Sinovac Biotech: A Bird Flu Play
by Richard Daverman, PhD
ChinaBio Today
Company Begins Phase II Test of Vaccine
Sinovac Biotech (SVA), a Beijing-based biotech that specializes in vaccines, announced that the Chinese government gave the company the go-ahead to begin Phase II trials of Panflu, its avian flu vaccine. In 2006, the company successfully completed a Phase I trial of the vaccine.
In the Phase I trial, two doses of the vaccine produced an immune response of sufficient quality to meet European standards for licensing a non-pandemic flu vaccine. Results were published in the on-line version of the British medical publication The Lancet.
The Chinese government pledged $2.7 million to help Sinovac build a manufacturing facility for its already-approved seasonal flu vaccine. This facility could easily be converted into an avian flu manufacturing plant if the vaccine continues to show promise. Reportedly, the facility will have the capability to produce 20 million doses of the vaccine annually.
Sinovac intends to begin producing avian flu vaccine before it has official state approval. It figures that governments will stockpile the vaccine as a stopgap measure, in case the worrisome virus ever develops the ability to transmit itself from one human to another – the doomsday scenario that would presage a pandemic.
After all, a government could spend a relatively paltry amount (say $50 million) for a large number of doses, just to be able to say it is doing something to protect its population in case of a pandemic. That kind of money would mean a lot to Sinovac, which ended 2006 slightly in the red on just $15 million of revenue.
Plus, the Chinese government is underwriting the cost of the research for the avian flu vaccine. It is not asking for any ownership rights as compensation for either the research or the manufacturing support.
In the Phase I trial, 120 patients were given a two-dose regimen of 30 micrograms of Panflu, which was administered along with an adjuvant. The vaccine contained a modified version of the whole H5N1 virus. The use of a whole virion vaccine, as opposed to a split-virion vaccine, lowers the amount of antigen needed to produce a sufficient response.
In the Phase II trial, Sinovac will conduct (simultaneously) a Phase Ib and Phase II test of the split-virion version of the vaccine alongside the regular Phase II trial of the whole virion vaccine.
History of Sinovac
Sinovac has been in the business of supplying vaccines to China for some time. Its main revenue producer is Healive, a vaccine for hepatitis A, which sold $15 million worth of product in 2006. The company also has two newer vaccines: Bilive adds a hepatitis B vaccine to Healive, providing immunity against both strains of hepatitis, and Anflu is a vaccine for seasonal flu. These two are only marginal sellers and Sinovac points out that any growth in Bilive would probably come at the expense of Healive revenues.
Meanwhile, Sinovac is also working on vaccines for Japanese encephalitis and SARS, in addition to the avian flu preventative. Because SARS has diminished as a threat, work on this vaccine has languished.
Most of Sinovac’s business is done through a subsidiary called Sinovac Beijing, of which Sinovac owns 71.6%. The other 28.4% is owned by China Bioway Biotech Group, an affiliate of Peking University. According to Sinovac, Chinese rules for minority ownership are such that major decisions require unanimous agreement of the board before the company can change its number of shares outstanding, be bought out, dissolve, or other momentous matters. This gives China Bioway de facto veto power over Sinovac’s major decisions. Also, China Bioway has a right of first refusal before Sinovac can transfer Sinovac Beijing to a third party.
In 2003, Sinovac came into being through a reverse merger with an on-line gambling business called Net-Force, which was listed on the OTC Bulletin Board. Sinovac Beijing was merged into Net-Force, and the wagering activities were spun off into a separate company, controlled by the former management. Originally, Sinovac owned only 51% of Sinovac Beijing, but in February 2005, Sinovac bought another 20.6% of Sinovac Beijing for $3.3 million in cash. This implies a value of $16.5 million for all of Sinovac Beijing.
A second subsidiary, Tangshan Yian, was acquired in January 2004. Tangshan Yian performs the manufacturing and R&D functions of Sinovac. Sinovac bought Tangshan Yian by issuing 3.5 million common shares and a promissory note of $2.2 million to its owner, Heping Wang. Sinovac continues to hold 1.5 million of the 3.5 million total shares.
Late in 2004, Sinovac migrated from the OTC Bulletin Board to the American Stock Exchange.
Financial Results
In 2006, Sinovac had $15.4 million in revenue, on which its gross profit was $11.1 million, for a margin of 72.4%. The majority of its costs were SG&A: $9.8 million or 63.5%. R&D, after the help from the Chinese government, consumed only 2.1%. Figuring in depreciation and interest, Sinovac ended 2006 with a net loss of $696,000. That was a big improvement from 2005, when Sinovac lost $5.6 million.
The company has 40 million shares outstanding, so with a share price of $3.17, Sinovac has a market capitalization of $127 million. That is 8.5 times revenues. In other words, like most Chinese companies, Sinovac is not cheap by American standards, though the same thing could also be said about other biotechs, including domestic ones, that are developing treatments for avian flu. Sinovac ended 2006 with $9.3 million in cash.
Although Healive has been commercially available since May 2002, its sales continue to ratchet dramatically higher. In 2004, 2005, and 2006, Sinovac sold 1.0 million, 1.3 million and 2.6 million doses of Healive respectively. This brought in $6.5 million, $8.3 million and $14.8 million in revenues, which represents a 78% improvement in 2006 over the year earlier. The company has the capability of producing 6 million doses of Healive per year. In 2006, 9.59 million doses of hepatitis A vaccine were released by the China SFDA, and 3.0 million doses of them, or 32%, were Healive.
Research funding for vaccine programs, including SARS and pandemic influenza totaled $1.7 million in 2004, $1.2 million in 2005, and $677,000 in 2006. Sinovac will apply for a grant in 2007 that will underwrite the cost of the clinical tests for its avian flu vaccine.
To increase sales of its already available products, Sinovac contracted with LG Life Sciences, a Korean pharma, in May 2005 to sell Healive worldwide. In February 2006, Sinovac stuck a deal with LG Life Sciences to sell the latter company’s hepatitis B vaccine in China for 5 years after Sinovac receives approval from government authorities. Also in 2005, Sinovac sold the rights to sell its products in Mexico to a Dutch biopharma. Work is underway in Mexico to register its vaccines.
Sinovac counts it as a plus that it does not have to sell its vaccines into government-controlled immunology programs, where the margins are lower. Instead, it sells its products directly to private parties, but it must compete with other similar products in terms of safety, price and ease of application.
Source: ChinaBioToday.com
RELATED READING:
- China Gets Serious about Drug and Food Safety
BioHealth Investor.com
______________________
ChinaBio Today
Company Begins Phase II Test of Vaccine
Sinovac Biotech (SVA), a Beijing-based biotech that specializes in vaccines, announced that the Chinese government gave the company the go-ahead to begin Phase II trials of Panflu, its avian flu vaccine. In 2006, the company successfully completed a Phase I trial of the vaccine. In the Phase I trial, two doses of the vaccine produced an immune response of sufficient quality to meet European standards for licensing a non-pandemic flu vaccine. Results were published in the on-line version of the British medical publication The Lancet.
The Chinese government pledged $2.7 million to help Sinovac build a manufacturing facility for its already-approved seasonal flu vaccine. This facility could easily be converted into an avian flu manufacturing plant if the vaccine continues to show promise. Reportedly, the facility will have the capability to produce 20 million doses of the vaccine annually.
Sinovac intends to begin producing avian flu vaccine before it has official state approval. It figures that governments will stockpile the vaccine as a stopgap measure, in case the worrisome virus ever develops the ability to transmit itself from one human to another – the doomsday scenario that would presage a pandemic.
After all, a government could spend a relatively paltry amount (say $50 million) for a large number of doses, just to be able to say it is doing something to protect its population in case of a pandemic. That kind of money would mean a lot to Sinovac, which ended 2006 slightly in the red on just $15 million of revenue.
Plus, the Chinese government is underwriting the cost of the research for the avian flu vaccine. It is not asking for any ownership rights as compensation for either the research or the manufacturing support.
In the Phase I trial, 120 patients were given a two-dose regimen of 30 micrograms of Panflu, which was administered along with an adjuvant. The vaccine contained a modified version of the whole H5N1 virus. The use of a whole virion vaccine, as opposed to a split-virion vaccine, lowers the amount of antigen needed to produce a sufficient response.
In the Phase II trial, Sinovac will conduct (simultaneously) a Phase Ib and Phase II test of the split-virion version of the vaccine alongside the regular Phase II trial of the whole virion vaccine.
History of Sinovac
Sinovac has been in the business of supplying vaccines to China for some time. Its main revenue producer is Healive, a vaccine for hepatitis A, which sold $15 million worth of product in 2006. The company also has two newer vaccines: Bilive adds a hepatitis B vaccine to Healive, providing immunity against both strains of hepatitis, and Anflu is a vaccine for seasonal flu. These two are only marginal sellers and Sinovac points out that any growth in Bilive would probably come at the expense of Healive revenues.
Meanwhile, Sinovac is also working on vaccines for Japanese encephalitis and SARS, in addition to the avian flu preventative. Because SARS has diminished as a threat, work on this vaccine has languished.
Most of Sinovac’s business is done through a subsidiary called Sinovac Beijing, of which Sinovac owns 71.6%. The other 28.4% is owned by China Bioway Biotech Group, an affiliate of Peking University. According to Sinovac, Chinese rules for minority ownership are such that major decisions require unanimous agreement of the board before the company can change its number of shares outstanding, be bought out, dissolve, or other momentous matters. This gives China Bioway de facto veto power over Sinovac’s major decisions. Also, China Bioway has a right of first refusal before Sinovac can transfer Sinovac Beijing to a third party.
In 2003, Sinovac came into being through a reverse merger with an on-line gambling business called Net-Force, which was listed on the OTC Bulletin Board. Sinovac Beijing was merged into Net-Force, and the wagering activities were spun off into a separate company, controlled by the former management. Originally, Sinovac owned only 51% of Sinovac Beijing, but in February 2005, Sinovac bought another 20.6% of Sinovac Beijing for $3.3 million in cash. This implies a value of $16.5 million for all of Sinovac Beijing.
A second subsidiary, Tangshan Yian, was acquired in January 2004. Tangshan Yian performs the manufacturing and R&D functions of Sinovac. Sinovac bought Tangshan Yian by issuing 3.5 million common shares and a promissory note of $2.2 million to its owner, Heping Wang. Sinovac continues to hold 1.5 million of the 3.5 million total shares.
Late in 2004, Sinovac migrated from the OTC Bulletin Board to the American Stock Exchange.
Financial Results
In 2006, Sinovac had $15.4 million in revenue, on which its gross profit was $11.1 million, for a margin of 72.4%. The majority of its costs were SG&A: $9.8 million or 63.5%. R&D, after the help from the Chinese government, consumed only 2.1%. Figuring in depreciation and interest, Sinovac ended 2006 with a net loss of $696,000. That was a big improvement from 2005, when Sinovac lost $5.6 million.
The company has 40 million shares outstanding, so with a share price of $3.17, Sinovac has a market capitalization of $127 million. That is 8.5 times revenues. In other words, like most Chinese companies, Sinovac is not cheap by American standards, though the same thing could also be said about other biotechs, including domestic ones, that are developing treatments for avian flu. Sinovac ended 2006 with $9.3 million in cash.
Although Healive has been commercially available since May 2002, its sales continue to ratchet dramatically higher. In 2004, 2005, and 2006, Sinovac sold 1.0 million, 1.3 million and 2.6 million doses of Healive respectively. This brought in $6.5 million, $8.3 million and $14.8 million in revenues, which represents a 78% improvement in 2006 over the year earlier. The company has the capability of producing 6 million doses of Healive per year. In 2006, 9.59 million doses of hepatitis A vaccine were released by the China SFDA, and 3.0 million doses of them, or 32%, were Healive.
Research funding for vaccine programs, including SARS and pandemic influenza totaled $1.7 million in 2004, $1.2 million in 2005, and $677,000 in 2006. Sinovac will apply for a grant in 2007 that will underwrite the cost of the clinical tests for its avian flu vaccine.
To increase sales of its already available products, Sinovac contracted with LG Life Sciences, a Korean pharma, in May 2005 to sell Healive worldwide. In February 2006, Sinovac stuck a deal with LG Life Sciences to sell the latter company’s hepatitis B vaccine in China for 5 years after Sinovac receives approval from government authorities. Also in 2005, Sinovac sold the rights to sell its products in Mexico to a Dutch biopharma. Work is underway in Mexico to register its vaccines.
Sinovac counts it as a plus that it does not have to sell its vaccines into government-controlled immunology programs, where the margins are lower. Instead, it sells its products directly to private parties, but it must compete with other similar products in terms of safety, price and ease of application.
Source: ChinaBioToday.com
RELATED READING:
- China Gets Serious about Drug and Food Safety
BioHealth Investor.com
______________________
posted by Nico at
4:57 PM
1 Comments:
A number of companies appear to be making progress here. Novavax, for example, came out with positive news the other day, although it seems to have been largely ignored by the street: http://www.medicalnewstoday.com/medicalnews.php?newsid=72881. Any views?
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