On January 18th, 21st Century Business Herald reporter Lin Yun and Xiao Beijing reported that Sinovac Biotech announced that Alternative Liquidity Index LP (hereinafter referred to as "Alternative Liquidity") has made a tender offer to purchase up to 10000000 shares of Sinovac Biotech's common stock at a cash price of $0.03 per share. In response, the board of directors of Sinovac Biotech believes that the tender offer is not advisable and does not align with the best interests of the company or its shareholders, And unanimously recommend that the company's shareholders refuse to accept the tender offer and not acquire their shares in accordance with the tender offer.
The 21st Century Business Herald reporter inquired about the intention of the tender offer, future business layout, and other issues from Sci Tech, but as of the time of publication, no relevant response has been received.
In the announcement, Sinovac Biotech conducted a specific analysis of the reasons for refusing the tender offer. Firstly, based on the implied valuation of the tender offer price being lower than the value of the company's assets, Alternative Liquidity only offered a purchase price of $0.03 per share.
The board of directors of Sinovac believes that the company has strong cash reserves and short-term investments. As of June 30, 2023, its total cash, cash equivalents, and restricted cash amounted to $1.6 billion. Based on the number of issued common shares and B-series convertible preferred shares as of June 30, 2023, the cash and cash equivalents are approximately $14.40 per share. In addition, as of June 30, 2023, the company's total short-term investment was $9.4 billion. During the six-month period ending June 30, 2023, Sinovac Biotech announced net income attributable to common shareholders of $14 million, which is $0.14 per share and $0.15 diluted per share.
Secondly, Alternative Liquidity acknowledges that it does not have any accurate method to determine the present value of the company's shares. Alternative Liquidity also stated that it determined the offer price by analyzing "a series of quantitative and qualitative factors", and "did not conduct or commission any evaluation, nor did it hire any independent financial advisors or other third parties to conduct any valuation analysis, nor did it provide any opinions on stock value." The board of directors of Sinovac believes that this indicates that Alternative Liquidity's valuation method lacks credibility, The offer price is also insufficient.
Alternative Liquidity further claims, "For shareholders who submit their shares, they will waive any opportunity to participate in future ownership gains, including potential dividends that the company may receive from operations or disposals, and the purchase price per share paid by the buyer to the submitting shareholder may be lower than the total amount of shares that the shareholder may receive from the company."
In addition to a total of $11 billion in cash and short-term investments, the main business goal of Sinovac Biotech is still to sell the company's diversified vaccine/biomedical product portfolio, as well as provide attractive risk adjusted returns to the company's shareholders through vaccine/biomedical product research and development work, and achieve potential long-term appreciation of the company.
At the same time, Alternative Liquidity has also made similar active partial acquisition offers for stocks of other listed companies, and has previously used the same strategy to make similar offers for stocks of Sinovac Biotech.
In addition, considering the offer price, the board of directors of Sinovac Biotech believes that the offer represents an opportunistic attempt at alternative liquidity, by purchasing stocks at extremely low prices relative to their value for profit, thereby depriving shareholders who bid for stocks in the offer of the potential opportunity to realize their long-term investment value in the company. Previously, in August 2023, Alternative Liquidity partially acquired shares of Sinovac Biotech at the same tender offer price and held 93507 shares.
Finally, the board of directors of Sinovac Biotech also noted that the acquisition agreement may be modified for various reasons, which poses a "trap". The board of directors believes that there can be no guarantee that the acquisition will be completed within the time required by Alternative Liquidity, or on the same terms and conditions, including but not limited to the offer price. Moreover, the shares submitted by shareholders under the acquisition offer are irrevocable and can only be withdrawn in accordance with the strict procedures outlined in the acquisition offer before the current deadline of February 21, 2024.
As the COVID-19 is getting farther and farther, the market demand for COVID-19 prevention and control is gradually shrinking, and the performance of Sinovac has also declined rapidly. According to the annual report of Kexing Biotechnology, the annual sales revenue of Kexing Biotechnology in 2022 was 1.5 billion US dollars, a significant decrease of 92% compared to 19.4 billion US dollars in 2021; The net profit attributable to shareholders of Sinovac Biotech was $114 million, a significant decrease of 99% year-on-year. The main reason for the sharp decline in sales is the decrease in sales of COVID-19 vaccine Kelafu. However, the non COVID-19 business of Sinovac will continue to grow in 2022.
The 2023 semi annual report of Kexing Biotechnology also shows that its sales in the first half of the year were 140 million US dollars, a year-on-year decrease of 88% from 1.2 billion US dollars in the same period of 2022; The net loss was $30 million, while the net income for the same period last year was $790.4 million. According to the analysis in the semi annual report, the main reason for the decline in sales is still the decrease in sales of COVID-19 vaccine.
Yin Weidong, Chairman, President and CEO of Sinovac Biotech, stated in his 2023 semi annual report, "Sinovac Biotech will continue to increase investment in COVID-19 vaccine research and production, and will also continue to increase investment in the research and production of other biopharmaceutical products (including antibodies)."
On January 10, 2024, after a document about the "COVID-19 Project Performance Wage Suspension Scheme" was released, the staff of the company also confirmed to the media that the company's COVID-19 vaccine production had been completely stopped. The news of the discontinuation of Sinovac vaccines has also attracted widespread attention, and it once topped the hot search list on Weibo that day.
Although the production of COVID-19 vaccine was stopped, Sinovac still has a layout in COVID-19 business. Previously, the COVID-19 neutralizing antibody SA55 developed by the Changping Laboratory Xie Xiaoliang/Cao Yunlong research group authorized SINOVAC Science and Technology to carry out industrial development. On August 30, 2023, the Phase II clinical trial of Kexing novel coronavirus broad-spectrum neutralizing antibody SA55 injection was launched in Ruijin Hospital affiliated to Shanghai Jiaotong University School of Medicine. The news from Sinovac said that the COVID-19 neutralizing antibody SA55 nasal spray and injection have the capability of mass production under GMP (Good Manufacturing Practice) conditions.
At the same time, for COVID-19 vaccine enterprises, facing the shrinking market and declining performance, it is also a must to focus on the layout of non COVID-19 business to seek a turn. In terms of non COVID-19 business, in 2023, the hepatitis A vaccine of Sinovac&Sinovac; Reg Influenza vaccines and live attenuated chickenpox vaccines have made progress in global new approvals, and their bivalent enterovirus inactivated vaccines have also been clinically approved in China.