Chinese Biotech Clover Bio Refuses to Repay $224 Million Advance from Gavi Amid Contract Dispute

On March 24, Clover Biopharmaceuticals announced that its wholly-owned subsidiary, Clover Hong Kong, had received a written notice dated March 21, 2025, from Gavi, the Vaccine Alliance, providing one month’s advance notice.The notice stated that Gavi unilaterally terminated the advance purchase agreement, along with a demand letter dated March 21, 2025, which required Clover Biopharmaceuticals Hong Kong to refund the advance payment of US$224 million (the “Advance Payment Amount”).

Clover Biopharmaceuticals announced that the Company has rejected requests for refunds, deeming such claims unsubstantiated under the terms of the pre-purchase agreements, and will make every effort to vigorously and firmly safeguard its legitimate rights and interests. To the best knowledge of Clover Biopharmaceuticals, as of the date of this announcement, no legal proceedings have been initiated in relation to the aforementioned claims.

Before clarifying why Sichuan Sanyecao Bio-pharmaceutical Co., Ltd. feels justified in refusing refunds, we must first understand these two enterprises/institutions and the context surrounding this incident.

Clover Biopharmaceuticals, founded in 2007 and listed on the Hong Kong Stock Exchange in 2021, is primarily dedicated to the development of novel vaccines and biotherapeutic candidates. In 2022, due to tight cash flow, Clover Biopharmaceuticals discontinued other projects to focus exclusively on its COVID-19 vaccine. This COVID-19 vaccine was included in China’s emergency use authorization in December 2022 and officially launched for the first time in February 2023. However, as the pandemic had already begun to subside by then, Clover Biopharmaceuticals failed to capitalize on the market surge. In its 2023 interim report, the company stated, “Due to the changing and declining overall demand for COVID-19 vaccines from procurement agencies in China and globally since 2023, the company does not expect COVID-19 vaccine sales to make a meaningful financial contribution in 2023.” Currently, Clover Biopharmaceuticals has shifted its vaccine portfolio toward respiratory diseases such as RSV and influenza.

Gavi is an international public-private partnership established in 2000 to promote global vaccine cooperation. Since its inception, Gavi’s vaccination programs have generated over $220.5 billion in economic value, helped more than one billion children in 78 low-income countries receive vaccinations, and prevented more than 17.3 million deaths. During the COVID-19 pandemic, Gavi was one of the initiators of the COVID-19 Vaccines Global Access (COVAX) facility. COVAX served as the most critical global mechanism for vaccine procurement and distribution during the pandemic, supplying large quantities of vaccines to low- and middle-income countries. China also participated in COVAX; since July 2021, Sinopharm and Sinovac have been providing vaccines to the initiative. Gavi supports COVAX by coordinating vaccine procurement, allocation, and delivery, and negotiates with vaccine manufacturers to ensure that participating countries can access vaccines at reasonable prices.

And the collaboration between Sichuan Sanyecao Bio-pharmaceutical Co., Ltd. and Gavi also originated from COVID-19.

In June 2021, Clover Biopharmaceuticals entered into an advance purchase agreement with Gavi. Under the agreement, Clover Biopharmaceuticals will supply up to 414 million doses of its recombinant protein-based COVID-19 vaccine candidate for distribution to participating countries worldwide through the COVAX Facility. Upon the inclusion of its COVID-19 vaccine candidate in the World Health Organization’s Emergency Use Listing (EUL), Clover Biopharmaceuticals will deliver an initial batch of 64 million doses for allocation by the COVAX Facility in 2021. Additionally, Gavi retains the option to procure up to an additional 350 million doses, with delivery scheduled for 2022.

In September 2022, Clover Biopharmaceuticals entered into and signed an amendment to the advance purchase agreement with Gavi. Under this amendment, Clover Biopharmaceuticals and Gavi agreed to convert the previous committed order into an option for 64 million doses of the SCB-2019 vaccine over a four-year extension period, while eliminating the initial option to purchase up to 350 million doses. The option to purchase 64 million doses may be exercised at Gavi’s discretion, reflecting Gavi’s continued interest in and support for Clover Biopharmaceuticals’ COVID-19 vaccine technology. The amendment announcement also disclosed that Clover Biopharmaceuticals had received a prepayment of $224 million (approximately RMB 1.627 billion) from Gavi to cover non-refundable materials required for the initial order of 64 million doses.

At this point, we have gained a thorough understanding of the participating institutions, enterprises, and matters of cooperation. We can also understand Sichuan Sanyecao Bio-pharmaceutical Co., Ltd.’s refusal:

First, and most importantly, the announcement at the time indicated that the $224 million paid by Gavi was an advance payment for non-refundable materials. Collaboration and investment in the pharmaceutical sector are inherently about paying for tomorrow’s “uncertainties.” From a legal perspective, advance payments serve to safeguard the basic rights and interests of R&D parties after they have committed substantial resources. Since the terms at the time explicitly stipulated the irrevocability of the advance payment, Sichuan Sanyecao Bio-pharmaceutical Co., Ltd. had no obligation to refund the amount, even if the agreement were terminated.

Secondly, according to the announcement, Gavi terminated the agreement solely on the grounds of “one month’s prior written notice,” without citing specific termination conditions stipulated in the agreement (such as breach of contract or force majeure). Sichuan Sanyecao Bio-pharmaceutical Co., Ltd. believes that Gavi’s unilateral termination does not comply with the terms of the agreement and therefore asserts that Gavi’s request lacks legal basis.

Third, as of March 24, 2025, Gavi has not initiated any legal proceedings nor publicly disclosed specific grounds for its refund claim (such as product quality or delivery delays), further undermining the reasonableness of its demand.

However, according to Gavi, by 2025 it had received only approximately 12 million vaccine doses, far below the quantity stipulated in the contract. Consequently, Gavi has proposed terminating the partnership and is demanding that Sichuan Sanyecao Bio-pharmaceutical Co., Ltd. refund advance payments totaling up to $224 million.However, according to Clover Biopharmaceuticals’ 2021 annual report, the company had previously invested as much as RMB 1.826 billion in research and development expenses to advance vaccine R&D and production. Furthermore, its 2024 semi-annual report shows that Clover Biopharmaceuticals currently holds only RMB 482 million in cash and cash equivalents. If Gavi prevails in subsequent legal proceedings, Clover Biopharmaceuticals could face a severe debt crisis.

Sichuan Sanyecao Bio-pharmaceutical Co., Ltd. has explicitly stated its firm resistance to Gavi’s repayment demands, indicating that the two parties may need to resolve their dispute through legal channels in the future. Given Sanyecao’s current financial situation, its ability to successfully defend its rights and avoid a capital outflow of up to $224 million is critical to its future survival and development. With both sides maintaining their respective positions, only time will tell who is in the right.

Gavi’s “return” of COVID-19 vaccine cooperation, and its victory, is not without precedent.

In February 2021, Gavi signed a vaccine procurement agreement with the pharmaceutical company Novavax. Initially, the agreement between Gavi and Novavax was for the purchase of 350 million doses; however, only approximately 2 million doses were delivered. This shortfall led Gavi to terminate the agreement and seek the recovery of $700 million in advance payments. Ultimately, Novavax opted to settle with Gavi to avoid potential arbitration risks. Under the settlement, Novavax agreed to refund $400 million to Gavi, comprising a $75 million upfront payment and annual installments of $80 million through the end of 2028. This $400 million obligation can be offset by sales revenues from vaccines sold to low- and middle-income countries, referred to as “vaccine credits.” Additionally, Gavi secured an extra $225 million in vaccine credits valid over a five-year period.

In fact, returns and termination of collaborations are common occurrences in the innovative drug sector and its industrial chain partnerships. Well-known Chinese pharmaceutical companies such as BeiGene, I-Mab, InnoCare Pharma, Hansoh Pharmaceutical, CStone Pharmaceuticals, Jacobio Pharmaceuticals, and LinkMed have all experienced terminations of license-out agreements. Factors leading to such terminations may include internal corporate restructuring, shifts in the competitive landscape, developments in clinical data, or sudden force majeure events.

Innovative drug development is inherently fraught with peril, where survival rates are exceedingly low; today’s partnership merely serves to pay for tomorrow’s uncertainties. We cannot make definitive statements regarding the specifics of the agreement or its subsequent outcomes, as answers will require lengthy judicial proceedings and multiple rounds of communication between both parties. More importantly, the question remains how biotech companies will chart their next steps following the termination of such collaborations.

In response to this issue, Clover Biopharmaceuticals stated in its announcement that the Group will continue to advance the research and development of its proprietary respiratory syncytial virus (RSV) vaccine candidate, SCB-1019, focusing on RSV revaccination and its application as part of a combination respiratory vaccine. It is anticipated that Clover Biopharmaceuticals will seize the emerging opportunity in the RSV vaccine market after missing the boom in COVID-19 vaccines, thereby achieving business transformation and profitability as soon as possible.

References:

1. “Breakup and Demand for Refund of Advance Payment! Clover Biopharmaceuticals Enters $224 Million Dispute with Gavi”
2. “Gavi (Co-founded by the Gates Foundation) Demands Sichuan Sanyecao Bio-pharmaceutical Refund $224 Million in Advance Payments”