Sinovac's Governance Crisis: Auditor Resignation and the Fight for Control

Sinovac Biotech (NASDAQ: SVA) finds itself at a critical crossroads as a governance dispute has erupted into a full-blown crisis. The resignation of its auditor, Grant Thornton Zhitong Certified Public Accountants LLP, coupled with missed regulatory filings and lingering questions over board legitimacy, has thrown the company’s future into doubt. Amid shareholder activism, legal battles, and operational uncertainty, investors must weigh the risks of a prolonged governance stalemate against the potential for resolution—and the impact on the company’s long-term prospects.

The Auditor Resignation: A Catalyst for Chaos

On April 22, 2025, Sinovac announced that its auditor had resigned immediately, citing “substantial uncertainties” arising from the current Board’s review of prior corporate actions. This review, announced on April 1, 2025, followed a January 16 UK Privy Council ruling that upheld the validity of a director slate from the 2018 shareholder meeting—a slate the current Board has failed to fully adopt. The auditor’s exit has direct consequences: Sinovac missed its April 30 deadline to file its 2024 Form 20-F with the SEC, and it explicitly withdrew reliance on its 2021–2023 audit opinions. This non-reliance declaration is a severe blow, as it undermines trust in past financial reporting and delays critical regulatory compliance.

The stock’s trajectory reflects this turmoil. SVA has plummeted 71.3% year-to-date, with a market cap of just $460.3 million as of April 2025, down from a peak of nearly $10 billion in 2021. The audit crisis has further eroded investor confidence, compounding existing concerns over governance.

A Board in Disarray

The current Board’s legitimacy is under fire. Of its five directors, only three were part of the 2018 slate validated by the UK Privy Council, and one of those three is currently in custody for crimes including embezzlement and forgery. Shareholders argue the Board’s composition violates the Privy Council’s ruling, while management insists it respects the decision but warns that unraveling past decisions risks destabilizing the company.

The former board, which governed from 2018 onward, oversaw significant milestones: revenue grew from $246 million in 2019 to over $19 billion in 2021, and subsidiaries distributed $2.7 billion to minority shareholders. Yet common shareholders have seen no dividends since 2021, fueling demands for accountability. Heng Ren Partners, a prominent shareholder, has pushed for an $8.9 billion dividend payout, citing the company’s historic revenue surge.

Management’s Playbook: New Leadership and Transparency?

In an attempt to restore stability, Sinovac has turned to seasoned healthcare investors. On April 15, 2025, it appointed Sven H. Borho, CFA—a founding partner of OrbiMed, a healthcare-focused investment firm—as a new director and chair of the Audit Committee. Borho’s expertise aims to bolster oversight, though OrbiMed’s 2.7 million share stake (a 12-year investment) underscores its long-term commitment.

Management also called for a shareholder meeting to elect a new Board, arguing that legitimacy and stability are prerequisites to resuming NASDAQ trading. The stock has been suspended for over six years due to litigation, though the legal case was resolved in January 2025. Shareholders remain skeptical, however, as governance disputes persist.

Risks and Opportunities Ahead

The path forward hinges on three critical factors:
1. Audit Resolution: Securing a new independent auditor to restore compliance and file delayed reports. Without this, the SEC could delist SVA or impose penalties.
2. Board Legitimacy: Resolving the dispute over director appointments to satisfy shareholders and regulators. A new, uncontested board could unlock trading and investor confidence.
3. Dividend Distribution: Addressing shareholder demands for returns, which could alleviate tensions but requires navigating legal and operational hurdles.

Conclusion: A High-Stakes Gamble

Sinovac’s governance crisis is a stark reminder of how operational and legal missteps can unravel a once-promising biotech firm. With a stock down 71.3% year-to-date, a market cap of $460 million, and a $8.9 billion dividend demand looming, the stakes are high. While the appointment of Borho signals a step toward transparency, the Board’s credibility remains in question until it aligns with the Privy Council’s ruling and addresses past irregularities.

Investors must weigh the potential upside of resolving these issues—such as resuming trading and leveraging Sinovac’s vaccine pipeline (including WHO-prequalified hepatitis A and EV71 vaccines)—against the risks of regulatory penalties, delisting, and prolonged instability. Until Sinovac delivers a credible path forward, its shares are likely to remain in limbo, with the company’s survival hinging on swift governance reforms. For now, the red flags outweigh the rewards, making SVA a speculative bet at best.

While past revenue surges (e.g., the $19 billion 2021 peak) hint at potential, the current governance quagmire demands more than just financial performance—it requires trust. Until that trust is restored, Sinovac’s future remains as uncertain as its audited financials.