Sinovac to Supply Vaccines to China Earthquake Victims

Sinovac Biotech Ltd. (AMEX: SVA) said China’s Ministry of Health placed a 20 million RMB ($2.9 million) order for Healive, the company’s inactivated hepatitis A vaccine, which will be administered to people living in the earthquake-affected provinces of Sichuan, Shanxi and Gansu.

The safety of the drinking water in the region is not assured, prompting officials to take extra measures to prevent outbreaks of infectious diseases.

Immediately following the May 12 earthquake, Sinovac donated 50,000 doses of Healive and 610,000 RMB ($88,000) to the Ministry of Health of China to support disease control efforts.

Disclosure: none.

Comments

[Craig Bird:]

Segue Ventures wrote in their blog a really good article that Seeking Alpha should have posted entitled, "A Paradigm Shift in China’s Crisis Relief Efforts; the Convergence of Communism and a Market Economy"

PART I

Ever since shifting towards a market base economy, political and financial experts have often pondered how this apparently paradoxical relationship would co-exist. In front of the whole world the scenario is playing out as public companies like Linkwell Corporation (OTCBB: LWLL) and Sinovac Biotech (Amex: SVA) are being integrated into the old communist emergency response system to form a whole new paradigm; more effective, efficient and fungible.

China was widely criticized for its handling of the 2002-2003 SARS epidemic. The government was accused of attempting to hide the crises and for being slow to react; and the PRC has since officially apologized. Since then, Chinese officials have claimed to have made numerous changes in its reporting and response policies, however many outsiders remained dubious.

Today, many political wonks and disaster relief professionals are speaking well of China’s response to the May 12th earthquake in Sichuan Province, which is significantly different than anytime in modern history. According to the People’s Daily China (English Edition), “The Wall Street Journal Asia Edition (U.S.), the Globe and Mail (Canada), the Guardian (U.K.), among other foreign news agencies, have recently published articles on China's earthquake relief. They have all lauded the earthquake relief efforts made by the Chinese government.”

The most often cited changes leading to this dramatic improvement include improved openness and the integration of non-government organizations (NGOs). The response has been overwhelming. Private individuals have volunteered time, skills and millions of dollars to the earthquake relief efforts. But one key development has escaped the attention of the media; the contributions of non-government enterprises, such as Linkwell Corporation and Sinovac Biotech.

Linkwell Corporation (Linkwell) (OTC Bulletin Board: LWLL - News), a leading developer, manufacturer and distributor of healthcare related disinfectants in China, announced that it was running 24/7 operations in support of China’s earthquake relief efforts. Sinovac Biotech Ltd., a leading provider of vaccines in China, also announced that it is providing immediate support to China's Ministry of Health to support disease control efforts. The Chinese government, non-government organizations (NGOs) and even individuals have mobilized on an unprecedented scale in response to the earthquake in the southwestern Sichuan Province.

2008 May 30 10:19 AM

[Craig Bird:]

"A Paradigm Shift in China’s Crisis Relief Efforts; the Convergence of Communism and a Market Economy"

PART II

According to Linkwell Chairman and CEO, Mr. Xuelian Bian, the Company’s response compares to the scale and efforts given during the 2002 - 2003 SARS epidemic. High level operations are expected to last through mid-June. Mr. Bian commented, “We are working with several emergency organizations, with authorization from the MOH Emergency Response Office, to provide disinfectant training and products throughout the affected region.”

According to independent news sources, More than 5,000 health personnel are working to disinfect China's earthquake-hit villages, and doctors and nurses are stationed round the clock in refugee camps to try to prevent survivors from falling sick. Linkwell is providing emergency training for disinfectant operators and disinfectant products, primarily to NGOs, including the Red Cross and the Communist Youth League. It is expected that the MOH will continue to recognize Linkwell as an authorized provider of products and services in future health crises.

There are some key differences between Sinovac’s and Linkwell’s contributions. According to Sinovac, it is donating vaccines, services and money, while Linkwell is donating some products and services, discounting others, and getting full payment for the majority of its products. The key reason for this is that Sinovac is donating to the MOH, while Linkwell, as an MOH authorized provider of its products and services, is selling its products primarily to non-government relief organizations, such as the Red Cross.

Linkwell’s manufacturing operations are going around the clock to meet disinfection requirements and emergency support teams are on call 24/7. The products are distributed via military transportation to the emergency areas; usually by air. “We are proud to have such a vital role and help in this relief effort” said Mr. Bian, “The products we are providing are used to control infection in the environment and on material surfaces and hand disinfection.”

China’s utilization of Linkwell and Sinovac is a fungible process for leveraging non-government public companies for government requirements. However, this does not come as some cost. In response to emergency relief efforts, Linkwell has suspended its normal disinfection and pest control training and licensing program and converted to emergency training for disinfection operators going into disaster areas. Once this is completed, the Company will revert to normal operations, showing once again that a nimble public company can be fungible between government and the public market.

Is this a paradigm shift for China’s emergency response system? It appears so, “Our relationship with MOH is very good and we are prepared to respond very quickly to future relief efforts,” said Linkwell’s COO, Mr. Arthur Huang, “Since our company was founded from the Second Military Medical University, we have a common culture, language and organizing process as the PLA, who are usually the first responders to disasters.” It is also quite possible that Sinovac will be taking a larger role in the future, since its relationship with MOH appears to becoming closer.

One thing appears abundantly clear; once again China’s central government has managed to forge together the communist government system with a modern market economic system.

2008 May 30 10:19 AM

[Craig Bird:]

My Comment: Obviously, Craig wrote this before the recent news on SVA's Hep A sales. These sales underscore his point that China is making a fundamental change in how it handles crisis health situations, which are more responsive for citizens and profitable for businesses.

Its a win - win situation for China and sure to continue, which is good for all of investing in SVA and LWLL

2008 May 30 10:30 AM