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A drugmaker’s COVID-19 vaccine is 78% effective, but can it escape its patchy business history?

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Brazilian authorities on Thursday said the COVID-19 candidate from private Chinese vaccine maker Sinovac was 78% effective in preventing infections, allowing it to join companies like Pfizer, Moderna and AstraZeneca as leaders in the global race to help end the COVID-19 pandemic.

Sinovac’s vaccine, called CoronaVac, uses an inactivated form of COVID-19 to induce immune responses, a technology that is likely to be an attractive option for many low- and middle-income countries because it doesn’t require expensive ultra-cold storage like Pfizer and Moderna.

Sinovac remains the only Chinese manufacturer to publish peer-reviewed Phase II trial data in a medical journal.

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Neither Brazil nor Sinovac have released public data to support Sinovac’s 78% effectiveness rate. The main health regulator in Brazil said Thursday that it was convincing enough to approve the vaccine for emergency use but did not disclose when the data could be made public.

Brazilian officials will ask health regulators for emergency use authorization on Friday to begin rolling out the vaccine to the public.

“Today is the day of hope, the day of life”, Joao Doria, governor of the Brazilian state of Sao Paolo, said at a press conference Thursday. Sinovac did not respond to Fortune immediate request for feedback on results.

Sinovac has negotiated distribution agreements or is in talks to do so with the Philippines, Indonesia, Hong Kong, Turkey and Chile.

Sinovac and its state counterpart, the Chinese vaccine maker Sinopharm, should also inoculate 50 million people in China in early February, although China has yet to officially authorize either of these vaccines. Chinese authorities cleared the Sinovac vaccine for emergency use in July, but have not officially approved it for distribution to the general public.

Sinovac’s high efficiency could make it a lifeline for countries left out of the Pfizer and Moderna frenzy since China, unlike the United States, pledged to share your vaccines with the world. But Sinovac’s favorite status is also a redemption chance for the 19-year-old Beijing-based company which has been embroiled in a multi-year corporate governance battle and plagued by corruption allegations.

CoronaVac

Sinovac founder Yin Weidong, a doctor, began his career in the 1980s in Tangshan, a city in northern China, where he investigated hepatitis outbreaks as part of a municipal public health agency. The experience prompted him to try to find a more lasting solution to the disease. In 1999, he and a group of scientists successfully developed the first inactivated hepatitis A vaccine in China. Chinese regulators have approved Sinovac’s vaccine in 2005. China included the vaccine in its national inoculation program in 2008 and the World Health Organization pre-approved it for export to other markets in 2017.

Yin founded Sinovac in Beijing in 2001 to expand his research into other vaccines.

Soon after the company was established, China battled an outbreak of Severe Acute Respiratory Syndrome (SARS). SARS, another coronavirus, killed more than 600 people in China from 2002 to 2004. In response to the epidemic, Yin developed the only SARS vaccine to reach phase I trials. SARS, a lesser disease contagious than COVID-19, largely disappeared by 2004, which means Sinovac’s SARS vaccine was never needed.

But years later, Sinovac discovered that his work on SARS would be helpful in tackling another coronavirus – COVID-19. Yin said Time in July that SARS and COVID-19 are like “brothers,” and Sinovac relied on its SARS research to develop its COVID-19 vaccine.

Sinovac’s inactivated vaccine is based on a Brute force technology that has been around for hundreds of years. Essentially, Sinovac takes a live version of the COVID-19 virus and then kills or inactivates the virus’s ability to cause disease, but it still provides the human body with the tools it needs to make antibodies against the virus.

After testing the safety and efficacy of CoronaVac in phase I and II trials in China, Sinovac launched its phase III trials in Brazil in July, testing its candidate on 13,000 volunteers.

In the trials, Sinovac partnered with the Butantan Institute, a Brazilian research center and the region’s largest vaccine maker. The tests were finally successful, but were subjected to intense political debate in the country.

In October, Joao Doria, governor of the powerful Brazilian state of São Paolo, declared CoronaVac the country’s most promising vaccine candidate. In response, Brazilian President Jair Bolsonaro condemned Doria’s comments and said Brazil would not buy a Chinese vaccine.

Bolsonaro’s government appears to disagree with his promise. Thursday, the Brazilian Minister of Health announced he was going buy 100 million doses of the Sinovac vaccine.

Bolsonaro, meanwhile, said on Thursday he would not take any vaccines and continues to imply, without evidence, that citizens may not need to take a vaccine at all.

“No one can force a person to take something whose consequences are still unknown”, Bolsonaro said Thursday.

Poison pill

In addition to the Brazilian political debate, Sinovac has its own turbulent history to overcome.

In 2016, China sentenced Yin Hongzhang (unrelated to Yin Weidong of Sinovac), the former deputy director of China’s Food and Drug Administration, to ten years in prison after admitting to accepting more than $ 500,000 in bribes from vaccine manufacturers from 2002 to 2013 in return for helping manufacturers expedite or obtain drug approvals. Yin, founder of Sinovac, testified in Yin Hongzhang’s trial, admitting to paying more $ 83,000 in bribes to Yin Hongzhang to license Sinovac vaccines.

In New York, Sinovac’s share price fell more than 20% in value after Yin’s conviction, but recovered later.

Neither Yin nor Sinovac have been formally charged in the case, but in February 2018, a group of Sinovac investors sought to wrest control of the company from Yin. Investors alleged that Yin’s corrupt history made him unfit to serve on the company’s board of directors, but Sinovac claimed it was a “ambush” and declared the takeover invalid.

Undeterred, a group of investors raided Sinovac’s Beijing offices in April 2018 in an attempt to steal the company’s official seal, legal documents, financial filings and information systems, Sinovac claimed in a dossier at the US Security and Exchange Commission.

In February 2019, Sinovac executives activated a financial weapon called the ‘poison pill’ to stop the takeover attempt, spreading 28 million new shares to dilute investor control over the company. Sinovac triggered the poison pill, which was written into the company’s articles of association, after Sinovac claimed that investors secretly conspired to accumulate more than 15% stake in the company.

“By the time Sinovac discovered the coup plan, most of the takeover defenses were too late to be effective,” said Wei Jiang, professor of finance at Columbia University. “This led them to resort to a poison pill, which could be immediately effective.”

The Nasdaq, where Sinovac debuted in 2012, suspended trading in the company’s shares following the poison pill, with the number of shares Sinovac traded on the platform in dispute. Today, almost two years later, Sinovac’s action remains on hold, as lawsuits over the corporate battle unfold in the United States and Antigua (where Sinovac is officially headquartered). Its suspension is one of the longest ever seen in the United States.

With its US actions suspended, Sinovac has consistently managed to raise capital to fund its COVID-19 vaccination effort.

In April, the Bank of Peking, backed by the state supplied Sinovac a low-interest loan of $ 8.5 million to begin construction of its first COVID-19 vaccine manufacturing plant on 70,000 square meters of land that a branch of the Beijing government has secured for the ‘company. In May and June, Sinovac raised an additional $ 32 million from private investors and Brazilian state of Sao Paolo to accelerate vaccine development and conduct clinical trials.

On December 7, Sinovac received a $ 515 million cash injection from the Chinese medicine company Sino Biopharm. This investment will allow Sinovac to double its manufacturing capacity to produce 600 million doses per year.

“Whatever impact accusations of corruption and instability in governance would have on the vaccine race, it is already reflected in the market,” said Brock Silvers, chief investment officer at Kai Yuan Capital.

Vaccine for the people

Based on positive data from Brazil, Sinovac is set to roll out its vaccine in countries that have been left behind in the global vaccine rollout so far.

In the Philippines, for example, presidential spokesman Harry Roque said on December 15 that talks with the United States to acquire Pfizer’s vaccine had failed in the face of intense global demand, causing the government to focus on the importation of Sinovac vaccine.

“The reason we buy [CoronaVac] can’t we get Pfizer, AstraZeneca or Moderna immediately, ”Roque said on December 15.

Roque’s comments indicated that the Philippine government’s own investigation The history of the company Sinovac, announced a few days earlier, would not deter the country from buying Sinovac’s vaccine. The Philippine Minister of Health said the investigation will examine whether Sinovac has paid bribes in connection with its COVID-19 vaccine. (No evidence has been presented so far; Sinovac has not commented on the matter.)

Sinovac’s troubled corporate history may give desperate governments a break, but rich countries have largely swallowed up the first vaccines, making Sinovac’s COVID-19 candidate a vital lifeline for developing countries, regardless of its past shortcomings.

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