CONQUERING COVID

Tumultuous battles among shareholders and management have roiled the Chinese company that makes a leading Covid-19 vaccine, according to this business book.

Halesworth recaps the history and fortunes of Sinovac, a Beijing biopharmaceutical firm and maker of the CoronaVac vaccine, from a deeply informed but materially interested perspective. He’s the founder and portfolio manager of Heng Ren Partners, a Boston hedge fund that owns Sinovac stock. He starts with an upbeat but sketchy rundown of CoronaVac’s success as an easy-to-store vaccine, with hundreds of millions of doses sold to developing countries despite its mediocre performance. (Studies put its efficacy in preventing mild and severe infections at 50.4% in Brazil.) The author soon turns from science to the book’s focus: disputes between Sinovac’s management and some of its investors over company governance and stock buyouts. The main issue was a 2016 Sinovac buyout proposal that offered investors $6.18 per share, a figure that Halesworth argues was far too low for the company’s true valuation. He further claims that Sinovac persistently played down the company’s prospects in order to keep the share price and the buyout cost low. The thorny situation became a rivalry between chairman and CEO Weidong Yin and his former partner Aihua Pan, leader of a dissident investors’ group that presented a competing buyout bid of $7 (later $8) per share. In Halesworth’s telling, the Pan Group won majority support in a shareholders’ vote, but when the Yin Group clung to power and issued new shares to friendly investors, things turned nasty. According to Sinovac, Pan Group minions tried to occupy the firm’s Beijing facilities and the police got involved. The struggle then proceeded down a labyrinth of lawsuits.

Halesworth gives an absorbing account of this contentious episode, complete with intriguing characters and a classic shareholder-meeting showdown where wily lawyer James Chang turned the tables on the Yin Group’s complacent board. The author sets it against a cogent analysis of the difficulties of the vaccine business—Sinovac’s SARS vaccine suddenly lost its potential market when that pandemic fizzled in 2005—and of the traps awaiting Americans who invest in China. He contends that opaque Chinese companies are listed on American stock exchanges but are beyond the reach of United States regulators. Halesworth elaborates this critique in prose that’s lucid and lively. (“After going private, they would often do a new stock offering in China for a new stock listing to trade at three to five times the price paid to buy out shareholders in the United States. These were not your father’s Chinese Communists.”) But he does have a stake in the proceedings, and it shows. He did not favor the Yin Group’s “lowball squeeze out,” and he reprints part of an open letter questioning the accounting and ethics of Sinovac’s buyout proposal. The book contains much scolding and lobbying of company management, including suggestions for reconfiguring the board and hiring a PR firm, along with calls for both sides to withdraw the lawsuits so that Sinovac investors can better profit from the bull market in biotech and vaccines. Readers and investors will find rich food for thought from Halesworth’s take on the Sinovac wrangles, but they should keep in mind that he’s not a neutral observer.

A one-sided but engrossing insider’s view of corporate scheming behind the vaccine triumphs.