depends primarily on the general plasma supply. The production volume of our hyper-immune products, which include human rabiesimmunoglobulin, human hepatitis B immunoglobulin and human tetanus immunoglobulin products, is subject to the availability of specific vaccinatedplasma and our production capacity. The supply of specific vaccinated plasma requires several months of lead time. Our production facility currently canonly accommodate the production of one type of hyper-immune products at any given time and we rotate the production of different types of hyper-immuneproducts 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 fromperiod to period. The sales volume of our human albumin products increased by 16.6% for 2015 as compared to 2014, as a result of the increased production volume atShandong Taibang and Guizhou Taibang. The sales volume of our IVIG products increased by 27.0% for 2015 as compared to 2014, mainly due to theincreased sales through distributors in tier-one cities and new markets supported by the increased output following the production resumption at GuizhouTaibang in March 2014. Further, in anticipation of a favorable market environment and our increased sales capabilities this year, we reserved a large volumeof IVIG pastes from previous years to be processed and sold in early 2015, which also contributed to our increased sales volume in 2015. The sales increase of other immunoglobulin products for 2015 as compared to 2014 was mainly attributable to the increase in average sales price of humantetanus immunoglobulin products. The increase in average sales price of human tetanus immunoglobulin products was primarily due to the strong marketdemand coupled by the removal of the retail price ceiling for drug products effective on June 1, 2015. The sales increase of placenta polypeptide products was generally in line with the volume increase for 2015 as compared to 2014. The sales volume ofplacenta polypeptide products increased by 12.8% for 2015 as compared to 2014, primarily due to the ramp-up of the production capacities for placentapolypeptide at Guizhou Taibang after receiving the GMP certification for the upgraded production facilities in January 2014. 55 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The sales increase of other products for 2015 as compared to 2014 was mainly due to the increase in sales volume of both factor VIII and PCC. Cost of sales & gross profit For the Year Ended December 31, Change 2015 2014 Amount % (U.S. dollars in millions, except percentage) Cost of sales $106.5 $80.0 $26.5 33.1 as a percentage of total sales 35.9% 32.9% 3.0 Gross Profit $190.0 $163.2 $26.8 16.4 Gross Margin 64.1% 67.1% (3.0) Our cost of sales was $106.5 million, or 35.9% of our sales, for 2015, as compared to $80.0 million, or 32.9% of our sales for 2014. Our gross profit was$190.0 million and $163.2 million for 2015 and 2014, respectively, representing gross margins of 64.1% and 67.1%, respectively. Excluding the sales of theproducts derived from raw plasma outsourced from Xinjiang Deyuan, whose cost is moderately higher than plasma from our own collection stations, our grossmargin would have been 65.4% for 2015. Our cost of sales and gross margin are affected by the volume and pricing of our finished products, raw materialcosts, production mix and yields, inventory impairments, production cycles and routine maintenance costs. The increase in cost of sales for 2015 as compared to 2014 was generally in line with the increases in sales volume and cost of plasma. In an effort to increaseplasma collection volume and expand our donor base, we increased the nutrition fees paid to donors consistent with the industry practice. We expect thenutrition fees to be paid to donors continue to increase as a result of improving living standards in China. Consequently, future improvements on marginswill need to be derived from increases in product pricing, product mix, yields and manufacturing efficiency. The increase in cost of sales as a percentage ofsales for 2015 as compared to 2014 was mainly due to the increase in cost of plasma partially offset by the increase in the average sales price of major plasmaproducts. Operating expenses For the Year Ended December 31, Change 2015 2014 Amount % (U.S. dollars in millions, except percentage) Operating expenses $57.4 $52.1 $5.3 10.2 as a percentage of total sales 19.4% 21.4% (2.0) Our total operating expenses increased by $5.3 million, or 10.2%, to $57.4 million for 2015 from $52.1 million for 2014. As a percentage of total sales, totalexpenses decreased by 2.0% to 19.4% for 2015 from 21.4% for 2014. The operating expenses for 2014 included a provision of $5.1 million for all thereceivables in respect of an employee housing development project at Shandong Taibang as discussed below. Excluding the effect of this provision, ouroperating expenses increased by $10.4 million, or 22.1%, for 2015 as compared to 2014, primarily due to the combined effect of the increase of the generaland administrative expenses and research and development expenses and the decrease of selling expenses as discussed below. 56 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Selling expenses For the Year Ended December 31, Change 2015 2014 Amount % (U.S. dollars in millions, except percentage) Selling expenses $10.0 $10.7 $(0.7) (6.5)as a percentage of total sales 3.4% 4.4% (1.0) For 2015, our selling expenses decreased by $0.7 million, or 6.5%, to $10.0 million from $10.7 million for 2014. As a percentage of total sales, our sellingexpenses for 2015 decreased by 1.0% to 3.4% from 4.4% for 2014. The decrease was mainly due to the decreased selling expense of placenta polypeptide for2015 as compared to 2014. We began to utilize internal resources instead of third-party service providers to promote sales of placenta polypeptide products,and did not renew a third-party engagement upon its expiration in May 2014. General and administrative expenses For the Year Ended December 31, Change 2015 2014 Amount % (U.S. dollars in millions, except percentage) General and administrative expenses $41.4 $32.1 $9.3 29.0 as a percentage of total sales 14.0% 13.2% 0.8 For 2015, our general and administrative expenses increased by $9.3 million, or 29.0%, to $41.4 million from $32.1 million for 2014. As a percentage of totalsales, general and administrative expenses increased by 0.8% to 14.0% for 2015 from 13.2% for 2014. The increase in general and administrative expenseswas mainly due to the increase of share-based compensation expenses totaling $6.7 million. In addition, the disposal losses on assets increased by $2.7million for 2015 as compared to 2014. Research and development expenses For the Year Ended December 31, Change 2015 2014 Amount % (U.S. dollars in millions, except percentage) Research and development expenses $6.0 $4.2 $1.8 42.9 as a percentage of total sales 2.0% 1.7% 0.3 For 2015, our research and development expenses increased by $1.8, or 42.9%, to $6.0 million from $4.2 million for 2014. In 2015 and 2014, we receivedgovernment grants totaling $1.2 million and $2.1 million respectively and recognized them as a reduction of research and development expenses. Excludingthis impact, our research and development expenses increased by $0.9 million for 2015 from 2014. As a percentage of total sales, our research anddevelopment expenses, excluding the impact of the government grants, decreased by 0.2% to 2.4% for 2015 from 2.6% for 2014. The increase of our researchand development expenses was mainly due to the expenditures paid for certain clinical trial programs in 2015. Provision for other receivables in respect of an employee housing development project In 2014, we made a full provision of $5.1 million for all the receivables in respect of an employee housing development project at Shandong Taibangbecause it became probable that these receivables may not be recoverable after all legal means of collection were exhausted. 57 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Equity in (loss) income of equity method investee Our equity method investment represented our 35.0% equity interest in Huitian, our equity method investee. For 2015, our equity in (loss) income of equitymethod investee decreased by $9.9 million to a loss of $1.3 million from income of $8.6 million for 2014. Huitian suspended its production and began toconstruct a new production facility to meet the new GMP standard in late 2013. Huitian incurred operation losses during the suspension period in 2015 as itdid not commence production at its new facility until February 2016. In 2014, Huitian disposed a subsidiary, recognizing a gain of RMB116.7 million(approximately $19.0 million). Income tax expense For the Year Ended December 31, Change 2015 2014 Amount % (U.S. dollars in millions, except percentage) Income tax expense $21.0 $26.6 $(5.6) (21.1)Effective income tax rate 15.5% 21.7% (6.2) Our provision for income taxes decreased by $5.6 million, or 21.1%, to $21.0 million for 2015 from $26.6 million for 2014. For 2014, we incurred thedividend withholding income tax of $8.9 million in respect of the dividends declared or to be declared by Shandong Taibang. With our plan to reinvestShandong Taibang's earnings in its business operations, we no longer incurred dividend withholding income tax in respect of Shandong Taibang since 2015following an internal corporate restructuring. Excluding the impact of dividend withholding income tax, our effective income tax rates were 15.5% and 14.4% for 2015 and 2014, respectively. Thestatutory tax rate applicable to our major operating subsidiaries in the PRC for 2015 and 2014 was 15.0%. Comparison of years ended December 31, 2014 and 2013 Sales Our total sales increased by 19.6%, or $39.9 million, to $243.3 million for 2014, compared to $203.4 million for 2013, primarily due to increases in the salesvolumes of human albumin, IVIG and placenta polypeptide products. In addition, the effect resulted from the foreign exchange appreciation of RMB againstU.S. dollars contributed 0.9% of the sales increase in U.S. dollars. The following table summarizes the breakdown of sales by major types of products: For the Year Ended December 31, Change 2014 2013 $ % $ % Amount % (U.S. dollars in millions, except percentage) Human albumin 95.6 39.3 89.7 44.1 5.9 6.6 Immunoglobulin products: IVIG 98.4 40.4 77.3 38.0 21.1 27.3 Other immunoglobulin products 19.7 8.1 19.7 9.7 - - Placenta polypeptide 24.0 9.9 12.2 6.0 11.8 96.7 Others 5.6 2.3 4.5 2.2 1.1 24.4 Totals 243.3 100.0 203.4 100.0 39.9 19.6 For 2014 as compared to 2013: 58 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·the average price for our approved human albumin products, which represented 39.3% of our total sales, increased by approximately 1.4% and,excluding the foreign exchange effect, their average price in RMB increased by approximately 0.6%; and ·the average price for our approved IVIG products, which represented 40.4% of our total sales, decreased by approximately 0.2%, and excluding theforeign exchange effect, their average price in RMB decreased by approximately 0.9%. The average sales price of human albumin products increased slightly for 2014 as compared to 2013, as a result of the combined effects of the highergovernment-imposed retail price ceiling, the reduced VAT rate and our sales effort to increase market shares in tier-one cities and new markets. The higherretail price ceiling announced by NDRC that became effective on February 1, 2013 provided us with more flexibility in pricing our human albumin productsand allowed us to increase our ex-factory prices in certain regional markets. The reduction of VAT rate from 6.0% to 3.0% effective on July 1, 2014 also had apositive effect on our sales price of plasma products as our sales are recognized as the invoiced price of the products sold minus VAT. We lowered sales priceof human albumin products, however, in order to expand our market shares in tier-one cities and certain new markets in 2014. The price decrease of IVIGproducts was mainly attributable to the increased sales through distributors in tier-one cities and new markets, partially offset by the reduced VAT rate. Toimprove our brand recognition and the market share of IVIG products in tier-one cities and new markets, we reduced our sales prices to distributors in 2014. The sales volume of our human albumin products increased by 5.1% for 2014 as compared to 2013, mainly due to the sales volume increase in ShandongTaibang, partially offset by the sales volume decrease in Guizhou Taibang as a result of the planned production suspension at Guizhou Taibang from June2013 to March 2014. The sales volume of our IVIG products increased by 27.4% for 2014 as compared to 2013, mainly due to the increased market demandresulted from the outbursts of Hand, Foot and Mouth Disease and the increased sales through distributors in tier-one cities and new markets during 2014. Inanticipation of a favorable market environment and our increased sales capabilities in 2014, we had reserved a large volume of our 2013 IVIG inventories tobe sold throughout 2014. The sales increase of placenta polypeptide products was generally in line with the volume increase for 2014 as compared to 2013. The sales volume ofplacenta polypeptide products increased significantly for 2014 as compared to 2013, primarily due to the expanded production of placenta polypeptide atGuizhou Taibang after receiving the GMP certification for the upgraded production facilities in January 2014. Cost of sales & gross profit For the Year Ended December 31, Change 2014 2013 Amount % (U.S. dollars in millions, except percentage) Cost of sales $80.0 $65.5 $14.5 22.1 as a percentage of total sales 32.9% 32.2% 0.7 Gross Profit $163.2 $137.9 $25.3 18.3 Gross Margin 67.1% 67.8% (0.7) Our cost of sales was $80.0 million, or 32.9% of our sales, for 2014, as compared to $65.5 million, or 32.2% of our sales for 2013. Our gross profit was $163.2million and $137.9 million for 2014 and 2013, respectively, representing gross margins of 67.1% and 67.8%, respectively. Our cost of sales and gross marginare affected by the volume and pricing of our finished products, raw material costs, production mix and respective yields, inventory impairments, productioncycles and routine maintenance costs. 59 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The increase in cost of sales for 2014 as compared to 2013 was primarily due to the increases in sales volume, cost of plasma and overhead. In an effort toincrease plasma collection volume and expand our donor base, we increased the nutrition fees paid to donors consistent with the industry practice. We expectthat the nutrition fees to be paid to donors will continue to increase as a result of the rising living standards in China. Consequently, future improvements onmargins will need to be derived from increases in product pricing and volume, product mix, yields and manufacturing efficiency. The increase in cost of salesas a percentage of sales for 2014 as compared to 2013 was mainly due to the increase in cost of plasma and the increase in overhead, especially depreciationexpenses, at Guizhou Taibang after its production resumption, partially offset by the change of our product mix to include more products with highermargins. Operating expenses For the Year Ended December 31, Change 2014 2013 Amount % (U.S. dollars in millions, except percentage) Operating expenses $52.1 $50.9 $1.2 2.4 as a percentage of total sales 21.4% 25.0% (3.6) Our total operating expenses increased by $1.2 million, or 2.4%, to $52.1 million for 2014 from $50.9 million for 2013. As a percentage of total sales, totalexpenses decreased by 3.6% to 21.4% for 2014 from 25.0% for 2013. The operating expenses for 2014 included a provision of $5.1 million for all thereceivables in respect of the employee housing development project at Shandong Taibang as discussed above. Excluding the effect of this provision, ouroperating expenses decreased by $3.9 million, or 7.7%, for 2014 as compared to 2013, primarily due to the decrease in general and administrative expenses. Selling expenses For the Year Ended December 31, Change 2014 2013 Amount % (U.S. dollars in millions, except percentage) Selling expenses $10.7 $10.6 $0.1 0.9 as a percentage of total sales 4.4% 5.2% (0.8) For 2014, our selling expenses increased by $0.1 million, or 0.9%, to $10.7 million from $10.6 million for 2013. As a percentage of total sales, our sellingexpenses for 2014 decreased by 0.8% to 4.4% from 5.2% for 2013. This decrease was mainly due to a decrease in the per-unit selling expenses of placentapolypeptide during 2014. We began to utilize internal resources instead of third party service providers to promote sales of placenta polypeptide products,and did not renew a third-party engagement upon its expiration in May 2014. General and administrative expenses For the Year Ended December 31, Change 2014 2013 Amount % (U.S. dollars in millions, except percentage) General and administrative expenses $32.1 $36.1 $(4.0) (11.1)as a percentage of total sales 13.2% 17.7% (4.5) 60 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. For 2014, our general and administrative expenses decreased by $4.0 million, or 11.1%, to $32.1 million from $36.1 million for 2013. As a percentage oftotal sales, general and administrative expenses decreased by 4.5% to 13.2% for 2014 from 17.7% for 2013, mainly due to a decrease in legal expenses andthe amortization expenses of intangible assets. In 2013, we incurred legal expenses in relation to the take-over defense against a competitor in China and thelegal disputes regarding the shares of Guizhou Taibang. We did not incur similar legal expenses for 2014. In addition, we incurred amortization expenses in2013 in relation to the acquisition of GMP certificates and other intangible assets when we acquired a majority stake in Guizhou Taibang in 2008. Becausethese intangible assets had been fully amortized by the end of 2013, we did not incur corresponding expenses in 2014. Research and development expenses For the Year Ended December 31, Change 2014 2013 Amount % (U.S. dollars in millions, except percentage) Research and development expenses $4.2 $4.2 $- - as a percentage of total sales 1.7% 2.1% (0.4) For 2014, our research and development expenses remained stable, as compared to 2013. In 2014, we received government grants totaling $2.1 million andrecognized them as a reduction of research and development expenses. Excluding this impact, our research and development expenses increased by $2.1million for 2014 from 2013. As a percentage of total sales, our research and development expenses, excluding the impact of the government grants, increasedby 0.5% to 2.6% for 2014 from 2.1% for 2013. The increase was mainly due to the expenditures paid for certain clinical trial programs and the engagement ofexternal experts for certain pipeline products in 2014. Equity in income of equity method investee For 2014, our equity in income of equity method investee increased by $6.4 million to $8.6 million from $2.2 million for 2013. As a percentage of total sales,equity in income of equity method investee increased by 2.5% to 3.6% for 2014 from 1.1% for 2013. Huitian contributed its land use right to its subsidiary ascapital in 2013 and disposed the subsidiary in 2014, recognizing a gain of RMB116.7 million (approximately $19.0 million) for 2014. As a result, our equityincome in Huitian increased by $6.7 million. Income tax expense For the Year Ended December 31, Change 2014 2013 Amount % (U.S. dollars in millions, except percentage) Income tax expense $26.6 $15.5 $11.1 71.6 Effective income tax rate 21.7% 16.8% 4.9 Our provision for income taxes increased by $11.1 million, or 71.6%, to $26.6 million for 2014 from $15.5 million for 2013. For 2014, the dividendwithholding income tax attributable to Shandong Taibang increased by $6.2 million, as compared to 2013, due to an increase in dividend distribution inShandong Taibang. The dividends from Shandong Taibang are subject to withholding tax at a rate of 10.0%. Excluding the impact of dividend withholding income tax, our effective income tax rates were 14.4% and 13.9% for 2014 and 2013, respectively. Thestatutory tax rate applicable to our major operating subsidiaries in China for 2014 and 2013 was 15.0%. 61 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Liquidity and Capital Resources To date, we have financed our operations primarily through cash flows from operations, augmented by bank borrowings and equity contributions by ourstockholders. As of December 31, 2015, we had $144.9 million in cash and cash equivalents, primarily consisting of cash on hand and demand deposits, and$38.0 million in time deposits. The following table sets forth a summary of our cash flows for the periods indicated: Cash Flow For the Year Ended December 31, 2015 2014 2013 (U.S. dollars in millions) Net cash provided by operating activities $109.4 $93.5 $74.3 Net cash used in investing activities (89.8) (13.4) (25.6)Net cash provided by (used in) financing activities 51.6 (142.8) (38.5)Effects of exchange rate change in cash (7.1) (0.6) 4.3 Net increase (decrease) in cash and cash equivalents 64.1 (63.3) 14.5 Cash and cash equivalents at beginning of the year 80.8 144.1 129.6 Cash and cash equivalents at end of the year $144.9 $80.8 $144.1 Operating activities Cash inflows from operating activities totaled $109.4 million in 2015, $93.5 million in 2014, and $74.3 million in 2013. Cash inflows increased by $15.9million in 2015 as compared to 2014 and increased by $19.2 million in 2014 as compared to 2013. Such increases in cash inflows from operations weremainly in line with the improvements in our results of operations in 2015 and 2014, partially offset by an increase in accounts receivable and inventoriesduring the relevant years. Accounts receivable Our average collection speed of accounts receivable slowed down slightly in 2015 as compared to 2014. The accounts receivable turnover days for plasmaproducts were 34 days, 31 days, and 30 days for 2015, 2014, and 2013, respectively. The increase in turnover days for 2015 was primarily due to theextended credit terms granted to certain distributors for human rabies immunoglobulin products. In 2015, we adjusted our sales strategy by granting extendedcredit terms to certain qualified distributors of human rabies immunoglobulin products to assist in their bidding efforts with provincial centers for diseasecontrol and prevention. In prior years, these distributors were required to make the payments in advance of our product deliveries. Excluding this impact, theturnover days would have been 32 days for both 2015 and 2014. Inventories Cash outflows for inventories increased in both 2015 and 2014. The increases in inventory for 2015, 2014 and 2013 were $32.1, $13.4 million and $10.4million, respectively. As compared to 2014, the increase of inventories in 2015 was mainly attributable to the source plasma and plasma pastes purchasedfrom Xinjiang Deyuan. As compared to 2013, the increase of inventories in 2014 was mainly attributable to an increase in work-in-process and finishedgoods at Guizhou Taibang following its resumption of production in March 2014 and, to a lesser extent, an increase in raw materials consistent with ourexpanded plasma collection volume. 62 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Investing activities Cash outflows from investing activities for 2015 was $89.8 million, as compared to $13.4 million and $25.6 million for 2014 and 2013, respectively. In2015, we paid $52.3 million for the acquisition of property, plant and equipment, intangible assets and land use rights and provided a long-term loan of$40.7 million to Xinjiang Deyuan, partially offset by government grants of $2.5 million in connection with our purchase of property, plant and equipment. In 2014, we paid $21.9 million for the acquisition of property, plant and equipment, intangible assets and land use rights, partially offset by a $1.6 millionrefund of deposits from the local government due to a decrease in the size of a land parcel purchased by Guizhou Taibang and proceeds of $6.6 million fromthe maturity of a time deposit made in 2013. In 2013, we paid $21.8 million for the acquisition of property, plant and equipment, intangible assets and land use right, partially offset by a $2.1 millionrefund of deposits from the local government due to a decrease in the size of a land parcel purchased by Guizhou Taibang. Financing activities Cash inflows from financing activities for 2015 totaled $51.6 million, as compared to cash outflows from financing activities totaled $142.8 million and$38.5 million for 2014 and 2013, respectively. Cash inflows from financing activities in 2015 mainly consisted of net proceeds of $80.6 million from afollow-on offering of our company’s common stock in June 2015, proceeds of $63.2 million from the maturity of deposits used as security for bank loans,proceeds of $15.8 million from a short-term bank loan and proceeds of $7.7 million from stock options exercised, partially offset by repayments of bank loanstotaling $113.5 million and a dividend of $3.7 million held in escrow by a trial court in connection with disputes with a minority shareholder of GuizhouTaibang. Cash outflows from financing activities in 2014 mainly consisted of a payment of $86.8 million for acquisition of noncontrolling interest in GuizhouTaibang, a dividend payment of $8.8 million by our subsidiaries to noncontrolling interest shareholders and a payment of $70.0 million for repurchase ofshares from an individual stockholder, partially offset by proceeds of $33.2 million from a follow-on offering of our company’s common stock. Cash outflows from financing activities in 2013 mainly consisted of a payment of $29.6 million for share repurchase and a dividend payment of $16.9million by our subsidiaries to the noncontrolling interest shareholders. Management believes that our company has sufficient cash on hand and will continue to have positive cash inflow for its operations from the sale of itsproducts in the PRC market. Obligations under Material Contracts The following table sets forth our material contractual obligations as of December 31, 2015: Payments due by period Contractual Obligations Total Less thanone year One to three years Three to five years More thanfive years (U.S. dollars in millions) Operating lease commitment 0.3 0.1 - - 0.2 Purchase commitment 85.2 31.2 54.0 - - Capital commitment 30.3 27.3 3.0 - - Total 115.8 58.6 57.0 - 0.2 63 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Seasonality of our Sales Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of newmarket 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 infinancial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors. Critical Accounting Policies The preparation of financial statements in conformity with United States generally accepted accounting principles, or U.S. GAAP, requires our managementto make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and relateddisclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgmentsand estimates in the preparation of financial statements, including the following: Use of estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and thereported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to suchestimates 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 equity instruments and stock compensation awards, the realizability of deferred tax assets and inventories, the recoverabilityof intangible assets, land use rights, property, plant and equipment, equity method investment and loan receivable, and accruals for income tax uncertaintiesand other contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions. 64 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Allowance for doubtful accounts We maintain an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance,management considers historical losses, the customers’ financial condition, the amount of accounts receivable in dispute, the accounts receivable aging andcustomers’ payment patterns. We review our allowance for doubtful accounts monthly. Past due balances are reviewed individually for collectability.Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.We do not have any off-balance-sheet credit exposure related to our customers. We generally ask our distributors to pay in advance before we deliver products, with few exceptions for a credit period of no longer than 60 days. Forhospitals and clinics, depending on the relationship and the creditability, we generally grant a credit period of no longer than 90 days with exceptions tocustomers, which we believe are credit worthy, of up to six months. We have provided a bad debt allowance of $34,902, $6,211 and $31,567 respectively for2015, 2014 and 2013. Due to recovery of bad debt that we previously provided an allowance, the recoveries of bad debt provision was nil, $30,673 and nilfor 2015, 2014 and 2013, respectively. Inventories Inventories are stated at the lower of cost or market. Adjustments are recorded to write down the carrying amount of any obsolete and excess inventory to itsestimated net realizable value based on historical and forecasted demand. We review the inventory periodically for possible obsolete goods and cost in excess of net realizable value to determine if any reserves are necessary.Provisions to write-down the carrying amount of obsolete inventory to its estimated net realizable value amounted to $76,587, $324,584 and nil for 2015,2014 and 2013, respectively, and were recorded as cost of sales in the consolidated statements of comprehensive income. Long-lived assets Long-lived assets, such as property, plant and equipment, and purchased intangible asset subject to amortization, are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or assetgroup be tested for possible impairment, we first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value.If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extentthat the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quotedmarket values and third-party independent appraisals, as considered necessary. 65 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 7A. 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 NorthAmerica and Western Europe. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legalenvironment in the PRC, and by the general state of the PRC economy. Our results may be adversely affected by changes in governmental policies withrespect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among otherthings. 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 interestrate risk exposure. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our futureinterest 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 othersources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk. Foreign Exchange Risk All of our consolidated revenues and consolidated costs and 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 resultsof 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 ofour RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated at exchange ratesat the balance sheet dates and revenue and expenses are translated at the average exchange rates and shareholders’ equity is translated at historical exchangerates. Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive income, acomponent of stockholders’ 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 notunder the “capital account,” which includes foreign direct investment. In addition, beginning in July 2005, China reformed its exchange rate regime bychanging to a managed floating exchange rate regime based on market supply and demand with reference to a basket of major foreign currencies. Under themanaged floating exchange rate regime, RMB is no longer pegged to U.S. dollars. The People’s Bank of China announces the closing prices of foreigncurrencies 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 makessuch 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 toexpand 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%. OnJune 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 theflexibility of the RMB exchange rate and that emphasis would be placed on reflecting market supply and demand with reference to a basket of major foreigncurrencies. On April 16, 2012, the People’s Bank of China announced a policy to expand the maximum daily floating range of RMB trading prices againstU.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 furtherexpand 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 longterm, RMB may appreciate or depreciate more significantly in value against U.S. dollars or other foreign currencies, depending on the market supply anddemand with reference to a basket of major foreign currencies. On August 10, 2015, the People’s Bank of China announced that it had changed thecalculation method for RMB’s daily central parity exchange rate against U.S. dollars, which resulted in an approximately 2.0% depreciation of RMB on thatday. RMB continued to depreciate against U.S. dollars throughout the remainder of 2015. 66 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Account Balances We maintain cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the bankslocated in the United States, Hong Kong Deposit Protection Board insured limits for the banks located in Hong Kong, or China Deposit Insurance Schemeinsured limits for the banks located in the PRC. Total cash at banks, time deposits and restricted cash deposits as of December 31, 2015 and December 31,2014 amounted to $182.3 million and $184.2 million respectively, $3.0 million and $0.1 million of which are covered by insurance, respectively. We havenot 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 operating results. Although we do not believe thatinflation 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 effecton 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 ofour products do not increase with these increased costs. Market for Human Albumin and IVIG Our two major products, human albumin and IVIG, accounted for 37.6% and 42.2% of the total sales for 2015, respectively. If the market demands for humanalbumin or IVIG cannot be sustained in the future or if there is substantial price decrease in either or both products, our operating results could be materiallyand adversely affected. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Consolidated Financial Statements The full text of our audited consolidated financial statements as of December 31, 2015, 2014 and 2013 begins on page F-1 of this report. Quarterly Financial Results The following table sets forth certain unaudited financial information for each of the eight quarters ended December 31, 2015. The consolidated financialstatements for each of these quarters have been prepared on the same basis as the audited consolidated financial statements included in this annual report and,in the opinion of management, include all adjustments necessary for the fair presentation of the results of operations for these periods. This informationshould be read together with our audited consolidated financial statements and the related notes included elsewhere in this annual report. 67 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2015 2015 2015 2015 2014 2014 2014 2014 (U.S. dollars in thousands, except per share data) Sales $68,285 $78,751 $79,068 $70,354 $57,987 $68,924 $60,074 $56,267 Gross profit 41,263 50,806 52,013 45,893 36,954 46,567 41,154 38,552 Earnings before income tax expense 23,531 35,931 40,366 35,271 26,989 35,214 31,258 29,291 Net income attributable to Company 16,280 22,877 26,724 23,162 12,858 20,060 19,725 18,274 Basic earnings per share 0.60 0.86 1.05 0.91 0.51 0.80 0.83 0.72 Diluted earnings per share 0.59 0.82 0.99 0.87 0.48 0.76 0.79 0.69 Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly net earnings per share will notnecessarily equal the total for the year. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. 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) that are designed to ensure that information thatwould be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’srules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding required disclosure. As required by Rule 13a-15(b) promulgated under the Securities Exchange Act, our management, with the participation of our Chief Executive Officer andChief Financial Officer, evaluated the design and operating effectiveness as of December 31, 2015 of our disclosure controls and procedures, as defined inRule 13a-15(e) promulgated under the Securities Exchange Act. Based on this evaluation our Chief Executive Officer and Chief Financial Officer concludedthat, as of December 31, 2015, our disclosure controls and procedures were effective at the reasonable assurance level to enable our company to record,process, summarize and report information required under the SEC’s rules in a timely manner. Management’s Annual Report on Internal Control over Financial Reporting Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) refers to the process designed by, or under thesupervision of, our Chief Executive Officer, and effected by our board of directors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles. Management is responsible for establishing and maintaining adequate internal control over financial reporting. 68 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this evaluation, managementused the framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including the controlenvironment, risk assessment, control activities, information and communication, and monitoring activities. Based on our evaluation we determined that ourinternal control over financial reporting was effective as of December 31, 2015. Our internal control over financial reporting as of December 31, 2015 has been audited by our registered public accounting firm as stated in their reportwhich is included in Part II, Item 9A of this form 10-K. 69 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Report of Independent Registered Public Accounting Firm The Board of Directors and StockholdersChina Biologic Products, Inc.: We have audited China Biologic Products, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in InternalControl – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). China BiologicProducts, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on our company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. In our opinion, China Biologic Products, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015,based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof China Biologic Products, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income,changes in equity and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated February 25, 2016 expressedan unqualified opinion on those consolidated financial statements. /s/ KPMG Huazhen LLP Beijing, ChinaFebruary 25, 2016 70 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Changes in Internal Controls over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(d) and 15d-15(f)) during the year endedDecember 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. Disclosure pursuant to Section 13(r) of the Exchange Act 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. economicsanctions. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law. Because theSEC defines the term “affiliate” broadly, it includes any entity under common “control” with us (and the term “control” is also construed broadly by theSEC). The description of the activities below has been provided to us by Warburg Pincus LLC, or WP, affiliates of which: (1) beneficially own more than 10.0% ofour outstanding common stock and/or are members of our board of directors, and (2) beneficially own more than 10.0% of the equity interests of, and havethe right to designate members of the board of directors of each of Santander Asset Management Investment Holdings Limited, or SAMIH, and EnduranceInternational Group Holdings, Inc., or Endurance. Each of SAMIH and Endurance 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, Endurance and their respective affiliates. The disclosure does not relate to anyactivities 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 thedisclosed activities, and neither we nor WP has independently verified or participated in the preparation of the disclosure. Neither we nor WP is representingas to the accuracy or completeness of the disclosure nor do we or WP undertake any obligation to correct or update it. We understand that each of SAMIH’s SEC-reporting affiliates intends to disclose in its next annual or quarterly SEC report that: (a) Santander UK plc (“Santander UK”) holds frozen savings accounts and one current account for two customers resident in the United Kingdom (“U.K.”)who are currently designated by the United States (“U.S.”) for terrorism. The accounts held by each customer were blocked after the customer’s designationand have remained blocked and dormant throughout 2015. Revenue generated by Santander UK on these accounts is negligible. 71 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) An Iranian national, resident in the U.K., who is currently designated by the U.S. under the Iranian Financial Sanctions Regulations and the Weapons ofMass Destruction Proliferators Sanctions Regulations (“NPWMD”), holds a mortgage with Santander UK that was issued prior to any such designation. Nofurther drawdown has been made (or would be allowed) under this mortgage although Santander UK continues to receive repayment installments. In 2015,total revenue in connection with the mortgage was approximately £3,876 while net profits were negligible relative to the overall profits of Santander UK.Santander UK does not intend to enter into any new relationships with this customer, and any disbursements will only be made in accordance with applicablesanctions. The same Iranian national also holds two investment accounts with Santander ISA Managers Limited. The funds within both accounts are investedin the same portfolio fund. The accounts have remained frozen during 2015. The investment returns are being automatically reinvested, and no disbursementshave been made to the customer. Total revenue for the Santander group in connection with the investment accounts was approximately £188 while net profitsin 2015 were negligible relative to the overall profits of Banco Santander, S.A. (c) During the third quarter of 2015 two additional Santander UK customers were designated. First, a UK national designated by the U.S. under the SpeciallyDesignated Global Terrorist (“SDGT”) sanctions program who is on the U.S. Specially Designated National (“SDN”) list. This customer holds a bank accountwhich generated revenue of approximately £180 during the third and fourth quarter of 2015. The account is blocked. Net profits in the third and fourthquarter of 2015 were negligible relative to the overall profits of Santander. Second, a UK national also designated by the U.S. under the SDGT sanctionsprogram who is on the U.S. SDN list, held a bank account. No transactions were made in the third and fourth quarter of 2015 and the account is blocked andin arrears. (d) In addition, during the fourth quarter of 2015, Santander UK has identified one additional customer. A UK national designated by the U.S. under theSDGT sanctions program who is on the U.S. SDN list, held a bank account which generated negligible revenue during the fourth quarter of 2015. The accountwas closed during the fourth quarter of 2015. Net profits in the fourth quarter of 2015 were negligible relative to the overall profits of Banco Santander, S.A. We understand that Endurance intends to disclose in its next annual or quarterly SEC report that: On December 2, 2015, Endurance terminated a subscriber account (the “Subscriber Account”) that Endurance believes to be associated with Issam Shammoutand Sky Blue Bird Aviation (“Shammout”) identified by the Office of Foreign Assets Control (“OFAC”), as a Specially Designated National (“SDN”), on May21, 2015, pursuant to 31 C.F.R. Part 594. The Subscriber Account was inadvertently migrated to Endurance’s servers following its acquisition of the assets ofArvixe LLC (“Arvixe”) on October 31, 2014. Pursuant to the terms of the asset purchase agreement between Endurance and Arvixe, any customer accountsprohibited by OFAC were expressly excluded from the acquisition. Accordingly, Endurance does not believe it took legal ownership of the SubscriberAccount, and no revenue was collected by Endurance in connection with the Subscriber Account since the date on which Shammout was added to the SDNlist. Nonetheless, upon identifying that the Subscriber Account had been migrated to its servers, Endurance promptly suspended all services and terminatedthe Subscriber Account. Endurance reported the Subscriber Account to OFAC as potentially the property of a SDN subject to blocking pursuant to ExecutiveOrder 13224. As of January 25, 2016, Endurance has not received any correspondence from OFAC regarding this matter. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by Item 10 of Part III is included in our Proxy Statement for our 2016 Annual Meeting of Stockholders and is incorporated hereinby reference. 72 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 11. EXECUTIVE COMPENSATION. The information required by Item 11 of Part III is included in our Proxy Statement for our 2016 Annual Meeting of Stockholders and is incorporated hereinby reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information required by Item 12 of Part III is included in our Proxy Statement for our 2016 Annual Meeting of Stockholders and is incorporated hereinby reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information required by Item 13 of Part III is included in our Proxy Statement for our 2016 Annual Meeting of Stockholders and is incorporated hereinby reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The information required by Item 14 of Part III is included in our Proxy Statement for our 2016 Annual Meeting of Stockholders and is incorporated hereinby reference. 73 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. Financial Statements and Schedules The financial statements are set forth under Item 8 of this annual report on Form 10-K. Financial statement schedules have been omitted since they are eithernot required, not applicable, or the information is otherwise included. Exhibit List The list of exhibits in the Exhibit Index to this Report is incorporated herein by reference. 74 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SIGNATURES In accordance with section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this Report on Form 10-K to be signed on its behalf bythe undersigned, thereto duly authorized individual. Date: February 25, 2016 CHINA BIOLOGIC PRODUCTS, INC. By:/s/ David (Xiaoying) Gao David (Xiaoying) Gao Chief Executive Officer By:/s/ Ming Yang Ming Yang Chief Financial Officer In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated. Signature TitleDate /s/ David (Xiaoying) Gao Chairman and Chief Executive OfficerFebruary 25, 2016David (Xiaoying) Gao (Principal Executive Officer) /s/ Ming Yang Chief Financial OfficerFebruary 25, 2016 Ming Yang (Principal Financial and Accounting Officer ) /s/ Sean Shao DirectorFebruary 25, 2016Sean Shao /s/ Zhijun Tong DirectorFebruary 25, 2016 Zhijun Tong /s/ Yungang Lu DirectorFebruary 25, 2016 Yungang Lu /s/ David Hui Li DirectorFebruary 25, 2016 David Hui Li /s/ Wenfang Liu DirectorFebruary 25, 2016Wenfang Liu /s/ Albert (Wai Keung) Yeung DirectorFebruary 25, 2016Albert (Wai Keung) Yeung /s/ Joseph Chow DirectorFebruary 25, 2016Joseph Chow /s/ Min Fang DirectorFebruary 25, 2016Min Fang 75 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES CONTENTS PageReport of Independent Registered Public Accounting FirmF-1Consolidated Balance SheetsF-2Consolidated Statements of Comprehensive IncomeF-3Consolidated Statements of Changes in EquityF-4Consolidated Statements of Cash FlowsF-5Notes to Consolidated Financial StatementsF-7 - F-31 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Report of Independent Registered Public Accounting Firm The Board of Directors and StockholdersChina Biologic Products, Inc.: We have audited the accompanying consolidated balance sheets of China Biologic Products, Inc. and subsidiaries (the “Company”) as of December 31, 2015and 2014, and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the years in the three-year periodended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of China BiologicProducts, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), China Biologic Products, Inc.’sinternal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 25, 2016 expressed an unqualified opinionon the effectiveness of the Company’s internal control over financial reporting. /s/ KPMG Huazhen LLP Beijing, ChinaFebruary 25, 2016 F-1 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS Note December 31, 2015 December 31, 2014 USD USD ASSETS Current Assets Cash and cash equivalents 144,937,893 80,820,224 Restricted cash deposits 9 - 63,677,610 Time deposits 38,032,593 - Accounts receivable, net of allowance for doubtful accounts 3 25,144,969 19,402,820 Inventories 5 126,395,312 101,304,932 Prepayments and other current assets, net of allowance for doubtful accounts 4 24,545,597 14,781,658 Deposits related to land use rights, current portion 8 10,056,200 - Total Current Assets 369,112,564 279,987,244 Property, plant and equipment, net 7 105,364,251 80,230,888 Land use rights, net 23,576,300 11,909,136 Deposits related to land use rights 8 - 12,792,355 Restricted cash and cash deposits, excluding current portion 9 - 40,230,250 Equity method investment 10 8,718,133 18,221,777 Loan receivable 11 39,834,173 - Other non-current assets 4,861,075 3,475,442 Total Assets 551,466,496 446,847,092 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Short-term bank loans, including current portion of long-term bank loans 12 - 57,902,600 Accounts payable 9,681,835 4,829,350 Other payables and accrued expenses 13 57,462,563 49,692,757 Income tax payable 4,510,986 8,257,133 Total Current Liabilities 71,655,384 120,681,840 Long-term bank loans, excluding current portion 12 - 40,000,000 Deferred income 4,525,867 2,765,024 Other liabilities 8,323,446 8,138,498 Total Liabilities 84,504,697 171,585,362 Stockholders’ Equity Common stock: par value $0.0001; 100,000,000 shares authorized; 28,835,053 and 27,865,871 shares issued at December 31, 2015 and 2014, respectively; 26,580,349 and 24,806,167 shares outstanding at December 31, 2015 and 2014,respectively 2,884 2,787 Additional paid-in capital 105,079,845 24,008,281 Treasury stock: 2,254,704 and 3,059,704 shares at December 31, 2015 and 2014,respectively, at cost 16,23 (56,425,094) (76,570,621) Retained earnings 333,704,094 244,661,391 Accumulated other comprehensive income (18,605) 19,985,189 Total equity attributable to China Biologic Products, Inc. 382,343,124 212,087,027 Noncontrolling interest 84,618,675 63,174,703 Total Stockholders’ Equity 466,961,799 275,261,730 Commitments and contingencies 11,20 - - Total Liabilities and Stockholders’ Equity 551,466,496 446,847,092 See accompanying notes to Consolidated Financial Statements. F-2 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, December 31, December 31, Note 2015 2014 2013 USD USD USD Sales 19 296,457,902 243,251,658 203,356,856 Cost of sales 106,482,626 80,025,375 65,484,153 Gross profit 189,975,276 163,226,283 137,872,703 Operating expenses Selling expenses 9,973,449 10,707,409 10,643,149 General and administrative expenses 41,391,520 32,129,985 36,073,871 Research and development expenses 6,024,368 4,161,901 4,223,165 Provision for other receivables in respect of an employee housingdevelopment project 6 - 5,068,075 - Income from operations 132,585,939 111,158,913 86,932,518 Other income (expenses) Equity in (loss) income of an equity method investee 10 (1,311,278) 8,646,181 2,170,473 Interest income 5,551,105 6,644,886 4,433,326 Interest expense (1,727,335) (3,697,819) (1,134,952)Total other income, net 2,512,492 11,593,248 5,468,847 Earnings before income tax expense 135,098,431 122,752,161 92,401,365 Income tax expense 14 20,992,913 26,639,527 15,540,301 Net income 114,105,518 96,112,634 76,861,064 Less: Net income attributable to noncontrolling interest 25,062,815 25,195,794 22,259,513 Net income attributable to China Biologic Products, Inc. 89,042,703 70,916,840 54,601,551 Net income per share of common stock: 21 Basic 3.40 2.85 2.05 Diluted 3.27 2.71 1.96 Weighted average shares used in computation: 21 Basic 25,599,153 24,427,196 26,410,819 Diluted 26,567,366 25,685,064 27,572,111 Net income 114,105,518 96,112,634 76,861,064 Other comprehensive income: Foreign currency translation adjustment, net of nil income taxes (24,368,360) (1,918,715) 9,126,218 Comprehensive income 89,737,158 94,193,919 85,987,282 Less: Comprehensive income attributable to noncontrolling interest 20,698,249 24,798,384 23,951,559 Comprehensive income attributable to China Biologic Products, Inc. 69,038,909 69,395,535 62,035,723 See accompanying notes to Consolidated Financial Statements. F-3 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Accumulated Equity Common stock Additional other attributable Number of paid-in Treasury Retained comprehensive to China Biologic Noncontrolling Shares Par value capital Stock earnings income Products, Inc. interest Total equity USD USD USD USD USD USD USD USD Balance as of January 1, 2013 26,629,615 2,663 62,251,731 - 119,143,000 14,072,322 195,469,716 61,949,448 257,419,164 Net income - - - - 54,601,551 - 54,601,551 22,259,513 76,861,064 Other comprehensive income - - - - - 7,434,172 7,434,172 1,692,046 9,126,218 Dividend declared tononcontrolling interestshareholders - - - - - - - (18,323,710) (18,323,710)Acquisition of noncontrollinginterests - - (664,662) - - - (664,662) (1,299,251) (1,963,913)Share repurchase - - - (29,594,080) - - (29,594,080) - (29,594,080)Share-based compensation - - 5,050,796 - - - 5,050,796 - 5,050,796 Common stock issued inconnection with: - Exercise of stock options 648,379 65 5,394,005 - - - 5,394,070 - 5,394,070 - Vesting of restricted shares 63,750 6 (6) - - - - - - Balance as of December 31,2013 27,341,744 2,734 72,031,864 (29,594,080) 173,744,551 21,506,494 237,691,563 66,278,046 303,969,609 Net income - - - - 70,916,840 - 70,916,840 25,195,794 96,112,634 Other comprehensive income - - - - - (1,521,305) (1,521,305) (397,410) (1,918,715)Dividend declared tononcontrolling interestshareholders - - - - - - - (13,056,733) (13,056,733)Acquisition of noncontrollinginterests - - (68,802,855) - - - (68,802,855) (15,122,799) (83,925,654)Share repurchase - - - (70,000,000) - - (70,000,000) - (70,000,000)Share-based compensation - - 5,396,271 - - - 5,396,271 - 5,396,271 Excess tax benefits from stockoption exercises - - 1,333,594 - - - 1,333,594 277,805 1,611,399 Reissuance of treasury stock - - 10,189,059 23,023,459 - - 33,212,518 - 33,212,518 Common stock issued inconnection with: - Exercise of stock options 417,002 42 3,860,359 - - - 3,860,401 - 3,860,401 - Vesting of restricted shares 107,125 11 (11) - - - - - - Balance as of December 31,2014 27,865,871 2,787 24,008,281 (76,570,621) 244,661,391 19,985,189 212,087,027 63,174,703 275,261,730 Net income - - - - 89,042,703 - 89,042,703 25,062,815 114,105,518 Other comprehensive income - - - - - (20,003,794) (20,003,794) (4,364,566) (24,368,360)Share-based compensation - - 12,114,272 - - - 12,114,272 - 12,114,272 Excess tax benefits from stockoption exercises - - 1,225,941 - - - 1,225,941 292,761 1,518,702 Reissuance of treasury stock - - 60,438,432 20,145,527 - - 80,583,959 - 80,583,959 Adjustments in noncontrollinginterest resulting fromcapital injections - - (452,962) - - - (452,962) 452,962 - Common stock issued inconnection with: - Exercise of stock options 780,557 78 7,745,900 - - - 7,745,978 - 7,745,978 - Vesting of restricted shares 188,625 19 (19) - - - - - - Balance as of December 31,2015 28,835,053 2,884 105,079,845 (56,425,094) 333,704,094 (18,605) 382,343,124 84,618,675 466,961,799 See accompanying notes to Consolidated Financial Statements. F-4 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, December 31, December 31, 2015 2014 2013 USD USD USD CASH FLOWS FROM OPERATING ACTIVITIES: Net income 114,105,518 96,112,634 76,861,064 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,179,376 6,989,222 6,096,650 Amortization 854,364 758,232 1,365,734 Loss (gain) on sale of property, plant and equipment 3,024,830 172,032 (123,777)Allowance (reversal) for doubtful accounts – accounts receivable, net 34,902 (24,462) 31,567 Allowance for doubtful accounts - other receivables and prepayments 788 5,068,075 65,094 Write-down of obsolete inventories 76,587 324,584 - Deferred tax (benefit) expense (170,345) 3,483,890 112,632 Share-based compensation 12,114,272 5,396,271 5,050,796 Equity in loss (income) of an equity method investee 1,311,278 (8,646,181) (2,170,473)Excess tax benefits from share-based compensation arrangements (1,518,702) (1,611,399) - Change in operating assets and liabilities: Accounts receivable (7,146,311) (2,191,118) (5,667,386)Prepayment and other current assets 879,165 (9,236,125) (624,159)Inventories (32,095,328) (13,418,971) (10,432,492)Accounts payable 5,348,896 405,071 1,621,917 Other payables and accrued expenses 6,734,988 4,472,691 2,562,739 Deferred income (416,185) (224,040) - Income tax payable (1,926,093) 5,683,912 (446,911)Net cash provided by operating activities 109,392,000 93,514,318 74,302,995 CASH FLOWS FROM INVESTING ACTIVITIES: Payment for property, plant and equipment (38,790,998) (17,194,201) (20,492,159)Payment for intangible assets and land use rights (13,500,526) (4,677,358) (1,327,148)Refund of deposits related to land use right - 1,635,200 2,100,150 Dividends received - - 565,425 Purchase of time deposit - - (6,608,612)Proceeds upon maturity of time deposit - 6,608,612 - Proceeds from sale of property, plant and equipment and land use rights 827,020 220,135 194,749 Long-term loan lent to a third party (40,744,167) - - Receipt of government grants related to property and equipment 2,452,864 - - Net cash used in investing activities (89,755,807) (13,407,612) (25,567,595) See accompanying notes to Consolidated Financial Statements. F-5 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, December 31, December 31, 2015 2014 2013 USD USD USD CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock option exercised 7,745,978 3,860,401 5,394,070 Payment for share repurchase - (70,000,000) (29,594,080)Proceeds from short-term bank loans 15,770,881 44,500,340 9,693,000 Repayment of short-term bank loans (47,201,255) (22,833,400) (8,014,000)Proceeds from long-term bank loans - 70,000,000 30,000,000 Repayment of long-term bank loans (66,300,000) (33,700,000) - Payment for cash deposit as security for bank loans - (104,172,005) (30,000,000)Maturity of deposit as security for bank loans 63,152,258 30,370,670 - Net proceeds from reissuance of treasury stock 80,583,959 33,212,518 - Acquisition of noncontrolling interest - (86,830,499) (1,963,913)Excess tax benefits from share-based compensation arrangements 1,518,702 1,611,399 - Dividend paid by subsidiaries to noncontrolling interest shareholders - (8,846,984) (16,931,149)Contribution from noncontrolling interest shareholders - - 2,891,422 Dividend to the trial court to be held in escrow as to dispute with Jie’an (3,690,814) - - Net cash provided by (used in) financing activities 51,579,709 (142,827,560) (38,524,650) EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH (7,098,233) (597,409) 4,318,420 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 64,117,669 (63,318,263) 14,529,170 Cash and cash equivalents at beginning of year 80,820,224 144,138,487 129,609,317 Cash and cash equivalents at end of year 144,937,893 80,820,224 144,138,487 Supplemental cash flow information Cash paid for income taxes 23,348,371 17,652,514 15,947,939 Cash paid for interest expense 1,526,807 3,150,381 347,602 Noncash investing and financing activities: Acquisition of property, plant and equipment included in payables 6,363,392 3,300,284 4,252,428 Restricted cash spent for property, plant and equipment - - 2,928,421 See accompanying notes to Consolidated Financial Statements. F-6 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2015, 2014 AND 2013 NOTE 1 – DESCRIPTION OF BUSINESS AND SIGNIFICANT CONCENTRATIONS AND RISKS China Biologic Products, Inc. (“CBP”) and its subsidiaries (collectively, the “Company”), through its subsidiaries in the People’s Republic of China (the“PRC”), is a biopharmaceutical company that is principally engaged in the research, development, manufacturing and sales of plasma-based pharmaceuticalproducts in the PRC. The PRC subsidiaries own and operate plasma stations that purchase and collect plasma from individual donors. The plasma isprocessed into finished goods after passing through a series of fractionating processes. All of the Company’s plasma products are prescription medicines thatrequire government approval before the products are sold to customers. The Company primarily sells its products to hospitals and inoculation centers directlyor through distributors in the PRC. Cash Concentration The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limitsfor its bank accounts located in the United States or may exceed Hong Kong Deposit Protection Board insured limits for its bank accounts located in HongKong or may exceed the insured limits for its bank accounts in China established by China Deposit Insurance Fund Management Institution. Total cash atbanks and deposits as of December 31, 2015 and December 31, 2014 amounted to $182,291,723 and $184,186,306, respectively, of which $3,020,569 and$86,744 are insured, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed to anysignificant risks on cash held in bank accounts. Sales Concentration The Company’s two major products are human albumin and human immunoglobulin for intravenous injection (“IVIG”). Human albumin accounted for37.6%, 39.3% and 44.1% of the total sales for the years ended December 31, 2015, 2014 and 2013, respectively. IVIG accounted for 42.2%, 40.4% and 38.0%of the total sales for the years ended December 31, 2015, 2014 and 2013, respectively. If the market demands for human albumin and IVIG cannot besustained 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 sales during theyears ended December 31, 2015, 2014 and 2013. No individual customer represented 10% or more of accounts receivables as at December 31, 2015 and2014. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. F-7 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Purchase Concentration There was one supplier, namely, Xinjiang Deyuan Bioengineering Co., Ltd. (“Xinjiang Deyuan”), that comprised 10% or more of the total purchases duringthe year ended December 31, 2015. No supplier that comprised 10% or more of the total purchases during the years ended December 31, 2014 and 2013,respectively. There was one supplier that represented more than 10% of accounts payables as at December 31, 2015 and December 31, 2014, respectively. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles inthe United States of America (“GAAP”), and include the financial statements of the Company and its majority owned subsidiaries. All significantintercompany balances and transactions have been eliminated upon consolidation. The Company has no involvement with variable interest entities. TheCompany accounts for investments over which it has significant influence but not a controlling financial interest using the equity method of accounting. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and thereported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to suchestimates 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 othercontingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions. Foreign Currency Translation The accompanying consolidated financial statements of the Company are reported in US dollar. The financial position and results of operations of theCompany’s subsidiaries in the PRC are measured using the Renminbi, which is the local and functional currency of these entities. Assets and liabilities of thesubsidiaries are translated at the prevailing exchange rate in effect at each period end. Revenues and expenses are translated at the average rate of exchangeduring the period. Translation adjustments are included in other comprehensive income. Revenue Recognition Revenue represents the invoiced value of products sold, net of value added taxes (VAT). Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred and the customer takes ownership andassumes risk of loss, the sales price is fixed or determinable and collection of the relevant receivable is probable. The Company mainly sells human albuminand human immunoglobulin to hospitals, inoculation centers and pharmaceutical distributors. For all sales, the Company requires a signed contract orpurchase order, which specify pricing, quantity and product specifications. Delivery of the product occurs when the customer receives the product, which iswhen the risks and rewards of ownership have been transferred. Delivery is evidenced by signed customer acknowledgement. The Company’s salesagreements do not provide the customer the right of return, unless the product is defective in which case the Company allows for an exchange of product orreturn. For the periods presented, defective product returns were inconsequential. F-8 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Fair Value Measurements The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or mostadvantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes betweenobservable and unobservable inputs, which are categorized in one of the following levels: • Level 1 Inputs: Unadjusted quoted prices for identical assets or liabilities in active markets accessible to the entity at the measurement date. • Level 2 Inputs: Other than quoted prices included in Level 1, inputs that are observable for the asset or liability, either directly or indirectly, forsubstantially the full term of the asset or liability. • Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, therebyallowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fairvalue measurement. See Note 18 to the Consolidated Financial Statements. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and demand deposits. The Company considers all highly liquid investments with original maturities ofthree-month or less at the time of purchase to be cash equivalents. Cash and cash equivalents at December 31, 2015 and 2014 include $85,422,000 and$38,489,045 of certificates of deposit with an initial term of three months or less. As of December 31, 2015 and 2014, the Company maintained cash and cash equivalents at banks in the following locations: December 31, 2015 December 31, 2014 USD USD PRC, excluding Hong Kong 130,319,811 77,627,358 U.S. 13,939,319 2,651,088 Total 144,259,130 80,278,446 F-9 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cashprovided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimatedlosses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses, the customers’ financialcondition, the amount of accounts receivables in dispute, the accounts receivables aging and the customers’ payment patterns. The Company reviews itsallowance for doubtful accounts monthly. Past due balances are reviewed individually for collectability. Account balances are charged off against theallowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. Inventories Inventories are stated at the lower of cost or market. Cost is determined using the weighted average method. Cost of work in progress and finished goodscomprise direct materials, direct production costs and an allocation of production overheads based on normal operating capacity. Adjustments are recorded towrite down the carrying amount of any obsolete and excess inventory to its estimated net realizable value based on historical and forecasted demand. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation and amortization of property, plant and equipment attributable to manufacturing activities is capitalized as part of inventories, and recognizedas cost of revenues when the inventory is sold. Cost incurred in the construction of property, plant and equipment, including process payments and deposits,are initially capitalized as construction-in-progress and transferred into their respective asset categories when the assets are ready for their intended use, atwhich time depreciation commences. Depreciation on property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Estimated useful lives ofthe assets are as follows: Buildings30 yearsMachinery and equipment10 yearsFurniture, fixtures, office equipment and vehicles5-10 years When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and the proceeds received thereon.Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized and amortized over the remaininguseful life. Equity Method Investment Investment in an investee in which the Company has the ability to exercise significant influence, but does not have a controlling interest is accounted forusing the equity method. Significant influence is generally presumed to exist when the Company has an ownership interest in the voting stock between 20%and 50%, and other factors, such as representation on the board of directors and participation in policy-making processes, are considered in determiningwhether the equity method of accounting is appropriate. Under the equity method of accounting, the Company’s share of the investee’s results of operationsis included in other income (expenses) in the Company’s consolidated statements of comprehensive income. Deferred taxes are provided for the differencebetween the book and tax basis of the investment. The Company recognizes a loss if it is determined that other than temporary decline in the value of theinvestment exists. The process of assessing and determining whether an impairment on a particular equity investment is other than temporary requires asignificant amount of judgment. To determine whether an impairment is other-than-temporary, management considers whether the Company has the abilityand intent to hold the investment until recovery and whether evidence indicating the carrying value of the investment is recoverable outweighs evidence tothe contrary. No impairment loss was recognized by the Company for the years ended December 31, 2015, 2014 and 2013. F-10 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Government Grants Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to them and the grantswill be received. Grants that compensate research and development expenses are recognized as a reduction to the related research and development expenses.Grants that compensate the Company for the cost of property, plant and equipment and land use rights are recognized as deferred income and are recognizedover the useful life of the asset by way of other income. For the year ended December 31, 2015, the Company received government grants of RMB15,000,000 (approximately $2,452,864) related to the newmanufacturing facilities for factor products in Shandong Taibang, which was recorded as deferred income. These grants are amortized as the related assets aredepreciated. The grants amortized amounted to $118,751 for the year ended December 31, 2015. For the year ended December 31, 2015, government grantsof RMB7,280,600 (approximately $1,188,907), have been recognized as a reduction of research and development expenses. For the year ended December 31, 2014, government grants of RMB12,963,600 (approximately $2,111,770), have been recognized as a reduction of researchand development expenses. For the year ended December 31, 2012, the Company received government grants of RMB18,350,000 (approximately $2,989,215) related to the technicalupgrade of the manufacturing facilities in Guizhou Taibang. The grants amortized amounted to $297,434, $224,191 and nil for the years ended December 31,2015, 2014 and 2013, respectively. Land Use Rights Land use rights represent the exclusive right to occupy and use a piece of land in the PRC for a specified contractual term. Land use rights are carried at cost,less accumulated amortization. Amortization is calculated using the straight-line method over the contractual period of the rights ranging from 40 to 50years. Research and Development Expenses Research and development costs are expensed as incurred. Research and development expenses for the years ended December 31, 2015, 2014 and 2013 were$6,024,368, $4,161,901 and $4,223,165, respectively. These expenses include the costs of the Company’s internal research and development activities. Product Liability The Company’s products are covered by two separate product liability insurances each with coverages of approximately $3,220,000 (or RMB20,000,000) forthe products sold by Shandong Taibang Biological Products Co., Ltd. (“Shandong Taibang”) and Guizhou Taibang Biological Products Co., Ltd. (“GuizhouTaibang”), respectively. There were no product liability claims as of December 31, 2015. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax loss andtax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in whichthose temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized inthe consolidated statements of comprehensive income in the period that includes the enactment date. A valuation allowance is provided to reduce theamount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. F-11 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income taxpositions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in theperiod in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties ingeneral and administrative expenses. Share-based Payment The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the awardand recognizes the cost over the period during which an employee is required to provide service in exchange for the award, which generally is the vestingperiod. Long-lived Assets Long-lived assets, such as property, plant and equipment, and purchased intangible asset subject to amortization, are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or assetgroup be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to itscarrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognizedto the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flowmodels, quoted market values and third-party independent appraisals, as considered necessary. Net Income per Share Basic net income per share of common stock is computed by dividing net income attributable to common stockholders by the weighted average number ofcommon stock outstanding during the year using the two-class method. Under the two-class method, net income is allocated between common stock andother participating securities based on their participating rights in undistributed earnings. The Company’s nonvested shares were considered participatingsecurities since the holders of these securities participate in dividends on the same basis as common stockholders. Diluted net income per share is calculatedby dividing net income attributable to common stockholders as adjusted for the effect of dilutive common stock equivalent, if any, by the weighted averagenumber of common stock and dilutive common stock equivalent outstanding during the year. Potential dilutive securities are not included in the calculationof diluted earnings per share if the impact is anti-dilutive. Segment Reporting The Company has one operating segment, which is the manufacture and sales of human plasma products. Substantially all of the Company’s operations andcustomers are located in the PRC, and therefore, no geographic information is presented. F-12 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Contingencies In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover awide range of matters, including, among others, government investigations and tax matters. An accrual for a loss contingency is recognized when it isprobable that a liability has been incurred and the amount of loss can be reasonably estimated. Legal costs incurred in connection with loss contingencies areexpensed as incurred. Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts withCustomers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles thatgovern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. The original effective date forASU 2014-09 would have required the Company to adopt beginning in its first quarter of 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenuefrom Contracts with Customers (Topic 606) – Deferral of the Effective Date, which defers the effective date of ASU 2014-09 for one year and permits earlyadoption as early as the original effective date of ASU 2014-09. Accordingly, the Company may adopt the standard in either its first quarter of 2017 or 2018.The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of thedate of adoption. The Company is currently evaluating the timing of its adoption and the impact of adopting the new revenue standard on its consolidatedfinancial statements. In July, 2015, the FASB issued ASU No. 2015-11 (“ASU 2015-11”), Simplifying the Measurement of Inventory, which required that inventory be measured atthe lower of cost and net realizable value. For public business entities, ASU 2015-11 is effective for financial statements issued for annual periods beginningafter December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of beginning of an interim orannual reporting period. The Company expects that the adoption of ASU 2015-11 will not have a material impact on its consolidated financial statements orrelated disclosures. In November, 2015, the FASB issued ASU No. 2015-17 (“ASU 2015-17”), Balance Sheet Classification of Deferred Taxes, which required that deferred taxliabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, ASU 2015-17 is effective forfinancial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application ispermitted for all entities as of beginning of an interim or annual reporting period. The Company expects that the adoption of ASU 2015-17 will not have amaterial impact on its consolidated financial statements or related disclosures. NOTE 3 – ACCOUNTS RECEIVABLE Accounts receivable at December 31, 2015 and 2014 consisted of the following: December 31, 2015 December 31, 2014 USD USD Accounts receivable 25,588,593 19,836,768 Less: Allowance for doubtful accounts (443,624) (433,948)Total 25,144,969 19,402,820 F-13 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The activity in the allowance for doubtful accounts – accounts receivable for the years ended December 31, 2015, 2014 and 2013 are as follows: For the Years Ended December 31, 2015 December 31, 2014 December 31, 2013 USD USD USD Beginning balance 433,948 460,689 415,607 Provisions 34,902 6,211 31,567 Recoveries - (30,673) - Write-offs - - - Foreign currency translation adjustment (25,226) (2,279) 13,515 Ending balance 443,624 433,948 460,689 NOTE 4 – PREPAYMENTS AND OTHER CURRENT ASSETS Prepayments and other current assets as of December 31, 2015 mainly represented other receivables of $17,846,006 and prepayments of $2,206,131.Prepayments and other current assets as of December 31, 2014 mainly represented other receivables of $7,197,778 and prepayments of $3,158,311. The activity in the allowance for doubtful accounts – other receivables and prepayments for the years ended December 31, 2015, 2014 and 2013 are asfollows: For the Years Ended December 31, 2015 December 31, 2014 December 31, 2013 USD USD USD Beginning balance 5,207,840 142,951 75,704 Provisions 788 5,068,075 65,094 Recoveries - - - Write-offs - - - Foreign currency translation adjustment (284,565) (3,186) 2,153 Ending balance 4,924,063 5,207,840 142,951 NOTE 5 – INVENTORIES Inventories at December 31, 2015 and 2014 consisted of the following: December 31, 2015 December 31, 2014 USD USD Raw materials 57,418,230 52,010,104 Work-in-process 27,401,062 22,128,405 Finished goods 41,576,020 27,166,423 Total 126,395,312 101,304,932 Raw materials mainly comprised of the human blood plasma collected from the Company’s plasma stations. Work-in-process represented the intermediateproducts in the process of production. Finished goods mainly comprised plasma products. Provisions to write-down the carrying amount of obsoleteinventory to its estimated net realizable value amounted to $76,587, $324,584 and nil for the years ended December 31, 2015, 2014 and 2013, respectively,and were recorded as cost of sales in the consolidated statements of comprehensive income. F-14 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 6 – OTHER RECEIVABLES IN RESPECT OF AN EMPLOYEE HOUSING DEVELOPMENT PROJECT In 2009, 107 employees, or the Employee-participants, of Shandong Taibang entered into agreements, or the Housing Project Agreements, with a real estatedeveloper regarding a housing development project, pursuant to which the developer agreed to develop and deliver residential units to the Employee-participants by the end of 2011 and the Employee-participants paid the developer deposits equal to 80% of the purchase prices of the residential units. Toassist with their deposit payment, Shandong Taibang entered into separate agreements, or the Financial Assistance Agreements, with the Employee-participants and provided them with advances of up to 50% of the purchase prices of the residential units. These advances were to be repaid by deductionsfrom the Employee-participants’ salaries. In addition, Shandong Taibang also entered into a purchase agreement with the developer to purchase additionalunits in the development project and made a deposit of RMB3,823,200 (approximately $622,799). However, the developer failed to deliver the residentialunits and is unlikely to be able to perform the Housing Project Agreements. In August 2014, the Company entered into agreements, or the Advance PaymentAgreements, with the Employee-participants, pursuant to which the Company made advance payments to the Employee-participants equal to the depositsthat the Employee-participants had paid the developer pursuant to the Housing Project Agreements and refunded them the deductions previously made fromtheir salaries pursuant to the Financial Assistance Agreements together with accrued interest totaling RMB27,071,684 (approximately $4,409,977). InNovember 2014, Shandong Taibang entered into supplemental agreements to the Advance Payment Agreements, or the Supplemental Agreements, with theEmployee-participants, pursuant to which the Employee-participants transferred and assigned to Shandong Taibang their rights under the Housing ProjectAgreements, including their rights to pursue legal actions against and recover damages from the developer, and in return, Shandong Taibang waived its rightto claim the advance payments and the refunds of the deductions under the Advance Payment Agreements. During the year ended December 31, 2014, theCompany made a full provision of $5,068,075 in the consolidated financial statements for all the receivables in respect of this employee housingdevelopment project (see Note 4), including the deposits paid to the developer, the total advance payments and refunds made under this employee housingdevelopment project, as well as the related fees and expenses, because it became probable that these receivables may not be recoverable after all legal meansof collection were exhausted. NOTE 7 – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31, 2015 and 2014 consisted of the following: December 31, 2015 December 31, 2014 USD USD Buildings 31,505,133 32,375,433 Machinery and equipment 54,640,502 58,946,498 Furniture, fixtures, office equipment and vehicles 7,859,951 8,230,842 Total property, plant and equipment, gross 94,005,586 99,552,773 Accumulated depreciation (31,521,859) (30,779,714)Total property, plant and equipment, net 62,483,727 68,773,059 Construction in progress 26,115,927 10,237,610 Prepayment for property, plant and equipment 16,764,597 1,220,219 Property, plant and equipment, net 105,364,251 80,230,888 F-15 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $8,179,376, $6,989,222 and $6,096,650, respectively. No interestexpenses were capitalized into construction in progress for the years ended December 31, 2015, 2014 and 2013. NOTE 8 – DEPOSITS RELATED TO LAND USE RIGHTS In 2012, Guizhou Taibang made a refundable payment of RMB83,400,000 (approximately $12,843,600) to the local government in connection with thepublic 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 $2,002,000) and RMB 10,000,000 (approximately $1,540,000) 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. The remaining deposit is expected to be refundedby the end of 2016. NOTE 9 – RESTRICTED CASH DEPOSITS In February 2014, the Company made time deposits of RMB246,500,000 (approximately $37,961,000) and RMB194,600,000 (approximately $29,968,400)with CMB BJ Branch as a security for a 24-month $40,000,000 loan and an 18-month $30,000,000 loan respectively lent by CMB NY Branch (see Note 12).The two bank loans were repaid in June 2015 and time deposit of RMB194,600,000 (approximately $29,968,400) matured in August 2015. In August 2014, the Company made a time deposit of RMB196,300,000 (approximately $30,230,200) with CMB BJ Branch as a security for a 6-monthRMB194,000,000 (approximately $29,876,000) loan lent by CMB BJ Branch (see Note 12). In February 2015, the Company repaid the loan and the timedeposit matured accordingly. NOTE 10 – EQUITY METHOD INVESTMENT The Company’s equity method investment as of December 31, 2015 and 2014 represented 35% equity interest investment in Xi’an Huitian Blood ProductsCo., Ltd. (“Huitian”). In October 2008, Shandong Taibang entered into an equity purchase agreement with one of the equity owners of Huitian (“Seller”) to acquire 35% equityinterest in Huitian. In connection with this transaction, in October 2008, Taibang Biological Limited (“Taibang Biological”) entered into an entrustagreement (the “Entrust Agreement”) with Shandong Taibang and the noncontrolling interest holder of Shandong Taibang, pursuant to which, TaibangBiological would pay the cash consideration, including interest, of $6,502,901 (or RMB44,327,887) to the Seller, and would bear the risks and benefits as a35% equity owner in Huitian. In addition, Taibang Biological would pay Shandong Taibang RMB120,000 (approximately $19,548) per year ascompensation for the administrative costs of Shandong Taibang’s holding of the 35% equity interest in Huitian on behalf of Taibang Biological. Suchamount paid and received is eliminated upon consolidation. Taibang Biological agreed to indemnify the noncontrolling interest holder of ShandongTaibang for any loss arising from the Entrust Agreement and has pledged the Company’s equity interest in Shandong Taibang as collateral against such loss. The excess of carrying amount over the Company’s share of net assets of equity method investees, which represented goodwill, is $1,260,243 and $1,333,075at December 31, 2015 and 2014, respectively. The equity method goodwill is not amortized; however, the investment is reviewed for impairment. Huitiancontributed its land use right to its subsidiary as capital in 2013 and disposed the subsidiary in 2014, recognizing a gain of RMB116.7 million(approximately $19.0 million) for the year ended December 31, 2014, which caused the Company’s equity income in Huitian increased by $6.7 millionaccordingly. F-16 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 11 –LOAN RECEIVABLE In August 2015, the Company entered into a cooperation agreement with Xinjiang Deyuan and the controlling shareholder of Xinjiang Deyuan. Pursuant tothe agreement, Guizhou Taibang agreed to provide Xinjiang Deyuan with interest-bearing loans at an interest rate of 6% per annum with an aggregateprincipal amount of RMB300,000,000 (approximately $46,200,000). The loans are due July 31, 2018 and secured by a pledge of Deyuan Shareholder’s58.02% 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 $39,834,173) was lent to Xinjiang Deyuan and the remaining RMB41,336,539 (approximately $6,365,827) will be lentupon Xinjiang Deyuan’s request. Interest income of $496,170 was accrued by Guizhou Taibang for the year ended December 31, 2015. NOTE 12 – BANK LOANS (a) Current The Company’s bank loans at December 31, 2015 and 2014 consisted of the following: Maturity Annual December 31, December 31, Loans date interest rate 2015 2014 USD USD Short-term bank loan, secured February 12, 2015 5.04% - 31,602,600 Current portion of long-term bank loans August 11, 2015 See note(b) - 26,300,000 Total - 57,902,600 In August 2014, the Company entered into a credit facility agreement with CMB BJ Branch to finance the acquisition of additional equity interest inGuizhou Taibang (see Note 24). Pursuant to the facility agreement, the Company obtained a 6-month RMB194,000,000 (approximately $29,876,000) loanfrom CMB BJ Branch secured by a time deposit of RMB196,300,000 (approximately $30,230,200). The Company repaid the loan in February 2015. Interest expense amounted to $1,727,335, $1,178,626 and $347,602 for the years ended December 31, 2015, 2014 and 2013, respectively. The Company did not have any revolving line of credit as of December 31, 2015 and 2014. (b) Non-current December 31,2015 December 31,2014 USD USD Long-term bank loans - 66,300,000 Less: current portion of long-term bank loans - 26,300,000 Total non-current bank loans - 40,000,000 F-17 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company entered into a credit facility agreement with CMB NY Branch in February, 2014 to finance the share repurchase (see Note 17). Pursuant to thefacility agreement, CMB NY Branch lent to the Company a 24-month $40,000,000 loan and an 18-month $30,000,000 loan, secured by time deposits ofRMB246,500,000 (approximately $37,961,000) and RMB194,600,000 (approximately $29,968,400), respectively, held at CMB BJ Branch. Both loans bearan interest rate of 3-month LIBOR plus 1.3% per annum and a facility fee of 1.2% per annum. In July 2014, the Company repaid $3,700,000 out of the 18-month $30,000,000 loan. In June 2015, the Company fully repaid these two bank loans. NOTE 13 – OTHER PAYABLES AND ACCRUED EXPENSES Other payables and accrued expenses at December 31, 2015 and 2014 consisted of the following: December 31, 2015 December 31, 2014 USD USD Payables to potential investors (1) 9,550,588 9,756,023 Payable to Guizhou Eakan Investing Corp. (2) 2,242,240 2,371,824 Payable to Guizhou Jie’an Company (3) 1,565,052 1,599,025 Salaries and bonuses payable 13,520,721 10,591,524 Accruals for selling commission and promotion fee 2,360,933 4,288,089 Dividends payable to noncontrolling interest 5,309,920 5,616,792 Payables for construction work 7,257,489 3,595,093 Other tax payables 3,855,405 3,878,983 Advance from customers 1,934,321 945,678 Deposits received 3,615,143 1,019,172 Others 6,250,751 6,030,554 Total 57,462,563 49,692,757 (1)The payables to potential investors comprise deposits received from potential investors of $6,123,040 and $6,476,904 as of December 31, 2015 and2014, respectively, and related interest plus penalty on these deposits totaling $3,427,548 and $3,279,119 as of December 31, 2015 and 2014,respectively. In 2007, Guizhou Taibang received an aggregate amount of RMB50,960,000 (approximately $7,847,840) from certain potential investors in connectionwith their subscription to purchase shares in Guizhou Taibang. In 2010, the Company refunded RMB11,200,000 (approximately $1,724,800) to one ofthe potential investors. According to the final judgment of the PRC Supreme Court, both the rights of these potential investors as shareholders ofGuizhou Taibang and their claims for the related dividend distribution have been denied in 2013. (See Note 20) (2)Guizhou Taibang has payables to Guizhou Eakan Investing Corp., amounting to approximately $2,242,240 and $2,371,824 as of December 31, 2015and 2014, respectively. The Company borrowed this interest free advance for working capital purpose for Guizhou Taibang. The balance is due ondemand. (3)Guizhou Taibang has payables to Jie’an, a noncontrolling interest shareholder of Guizhou Taibang, amounting to approximately $1,565,052 and$1,599,025 as of December 31, 2015 and 2014, respectively. In 2007, Guizhou Taibang received additional contributions from Jie’an of RMB6,480,000(approximately $997,920) to subscribe for 1,800,000 shares in Guizhou Taibang. However, due to a legal dispute among shareholders over raisingadditional capital as discussed in the legal proceeding section (see Note 20), the contribution is subject to be returned to Jie’an. F-18 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 14 – INCOME TAX The Company and each of its subsidiaries file separate income tax returns. The United States of America The Company is incorporated in the State of Delaware in the U.S., and is subject to U.S. federal corporate income tax at gradual rates of up to 35%. British Virgin Islands Taibang Biological is incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands (BVI), Taibang Biological is not subjectto tax on income or capital gains. In addition, upon payments of dividends by Taibang Biological, no British Virgin Islands withholding tax is imposed. Hong Kong Taibang Holdings (Hong Kong) Limited (“Taibang Holdings”, formerly known as “Logic Holdings (Hong Kong) Limited”) is incorporated in Hong Kongand is subject to Hong Kong’s profits tax rate of 16.5% for the years ended December 31, 2015, 2014 and 2013. Taibang Holdings did not earn any incomethat was derived in Hong Kong for the years ended December 31, 2015, 2014 and 2013. The payments of dividends by Hong Kong companies are not subjectto any Hong Kong withholding tax. PRC The PRC’s statutory income tax rate is 25%. The Company’s PRC subsidiaries are subject to income tax at 25% unless otherwise specified. On February 12, 2009, Shandong Taibang received the High and New Technology Enterprise certificate from the Shandong provincial government. Thiscertificate entitled Shandong Taibang to pay income taxes at a 15% preferential income tax rate for a period of three years from 2008 to 2010. On October 31,2011, Shandong Taibang obtained a notice from the Shandong provincial government that the High and New Technology Enterprise qualification has beenrenewed for an additional three years from 2011 to 2013. In October 2014, Shandong Taibang obtained a notice from the Shandong provincial governmentthat granted it the High and New Technology Enterprise certificate. This certificate entitled Shandong Taibang to enjoy a preferential income tax rate of 15%for a period of three years from 2014 to 2016. According to CaiShui [2011] No. 58 dated July 27, 2011, Guizhou Taibang, being a qualified enterprise located in the western region of the PRC, enjoys apreferential income tax rate of 15% effective retroactively from January 1, 2011 to December 31, 2020. F-19 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The components of earnings (losses) before income tax expense by jurisdictions are as follows: For the Years Ended December 31, December 31, December 31, 2015 2014 2013 USD USD USD PRC, excluding Hong Kong 147,580,488 122,116,071 98,401,673 U.S. (11,711,102) (8,032,150) (7,855,555)BVI (1,336,183) 8,625,859 2,116,243 Hong Kong 565,228 42,381 (260,996)Total 135,098,431 122,752,161 92,401,365 Income tax expense for the years ended December 31, 2015, 2014 and 2013 represents current income tax expense and deferred tax (benefit) expense: For the Years Ended December 31, December 31, December 31, 2015 2014 2013 USD USD USD Current income tax expense 21,163,258 23,155,637 15,427,669 Deferred tax (benefit) expense (170,345) 3,483,890 112,632 20,992,913 26,639,527 15,540,301 The effective income tax rate based on income tax expense and earnings before income taxes reported in the consolidated statements of comprehensiveincome differs from the PRC statutory income tax rate of 25% due to the following: For the Years Ended December 31, December 31, December 31, 2015 2014 2013 (in percentage to earnings before income tax expense) PRC statutory income tax rate 25.0% 25.0% 25.0%Non-deductible expenses: Share-based compensation 1.3% 0.5% 0.9%Others 0.1% 0.5% 0.7%Tax rate differential - (2.2)% (1.0)%Effect of PRC preferential tax rate (10.5)% (9.7)% (12.7)%Bonus deduction on research and development expenses (1.5)% (1.4)% (1.4)%Change in valuation allowance 1.3% (0.7)% 1.7%PRC dividend withholding tax - 7.3% 2.8%Tax effect of equity method investment (0.2)% 2.4% 0.8%Effective income tax rate 15.5% 21.7% 16.8% The PRC tax rate has been used because the majority of the Company’s consolidated pre-tax earnings arise in the PRC. F-20 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. As of December 31, 2015 and 2014, significant temporary differences between the tax basis and financial statement basis of assets and liabilities that gaverise to deferred taxes were principally related to the following: December 31, 2015 December 31, 2014 USD USD Deferred tax assets arising from: -Accrued expenses 3,225,045 3,345,926 -Tax loss carryforwards 8,669,632 10,401,398 Gross deferred tax assets 11,894,677 13,747,324 Less: valuation allowance (8,160,611) (6,661,139)Net deferred tax assets 3,734,066 7,086,185 Deferred tax liabilities arising from: - Intangible assets (314,109) (439,116)- Equity method investment (509,021) (3,740,259)- Dividend withholding tax (7,351,023) (7,351,023)Deferred tax liabilities (8,174,153) (11,530,398) Classification on consolidated balance sheets: Deferred tax assets – current, net (included in prepayments and other current assets) 3,225,045 3,345,926 Deferred tax liabilities - non-current, net (included in other liabilities) (7,665,132) (7,790,139) In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assetswill not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in whichthose temporary differences become deductible and tax loss carryforwards are utilized. Management considers the scheduled reversal of deferred taxliabilities (including the impact of available carryforwards periods), projected future taxable income, and tax planning strategies in making this assessment. The deferred tax assets of $8,669,632 for tax loss carry forwards as of December 31, 2015, of which $6,560,170 and $2,109,462 relate to tax losscarryforwards of certain PRC subsidiaries and CBP, respectively. For PRC income tax purposes, certain of the Company's PRC subsidiaries had tax losscarryforwards of $26,240,681, of which $4,911,567, $6,754,594, $5,050,711, $5,079,935 and $4,443,874 would expire by 2016, 2017, 2018, 2019 and 2020,respectively, if unused. For United States federal income tax purposes, CBP had tax loss carryforwards of approximately $6,204,299, of which $162,235,$3,382,154, $978,837, $1,296,319 and $384,754 would expire by 2030, 2031, 2032, 2033 and 2034, respectively, if unused. In view of their cumulativelosses positions, management determined it is more likely than not that deferred tax assets of these PRC subsidiaries will not be realized, and therefore fullvaluation allowances of $6,560,170 and $6,051,100 were provided as of December 31, 2015 and 2014, respectively. For deferred tax assets of CBP,management determined it is more likely than not that some portion of the deferred tax assets of CBP will not be realized, and therefore valuation allowancesof $1,600,441 and $610,039 were provided as of December 31, 2015 and 2014, respectively. Management believes it is more likely than not that theCompany will realize the benefits of the deferred tax assets, net of the valuation allowances, as of December 31, 2015 and December 31, 2014. F-21 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following table presents the movement of the valuation allowance for deferred tax assets for the years ended December 31, 2015, 2014 and 2013: For the Years Ended December 31, 2015 December 31, 2014 December 31, 2013 USD USD USD Beginning balance 6,661,139 7,558,590 5,887,981 Addition (deduction) during the year 1,703,771 (885,253) 1,588,875 Foreign currency translation adjustment (204,299) (12,198) 81,734 Ending balance 8,160,611 6,661,139 7,558,590 According to the prevailing PRC income tax law and relevant regulations, dividends relating to earnings accumulated beginning on January 1, 2008 that arereceived by non-PRC-resident enterprises from PRC-resident enterprises are subject to withholding tax at 10%, unless reduced by tax treaties or similararrangement. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Further, dividendsreceived by the Company from its overseas subsidiaries are subject to the U.S. federal income tax at 34%, less any qualified foreign tax credits. Based on thedividend policy the Company has provided the deferred tax liabilities of $7,351,023 on undistributed earnings of $74 million, approximately 50% ofShandong Taibang’s total undistributed earnings at December 31, 2014. Due to the Company’s plan and intention of reinvesting its earnings in its PRCbusiness, the Company has not provided for the related deferred tax liabilities on the remaining undistributed earnings of the PRC subsidiaries totaling $283million as of December 31, 2015. As of January 1, 2013 and for each of the years ended December 31, 2013, 2014 and 2015, the Company and its subsidiaries did not have any unrecognizedtax benefits, and therefore no interest or penalties related to unrecognized tax benefits were accrued. The Company does not expect that the amount ofunrecognized tax benefits will change significantly within the next 12 months. The Company and each of its PRC subsidiaries file income tax returns in the United States and the PRC, respectively. The Company is subject to U.S. federalincome tax examination by tax authorities for tax years beginning in 2007. According to the PRC Tax Administration and Collection Law, the statute oflimitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute oflimitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 (approximately $15,400). In thecase of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The PRC tax returns for theCompany’s PRC subsidiaries are open to examination by the PRC tax authorities for the tax years beginning in 2010. NOTE 15 – OPTIONS AND NONVESTED SHARES Options Effective May 9, 2008, the Board of Directors adopted the China Biologic Products, Inc. 2008 Equity Incentive Plan, (“the 2008 Plan”). The 2008 Planprovides for grants of stock options, stock appreciation rights, performance units, restricted stock, restricted stock units and performance shares. A total of fivemillion shares of the Company’s common stock may be issued pursuant to the 2008 Plan. The exercise price per share for the shares to be issued pursuant toan exercise of a stock option will be no less than the fair market value per share on the grant date, except that, in the case of an incentive stock option grantedto a person who holds more than 10% of the total combined voting power of all classes of the Company’s stock or any of its subsidiaries, the exercise pricewill be no less than 110% of the fair market value per share on the grant date. No awards may be granted under the 2008 Plan after May 9, 2018, except thatany award granted before then may extend beyond that date. All the options to be granted will have 10-year terms. F-22 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. For the year ended December 31, 2015 and 2014, no stock options to purchase common stock were granted to any directors or employees. For the year ended December 31, 2013, stock options to purchase an aggregate of 33,000 common stocks were granted to directors and employees at exerciseprices ranging from $4.00 to $12.26 which vested immediately. A summary of stock options activity for the years ended December 31, 2015, 2014 and 2013 is as follows: Weighted WeightedAverage AverageRemaining Number of Exercise Contractual Aggregate Options Price Term in years Intrinsic Value USD USD Outstanding as of January1, 2013 2,648,609 9.39 7.65 18,374,422 Granted 33,000 10.48 Exercised (648,379) 8.32 (10,923,644)Forfeited and expired (150,854) 6.78 Outstanding as of December 31, 2013 1,882,376 9.98 7.20 35,518,897 Granted - - Exercised (417,002) 9.26 (17,529,500)Forfeited and expired (32,920) 11.44 Outstanding as of December 31, 2014 1,432,454 10.16 6.53 81,753,119 Granted - - Exercised (780,557) 9.92 (68,089,712)Forfeited and expired - - Outstanding as of December 31, 2015 651,897 10.44 5.24 86,064,461 Vested and expected to vest as of December 31, 2015 651,897 10.44 5.24 86,064,461 Exercisable as of December 31, 2015 530,647 10.57 4.92 69,985,499 The weighted average option fair value of $8.37 per share or an aggregate of $276,250 on the date of grant during the year ended December 31, 2013, wasdetermined based on the Black-Scholes option pricing model using the following weighted average assumptions: For the Years Ended December 31, 2013 Expected volatility 104.00%Expected dividends yield 0%Expected term (in years) 5.38 Risk-free interest rate 0.72%Fair value of underlying common stock (per share) $10.48 The volatility of the Company’s common stock was estimated by management based on the historical volatility of the Company’s common stock. The riskfree interest rate was based on Treasury Constant Maturity Rates published by the U.S. Federal Reserve for periods applicable to the estimated term of theoptions. The expected dividend yield was based on the Company’s current and expected dividend policy. F-23 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. For the years ended December 31, 2015, 2014 and 2013, the Company recorded stock compensation expense of $1,117,994, $1,669,573 and $3,773,073,respectively, in general and administrative expenses. As of December 31, 2015, approximately $649,203 of stock compensation expense with respect to stock options is to be recognized over weighted averageperiod of approximately 0.67 years. Nonvested shares For the years ended December 31, 2015, 2014 and 2013, nonvested shares were granted to certain directors and employees (collectively, the “Participant”).Pursuant to the nonvested share grant agreements between the Company and the Participant, the Participant will have all the rights of a stockholder withrespect to the nonvested shares. The nonvested shares granted to directors generally vest in one or two years. The nonvested shares granted to employeesgenerally vest in four years. A summary of nonvested shares activity for the year ended December 31, 2015, 2014 and 2013 is as follow: Number of Grant date weighted nonvested shares average fair value USD Outstanding as of January 1, 2013 120,000 9.85 Granted 306,500 22.94 Vested (63,750) 9.85 Forfeited - - Outstanding as of December 31, 2013 362,750 20.91 Granted 299,000 51.88 Vested (107,125) 20.66 Forfeited (2,500) 9.85 Outstanding as of December 31, 2014 552,125 37.78 Granted 313,100 120.62 Vested (188,625) 34.78 Forfeited (7,500) 28.8 Outstanding as of December 31, 2015 669,100 77.49 For the years ended December 31, 2015, 2014 and 2013, the Company recorded stock compensation expense of $10,996,278, $3,726,698 and $1,277,723 ingeneral and administrative expenses, respectively. As of December 31, 2015, approximately $45,040,836 of stock compensation expense with respect to nonvested shares is to be recognized over weightedaverage period of approximately 2.64 years. NOTE 16 – STATUTORY RESERVES The Company’s PRC subsidiaries are required to allocate at least 10% of its after tax profits as determined under generally accepted accounting principal inthe PRC to its statutory surplus reserve until the reserve balance reaches 50% of respective registered capital. The accumulated balance of the statutoryreserve as of December 31, 2015 and 2014 was $34,160,154 and $32,137,551, respectively. NOTE 17 – SHARE REPURCHASE On January 27, 2014, the Company entered into a repurchase agreement with an individual shareholder, pursuant to which the Company repurchased2,500,000 shares of common stock for a consideration of $70,000,000. The transaction was completed on February 28, 2014. F-24 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On August 2, 2013, the Company entered into a repurchase agreement with an individual shareholder, pursuant to which the Company repurchased1,479,704 shares of common stock for a consideration of $29,594,080. The transaction was completed on August 8, 2013. NOTE 18 – 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 deposit, restricted cash deposits, accounts receivable, other receivables, short-term bank loans including current portion of long-term bank loans, accounts payable, other payables and accrued expenses) – The carrying amounts of theshort-term financial instruments approximate their fair values because of the short maturity of these instruments. • Loan receivable, restricted cash and cash deposits, excluding current portion – The carrying amounts of loan receivable, restricted cash and cash depositapproximate their fair value. The fair value is estimated using discounted cash flow analysis based on the Company’s incremental borrowing rates for similarborrowing. • Long-term bank loan excluding current portion– fair value is based on the amount of future cash flows associated with the long-term bank loan discountedat the Company’s current borrowing rate for similar debt instruments of comparable terms. The carrying value of the long-term bank loan approximate its fairvalue as the long-term bank loan carry variable interest rate which approximate rate currently offered by the Company’s bankers for similar debt instrumentsof comparable maturities. NOTE 19 – SALES The Company’s sales are primarily derived from the manufacture and sale of Human Albumin and Immunoglobulin products. The Company’s sales bysignificant types of product for the years ended December 31, 2015, 2014 and 2013 are as follows: For the Years Ended December 31,2015 December 31,2014 December 31,2013 USD USD USD Human Albumin 111,422,258 95,547,952 89,671,619 Immunoglobulin products: Human Immunoglobulin for Intravenous Injection 125,136,104 98,389,729 77,341,616 Other Immunoglobulin products 22,518,554 19,736,027 19,682,927 Placenta Polypeptide 27,194,800 24,029,706 12,150,539 Others 10,186,186 5,548,244 4,510,155 Total 296,457,902 243,251,658 203,356,856 F-25 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 20 – COMMITMENTS AND CONTINGENCIES Commitments As of December 31, 2015, commitments outstanding for the purchase of property, plant and equipment approximated $30.3 million. As of December 31, 2015, commitments outstanding for the purchase of plasma from 2016 to 2018 approximated $85.2 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 theissuance of an additional 20,000,000 shares of Guizhou Taibang. The plan required all existing Guizhou Taibang shareholders to waive their rights of firstrefusal to subscribe for the additional shares. The remaining 9% minority shareholder of Guizhou Taibang’s shares, Guizhou Jie’an Company, or Jie’an, didnot support the plan and did not waive its right of first refusal. In May 2007, Guizhou Taibang signed an Equity Purchase Agreement with certain allegedstrategic investors (who concealed their background), pursuant to which such investors agreed to invest an aggregate of RMB50,960,000 (approximately$7,847,840) in exchange for 21.4% of Guizhou Taibang’s equity interests. Such Equity Purchase Agreement was not approved or ratified by over two-thirdssupermajority of Guizhou Taibang’s shareholders, which approval or ratification is required under the PRC Company Law. At the same time, as an existingshareholder, 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 Taibangreceived RMB50,960,000 (approximately $7,847,840) from the investors and RMB6,480,000 (approximately $997,920) 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 underthe Equity Purchase Agreement. The trial court denied Jie’an’s request, and the PRC Supreme Court ultimately sustained the original ruling in May 2009 anddenied 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 localadministration of industry and commerce, or AIC. Guizhou Taibang’s board of directors withheld its required ratification of Jie’an’s request, pending theoutcome 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 thelocal 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 $2,126,616) associated with these sharesand the related interest expenses to Jie’an. Guizhou Taibang and Jie’an subsequently filed a cross-appeal. In December 2014, the appellate court ruled infavor 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 ofRMB18,339,227 (approximately $2,824,241) associated with these shares plus the related interest expenses to Jie’an. In the first half of 2015, GuizhouTaibang paid an aggregate of RMB22,639,227 (approximately $3,486,441) to the trial court held in escrow pending further appeal of this case. GuizhouTaibang appealed to the High Court of Guizhou in June 2015 which overruled the decision of the appellate court and remanded the case to the trial court forretrial in September 2015. F-26 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In November 2013, Guizhou Taibang held a shareholders meeting and the shareholders passed resolutions, or the November 2013 Resolutions, that, interalia, (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’ansubscribe 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 againstGuizhou Taibang in December 2013, requesting that the court declare the November 2013 Resolutions void. Both the trial court and the appellate courtdenied 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 existingshareholders. Guizhou Taibang subsequently updated the registration with the local AIC regarding the additional capital injections in August 2014. InSeptember 2014, Jie’an and another minority shareholder of Guizhou Taibang filed a lawsuit against Guizhou Taibang, requesting that the court declare boththe 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. If the pending cases with Jie’an are ultimately ruled in Jie’an’s favor, the ownership interest in Guizhou Taibang may be diluted to 80% and Jie’an may beentitled to receive accumulated dividends of RMB18,339,227 (approximately $2,824,241) , being its claimed share of Guizhou Taibang’s accumulateddividend distributions associated with the 1.8 million shares, and the related interest expenses from Guizhou Taibang. As of December 31, 2015, GuizhouTaibang had maintained, on its balance sheet, payables to Jie’an in the amounts of RMB5,040,000 (approximately $776,160) as received funds in respect ofthe 1.8 million shares in dispute, RMB1,440,000 (approximately $221,760) for the over-paid subscription price paid by Jie’an and RMB3,682,673(approximately $567,132) for the accrued interest. As these cases are closely interlinked to the outcome of the disputes with certain individual investordescribed below, based on its PRC litigation counsel’s assessment, the Company does not expect Jie’an to prevail. Dispute with Certain Individual Investors 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 byGuizhou Taibang’s shareholders, such investors’ equity ownership in Guizhou Taibang and the related increase in registered capital of Guizhou Taibanghave never been registered with the local AIC. In January 2010, one individual among such investors brought a lawsuit against Guizhou Taibang requestingto register his 14.35% ownership interest in Guizhou Taibang with the local AIC and seeking the distribution of his share of Guizhou Taibang’s dividendsdeclared since 2007. F-27 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In October 2010, the trial court denied such individual investor’s right as shareholders of Guizhou Taibang and his entitlement to share the dividends, whichruling was reaffirmed after a re-trial by the same trial court in December 2012. After such ruling, Guizhou Taibang attempted to return the originally receivedfund of RMB34,160,000 (approximately $5,260,640) to such investor by wiring the fund back to his bank account but was unable to do so due to the closureof his bank account. Another investor, however, accepted the returned fund of RMB11,200,000 (approximately $1,724,800) from Guizhou Taibang inNovember 2010. In 2013, the same individual investor appealed the case to the PRC Supreme Court, which also denied his claims for shareholder status inGuizhou Taibang and the related dividend distribution and accrued interest in September 2013. Such investor subsequently attempted to seek a re-trial bythe PRC Supreme Court, which request was denied by the PRC Supreme Court in January 2014. He then applied to the PRC Supreme Procuratorate to requestfor 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 onhis behalf. In July 2015, the PRC Supreme Procuratorate rejected his request for review. As of December 31, 2015, Guizhou Taibang had maintained, on its balance sheet, payables to the investors of RMB34,160,000 (approximately $5,260,640)as originally received funds from such individual investor in respect of the shares in dispute, RMB17,677,791 (approximately $2,722,380) for the interestexpenses, and RMB341,600 (approximately $52,606) for the 1% penalty imposed by the Equity Purchase Agreement for any breach in the event thatGuizhou Taibang is required to return the original investment amount to such investor. NOTE 21 – NET INCOME PER SHARE The following table sets forth the computation of basic and diluted net income per share of common stock for the periods indicated: For the Years Ended December 31, December 31, December 31, 2015 2014 2013 USD USD USD Net income attributable to China Biologic Products, Inc. 89,042,703 70,916,840 54,601,551 Earnings allocated to participating nonvested shares (2,070,762) (1,210,895) (456,261)Net income allocated to common stockholders used in computing basic and diluted net incomeper common stock 86,971,941 69,705,945 54,145,290 Weighted average shares used in computing basic net income per common stock 25,599,153 24,427,196 26,410,819 Diluted effect of stock option 968,213 1,257,868 1,161,292 Weighted average shares used in computing diluted net income per common stock 26,567,366 25,685,064 27,572,111 Net income per common stock – basic 3.40 2.85 2.05 Net income per common stock – diluted 3.27 2.71 1.96 During the year ended December 31, 2015, 2014 and 2013, no option was antidilutive or excluded from the calculation of diluted net income per commonstock. Further, rights issued pursuant to the stockholder rights plan (see Note 25) were excluded from the calculation of diluted net income per common stocksince they were antidilutive. F-28 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 22 – CHINA BIOLOGIC PRODUCTS, INC. (PARENT COMPANY) The following represents condensed unconsolidated financial information of the Parent Company only: Condensed Balance Sheets: December 31, 2015 December 31, 2014 USD USD Cash 13,939,319 2,651,088 Prepayments and prepaid expenses 86,404 89,580 Property, plant and equipment, net 211 368 Investment in and amounts due from subsidiaries 372,035,937 279,497,751 Total Assets 386,061,871 282,238,787 Other payables and accrued expenses 3,718,747 3,851,760 Long-term loan, including current portion - 66,300,000 Total Liabilities 3,718,747 70,151,760 Total Equity 382,343,124 212,087,027 Total Liabilities and Equity 386,061,871 282,238,787 Condensed Statements of Comprehensive Income: For the Years Ended December 31, 2015 December 31, 2014 December 31, 2013 USD USD USD Equity in income of subsidiaries 100,753,805 78,948,990 62,457,106 General and administrative expenses (10,693,991) (6,008,852) (7,460,763)Other expenses, net (1,017,111) (2,023,298) (394,792)Earnings before income tax expense 89,042,703 70,916,840 54,601,551 Income tax expense - - - Net Income 89,042,703 70,916,840 54,601,551 Condensed Statements of Cash Flows: For the Years Ended December 31, 2015 December 31, 2014 December 31, 2013 USD USD USD Net cash (used in) provided by operating activities (3,904,038) (444,755) 197,001 Net cash used in investing activities - - - Net cash provided by financing activities 15,192,269 2,416,821 405,920 Net increase in cash 11,288,231 1,972,066 602,921 Cash at beginning of year 2,651,088 679,022 76,101 Cash at end of year 13,939,319 2,651,088 679,022 F-29 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NOTE 23 – FOLLOW-ON OFFERING OF COMMON STOCK On June 15, 2015, the Company completed a follow-on offering of 3,450,000 shares of common stock at a price of $105.00 per share, less the underwritingdiscounts and commissions and offering expenses. In this June 2015 follow-on offering, the Company sold 805,000 shares (including 105,000 shares soldpursuant to the exercise by the underwriters of their option to purchase additional shares from the Company) and certain selling stockholders sold 2,645,000shares (including 345,000 shares sold pursuant to the exercise by the underwriters of their option to purchase additional shares from such sellingstockholders). The Company raised net proceeds of approximately $80.6 million from this offering, after deducting the underwriting discounts andcommissions and offering expenses payable by the Company. The Company did not receive any proceeds from the sale of the shares by the sellingstockholders. On July 2, 2014, the Company completed a follow-on offering of 1,782,500 shares of common stock at a price of $38.00 per share, less the underwritingdiscounts and commissions and offering expenses. In this July 2014 follow-on offering, the Company sold 920,000 shares (including 120,000 shares soldpursuant to the exercise by the underwriters of their option to purchase additional shares from the Company) and a selling stockholder sold 862,500 shares(including 112,500 shares sold pursuant to the exercise by the underwriters of their option to purchase additional shares from such selling stockholder). TheCompany raised net proceeds of approximately $33.2 million from this offering, after deducting the underwriting discounts and commissions and offeringexpenses payable by the Company. The Company did not receive any proceeds from the sale of the shares by the selling stockholder. NOTE 24 – ACQUISITION OF ADDITIONAL EQUITY INTEREST IN GUIZHOU TAIBANG On August 25, 2014, Guiyang Dalin Biotechnology ("Guiyang Dalin"), a wholly-owned subsidiary of the Company, entered into an agreement to acquire anadditional 19.84% equity interest in Guizhou Taibang from Guizhou Eakan, a non-controlling interest shareholder of Guizhou Taibang. The totalconsideration of the transaction was RMB535 million (approximately $82.4 million). The Company completed the acquisition on September 4, 2014 andincreased its equity interest in Guizhou Taibang to 76.23%. NOTE 25 – STOCKHOLDER RIGHTS PLAN On January 8, 2015, the Board of Directors (the “Board”) adopted a stockholder rights plan (the “Rights Agreement”). Pursuant to the Rights Agreement, theBoard of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of the common stock, par value$0.0001 per share (the “Common Shares”), of the Company to stockholders of record at the close of business on January 20, 2015 (the “Record Date”). EachRight entitles the registered holder to purchase from the Company one one-thousandth of a share of the Series A Participating Preferred Stock, par value$0.0001 per share (the “Preferred Shares”), of the Company at an exercise price of $325.00 per one one-thousandth of a Preferred Share, subject to adjustment(the “Exercise Price”). However, the Rights are not immediately exercisable and will become exercisable only upon the occurrence of certain events. Inparticular, after January 8, 2015: lif a person or group acquires 15% or more of the Company’s Common Shares (including through derivatives), then the Rights will become exercisableand each Right will entitle its holder (except the acquiring person or group) to purchase, at the Exercise Price, a number of the Company’s CommonShares having a then-current market value of twice the Exercise Price; lif after a person or group acquires 15% or more of the Company’s Common Shares, the Company merges into another company, an acquiring entitymerges into the Company or the Company sells or transfers more than 50% of its assets, cash flow or earning power, then each Right will entitle itsholder (except the acquiring person or group) to purchase, for the Exercise Price, a number of shares of common stock of the person engaging in thetransaction having a then-current market value of twice the Exercise Price; or F-30 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. lafter a person or group acquires 15% or more of the Company’s Common Shares, the Board may, at its option, exchange the Rights (except for Rightsheld by the acquiring person or group), in whole or in part, for Common Shares at an exchange ratio of one Common Share per Right (subject toadjustment). The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing asignificant penalty upon any person or group that acquires 15% or more of the Common Shares without the approval of the Board after January 8, 2015. As aresult, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a merger, tender or exchangeoffer or other business combination involving the Company that is not approved by the Board. However, neither the Rights Agreement nor the Rights shouldinterfere with any merger, tender or exchange offer or other business combination approved by the Board. The Board of Directors may redeem the rights for$0.001 per right at any time before an event that causes the rights to become exercisable. If not redeemed, the right will expire on January 8, 2017. The Boardhad previously adopted a similar preferred shares rights agreement on November 19, 2012, which expired on November 20, 2014. F-31 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT INDEX Exhibit No. Description2.1 Share Exchange Agreement between the registrant, Logic Express Limited and the selling stockholders signatory thereto, dated July 18,2006 (incorporated by reference to Exhibit 2 of the registration statement on Form SB-2 filed by the registrant on September 5, 2007) 3.1 Second Amended and Restated Certificate of Incorporation of China Biologic Products, Inc. (incorporated by reference to Exhibit 3.1 ofthe quarterly report on Form 10-Q filed by the registrant on August 5, 2014) 3.2 Third Amended and Restated Bylaws of China Biologic Products, Inc. (incorporated by reference to Exhibit 3.2 of the quarterly report onForm 10-Q filed by the registrant on August 5, 2014) 4.1 Form of Registration Rights Agreement, dated June 5, 2009 (incorporated by reference to Exhibit 4.1 of the current report on Form 8-Kfiled by the registrant on June 5, 2009) 4.2 Form of 3.8% Convertible Senior Secured Note due 2011 (incorporated by reference to Exhibit 4.2 of the current report on Form 8-Kfiled by the registrant on June 5, 2009) 4.3 Form of Warrant (incorporated by reference to Exhibit 4.3 of the current report on Form 8-K filed by the registrant on June 5, 2009) 4.4 Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of China Biologic Products, Inc.(incorporated by reference to Exhibit 3.1 of the registration form on Form 8-A12B filed by the registrant on November 21, 2012) 4.5 Preferred Shares Rights Agreement, between the registrant and Securities Transfer Corporation, dated as of January 8, 2015 (incorporateby reference to Exhibit 4.1 of the current report on Form 8-K filed by the registrant on January 9, 2015) 10.1 China Biologic Products, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the current report on Form 8-Kfiled by the registrant on May 13, 2008) 10.2 Form of Stock Option Award Agreement of China Biologic Products, Inc. (incorporated by reference to Exhibit 10.5 of the current reporton Form 8-K filed by the registrant on May 13, 2008) 10.3 Form of Restricted Stock Award Agreement of China Biologic Products, Inc. (incorporated by reference to Exhibit 3.3 of the currentreport on Form 8-K filed by the registrant on August 6, 2011) 10.4 Group Secondment Agreement, dated October 28, 2002, between Shandong Taibang and the Shandong Institute (English Translation)(incorporated by reference to Exhibit 10.1 of the registration statement on Form SB-2/A filed by the registrant on December 3, 2007) 76 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.5 Amended and Restated Joint Venture Agreement, between Logic Express Limited and the Shandong Institute, dated as of March 12,2006 (English Translation) (incorporated by reference to Exhibit 10.2 of the registration statement on Form SB-2 filed by the registranton September 5, 2007) 10.6 Letter of Intent for Equity Transfer, between Logic Express Limited and the Shandong Institute, dated as of June 10, 2006 (EnglishTranslation) (incorporated by reference to Exhibit 10.3 of the registration statement on Form SB-2 filed by the registrant on September 5,2007) 10.7 Joint Venture and Cooperation Agreement between Mr. Fan Qingchun, Shandong Taibang and Shaanxi Power ConstructionCorporation, dated September 12, 2008 (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by theregistrant on October 16, 2008) 10.8 Agreement on Equity Transfer, Acquisition, Joint Venture and Cooperation, among Shandong Taibang, Shaanxi Power ConstructionCorporation and Mr. Fan Qingchun, dated September 12, 2008 (incorporated by reference to Exhibit 10.3 of the current report on Form8-K filed by the registrant on October 16, 2008) 10.9 (Shareholder) Agreement among Shandong Taibang, Logic Express Limited and Biological Institute dated September 12, 2008(incorporated by reference to Exhibit 10.4 of the current report on Form 8-K, filed by the registrant on October 16, 2008) 10.10 Equity Transfer Agreement, dated September 26, 2008, among Logic Express Limited, Chongqing Dalin Biologic Technologies Co.,Ltd. and certain shareholders of Chongqing Dalin Biologic Technologies Co., Ltd. (incorporated by reference to Exhibit 10.1 of thecurrent report on Form 8-K filed by the registrant on October 2, 2008) 10.11 Equity Transfer Agreement, between Shandong Taibang and Mr. Fan Qingchun, dated October 10, 2008 (incorporated by reference toExhibit 10.1 of the current report on Form 8-K filed by the registrant on October 16, 2008) 10.12 Supplemental Agreement, dated November 3, 2008, among Logic Express Limited, Fan Shaowen, as representative of the shareholders ofChongqing Dalin Biologic Technologies Co., Ltd. and Chongqing Dalin Biologic Technologies Co., Ltd. (English Translation)(incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the registrant on November 7, 2008) 10.13 Second Supplemental Agreement, dated November 14, 2008, among Logic Express Limited, Fan Shaowen as representative of theshareholders of Chongqing Dalin Biologic Technologies Co., Ltd. and Chongqing Dalin Biologic Technologies Co., Ltd. (EnglishTranslation) (incorporated by reference to exhibit 10.3 of the current report on Form 8-K filed by the registrant on November 20, 2008) 10.14 Amended Equity Transfer Agreement, dated December 12, 2008, among Logic Express Limited, Chongqing Dalin BiologicTechnologies Co., Ltd., and certain shareholders of Chongqing Dalin Biologic Technologies Co., Ltd. (English Translation)(incorporated by reference to exhibit 10.4 of the current report on Form 8-K filed by the registrant on December 18, 2008) 77 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.15 Equity Transfer and Entrustment Agreement, dated April 6, 2009, among Logic Express, Shandong Taibang and the Shandong Institute(English Translation) (incorporated by reference to Exhibit 10.6 of the current report on Form 8-K filed by the registrant on April 13,2009) 10.16 Asset Purchase Agreement, between Xia Jin An Tai Plasma Collection Co., Ltd. and Xia Jin County Plasma Collection Station, dated asof October 20, 2006 (English Translation) (incorporated by reference to Exhibit 10.15 of the registration statement on Form SB-2/A filedby the registrant on December 3, 2007) 10.17 Asset Purchase Agreement, between Liao Cheng An Tai Plasma Collection Co., Ltd. and Yang Gu County Plasma Collection Station,dated as of November 3, 2006 (English Translation) (incorporated by reference to Exhibit 10.16 of the registration statement on FormSB-2/A filed by the registrant on December 3, 2007) 10.18 Asset Purchase Agreement, between Qi He An Tai Plasma Collection Co., Ltd. and Qi He County Plasma Collection Station, dated as ofNovember 9, 2006 (English Translation) (incorporated by reference to Exhibit 10.14 of the registration statement on Form SB-2/A filedby the registrant on December 3, 2007) 10.19 Asset Purchase Agreement, between He Ze An Tai Plasma Collection Co., Ltd and Yun Cheng County Plasma Collection Station, datedas of December 15, 2006 (English Translation) (incorporated by reference to Exhibit 10.22 of the registration statement on Form SB-2/Afiled by the registrant on December 3, 2007) 10.20 Asset Purchase Agreement, between Zhang Qiu An Tai Plasma Collection Co., Ltd. and Zhang Qiu Plasma Collection Station, dated as ofDecember 31, 2006 (English Translation) (incorporated by reference to Exhibit 10.12 of the registration statement on Form SB-2/A filedby the registrant on December 3, 2007) 10.21 Asset Purchase Agreement, between Guang Xi Huan Jiang Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan AutonomousCounty Plasma Collection Station, dated as of April 24, 2007 (English Translation) (incorporated by reference to Exhibit 10.13 of theregistration statement on Form SB-2/A filed by the registrant on December 3, 2007) 10.22 Asset Purchase Agreement, between Fang Cheng Plasma Collection Co., Ltd. and Fang Cheng Plasma Company, dated as of April 30,2007 (English Translation) (incorporated by reference to Exhibit 10.21 of the registration statement on Form SB-2/A filed by theregistrant on December 3, 2007) 10.23 Asset Purchase Agreement, between Guang Xi Huan Jiang Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan AutonomousCounty Plasma Collection Station, dated as of August 5, 2007 (English Translation) (incorporated by reference to Exhibit 10.13 of theregistration statement on Form SB-2/A filed by the registrant on December 3, 2007) 10.24 Trademark Licensing Agreement, dated as of February 27, 2007 (English Translation) (incorporated by reference to Exhibit 10.17 of theregistration statement on Form SB-2/A filed by the registrant on December 3, 2007) 10.25 Loan Agreement, dated as of November 30, 2006, among Shandong Taibang and the Shandong Institute and Logic Express (EnglishTranslation) (incorporated by reference to Exhibit 10.18 of the registration statement on Form SB-2/A filed by the registrant onDecember 3, 2007) 78 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.26 Supplementary Agreement, dated as of September 1, 2007, among Shandong Taibang, the Shandong Institute and Logic Express Limited(English Translation) (incorporated by reference to Exhibit 10.19 of the registration statement on Form SB-2/A filed by the registrant onDecember 3, 2007) 10.27 Employment Agreement, between David (Xiaoying) Gao and the registrant, dated May 11, 2014 (incorporated by reference to Exhibit10.1 of the current report on Form 8-K filed by the registrant on May 15, 2014) 10.28 Form of Director’s Employment Agreement (incorporated by reference to Exhibit 10.8 of the registration statement on Form SB-2 filedby the registrant on September 5, 2007) 10.29 Form of Independent Director Agreement (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by theregistrant on July 30, 2008) 10.30 Form of Indemnity Agreement (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the registrant on July30, 2008) 10.31 Form of Guarantee and Pledge Agreement, dated June 10, 2009 (incorporated by reference to Exhibit 10.2 of the current report on Form8-K filed by the registrant on June 5, 2009). 10.32 Form of Indemnification Agreement, dated June 10, 2009 (incorporated by reference to Exhibit 10.3 of the current report on Form 8-Kfiled by the registrant on June 5, 2009). 10.33 Cooperation Agreement, among Guizhou Taibang, Xinjiang Deyuan and its controlling shareholder, dated August 28, 2015 (SummaryEnglish Translation) (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the registrant on September 2,2015) 10.34 Supplemental Agreement, between Guizhou Taibang and Xinjiang Deyuan, dated April 16, 2015 (Summary English Translation)(incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by the registrant on April 16, 2015) 10.35 Cooperation Agreement, between Guizhou Taibang and Xinjiang Deyuan, dated September 30, 2014 (Summary English Translation)(incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed by the registrant on April 16, 2015) 10.36 Registered Equity Purchase Agreement, between Guiyang Dalin Biotechnology Co., Ltd. and Guizhou Eakan Pharmaceutical Co., Ltd.,dated August 21, 2014 (Summary English Translation) (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filedby the registrant on August 25, 2014) 10.37 Equity Exchange Agreement, between Guiyang Dalin Biotechnology Co., Ltd. and Guizhou Eakan Pharmaceutical Co., Ltd., datedAugust 21, 2014 (Summary English Translation) (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed by theregistrant on August 25, 2014) 79 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.38 Unregistered Equity Purchase Agreement, between Guiyang Dalin Biotechnology Co., Ltd. and Guizhou Eakan Pharmaceutical Co.,Ltd., dated August 21, 2014 (Summary English Translation) (incorporated by reference to Exhibit 10.3 of the current report on Form 8-Kfiled by the registrant on August 25, 2014) 14 Code of Ethics (incorporated by reference to Exhibit 14 of the annual report on Form 10-KSB filed by the registrant on March 28, 2008) 21* Subsidiaries of the registrant 23.1* Consent of KPMG, an independent registered public accounting firm 31.1* Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101* Interactive data files pursuant to Rule 405 of Regulation S-T *Filed herewith. 80 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 21 CHINA BIOLOGIC PRODUCTS, INC.SUBSIDIARIES OF REGISTRANT The subsidiaries of China Biologic Products, Inc. are as follows: Jurisdiction of Name Incorporation or Organization Ownership InterestTaibang Biological Ltd. BVI 100.0%Taibang Holdings (Hong Kong) Limited HK 100.0%Taibang Biotech (Shandong) Co., Ltd. Shandong PRC 100.0%Taibang (Beijing) Pharmaceutical Research Institute Co., Ltd. Beijing PRC 100.0%Shandong Taibang Biological Products Co., Ltd. Shandong PRC 82.76%Qihe Antai Plasma Co., Ltd. Shandong PRC 82.76%Xiajin Antai Plasma Co., Ltd. Shandong PRC 82.76%Zhangqiu Antai Plasma Co., Ltd. Shandong PRC 82.76%Liaocheng Antai Plasma Co., Ltd. Shandong PRC 82.76%Yishui Taibang Plasma Co., Ltd. Shandong PRC 82.76%Heze Antai Plasma Co., Ltd. Shandong PRC 82.76%Ningyang Taibang Plasma Co., Ltd. Shandong PRC 82.76%Cao Xian Taibang Plasma Co., Ltd. Shandong PRC 82.76%Taibang Biologic Plasma Co., Ltd., Fangcheng District, Fangchenggang City Guangxi PRC 82.76%Huanjiang Taibang Plasma Co., Ltd. Guangxi PRC 82.76%Yuncheng Ziguang Biologic Technology Zone Co., Ltd. Shandong PRC 82.76%Zaozhuang Taibang Plasma Co., Ltd. Shandong PRC 82.76%Xinglong Xian Taibang Plasma Co., Ltd. Hebei PRC 82.76%Daming Xian Taibang Plasma Co., Ltd. Hebei PRC 82.76%Shandong Taibang Medical Co., Ltd. Shandong PRC 100.0%Guiyang Dalin Biologic Technologies Co., Ltd. Guizhou PRC 100.0%Guizhou Taibang Biological Products Co., Ltd. Guizhou PRC 81.81%Guizhou Qianfeng Renyuan Bio Material Co., Ltd. Guizhou PRC 81.81%Puding Xian Taibang Plasma Co., Ltd. Guizhou PRC 81.81%Huangping Xian Taibang Plasma Co., Ltd. Guizhou PRC 81.81%Danzhai Xian Qianfeng Plasma Co., Ltd. Guizhou PRC 81.81%Nayong Xian Qianfeng Plasma Co., Ltd. Guizhou PRC 81.81%Sansui Xian Qianfeng Plasma Co., Ltd. Guizhou PRC 81.81%Weining Xian Qianfeng Plasma Co., Ltd. Guizhou PRC 81.81%Zhenyuan Xian Qianfeng Plasma Co., Ltd. Guizhou PRC 81.81% Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 23.1 Consent of Independent Registered Public Accounting Firm The Board of DirectorsChina Biologic Products, Inc.: We consent to the incorporation by reference in the registration statement (No. 333-204761) on Form S-3 and the registration statement (No. 333-151263) onForm S-8 of China Biologic Products, Inc. of our reports dated February 25, 2016, with respect to the consolidated balance sheets of China Biologic Products,Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in equity and cash flowsfor each of the years in the three-year period ended December 31, 2015, and the effectiveness of internal control over financial reporting as of December 31,2015, which reports appear in the December 31, 2015 annual report on Form 10-K of China Biologic Products, Inc. /s/ KPMG Huazhen LLP Beijing, ChinaFebruary 25, 2016 Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1 CERTIFICATIONS I, David (Xiaoying) Gao, certify that: 1.I have reviewed this annual report on Form 10-K of China Biologic Products, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: February 25, 2016 /s/ David (Xiaoying) Gao David (Xiaoying) Gao Chief Executive Officer (Principal Executive Officer) Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 31.2 CERTIFICATIONS I, Ming Yang, certify that: 1.I have reviewed this annual report on Form 10-K of China Biologic Products, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: February 25, 2016 /s/ Ming Yang Ming Yang Chief Financial Officer (Principal Financial and Accounting Officer) Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, David (Xiaoying) Gao, the Chief Executive Officer of CHINA BIOLOGIC PRODUCTS, INC. (the “Company”), DOES HEREBYCERTIFY that: 1. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the “Report”), fully complies with the requirements ofSection 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. IN WITNESS WHEREOF, the undersigned has executed this statement this 25th day of February, 2016. /s/ David (Xiaoying) Gao David (Xiaoying) Gao Chief Executive Officer (Principal Executive Officer) A signed original of this written statement required by Section 906 has been provided to China Biologic Products, Inc. and will be retained by ChinaBiologic Products, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed forpurposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company,whether made before or after the date hereof, regardless of any general incorporation language in such filing. Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Ming Yang, the Chief Financial Officer of CHINA BIOLOGIC PRODUCTS, INC. (the “Company”), DOES HEREBY CERTIFY that: 1. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the “Report”), fully complies with the requirements ofSection 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. IN WITNESS WHEREOF, the undersigned has executed this statement this 25th day of February, 2016. /s/ Ming Yang Ming Yang Chief Financial Officer (Principal Financial and Accounting Officer) A signed original of this written statement required by Section 906 has been provided to China Biologic Products, Inc. and will be retained by ChinaBiologic Products, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed forpurposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company,whether made before or after the date hereof, regardless of any general incorporation language in such filing. Source: China Biologic Products, Inc., 10-K, February 25, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Address: 18th Floor, 19 Chaoyang Park Road Chaoyang District, Beijing 100125 People’s Republic of China China: +86 10 6598 3099 ir@chinabiologic.com Web site: www.chinabiologic.com China Biologic Products, Inc. 

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