On March 24th, Clover Biotech announced that its wholly-owned subsidiary Clover Hong Kong had received a written notice from the Global Alliance for Vaccines and Immunization (Gavi) dated March 21, 2025, one month in advance. The notice claims that Gavi unilaterally terminated the pre order agreement and a claim letter dated March 21, 2025, which demanded that Clover Hong Kong refund the advance payment of $224 million (the "Advance Payment Amount").
San Ye Cao Biological announced that the company has refused the request for a refund, believing that such a request lacks basis based on the terms of the pre order agreement, and will do its utmost to safeguard its own rights and interests. To the best of Clover Biology's knowledge, as of the date of this announcement, no legal proceedings have been initiated regarding the aforementioned claims.

01. Irreversible advance payment
Before clarifying why Clover Biology confidently refused to refund the money, we need to first understand these two companies/institutions and the causes and consequences of this matter.

Trifolium Biotech was founded in 2007 and listed on the Hong Kong Stock Exchange in 2021. Its main focus is on developing new vaccines and candidate biological therapy products. In 2022, due to the tight cash flow, clover biology will cut down other projects and only pledge COVID-19 vaccine. The COVID-19 vaccine was put into emergency use in China in December 2022 and officially launched for the first time in February 2023. But at that time, the epidemic had already leveled off, so Clover Biology did not catch up with the trend. In the semi annual report of 2023, Trifolium Biology once said, "Since the overall demand for COVID-19 vaccine from Chinese and global procurement departments has been changing and decreasing since 2023, the company expects that COVID-19 vaccine sales will not bring meaningful financial contributions in 2023." At present, the vaccine layout of Trifolium Biology has shifted to respiratory diseases such as RSV, influenza.

Gavi is an international alliance composed of both public and private sectors, established in 2000, aimed at promoting global vaccine cooperation. Since its establishment, the vaccines popularized by Gavi have created over $220.5 billion in economic value, helped over 1 billion children in 78 low-income countries receive vaccines, and prevented over 17.3 million deaths. Gavi was one of the initiators of the COVID-19 Vaccine Implementation Plan (COVAX) during COVID-19. COVAX is the most important global vaccine procurement and distribution mechanism during the COVID-19 epidemic, providing a large number of vaccines to low - and middle-income countries. China has also participated in COVAX, and since July 2021, China National Pharmaceutical Group and Sinovac have been providing vaccines to COVAX. Gavi provides support for COVAX, responsible for coordinating the procurement, distribution, and delivery of vaccines, negotiating with vaccine companies to ensure that countries participating in COVAX can obtain vaccines at reasonable prices.

The cooperation between clover biology and Gavi also stems from COVID-19.

In June 2021, Clover Biology entered into a pre order agreement with Gavi. According to the agreement, clover biology will provide up to 414 million doses of recombinant protein COVID-19 candidate vaccine, which will be distributed to global participating countries through the "COVID-19 vaccine implementation plan" (COVAX mechanism). Once its COVID-19 candidate vaccine is approved to be included in the WHO Emergency Use List (EUL), clover biology will provide the first batch of 64 million doses of vaccine for distribution by COVAX mechanism in 2021. Meanwhile, Gavi also reserves the option to purchase a total of 350 million doses of vaccines for delivery in 2022.

In September 2022, Clover Biology and Gavi signed a revised pre order agreement. Based on this revision, Clover Biotech and Gavi have agreed to convert their previous commitment orders into the option to purchase 64 million doses of SCB-2019 vaccine during a four-year extension period, and to remove the initial option to purchase up to 350 million doses. The option to purchase 64 million doses can be exercised at Gavi's discretion, which means Gavi's continued interest and support for Trifolium Biotech's COVID-19 vaccine technology. The revised announcement also revealed that Trifolium Biotech has received $224 million (approximately RMB 1.627 billion) from Gavi as a prepayment for non refundable materials required to purchase the initial 64 million dose order.

At this point, we have gained a comprehensive understanding of the participating institutions, enterprises, and cooperation matters. We can also understand the rejection of clover organisms:
Firstly, and most importantly, the announcement at that time indicated that the $224 million paid by Gavi was a prepayment for non refundable materials. Cooperation and investment in the pharmaceutical field are originally more about paying for tomorrow's' uncertainty '. From a legal perspective, advance payment is to protect the basic rights and interests of the research and development party after investing a large amount of resources. Since the terms at that time clearly stipulated the irreversibility of the advance payment, even if the agreement was terminated, Clover Biology had no obligation to return it.

Secondly, according to the announcement, Gavi only terminated the agreement on the grounds of "one month's written notice in advance", but did not provide specific termination conditions that comply with the agreement (such as breach of contract, force majeure, etc.). Clover Biology believes that its unilateral termination behavior does not comply with the terms of the agreement, and therefore claims that Gavi's request has no legal basis.

Thirdly, as of March 24, 2025, Gavi has not initiated any legal proceedings and has not disclosed the specific reasons for its claim for a refund (such as product quality, delivery delay, etc.), further weakening the reasonableness of its requirements.

However, according to Gavi's statement, as of 2025, Gavi has only received about 12 million doses of vaccines, far below the quantity agreed upon in the contract. Therefore, Gavi proposed to terminate the cooperation between the two parties and demanded that Clover Biology refund up to $224 million in advance payment. However, according to the 2021 annual report of Trifolium Biotech, the company had previously invested up to 1.826 billion yuan in research and development to promote vaccine development and production. According to the 2024 semi annual report, the current cash and equivalents on the account of Clover Biotechnology are only RMB 482 million. If Gavi wins the legal process in the future, Clover Biology may fall into a huge debt crisis.

Clover Biology has made it clear that it will firmly resist Gavi's repayment request, which may require both parties to resolve disputes through legal means in the future. Considering the current financial situation of Clover Biology, it is crucial for its future survival and development to successfully defend its rights and avoid a loss of up to $224 million in funds. Now, both sides hold their own opinions and can only let the bullets fly for a while.

02. Reflections under the BD craze
Gavi's "return" of COVID-19 vaccine cooperation and success are not unprecedented.

In February 2021, Gavi signed a vaccine procurement agreement with vaccine company Novavax. Initially, Gavi signed an agreement with Novavax to purchase 350 million doses of vaccines, but only received orders for about 2 million doses, which led to Gavi terminating the agreement and pursuing a $700 million advance payment. In the end, Novavax chose to avoid potential arbitration risks by reaching a settlement with Gavi. Novavax has agreed to refund Gavi $400 million, which includes a down payment of $75 million and an annual installment payment of $80 million by the end of 2028. This $400 million can be offset by sales revenue from vaccines sold to low - and middle-income countries (known as vaccine credits). Gavi also received an additional $225 million vaccine credit for 5 years.

In fact, returns and termination of cooperation are the norm in the cooperation of innovative drugs and their industry chains. well-known Chinese pharmaceutical companies such as BeiGene, Tianjing Biotechnology, Nocheng Jianhua, Haosen Pharmaceutical, Cornerstone Pharmaceutical, Gakos, and Lingke Pharmaceutical have all experienced license out termination of cooperation. Internal adjustments within the enterprise, changes in market competition patterns, progress in clinical data, or sudden force majeure factors may all be factors that could lead to the termination of the agreement.

Innovative drugs are inherently doomed, and today's collaboration is just paying for tomorrow's uncertainty. We cannot assert the details of the agreement and the subsequent outcome, which requires a lengthy judicial process and multiple communications between both parties to provide an answer. More importantly, what will be the next development of Biotech after the termination of cooperation.

Regarding this issue, Trifolium Biotech stated in the announcement that the group will continue to work towards promoting the development and application of its proprietary respiratory syncytial virus (RSV) candidate vaccine SCB-1019 for repeated RSV vaccination and as part of respiratory combination vaccines. It is expected that clover biology will seize the RSV vaccine tuyere after missing the COVID-19 vaccine tuyere and realize transformation and profitability as soon as possible.

Source: https://pharm.jgvogel.cn/c1499316.shtml