U.S.-listed Sinovac Biotech said first-quarter earnings were hit by new rules on vaccine sales in China that came in response to a scandal unrelated to the company that involved the sale of poorly tracked vaccines through unlicensed vendors.
This illegal network, allegedly helmed by a mother and daughter, reportedly sold $88 million of vaccines throughout China without adhering storage and transport protocols and ignoring expiry dates--creating renewed concerns about regulatory oversight in pharmaceuticals.
In response, China's State Council banned wholesalers from direct sales of vaccines to clinics at the provincial level where purchases will be centralized.
The State Council action has now hit Beijing-based Sinovac's distribution model for the out-of-pocket market after earlier this year it cleared regulatory approvals to make and sell its Enterovirus 71 (EV71) hand, foot and mouth disease vaccine.
"Currently, most of the provinces have yet to establish the platform, and a detailed interpretation and execution plan associated with the regulation has yet to be released by the central government, resulting in stagnated nationwide sales of private-pay market vaccines," said Weidong Yin, Chairman, president and CEO of Sinovac, said in a statement.
"While Sinovac was not directly implicated in the incident, our sales performance has been negatively affected and we also expect management and administration costs of vaccine distribution to increase in the future."
Revenues in the first quarter fell by half, the company said in its results announcement, with expectations being that sales will remain downbeat in the second quarter as well.
The company is in the midst of two privatization offers and in March it announced a rights issue via a board-approved payment of one preferred share purchase right on each outstanding common share in response.
Sinovac also received an unsolicited offer back in February of $7 a share from a consortium of Chinese drug and investment firms, placing it 13% above an earlier management-led offer of $6.18 a share.
- here's the release from Sinovac