SCHEDULE: Major Shareholder 1Globe Capital Opposes Sinovac Biotech Board Overhaul Amidst Ongoing Litigation

1Globe Capital LLC and 1Globe Biomedical (Hong Kong) Company Limited, holding 32.3% of Sinovac Biotech Ltd. common shares, have formally declared their vote against proposals to remove and replace current board members at the upcoming Special Meeting.

Summary

• 1Globe Capital LLC and 1Globe Biomedical (Hong Kong) Company Limited, the reporting persons, filed Amendment No. 4 to Schedule 13D concerning Sinovac Biotech Ltd.
• The reporting persons beneficially own an aggregate of 18,515,315 common shares, representing 32.3% of Sinovac Biotech Ltd.'s outstanding common shares.
• Dr. Chiang Li, Chairman of 1Globe Capital LLC and 1Globe Biomedical (Hong Kong) Company Limited, voted 6,812,855 common shares against both proposals described in the proxy statement for the Special Meeting.
• 1Globe Biomedical (Hong Kong) Company Limited instructed CDH Utopia Limited to vote 4,200,000 Subject Shares against both proposals.
• Dr. Li also requested related parties holding 5,702,460 common shares to vote against both proposals.
• The first proposal seeks to remove current Board members, excluding Dr. Li, while the second proposal aims to replace them with a new slate of directors, which includes Dr. Li, nominated by SAIF.
• Dr. Li stated his intention to continue serving on the Board if elected as part of the SAIF slate, but clarified he would vote against both proposals to support the current Board.
• The percentage of ownership is calculated based on 57,281,861 shares outstanding as of December 31, 2017, as reported in the 2018 20-F.
• The shares outstanding calculation excludes shares purportedly issued after May 2018, specifically the Exchange Shares and Disputed PIPE, which are subjects of ongoing litigation.

Sentiment

Score: 4

Explanation: While the reporting persons are taking a clear stance, the document highlights significant internal conflict, ongoing litigation, and a contested board, which generally creates uncertainty and can be detrimental to a company's stability and market perception.

Positives

• Dr. Chiang Li, a significant shareholder and current Chairman, is committed to continuing his service on the Board.
• The reporting persons are actively engaging in corporate governance by exercising their substantial voting rights to influence the company's direction.

Negatives

• A significant shareholder group (1Globe Capital/Dr. Li) is voting against proposals to remove and replace board members, indicating a contested board and internal conflict within the company.
• Ongoing litigation concerning the issuance of Exchange Shares and Disputed PIPE shares creates uncertainty regarding the company's share structure and beneficial ownership.

Risks

• Ongoing litigation related to the issuance of Exchange Shares and the Disputed PIPE could impact the company's share capital and ownership structure.
• Internal corporate governance disputes, as evidenced by the Special Meeting called to potentially remove and replace board members, pose a risk to company stability.
• Potential for continued operational or strategic distraction due to unresolved board conflicts and legal proceedings.

Future Outlook

The document indicates continued board disputes and ongoing litigation regarding share issuance, suggesting a period of corporate governance uncertainty until these matters are resolved. Dr. Li intends to continue serving on the board regardless of the outcome of the proposals.

Management Comments

• Dr. Li stated that he would continue to serve on the Board in the event the shareholders voted for both proposals at the Special Meeting.
• Dr. Li also made it clear that he would vote against both proposals at the Special Meeting in support of the current Board.

Industry Context

This filing highlights a significant corporate governance challenge within a biotech company, common in industries where control and strategic direction can be highly contested, especially in companies with complex ownership structures or international operations. The ongoing litigation suggests a struggle for control or disagreement over past corporate actions.

Corporate Governance

Legal Proceedings

• Ongoing litigation concerning the issuance of Exchange Shares and the Disputed PIPE.
• 1Globe Capital and OrbiMed Advisors LLC have been co-defendants in multiple lawsuits filed by certain affiliates of Vivo Capital LLC and by Advantech Capital Partners Ltd.'s affiliate Prime Success, L.P. against the Issuer.
• 1Globe Capital and OrbiMed Advisors LLC have been co-plaintiffs in one action related to the Disputed PIPE.
• The Issuer's Board has sought to fulfill its fiduciary duty to implement the Privy Council's Judgment (January 16, 2025) and Order (February 5, 2025).

Related Party Transactions

• Dr. Li asked related parties of the reporting persons, holding 5,702,460 Common Shares, to vote all shares 'AGAINST' proposal 1 and 'AGAINST' proposal 2.
• The inclusion of these 5,702,460 shares is pursuant to an order issued by the SEC (Release No. 88864 in connection with administrative proceeding File No. 3-19799), though the reporting persons state this should not be construed as an admission of beneficial ownership.

Stakeholder Impact

• Shareholders: Significant impact due to ongoing board disputes, litigation affecting share count, and uncertainty regarding corporate control and strategic direction. The outcome of the Special Meeting will directly affect board composition.
• Management/Board: The current board faces a challenge to its composition, while Dr. Li is actively defending the current board structure.
• Creditors/Investors: Increased risk perception due to internal conflicts and legal uncertainties, potentially affecting access to capital or valuation.

Next Steps

• The Special Meeting of the Issuer's shareholders is scheduled for July 8, 2025, where the proposals to remove and replace board members will be voted upon.
• Ongoing litigation concerning the issuance of Exchange Shares and Disputed PIPE shares will continue.

Key Dates

Keywords

Sinovac Biotech, SVA, 1Globe Capital, 1Globe Biomedical, Schedule 13D, beneficial ownership, shareholder vote, corporate governance, board dispute, proxy vote, litigation, common shares, Dr. Chiang Li, SAIF, CDH Utopia Limited, OrbiMed Advisors, Vivo Capital, Advantech Capital