Accusing OrbiMed as co-conspirator in failed coup, Sinovac aborts go-private deal

In a string of bizarre events that involve violence, lawsuits and a high-profile investment shop, Nasdaq-listed Chinese vaccine maker Sinovac has terminated its plan to take the company private.

Amid a tug of war for control that spans two years, Sinovac last June announced a management-led buyout by a consortium headed by Chairman and CEO Weidong Yin. But now, it has decided to dropthat process, and opted for $86.73 million in private investment from Vivo Capital and Advantech Capital.

Its fight with another would-be set of buyers—led by another executive, Aihua Pan—is far from over. And thanks to laptops and thumb drives left behind after a raid at the company’s Beijing offices, Sinovac now knows the healthcare investment firm Orbimed is also embroiled in this go-private brouhaha.

As chairman of Sinovac’s key Beijing operation and chairman of Sinobioway Biomedicine, as well as a shareholder in that subsidiary, Pan is a crucial figure in Sinovac’s history. He’s shown interest in buying Sinovac since the take-private plan was first announced in 2016, but his buyer group lost to Yin’s even though Pan offered a higher price.

Pan then alleged that a special committee appointed by the board colluded with Yin’s consortium, while Yin in turn accused Sinovac’s largest shareholder, 1Globe Capital—which publicly backed Pan’s buyout deal—and the family of Chiang Li of secretly seizing control of Sinovac without disclosing its intention as required by the Securities and Exchange Commission.

Things took an unexpected turn in February after an investor conference, when the two sides announced two different rosters of board members, both claiming legitimacy. Stranger still, the power grab turned violent in April, when "dozens of unnamed individuals" showed up at Sinovac’s Beijing offices.

Sinovac said Pan and his people forcibly entered the site and "limited the physical movement of the employees" in an attempt to take control of the unit and later the company’s websites. The chaos disrupted Sinovac’s hepatitis A vaccine and seasonal flu vaccine production and left several Sinovac people injured. That series of events is now wrapped in a case against Sinobioway and Pan personally before a court in Beijing.

But the most bizarre part of that raid was only made public a few days ago via a motion filed in a Delaware court. According to court filings, those alleged Sinobioway invaders left two laptops and two thumb drives at the scene. Sinovac copied the data, and what did they find? Minutes and audio recording of a teleconference held in January that showed 1Globe, together with OrbiMed and others including Li, plotted with the Sinobioway consortium to stage a coup at the annual meeting by electing a new board slate.

Sinovac argues the dissidents thereby formed a group 13D per U.S. securities law, which requires disclosure to inform the public of a possible change of control, such as a hostile takeover. The company is now asking the court for permission to allow all shareholders except those dissidents to acquire additional Sinovac, which would significantly dilute their stake. Both 1Globe and OrbiMed denied the allegations, according to the court document.

Whatever happens next, Sinovac has for now abandoned its go-private plan "in the best interests of the Company and its shareholders." Vivo and Advantech each received a total of 5.9 million Sinovac common shares for $7.35 each, representing 16.6% of the company. Sinovac said in a statement that it plans to use the proceedings "to build additional production facilities to support the development and commercialization of sIPV-based combination vaccine and other new vaccine projects."

According to its much-belated annual report filed to the SEC in May, Sinovac’s sales jumped 140.7% to reach $174.3 million in 2017, thanks to its new vaccine against enterovirus 71. Its portfolio also includes vaccines against hepatitis A and B, seasonal flu, H5N1 pandemic flu, H1N1 swine flu, and mumps.

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