Jabs to the chin

China’s equivalent is Sinovac

Moderna was valued at $7 billion, or $23 a share, when the biotech firm went public on the Nasdaq in December 2018, a year before the Covid-19 outbreak was first reported in China’s Wuhan. The 12 year-old firm was worth nearly $500 per share at one point last year. Its coronavirus vaccine has also made it one of the world’s most profitable companies.

Turning back the clock to late 2018, there was a lot less interest from investors in Moderna’s mRNA technology, which aims to transform the patient’s own cells into antibody factories. Even fewer investors were bold enough to invest in vaccine developers in China. At the time, the sector was mired in   scandal after a major vaccine firm was exposed for fabricating clinical data. Confidence in mainland Chinese vaccines was so weak that sales agents in the tourism and insurance sectors had lucrative sidelines arranging for their clients to get jabs in Hong Kong (see WiC434).

But that was also the time when Softbank took a punt on Sinovac, the developer of a Covid-19 vaccine that has since been widely applied in China. The Japanese investment conglomerate first invested in 2017 and  then subsequently upped its holding. According to 21CN Business Herald, Softbank owns a 19% stake in Sinovac  today, mainly through its investment offshoot SAIF Capital. That makes the Japanese giant the single biggest shareholder.

No one is quite sure how to value that shareholding today, however.  Sinovac went public on Nasdaq as long ago as 2003 but its stock has been suspended from trading since February 2019 after the pharma firm was caught up in a legal dispute over issues including shareholding control.

The shares last traded at a price of $6.47, bringing a market capitalisation of $460 million. But Sinovac’s value may have spiked as much as a hundredfold since then after the biotech firm’s CoronaVac became one of two domestically-developed vaccines approved by the Chinese government to guard against Covid.

Some scientists have compared Sinovac’s vaccines unfavourably with mRNA alternatives made by BioNTech and Moderna, particularly in fending off Omicron – though dosage is a key factor. A Hong Kong University study found that CoronaVac was found to be less effective at preventing death from Covid among the elderly than BioNTech, unless they received three shots of the Sinovac vaccine at which point its effectiveness became similar, the Financial Times reports.

Sinovac announced last month that annual profits had jumped more than 15 times to Rmb95.5 billion ($14.5 billion) last year. You’d think such numbers would indicate morale amongst staff was high, but the mood is sour.

Sinovac’s senior management – which went on a hiring spree in 2020 in  anticipation of a surge in demand for its vaccines – had promised to ringfence 10% of its 2021 net profits as year-end bonuses, a number of Chinese media outlets have reported. But just when thousands of staff were starting to celebrate the payouts, Sinovac shocked its workforce by announcing that the windfalls weren’t going to happen. Worse, according to 21CN, Sinovac has actually been laying off hundreds of staff this year. 

What motivated Sinovac to cancel the staff bonuses is unclear but the  decision to downsize the workforce has been attacked in the Chinese media as “killing the donkey after it has finished turning the millstone”.

One interpretation is that company bosses are preparing for dwindling demand in the post-pandemic era. Data from UNICEF suggests that major Chinese vaccine makers delivered a total of 6.78 million doses to overseas recipients in April, for instance, down 97% from the peak in September last year.

Other critics have even been questioning Sinovac’s identity as China’s largest vaccine maker, given that the single biggest shareholder is Softbank. Significant resources from the national social security fund have been deployed to purchase CoronaVac, the Shanghai Securities News adds, with suggestions that the bulk of Sinovac’s profits will be paid as dividends to overseas shareholders like Softbank.

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