Sino Biopharm secures room for future growth with US$515 million investment in Sinovac’s Covid-19 vaccine unit
- Beijing-based generic drug maker buys 15 per cent stake in Sinovac Life Sciences, a unit of Nasdaq-listed pharmaceutical firm Sinovac Biotech
- Deal comes ahead of major announcement from China to launch 600 million doses of Covid-19 vaccines for use this year
Sino Biopharmaceutical on Monday announced a US$515 million investment in Covid-19 vaccine developer Sinovac Life Sciences, as the Beijing-based generic drug maker seeks to expand its reach into vaccine development and sales.
The Hong Kong-listed company agreed to buy a 15 per cent stake in Sinovac Life Sciences, a unit of Nasdaq-listed pharmaceutical firm Sinovac Biotech.
“The board believes the capital contribution will introduce a key strategic partner to the group and expects that both parties will join efforts to expand the partnership in further improving vaccine sales capability, expansion to overseas markets as well as development for new technologies,” Sino Biopharmaceuticals said in an exchange filing on Monday.
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First doses of China’s CoronaVac Covid-19 vaccine land in Brazil
“The immediate earnings impact is rather limited for Sino Biopharmaceutical,” said Daiwa Capital Markets analyst Dennis Ip. “We are in the process of [assessing the potential upside] for it given the prospect that Sinovac’s Covid vaccine may be launched soon.”
He said that Sinovac Biotech’s profit last year amounted to 1 per cent of Sino Biopharmaceutical’s profit.
Sinovac and China National Biotec Group are the two Chinese firms conducting phase three trials on so-called “inactivated” Covid-19 vaccine candidates. Sinovac’s CoronaVac has been undergoing phase-three clinical trials in Brazil, Turkey, Indonesia and Chile.
“CoronaVac has reached critical milestones in clinical trials in Asia and Latin America,” Yin Weidong, CEO of Sinovac Biotech, said in a statement on Monday.
Both Sinovac and China National Biotec have yet to release any of the phase three trial data needed for full regulatory approval for their vaccines, which use a conventional technique that involves killing off the virus grown in a lab and injecting it in humans to trigger an immune response.
Sino Biopharmaceutical’s investment in Sinovac’s vaccine arm is probably motivated more by its desire to expand overseas – such as in Southeast Asia – than financial gain, since the Covid-19 vaccine’s profit margin is not expected to be high, said Jay Lee, analyst at independent investment research provider Morningstar Investment Management Asia.
Given the limited supply of gene-based vaccines like those developed by US-based Moderna and Pfizer and Germany’s BioNTech compared with demand next year, plenty of inactivated vaccines are likely to be sold in developing countries. These countries might not be able to buy gene-based vaccines because of the unavailability, or lack, of the required specialised cold-chain infrastructure.
“As long as phase three trial data ultimately demonstrates that inactivated vaccines provide a reasonable degree of protection, they should see robust demand over the next two years,” he said.
Sinovac said it has the capability to manufacture 300 million doses a year and aims to double the capacity once a second production facility is completed by the end of this year.
“Depending on market conditions and the availability of financing, the company may in the future seek to further expand its production capacity,” it said on Monday.
Ahead of Monday’s announcement, private equity firms Advantech Capital and Vivo Capital swapped their convertible loan for a 7.5 per cent equity stake in Sinovac Life Sciences, which will be diluted to 6.3 per cent after Sino Biopharmaceutical’s investment.
