Sinovac Biotech Ltd (SVA) Upside Limited

Sinovac Biotech’s (NASDAQ: SVA) product quality and sales/marketing network could provide investors’ comfort on market demands of its products even in an over-supplied market, believes Hongbo B. Lu, Sr. Research Analyst at Piper Jaffray and thus estimates a price target of $11.

There could be an increase to 2010 H1N1 pandemic vaccine order and operating margin. SVA has received a total of 12.5m dose orders from the government. They indicated that 12.5m doses are the maximal amount of vaccines SVA can produce before year-end.

Due to great demand in China for the pandemic influenza vaccine, additional influenza production capacity is being built, which could potentially translate to over-capacity post H1N1. 120m doses represent less than 10% vaccination rate for 1.3b Chinese people, which is significantly less than vaccination rates reported by other countries. As such, over-capacity of Influenza vaccine is not causing any worries to investors at the moment.