Sinovac Biotech Ltd (Sinovac) (NASDAQ: SVA) is a Chinese biotech company vying for a leading position in the race to develop a COVID-19 vaccine. Recently, its wholly-owned subsidiary, Sinovac Research and Development Co., Ltd, (Sinovac R&D) received a $15 million convertible investment injection from Advantech Capital and Vivo Capital, to further the development of their inactivated vaccine against COVID-19 now named CoronaVac. This investment was structured in the form of a convertible loan ($7.5 million each), meaning the investors can elect to collect interest on the loan or convert the debenture into a 7.5% equity interest in Sinovac R&D.
The convertible debt deal structure can benefit the biotech in that they can make sue of debt structure for a lower interest rate as the investor will accept in exchange for the ability to convert to equity should the conditions warrant such an action. Prominent investment bank Houlihan Lokey served as financial advisor while full-service China-based Han Kun Law Offices and top American law firm Latham & Watkins served as the company’s legal advisors.
This has become a more prominent way of biotech financing. Jacob Plieth writing for Evaluate Vantage offered insight into the growing use of convertible debt as a biotech financing instrument with some example deals and terms.
Other Recent Financing
Apparently, last month the company also secured an $8.5 million low-interest line of credit from the Bank of Beijing, according to a report in Reuters.
Preclinical Results to Date
Sinovac’s CoronaVac’s preclinical data were published in the peer-reviewed academic journal Science in an article noting that the vaccine candidate is safe and provides protection to rhesus macaques (monkeys) through an animal challenge study.
The Chinese regulatory authorities approved both Phase I and Phase II human clinical trials in China. The Phase I clinical trial, established to evaluate the safety, tolerance and preliminary immunogenicity of CoronaVac, started in April. The Phase II study commenced in May as sufficient data was observed during the Phase I (again April through May). The Phase II clinical trial evaluates the immunogenicity and safety of CoronaVac in a larger population in order to define dosage, regimen and immunization schedule.
Phase I/II Study
Sinovac has disclosed two studies in the U.S. clinical trials registry including a Phase I/II titled Safety and Immunogenicity Study of Inactivated Vaccine for Prophylaxis of SARS-CoV-2 Infection (COVID-19) and one currently recruiting titled Safety and Immunogenicity Study of Inactivated Vaccine for Prophylaxis of SARS-CoV-2 Infection (COVID-19).
The randomized, double-blinded, single-center, placebo-controlled Phase I/II study in adults aged 18-59 years old evaluates the immunogenicity and safety of CoronaVac. A total of 744 subjects are targeted for enrollment, with 144 at Phase I and 600 at Phase II. Participants are assigned to receive two doses of CoronaVac or placebo on the schedule of Day 0,14 or day 0, 28. The study commenced April 16, 2020; their estimated primary completion date is August 13, 2020 while the final completion target is December 2020.
Primary Outcome Measures
The sponsor’s primary outcome measures include 1) safety indexes of adverse reactions (from beginning of dose to 28 days after the whole schedule vaccination); 2) immunogenicity indexes of neutralizing-antibody seroconversion rates for the emergency vaccination schedule (14th day after two doses of the vaccination); and 3) immunogenicity indexes of neutralizing-antibody seroconversion rates for the routine vaccination schedule (the 28th day after two doses of the vaccination). Several secondary and other measures can be viewed here.
The vaccination study is led by Dr. Fengcai Zhu at Jiangsu Provincial Center for Disease Control and Prevention.
The second study titled Phase I/II titled Safety and Immunogenicity Study of Inactivated Vaccine for Prophylaxis of SARS-CoV-2 Infection (COVID-19) launched in May and according Sinovac’s disclosure is a randomized, double-blinded, single-center, placebo-controlled Phase I/II clinical trial in adults aged≥ 60. The experimental vaccine and placebo, both manufactured by Sinovac Research & Development Co., Ltd., will be tested on 422 subjects: 71 during Phase I and 350 during Phase II. The subjects will be assigned to receive two doses of different dosage of experimental vaccine or placebo on the schedule of day 0,28.
Primary Outcome Measures
The sponsor designed two measures including 1) Safety index-incidence of adverse reactions and 2) Immunogenicity index-seroconversion rates of neutralizing antibody.
Led by Yuliang Zhao Master, this study centering on individuals 60 and up will occur at Renqiu City Center for Disease Control and Prevention. Zhao is from Hubei Provincial Center for Disease Control and Prevention.
Commercial Production Plan
The company reports in its press release that it is building a commercial vaccine production plant that is expected to manufacture up to 100 million doses of CoronaVac annually. In Reuters it was reported that the company secured access to over 70,000 square meters of land and property as it plans for a large production complex for multiple vaccines with one plant devoted to COVID-19 should it be successful with its clinical trials.
The Recent Investors
The most recent investors for this convertible deal include Advantech Capital and Vivo Capital. Based in Hong Kong and Beijing, Advantech Capital has $560 million under management for investments. The fund was launched in 2016 by Mr. Jianming Yu. Also behind New Horizon Capital, Mr. You earned an MBA at Kellogg School of Management and PhD from Harvard in Biological Sciences.
Based in Silicon Valley (Palo Alto) and China, Vivo Capital has raised over $4 billion in capital for three fund vehicles including private equity, public equity and venture capital.
Sinovac Biotech Ltd. is a China-based biopharmaceutical company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases. Sinovac’s product portfolio includes vaccines against enterovirus71 (EV71), hepatitis A and B, seasonal influenza, H5N1 pandemic influenza (avian flu), H1N1 influenza (swine flu), varicella and mumps. Healive, the hepatitis A vaccine manufactured by the Company, has passed the assessment under WHO prequalification procedures in 2017. The EV71 vaccine, an innovative vaccine developed by Sinovac against hand foot and mouth disease caused by EV71, was commercialized in China in 2016. In 2009, Sinovac was the first company worldwide to receive approval for its H1N1 influenza vaccine, which it has supplied to the Chinese Government’s vaccination campaign and stockpiling program. The Company is also the only supplier of the H5N1 pandemic influenza vaccine to the Chinese government’s stockpiling program. The Company is developing a number of new products including a Sabin-strain inactivated polio vaccine, pneumococcal polysaccharides vaccine, a quadrivalent influenza vaccine, and a SARS-CoV-2 (commonly referred to as COVID-19) vaccine. Sinovac primarily sells its vaccines in China, while also exploring growth opportunities in international markets. The Company is registering its products in over 30 countries outside of China
Dr. Fengcai Zhu at Jiangsu Provincial Center for Disease Control and Prevention.
Dr. Hongxing Pan, Jiangsu Provincial Center for Disease Control and Prevention.
Led by Yuliang Zhao Master, Hubei Provincial Center for Disease Control and Prevention