You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information — D. Risk Factors" or in other parts of this annual report on Form 20-F. A. Operating Results Overview We are a fully integrated China-based biopharmaceutical company focused on the research, development, manufacturing and commercialization of vaccines for the prevention of human infectious diseases, including certain diseases with significant unmet medical needs. We have developed a comprehensive vaccine portfolio covering hepatitis A, hepatitis B, hand, foot and mouth disease ("HFMD") caused by enterovirus 71 ("EV71"), seasonal and pandemic influenza, COVID-19, pneumococcal disease, poliomyelitis, mumps, varicella, rabies and tetanus. Product Name [abbr.] Date of Approval Hepatitis A Vaccine (Human Diploid Cell), Inactivated [HepA-I] May 2002 Hepatitis A and B Combined Vaccine [HepA&B] January 2005 Influenza Vaccine (Split Virion), Inactivated [IIV3] July 2005 Influenza Vaccine (Split Virion), Inactivated, Quadrivalent [IIV4] June 2020 Pandemic Influenza Vaccine (Inactivated, adjuvanted) [PIV-I-Adj](1) April 2008 Pandemic Influenza Vaccine (Split virion, adjuvanted) [PIV-SV-Adj](1) November 2011 H1N1 Influenza A Vaccine (Split Virion), Inactivated [pH1N1](1) September 2009 Enterovirus Type 71 Vaccine (Vero Cell), Inactivated [EV71] December 2015 23-Valent Pneumococcal Polysaccharide Vaccine [PPSV23] December 2020 Poliomyelitis Vaccine (Vero Cell), Inactivated, Sabin Strains [sIPV] July 2021 Mumps Vaccine, Live [MuV] September 2012 Varicella Vaccine, Live [VAR] December 2019 COVID-19 Vaccine (Vero Cell), Inactivated [COV-I] February 2021 Tetanus Vaccine, Adsorbed [TT] August 2025 (1)PIV-I-Adj, PIV-SV-Adj and pH1N1 did not undergo Phase III clinical trials because none were required by the relevant authorities in order to receive regulatory approval and they are sold exclusively to the PRC government. Revenue from these products is recognized upon completion of government audits confirming our fulfillment of stockpiling orders. Our Proprietary Rights We hold the proprietary rights to our key commercialized vaccines. The underlying technologies and formulations were either developed internally or acquired through strategic transactions and technology transfers during our early stages of operation (2001–2005). The acquisition costs for these legacy proprietary rights were fully expensed as purchased in-process research and development costs at the time of acquisition. We hold two licenses from the National Institutes of Health ("NIH"): a Patent License Agreement for Rotavirus Strains and Monoclonal Antibodies (2009, as amended in 2022) and a Biological Materials License Agreement (2022). Under the Patent License Agreement, NIH has granted us a non-exclusive license to import and use certain biological materials to develop an oral rotavirus vaccine and produce the vaccine for commercial sales. Financial terms include an initial royalty of $170,000, a minimum annual royalty of $7,500, sales royalties ranging from 1.5% to 4.0% depending on the sales territory and customer type, and up to $330,000 in clinical and commercial milestone payments. We made royalty payments of $15,000, $nil and $80,000 for the years ended December 31, 2025, 2024 and 2023, respectively. We also operate under a 50-year non-exclusive license agreement with INTRAVACC (signed in 2014) to develop and commercialize our Sabin Inactivated Polio Vaccine (sIPV) in China and other countries. The financial terms include up to $2.4 million (€1.5 million) in entrance and milestone fees, plus a single-digit percentage worldwide sales royalty. We paid royalty fee of $1,033,922 (€899,169), $597,776 (€542,634) and $134,245 (€124,117) for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, the Company had an outstanding liability of royalty fee in amount of $748,001 (€650,464). In July 2025, we entered into a non-exclusive biological material license agreement with the American Type Culture Collection ("ATCC") to use certain ATCC Materials, including ATCC® VR-795™ (Human herpesvirus 3), to develop, manufacture, and commercialize a human varicella vaccine. The term of the license is 30 years, unless earlier terminated in accordance with its terms. We agreed to pay ATCC an initiation fee of 46 $1.8 million payable within 30 days after the effective date, as well as an annual royalty of 0.5% of the net sales of licensed products sold by us. We paid the initiation fee of $1.8 million and accrued royalties of $0.7 million for the year ended December 31, 2025. As of the date of this annual report, we hold 158 issued patents related to our vaccines and antibodies in China. We maintain 111 trademark registrations across our operational regions, including core brands "SINOVAC", "Healive", "Anflu", "Inlive" and "CoronaVac." We have registered our domain names, including www.sinovac.com.cn and www.sinovac.com, with the China Internet Network Information Center. Additionally, we require all employees and partners to execute strict confidentiality and invention-assignment agreements to protect our unpatented know-how and clinical data. Research and Development Programs Our research and development strategy is directed by management, subject to rigorous feasibility reviews, annual budgeting, and approval by our board of directors. We dynamically allocate personnel and leverage our diverse technology platforms, including inactivation, attenuated, recombinant, viral vector, and mRNA technologies, across multiple product development programs based on clinical progress and commercial potential. The following table summarizes the clinical status of our key pipeline candidates that may have a material impact on our results of operations. Detailed descriptions of target indications and clinical trial designs are provided in "Item 4. Information on the Company — Research and Development." Candidate Current Status / Recent Milestones Rabies Vaccine (Serum-Free Vero Cell) NDA phase (approval estimated July 2026). International Phase II trial in Pakistan ongoing. Pneumococcal Conjugate Vaccine (PCV13/PCV24) PCV13: Phase III trial ongoing. PCV24: Phase I/II trial ongoing. Meningococcal Conjugate Vaccine (ACYW135/ACYW135X) ACYW135: Phase III trial ongoing. ACYW135X: Phase I trial ongoing. Reassortant Rotavirus Vaccine Phase II trial ongoing; Phase III trial in preparation. Enterovirus Vaccine (Bivalent/Quadrivalent) Bivalent: Phase III trial ongoing. Quadrivalent: Phase III trial in preparation. Anti-Tetanus Monoclonal Antibody Phase III trial in preparation. Herpes Zoster Vaccines (mRNA and Recombinant) mRNA: Phase I trial ongoing. Recombinant (CHO cell): Phase I trial in preparation. RSV mRNA Vaccine Phase I trial ongoing. Influenza Virus Split Vaccine (MDCK Cells) IND application submitted in early 2026. Pentavalent DTaP-IPV/Hib Preclinical development. Fully Human Monoclonal Antibody Against Respiratory Syncytial Virus Preclinical development. Government Grants Deferred government grants represent funding received from the government for research and development, or investment in building or improving production facilities. Government grants for specific R&D projects are recorded as deferred government grants upon receipt and are recognized in income when the attached conditions are met. Government grants related to property, plant and equipment are deferred and recognized as a reduction of the related depreciation and amortization expense over the same periods in which the underlying assets are depreciated. We received and deferred government grants in the amounts of $3.2 million (RMB20.4 million), $0.6 million (RMB5.6 million) and $7.6 million (RMB57.7 million) in 2025, 2024 and 2023, respectively. We recognized $4.0 million (RMB29.0 million) in the consolidated statements of operations and comprehensive income (loss) in 2025 (2024 - $8.6 million (RMB61.7 million), 2023 - $22.8 million (RMB161.7 million)), including amounts recognized from deferred government grants upon fulfillment of attached conditions and amounts received without conditions that were recognized directly in the consolidated statements of operations and comprehensive income (loss). Deferred government grants included the following: Government grants for property, plant and equipment We have five deferred government grants related to property, plant and equipment. We have fulfilled the conditions attached to four of these grants as of the end of 2025. Of the remaining deferred amounts, $0.8 million (RMB5.9 million) will be amortized over the next 12 months and is included in the current portion of deferred government grants and $5.1 million (RMB35.6 million) will be amortized beyond the next 12 months and is included in the non-current portion of deferred government grants. 47 Government grants for research and development We have twelve deferred government grants related to various research and development projects. We expect to fulfill the conditions attached to eight of these grants within the next 12 months and have recorded $2.2 million (RMB15.3 million) as the current portion of deferred government grants. The conditions attached to the remaining four grants are expected to be fulfilled beyond the next 12 months, and the aggregate amount of $0.8 million (RMB5.6 million) has been recorded in the non-current portion of deferred government grants as of December 31, 2025. RESULTS OF OPERATIONS Year ended December 31, Consolidated statements of operations and comprehensive income (loss) data 2025 2024 2023 (in thousands) Sales $ 386,013 $ 361,374 $ 470,170 Cost of sales 124,032 140,688 146,853 Gross profit 261,981 220,686 323,317 Operating expenses: Selling, general and administrative expenses 332,979 420,922 598,250 Provision for credit losses 4,144 12,306 2,638 Research and development expenses 216,180 270,661 350,187 Loss on disposal and impairment of property, plant and equipment 137,235 30,279 108,722 Loss on impairment of intangible assets 49,922 — — Loss on impairment of goodwill 15,686 — — Government grants recognized in income (4,035 ) (7,947 ) (22,497 ) Total operating expenses 752,111 726,221 1,037,300 Operating loss (490,130 ) (505,535 ) (713,983 ) Interest and financing expenses (9,819 ) (5,637 ) (4,941 ) Interest income 33,281 29,073 87,122 Share of losses from equity method investments (4,036 ) (2,700 ) (11,461 ) Other income, net 208,602 527,636 558,776 (Loss) income before income taxes (262,102 ) 42,837 (84,487 ) Income tax benefit (expense) 63,266 (2,181 ) (36,371 ) Net (loss) income (198,836 ) 40,656 (120,858 ) Less: net loss attributable to non-controlling interests (139,156 ) (50,249 ) (107,367 ) Net (loss) income attributable to common shareholders of Sinovac (59,680 ) 90,905 (13,491 ) Comprehensive income (loss) 81,865 (193,820 ) (389,789 ) Less: comprehensive loss attributable to non-controlling interests (53,009 ) (140,337 ) (214,146 ) Comprehensive income (loss) attributable to shareholders of Sinovac $ 134,874 $ (53,483 ) $ (175,643 ) Sales Sales mainly represent: (1) the invoiced value of goods, net of value added taxes, and provisions for sales returns. See "Item 5. Operating and Financial Review and Prospects — A. Operating Results — Taxes and incentives." We recognize revenues when control of promised goods is transferred to our customers for the amount of consideration to which we expect to be entitled in exchange for such goods, and we can reasonably estimate the return provision for the goods; and (2) the value of goods produced for government stockpiling program. We recognize revenues from the sales of products to the government stockpiling program when cash has been received and the applicable stockpiling period has expired and the products have passed government inspection or are delivered per government instructions. Our revenues, growth and results of operations depend on several factors, including the level of acceptance of our products among doctors, hospitals and patients, and our ability to maintain or increase prices for our products at levels that provide favorable margins. The level of acceptance among doctors, hospitals and patients is influenced by the performance, promotion and academic research, and pricing of our products. We market and sell our vaccine products primarily through provincial and municipal CDCs. We enter into sales agreements with CDCs each time a CDC places a purchase order. Pursuant to these sales agreements, CDCs typically agree not to re-sell our products to regions outside the territory that the pertinent CDC administers. For vaccines included in the government-sponsored expanded immunization program, we actively participate in the tenders and bidding processes organized by various provincial level CDCs. We enter into sales agreements with CDCs when we win a bid. 48 In the Chinese Mainland public market, the government purchases vaccines typically by issuing government tenders. During the evaluation process, price is a key factor that impacts the result of the tender. Therefore, we need to price our products competitively to win tenders. We believe that our emphasis on product quality is an advantage which increases our competitiveness. In the Chinese Mainland private market and export market, we set our prices based on our production costs, the prices of competitive products and the acceptance levels of procurement agencies and patients. We also adjust our product prices according to changes in the external environment to balance sales volume and gross profit, and ultimately to maximize sales profit margins. The table below sets forth a breakdown of our sales by market type: Year ended December 31, Sales 2025 2024 2023 (in thousands) Chinese Mainland Public Market $ 24,998 $ 50,362 $ 46,481 Chinese Mainland Private Market 236,186 246,641 356,476 Export 124,829 64,371 67,213 Total sales $ 386,013 $ 361,374 $ 470,170 Cost of sales Our cost of sales primarily consists of finished goods sold, which includes direct materials, direct labor, and manufacturing overheads. Depreciation of property, plant and equipment attributable to manufacturing activities and license amortization are capitalized as part of work-in-process and finished goods, and recognized in cost of sales when the related finished goods are sold. Costs incurred when production lines are not fully utilized are recorded as underutilized manufacturing cost. We recorded $11.6 million of underutilized manufacturing costs in 2025, primarily due to lower production volume of PPSV23 and sIPV. We recorded $17.2 million of underutilized manufacturing costs in 2024 primarily due to lower production volume of influenza vaccine and varicella vaccine. We recorded $17.3 million of underutilized manufacturing costs in 2023, primarily due to lower production volume of Anflu, sIPV and CoronaVac. Our production capacities have not been fully utilized. If we successfully commercialize new products and increase sales of existing products, we expect capacity utilization to improve and unit production costs to decrease. Selling, general and administrative expenses Selling expenses consist primarily of salaries and related expenses for personnel engaged in sales, marketing and customer support functions, as well as costs associated with marketing activities and shipping. General and administrative expenses consist primarily of compensation for employees in executive and operational functions, including finance and accounting and human resources. Other significant costs include facilities expenses, as well as professional fees for accounting and legal services. Research and development expenses Our research and development expenses consist primarily of: •salaries and related expenses for personnel; •fees paid to consultants and contract research organizations for independent monitoring of our clinical trials and for acquiring and evaluating clinical trial data; •fees paid to third-party service providers in connection with other aspects of our product development efforts; •costs of materials used in research and development; •depreciation of facilities and equipment used to develop our products; and •technology license fees and milestone payments paid to third parties before a product receives regulatory approval. We expense both internal and external research and development costs as incurred, other than (i) capital expenditures that have alternative future uses, such as the build-out of our manufacturing facility, and (ii) license fees and milestone payments made to third parties after regulatory approval is received. We expect our research and development expenses to increase as we advance our current portfolio of product candidates through clinical trials and advance additional product candidates into preclinical and clinical development. 49 The table below sets forth a breakdown of research and development expenses by product candidate: Year ended December 31 Research and Development Expenses 2025 2024 2023 (in millions) Pneumococcal Conjugate Vaccine $ 38.9 $ 43.2 $ 44.1 Bivalent Enterovirus Vaccine 20.0 13.7 6.7 Pentavalent DTaP-IPV/Hib Combination Vaccine 17.3 33.8 93.2 Rabies vaccine for human use 15.5 45.6 28.4 Group ACYW135 Meningococcal Conjugate Vaccine 13.5 21.6 29.2 Adsorbed Tetanus Vaccine 11.8 7.7 1.4 Lyophilized Herpes Zoster Virus mRNA Vaccine 9.2 8.1 5.1 Recombinant Norovirus Vaccine 8.7 13.8 2.4 Reassortant Rotavirus Vaccine 8.3 27.8 11.8 Lyophilized Respiratory Syncytial Virus mRNA Vaccine 7.8 17.5 8.9 Others(1) 65.2 37.9 119.0 Total Research and Development Expenses $ 216.2 $ 270.7 $ 350.2 (1) Includes research and development expenses on other product candidates at preliminary stage. Taxes and incentives Our Chinese Mainland Subsidiaries are subject to income tax in China on their taxable income at the rate prescribed by the relevant PRC income tax laws and regulations. In general, the PRC tax authorities have up to five years from the date of filing to conduct examinations of the tax returns of our Chinese Mainland Subsidiaries. Accordingly, income tax returns filed by our Chinese Mainland Subsidiaries for tax years beginning in 2021 remain open to examination by the tax authorities. Effective from January 1, 2008, the PRC statutory EIT rate is 25%. An enterprise may benefit from a preferential tax rate of 15% under the EIT Law if it qualifies as a HNTE. Sinovac Beijing and Sinovac Dalian each reconfirmed their HNTE status in 2020 and again in 2023, in each case for a period of three years. As a result, subject to continued satisfaction of the applicable criteria, Sinovac Beijing and Sinovac Dalian are entitled to a reduced EIT rate of 15% from 2020 through 2025. It is expected that Sinovac Beijing and Sinovac Dalian will be qualified as a HNTE in 2026, and we will continue to assess the status. Sinovac LS confirmed its HNTE status in 2020 for a period of three years, and subsequently reconfirmed that status in 2023 for a period of three years. Notwithstanding such reconfirmation, the applicable criteria required for HNTE status must be maintained on a three-year rolling basis, and failure to meet these criteria could result in the loss of HNTE status and the application of the 25% statutory rate. Sinovac LS will apply for HNTE in 2026 for another period of three years. Sinovac Chengdu is expected to be eligible for the 15% preferential EIT rate under the Western Development incentive policy going forward. Our other Chinese Mainland Subsidiaries are subject to EIT at the statutory rate of 25%. We determine deferred taxes for each tax-paying entity in each tax jurisdiction. We evaluate our valuation allowance requirements at each reporting period by reviewing all available evidence, both positive and negative, and considering whether, based on the weight of that evidence, a valuation allowance is needed. When a change in circumstances causes a change in management's judgment about the ability to realize deferred tax assets, the impact of the change on the valuation allowance is generally reflected in income from operations. The future realization of the tax benefit of an existing deductible temporary difference ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryforward period available under applicable tax law. As of December 31, 2025, tax losses of our Chinese Mainland Subsidiaries amounted to $1,500.8 million (RMB10,489.4 million) will expire, if not utilized, from 2026 to 2030. Tax losses of our subsidiaries outside Chinese Mainland are immaterial as of December 31, 2025. We continue to monitor and evaluate legislative developments related to the Global Anti-Base Erosion ("GloBE") rules under the OECD Pillar Two framework. The Pillar Two initiative introduces a 15% global minimum tax applied on a country-by-country basis, which took effect in many jurisdictions in which we operate on or after January 1, 2025. To date, such legislation has not materially impacted our consolidated financial statements. 50 Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Sales. Total sales increased to $386.0 million in 2025 from $361.4 million in 2024. The increase was primarily driven by higher sales of varicella vaccines and influenza vaccines resulting from increased procurement by international customers, partially offset by a decline in sIPV vaccine sales due to lower domestic birth rates. Cost of Sales. Total cost of sales decreased to $124.0 million in 2025 from $140.7 million in 2024. The decrease was mainly due to lower expenses recognized in connection with the long-term employee incentive plan adopted in 2022 (the "Employee Incentive Plan"), and our ongoing efforts in cost reduction and efficiency improvement. Gross Profit. Gross profit increased to $262.0 million in 2025 from $220.7 million in 2024. Gross margin increased from 61.1% in 2024 to 67.9% in 2025, primarily driven by a favorable shift in product and channel mix toward higher-margin international sales, as well as improved cost efficiencies in production. Selling, General and Administrative Expenses. Selling, general and administrative expenses in 2025 decreased to $333.0 million from $420.9 million in 2024. The decrease was mainly due to lower expenses recognized in connection with the Employee Incentive Plan. Research and Development Expenses. Research and development expenses, which primarily represent expenditures on the advancement of pipeline vaccine candidates, decreased to $216.2 million in 2025 from $270.7 million in 2024. The decrease was mainly due to lower expenses recognized in connection with the Employee Incentive Plan. Loss on disposal and impairment of property, plant and equipment. Loss on disposal and impairment of property, plant and equipment increased to $137.2 million in 2025 from $30.3 million in 2024, primarily driven by impairment triggers for our machinery, equipment, construction in progress and leasehold improvements and a drop in the lease market price of certain plants. Loss on Impairment of intangible assets and Goodwill. We recorded an impairment loss of intangible assets and goodwill of $65.6 million in 2025, which was mainly due to impairment triggering events identified in connection with our acquisition of Sinovac Chengdu. No goodwill impairment was recorded in 2024. Interest and Financing Expenses. Interest and financing expenses increased to $9.8 million in 2025 from $5.6 million in 2024, primarily due to higher outstanding bank loan balances as of December 31, 2025. Other Income, net. We recorded net other income of $208.6 million and $527.6 million in 2025 and 2024, respectively. Net other income primarily consisted of (i) investment income of $307.4 million and $482.1 million in 2025 and 2024, respectively, earned from investment products issued by financial institutions; and (ii) a net foreign exchange loss of $109.8 million in 2025 and a net foreign exchange gain of $61.4 million in 2024, resulting from fluctuations in foreign exchange rates. Income Tax Benefit (Expenses). We recorded an income tax benefit of $63.3 million in 2025, and income tax expense of $2.2 million in 2024. The variance was mainly due to the reversal of deferred tax liabilities, which resulted from realized income of short-term investment and the reversal of deferred tax liabilities arising from impairment of property, plant and equipment and in-process research and development assets ("IPR&D") acquired in previous acquisitions. Net Income (Loss). Net loss was $198.8 million in 2025, compared to net income of $40.7 million in 2024. Net loss attributable to common shareholders of Sinovac Antigua was $59.7 million in 2025, compared to net income attributable to common shareholders of Sinovac Antigua of $90.9 million in 2024. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Sales. Total sales decreased to $361.4 million in 2024 from $470.2 million in 2023. The decrease was mainly due to a decrease in sales volume of quadrivalent influenza vaccines driven by intensified competition and reduced production volume of mumps vaccines. Cost of Sales. Total cost of sales decreased to $140.7 million in 2024 from $146.9 million in 2023, primarily due to reduced sales activities in 2024. Gross Profit. Gross profit in 2024 decreased to $220.7 million from $323.3 million in 2023. Gross margin decreased from 68.8% in 2023 to 61.1% in 2024, primarily due to lower average selling prices, partially offset by our ongoing efforts in cost reduction and efficiency improvement. Selling, General and Administrative Expenses. Selling, general and administrative expenses in 2024 decreased to $420.9 million from $598.3 million in 2023. The decrease was mainly due to lower expenses recognized in connection with the Employee Incentive Plan, as well as lower marketing, promotional and logistics costs due to reduced sales activities. 51 Research and Development Expenses. Research and development expenses, which primarily represent expenditures on the advancement of pipeline vaccine candidates, decreased to $270.7 million in 2024 from $350.2 million in 2023. Interest and Financing Expenses. Interest and financing expenses increased to $5.6 million in 2024 from $4.9 million in 2023, primarily due to higher outstanding bank loan balances as of December 31, 2024. Other Income, net. We recorded net other income of $527.6 million and $558.8 million in 2024 and 2023, respectively, primarily consisting of investment income from investment products issued by financial institutions, which amounted to $482.1 million and $449.3 million in 2024 and 2023, respectively. Income Tax Benefit (Expense). Income tax expense decreased to $2.2 million in 2024 from $36.4 million in 2023. The decrease was primarily due to reversal of deferred tax liabilities in 2024. Net Income (Loss). Net income was $40.7 million in 2024, compared to a net loss of $120.9 million in 2023. Net income attributable to common shareholders of Sinovac Antigua was $90.9 million in 2024, compared to net loss attributable to common shareholders of Sinovac Antigua of $13.5 million in 2023. B. Liquidity and capital resources To date, we have financed our operating and investing activities through cash flows from operations and proceeds from financing activities, including bank borrowings. As of December 31, 2025, 2024 and 2023, our cash and cash equivalents totaled $488.2 million, $335.3 million and $1,124.0 million, respectively. Based on our current business plan, we believe that our existing capital resources are sufficient to meet our cash requirements for planned operations and other commitments for at least the next 12 months. However, we may seek to enhance our liquidity position or increase our cash reserves through additional financing to support future operations and investments. For more information, see "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Company—We may need additional capital to upgrade or expand our production capabilities, to continue development of our product pipeline and to market existing and future products on a large scale. We cannot guarantee that we will find adequate sources of capital in the future." Cash Flows and Working Capital The following table sets forth a summary of our net cash flows for the periods indicated: Year ended December 31, 2025 2024 2023 (in thousands) Net cash (used in) provided by operating activities $ (512,184 ) $ (56,891 ) $ 138,645 Net cash provided by (used in) investing activities 4,388,170 456,359 (2,699,051 ) Net cash used in financing activities (3,434,706 ) (823,950 ) (88,554 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 112,932 (102,423 ) (108,846 ) Increase (decrease) in cash and cash equivalents and restricted cash 554,212 (526,905 ) (2,757,806 ) Cash and cash equivalents and restricted cash, beginning of year 602,217 1,129,122 3,886,928 Cash and cash equivalents and restricted cash, end of year $ 1,156,429 $ 602,217 $ 1,129,122 Operating Activities Net cash used in operating activities was $512.2 million in 2025, compared to $56.9 million in 2024. The increase in cash outflows were primarily attributable to tax payments made during the year and decline in cash collections from sales. Net cash used in operating activities was $56.9 million in 2024, compared to net cash provided by operating activities of $138.6 million in 2023. The shift from cash inflows to cash outflows was primarily attributable to payments made under the Employee Incentive Plan. Investing Activities Net cash provided by investing activities was $4,388.2 million in 2025. We generated proceeds primarily from the maturity and sales of debt and equity securities, which exceeded the amount of new securities purchased during the year. These net inflows were partially offset by capital expenditures for property, plant and equipment. 52 Net cash provided by investing activities was $456.4 million in 2024. We generated proceeds primarily from the maturity and sales of debt and equity securities, which exceeded the amount of new securities purchased during the year. These net inflows were partially offset by capital expenditures for property, plant and equipment, as well as the acquisition of Sinovac Chengdu. Financing Activities Net cash used in financing activities was $3,434.7 million in 2025, primarily driven by dividend distributions of $3,534.0 million to shareholders, partially offset by net proceeds from bank borrowings. Net cash used in financing activities was $824.0 million in 2024, primarily driven by dividend distributions of $947.0 million from subsidiaries to non-controlling shareholders, partially offset by net proceeds from bank borrowings. Accounts Receivable Our total accounts receivable were $286.3 million as of December 31, 2025, a decrease from $300.9 million as of December 31, 2024, primarily due to increased collections on outstanding balances from prior years, partially offset by higher allowances for credit losses recognized in 2025. Our average accounts receivable turnover period in 2025 was 318 days, compared to 378 days in 2024. Our maximum exposure to credit risk at the balance sheet dates relating to accounts receivable is summarized as follows: December 31, 2025 2024 (in thousands) Aging within one year, net of allowance for credit losses $ 218,475 $ 214,548 Aging greater than one year, net of allowance for credit losses 67,869 86,339 Accounts receivable, net $ 286,344 $ 300,887 Borrowings As of December 31, 2025, we had $229.4 million in short-term bank loans and the current portion of long-term bank loans, offset by $488.2 million in cash and cash equivalents, resulting in a liquid assets balance of $258.8 million, compared with $123.4 million as of December 31, 2024. The following tables summarize our short-term and long-term bank borrowings as of December 31, 2025: Type Amount Annual Interest Rate Maturity Date Purpose Bank loan from China Merchants Bank (a) $175.5 million 2.11% to 2.85% September 22, 2027 Daily operations Bank loan from Bank of Beijing (b) $35.5 million 2.11% to 2.90% June 27, 2026 Daily operations Bank loan from China Construction Bank (c) $232.8 million 2.11% to 2.77% November 28, 2043 Purchase of property, plant and equipment, daily operations and acquisition Bank loan from Bank of China (d) $43.3 million 2.15% to 2.50% September 25, 2026 Daily operations Bank loan from Bank of Chengdu (e) $4.3 million 2.45% to 2.55% June 22, 2026 Daily operations Bank loan from Chengdu Rural Commercial Bank (f) $0.7 million 2.50% May 26, 2026 Daily operations Bank loan from China Minsheng Banking (g) $1.4 million 3.00% May 26, 2026 Daily operations China CITIC Bank (h) $1.4 million 2.45% July 26, 2028 Daily operations (a) On January 22, 2024, Sinovac LS entered into a maximum credit facility of $214.6 million (RMB1,500 million) with China Merchants Bank to support its daily operations. The loans bear an annual interest rate at 60 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.40% to 2.85%. Principal installment repayments began in 2024 and shall be fully repaid by April 16, 2027. As of December 31, 2025, $99.2 million (RMB694 million) is recorded in bank loans due within one year and $53.6 million (RMB375 million) is recorded in long-term bank loans. 53 On March 7, 2025, Sinovac Beijing entered into a maximum credit facility of $28.6 million (RMB200 million) with China Merchants Bank to support its daily operations. The loans bear annual interest rate at 76 to 89 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.11% to 2.24%. Principal installment repayments began in 2025 and shall be fully repaid by September 22, 2027. As of December 31, 2025, $11.5 million (RMB80 million) is recorded in bank loans due within one year and $7.2 million (RMB50 million) is recorded in long-term bank loans. On August 13, 2025, Sinovac Chengdu entered into a maximum credit facility of $7.2 million (RMB50 million) with China Merchants Bank to support its daily operations. The loans bear annual interest rate at 55 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.45%. Principal installment repayments began in 2026 and shall be fully repaid by December 30, 2026. As of December 31, 2025, $4.0 million (RMB28 million) is recorded in bank loans due within one year. (b) On April 14, 2023, Sinovac LS entered into a maximum credit facility of $71.5 million (RMB500 million) with Bank of Beijing to support its daily operations. The loans bear annual interest rate at 75 to 80 basis points below the prime rate of a one-year term loan published by the People's Bank of China, ranging from 2.70% to 2.90%. Principal installment repayments begin in 2025 and shall be fully repaid by April 28, 2026. As of December 31, 2025, $28.6 million (RMB200 million) is recorded in bank loans due within one year. On June 27, 2025, Sinovac Beijing entered into a maximum credit facility of $71.5 million (RMB500 million) with Bank of Beijing to support its daily operations. The loans bear annual interest rate at 89 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.11%. Principal installment repayments begin in 2026 and shall be fully repaid by June 27, 2026. As of December 31, 2025, $6.9 million (RMB48 million) is recorded in bank loans due within one year. (c) On May 31, 2023, Sinovac Biotech (Yidao) Co., Ltd. entered into a maximum credit facility of $186.0 million (RMB1,300 million) with China Construction Bank to finance its purchase of property, plant and equipment, with a term from June 15, 2023 to June 14, 2041. The loan bears annual interest rate at 118 basis points below the prime rate of a five-year term loan published by the People's Bank of China, at 2.32% to 2.77%. Principal installment repayments begin in 2026 and shall be fully repaid by June 14, 2041. As of December 31, 2025, $0.1 million (RMB0.5 million) is recorded in bank loans due within one year and $101.1 million (RMB707 million) is recorded in long-term bank loans. Certain prepaid land use rights, properties of Sinovac Biotech (Yidao) Co., Ltd. have been pledged as collateral, with a contractually agreed collateral value of $132.2 million (RMB924 million). On November 29, 2023, Yihoo Biotech Co., Ltd. entered into a maximum credit facility of $42.9 million (RMB300 million) with China Construction Bank to finance its purchase of property, plant and equipment, with a term from January 17, 2024 to November 28, 2043. The loan bears annual interest rate at 105 basis points below the prime rate of a five-year term loan published by the People's Bank of China, at 2.45%. Principal installment repayments begin in 2025 and shall be fully repaid by November 28, 2043. As of December 31, 2025, $0.6 million (RMB4 million) is recorded in bank loans due within one year and $25.4 million (RMB178 million) is recorded in long-term bank loans. Certain prepaid land use rights of Yihoo Biotech Co., Ltd. have been pledged as collateral, with a contractually agreed collateral value of $4.6 million (RMB32 million). On September 29, 2024, Sinovac Beijing entered into a maximum credit facility of $64.4 million (RMB450 million) with China Construction Bank to support its daily operations. The loans bear annual interest rate at 75 to 89 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.11% to 2.35%. Principal installment repayments begin in 2026 and shall be fully repaid by August 20, 2026. As of December 31, 2025, $28.6 million (RMB200 million) is recorded in bank loans due within one year. On January 9, 2025, Sinovac LS entered into a maximum credit facility of $77.0 million (RMB538 million) with China Construction Bank to support its acquisition. The loan bears annual interest rate from 94 basis points below the prime rate of a five-year term loan published by the People's Bank of China, at 2.66%. Principal installment repayments begin in 2025 and shall be fully repaid by January 8, 2032. As of December 31, 2025, $0.1 million (RMB0.5 million) is recorded in bank loans due within one year and $76.9 million (RMB537 million) is recorded in long-term bank loans. (d) On September 23, 2024, Sinovac Beijing entered into a maximum credit facility of $64.4 million (RMB450 million) with Bank of China to support its daily operations. The loans bear annual interest rate at 75 to 85 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.15% to 2.35%. Principal installment repayments begin in 2025 and shall be fully repaid by April 16, 2026. As of December 31, 2025, $41.9 million (RMB293 million) is recorded in bank loans due within one year. On March 12, 2025, Sinovac Chengdu entered into a maximum credit facility of $1.4 million (RMB10 million) with Bank of China to support its daily operations. The loans bear annual interest rate at 60 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.50%. Principal installment repayments began in 2025 and shall be fully repaid by September 25, 2026. As of December 31, 2025, $1.4 million (RMB10 million) is recorded in bank loans due within one year. 54 (e) On March 13, 2025, Sinovac Chengdu entered into a maximum credit facility of $4.3 million (RMB30 million) with Bank of Chengdu to support its daily operations. The loans bear annual interest rate at 55 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.45% to 2.55%. Principal installment repayments begin in 2026 and shall be fully repaid by June 22, 2026. As of December 31, 2025, $4.3 million (RMB30 million) is recorded in bank loans due within one year. (f) On March 27, 2025, Sinovac Chengdu entered into a maximum credit facility of $0.7 million (RMB5 million) with Chengdu Rural Commercial Bank to support its daily operations. The loans bear annual interest rate at 60 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.50%. Principal installment repayments begin in 2026 and shall be fully repaid by May 26, 2026. As of December 31, 2025, $0.7 million (RMB5 million) is recorded in bank loans due within one year. (g) On March 12, 2025, Sinovac Chengdu entered into a maximum credit facility of $7.2 million (RMB50 million) with China Minsheng Banking to support its daily operations. The loans bear annual interest rate at 10 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 3.00%. Principal installment repayments begin in 2026 and shall be fully repaid by May 26, 2026. As of December 31, 2025, $1.4 million (RMB10 million) is recorded in bank loans due within one year. (h) On January 26, 2025, Sinovac Chengdu entered into a maximum credit facility of $28.6 million (RMB200 million) with China CITIC Bank to support its daily operations. The loans bear annual interest rate at 55 basis points below the prime rate of a one-year term loan published by the People's Bank of China, at 2.45%. Principal installment repayments begin in 2026 and shall be fully repaid by July 26, 2028. As of December 31, 2025, $0.1 million (RMB1 million) is recorded in bank loans due within one year and $1.3 million (RMB 9 million) is recorded in long-term bank loans. Treasury Policy We have established a treasury policy to optimize the utilization of our financial resources and to manage the cash generated from our operations. Under this policy, when our internal cash flow and liquidity forecasts indicate that we will maintain sufficient capital resources to fund our operating activities and capital expenditure requirements, we may deploy a portion of our excess cash into liquid investments with the objective of achieving a better returns than those available through conventional bank deposits. Our cash and cash equivalents consist of cash on hand, interest-bearing demand deposits, time deposits, and other highly liquid instruments with original maturities of three months or less at the time of purchase. Short-term and long-term investments primarily consist of deposits with commercial banks and wealth management products issued by commercial banks and other financial institutions. Restrictions on Cash Dividends Sinovac Antigua is a holding company, and relies in part on dividends paid by its subsidiaries for its cash needs, including its operating expenses and additional investment opportunities. The payment of dividends from our Chinese Mainland Subsidiaries is subject to certain limitations. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in the Chinese mainland. Each of our Chinese Mainland Subsidiaries is also required to set aside at least a portion of its after-tax profit based on PRC accounting standards each year to fund the statutory surplus reserves. The reserves can be used to recoup previous years' losses, if any, and, subject to the approval of the relevant PRC government authority, may be converted into share capital in proportion to existing shareholdings, or by increasing the par value of the shares currently held by the shareholders. Such reserves, however, are not distributable as cash dividends. In addition, at the discretion of their board of directors, our Chinese Mainland Subsidiaries may allocate a portion of their after-tax profits based on PRC accounting standards to the employee welfare and bonus funds, which may be utilized for collective staff benefits. In addition, if our Chinese Mainland Subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict the ability of one or more of our Chinese Mainland Subsidiaries, as the case may be, to pay dividends or make other distributions to us. The ability of our Chinese Mainland Subsidiaries to convert renminbi into U.S. dollars and make payments to us is subject to PRC foreign exchange regulations. Under these regulations, the renminbi is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. Conversion of renminbi for capital account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject to the approval of SAFE. See "Item 3. Key Information — D. Risk Factors—Risks Related to Doing Business in China—We rely on dividends paid by our Chinese Mainland Subsidiaries for our cash needs. If they are unable to pay us sufficient dividends due to statutory, regulatory or contractual restrictions on their abilities to distribute dividends to us, our various cash needs may not be met." and "Item 10. Additional Information — D. Exchange Controls." Under PRC laws, Sinovac Antigua may fund our Chinese Mainland Subsidiaries only through capital contributions or loans, subject to satisfaction of applicable government registration and approval requirements. In 2024 and 2023, no assets other than cash were transferred through our organization. Sinovac Antigua did not receive any dividend from its subsidiaries and there was no cash transfer between Sinovac Antigua and its subsidiaries in 2024. Sinovac Antigua did not distribute any dividend to investors, including U.S. investors, in 2024 and 2023. In April 2025, the board of directors of Sinovac Antigua decided to declare the 2025 Dividend to valid holders of Sinovac Antigua's common shares as of the close of business on May 23, 2025. The 2025 Dividend is funded from available cash resources of Sinovac Antigua and its subsidiaries, including prior 55 distributions from Sinovac LS and other operating subsidiaries of Sinovac Antigua to Sinovac Hong Kong. The 2025 Dividend is intended to provide Sinovac Antigua's shareholders with their appropriate share of these prior distributions from Sinovac Antigua's subsidiaries. An amount equal to the aggregate amount of cash that would be payable under the 2025 Dividend in respect of the 2018 PIPE Shares has been set aside and is retained in an escrow account of Sinovac Antigua pending the final resolution and arbitration proceedings with respect to the PIPE Shares in Antigua and Hong Kong. In 2024, $1,155.2 million (RMB8,432.3 million) in dividends was declared by Sinovac Beijing, Sinovac LS and Sinovac Dalian to their respective minority shareholders, of which $947.0 million (RMB6,814.4 million) in dividends was paid in 2024, and $213.0 million (RMB1,617.9 million) was retained as deferred dividend payments by Sinovac LS to its minority shareholders that was paid in 2025. $1,726.6 million (RMB12.6 billion) in dividends was declared, of which $655.5 million (RMB4,716.7 million) in dividends was paid by such subsidiaries to Sinovac Hong Kong and Sinovac Beijing Holding in 2024, and $1,080.4 million (RMB7,886.0 million) was retained as deferred dividend payments by Sinovac LS to Sinovac Beijing Holding that was paid in 2025. In 2025, $20.9 million (RMB145.8 million) in dividends was declared and paid by Sinovac Beijing and Sinovac Dalian to their respective minority shareholders. $55.7 million (RMB389.3 million) in dividends was declared and paid by such subsidiaries to Sinovac Beijing Holding in 2025. Additionally, $3,958.2 million in dividends was declared and paid by Sinovac Hong Kong to Sinovac Antigua in June 2025, and $3,300.3 million in dividends was paid by Sinovac Antigua to its shareholders in 2025, and $657.9 million was retained as deferred dividend payments to Sinovac Antigua's shareholders. In 2026, $88.0 million (RMB600.0 million) in dividends was declared and paid by Sinovac Beijing and Sinovac Dalian, of which $24.4 million (RMB166.5 million) was declared and paid to their respective minority shareholders, and $63.6 million (RMB433.5 million) in dividends was declared and paid by such subsidiaries to Sinovac Beijing Holding. Material Cash Requirements Other than the ordinary cash requirements for our operations, our material cash requirements as of December 31, 2025, and any subsequent interim period, primarily include our short-term and long-term bank borrowings, capital expenditures and cash requirements for potential investments. We intend to fund our existing and future material cash requirements primarily with anticipated cash flows from operations, our existing cash balances and other financing alternatives. We will continue to make cash commitments, including capital expenditures, to support the growth of our business. Capital Expenditures We made capital expenditures of $49.4 million, $97.6 million and $156.2 million in 2025, 2024 and 2023, respectively. As of December 31, 2025, our outstanding commitments related to capital expenditures, of approximately $5.7 million, were primarily for the construction of vaccine production facilities for pipeline products. We will finance such commitments through cash generated from operations. Off-Balance Sheet Commitments and Arrangements We have not entered into any financial guarantees or other commitments or obligations to guarantee the payment obligations of any unconsolidated third parties, except for (i) a guarantee for a loan of approximately $194.4 million (RMB1.4 billion) borrowed by SKY Biologics and (ii) a loan of $11.0 million to SKY Biologics which was approved on April 24, 2026 and remained unsigned as of the date of this annual report. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions" of this annual report. In addition, we have not entered into any derivative contracts that are indexed to Sinovac Antigua's shares and classified as shareholders' equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us. C. Research and Development, Patents and Licenses, Etc. See discussions under "Item 5. Operating and Financial Review and Prospects — A. Operating Results — Research and Development Programs." D. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments, or events as of December 31, 2025 and through the date of this annual report, that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. 56 E. Critical Accounting Estimates Our consolidated financial information has been prepared in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (1) the reported amounts of our assets and liabilities, (2) the disclosure of our contingent assets and liabilities at the end of each fiscal period and (3) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. When reviewing our financial statements, you should consider (1) our selection of critical accounting policies, (2) the judgment and other uncertainties affecting the application of those policies and (3) the sensitivity of reported results to changes in conditions and assumptions. We believe the following accounting policies involve the most significant judgment and estimates used in the preparation of our financial statements. Revenue from Contracts with Customers Revenue is recognized at a point in time when the performance obligation is satisfied, whereby control of promised goods is transferred to our customers in an amount of consideration to which we expect to be entitled in exchange for those goods, and when we can reasonably estimate the provisions for product returns. Product return provisions are estimated based on historical return data and post-balance-sheet-date return activities as well as inventory levels of the products in distribution channels. As of December 31, 2025, sales return accrued liabilities for our vaccine products were $37.3 million, compared to $35.1 million as of December 31, 2024. For the years ended December 31, 2025, 2024 and 2023, we recorded $31.6 million, $28.8 million and $61.7 million of provisions for sales returns as reductions to gross product sales related to variable consideration, respectively. For the years ended December 31, 2025, 2024 and 2023, we did not have any significant incremental costs of obtaining contracts with customers or costs incurred in fulfilling contracts with customers within the scope of Accounting Standards Codification ("ASC") Topic 606, that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract. We do not have contract assets since revenue is recognized as control of goods is transferred and we have an unconditional right to the consideration since payment is due based only upon the passage of time. Contract liabilities consist of advance payments from customers. Contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. All contract liabilities are included in deferred revenue on the consolidated balance sheets. For the years ended December 31, 2025 and 2024, we recognized sales of $3.9 million and $2.6 million, respectively, related to contract liabilities as of January 1 of each respective year. Allowance for Credit Losses We extend unsecured credit to our customers in the ordinary course of business and actively pursues past due accounts. An allowance for credit losses is established and recorded based on management's assessment of the credit history with the customer and current relationships with them. We also maintain an allowance for credit losses for estimated losses based on our assessment of the collectability of specific customer accounts and the aging of the accounts receivable. We analyze accounts receivable and historical bad debts, customer concentrations, customer solvency, current economic and geographic trends, and changes in customer payment terms and practices when evaluating the adequacy of our current and future allowance. In circumstances where we are aware of a specific customer's inability to meet its financial obligations to us, a specific allowance for bad debt is estimated and recorded, which reduces the recognized receivable to the estimated amount we believe will ultimately be collected. We monitor and analyze the accuracy of the allowance for credit losses estimate by reviewing past collectability and adjusting it for future expectations to determine the adequacy of our current and future allowance. Our reserve levels have generally been sufficient to cover credit losses. Our allowance for credit losses as of December 31, 2025 was $29.0 million, compared to $24.0 million as of December 31, 2024. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. For the years ended December 31, 2025, 2024 and 2023, provisions for credit losses on accounts receivable were $4.2 million, $11.2 million and $2.6 million, respectively. 57 Impairment of Long-Lived Assets with definite lives Long-lived assets with definite lives, including property, plant and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable from the future undiscounted net cash flows expected to be generated by the asset group. An asset group is identified as assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. If the asset group is not fully recoverable, an impairment loss would be recognized for the difference between the carrying value of the asset group and its estimated fair value, based on the discounted net future cash flows or other appropriate methods, such as comparable market values. We use estimates and judgments in the impairment tests, and the timing and amount of impairment charges could be materially different if different estimates or judgments are utilized. In 2025 and 2024, we identified impairment indicators on certain of our machinery, equipment, construction in progress and leasehold improvements. We performed a recoverability test by comparing the forecasted undiscounted cash flows to be generated from continued use of these assets to the asset carrying values. As the carrying values exceeded the projected undiscounted cash flows, we measured the impairment amount by estimating the fair value of the assets using a discounted cash flow approach. The estimate also considers physical deterioration, economic obsolescence, and alternative future use. We recorded $27.2 million of impairment for the year ended December 31, 2025, compared to $8.9 million for the year ended December 31, 2024. We identified declines in market rental rates and market conditions for certain plants located in Hangzhou and Beijing. We performed a recoverability test by comparing the forecasted undiscounted cash flows to be generated from continued use of these plants to the asset carrying values. As the carrying values exceeded the projected undiscounted cash flows, we measured the impairment amount by estimating the fair value of the assets. We determined the fair value using the income approach by capitalizing the existing rental income over the remaining lease agreement terms and future market rental income for the remaining term through the land use right expiration date. The estimate also considers physical deterioration, economic obsolescence, and alternative future use. The impairment of $110.4 million was recorded for the year ended December 31, 2025, compared to $19.1 million for the year ended December 31, 2024. Impairment of Goodwill and IPR&D Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination. The Company assesses goodwill for impairment in accordance with ASC Subtopic 350-20, Intangibles—Goodwill and Other: Goodwill ("ASC 350-20"), which requires goodwill to be tested for impairment at the reporting unit level at least annually and more frequently upon the occurrence of certain events, as defined by ASC 350-20. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If as a result of the qualitative assessment, it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of each reporting unit exceeds its fair value, an impairment loss equal to the difference between the fair value of the reporting unit and its carrying amount will be recorded. Application of a goodwill impairment test requires significant management judgment and estimation, such as identification of reporting units, estimating the fair value of each reporting unit. The judgment in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. The Company recognizes IPR&D assets acquired in a business combination at fair value as of the acquisition date and subsequently accounts for them as indefinite-lived intangible assets until completion or abandonment of the associated R&D efforts. The subsequent R&D expenditures related to the acquired IPR&D intangible assets were expensed as incurred. IPR&D are tested for impairment annually or more frequently if events or changes in circumstances indicate that the assets may be impaired. In 2025, the Company identified impairment triggering events for goodwill and IPR&D, resulting from intensive product competition. The Company compared the fair value of IPR&D to its carrying value. To estimate the fair value of IPR&D, the Company utilized an income approach based on the multi-period excess earnings method, based on market participant assumptions. The assumptions used to estimate the fair value included forecasted revenue, long-term expectations for growth rates and operating profit margin, contributory asset charges ("CACs"), and a market-participant discount rate. The carrying amount of the IPR&D exceeded its estimated fair value, and an IPR&D impairment loss of $49.8 million was recognized for the year ended December 31, 2025. Based on the above event, the Company assessed that it was more likely than not that the fair value of Sinovac Chengdu reporting unit was less than its carrying amount and performed quantitative impairment test. The judgment in estimating the fair value of the reporting unit was determined based on the discounted cash flow analysis using the assumptions including internal cash flows forecasts, long-term future growth rates and discount rates, among others. The carrying amount of the reporting unit exceeded its estimated fair value, and a goodwill impairment loss of $15.7 million was recognized for the year ended December 31, 2025. 58 Recently Issued Accounting Standards Adopted On December 14, 2023, the FASB issued ASU 2023-09, which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The ASU amends ASC 740-10-50-12 to require public business entities ("PBEs") to disclose a reconciliation between the amount of reported income tax expense (or benefit) from continuing operations and the amount computed by multiplying the income (or loss) from continuing operations before income taxes by the applicable statutory federal (national) income tax rate of the jurisdiction (country) of domicile. If a PBE is not domiciled in the United States, the federal (national) income tax rate in such entity's jurisdiction (country) of domicile shall normally be used in the rate reconciliation. The amendments prohibit the use of different income tax rates for subsidiaries or segments. Further, PBEs that use an income tax rate in the rate reconciliation that is other than the U.S. income tax rate must disclose the rate used and the basis for using it. The ASU also adds ASC 740-10-50-12A, which requires entities to annually disaggregate the income tax rate reconciliation into the following eight categories by both percentages and reporting currency amounts: (1) State and local income tax, net of federal (national) income tax effect; (2) Foreign tax effects; (3) Effect of changes in tax laws or rates enacted in the current period; (4) Effect of cross-border tax laws; (5) Tax credits; (6) Changes in valuation allowances; (7) Nontaxable or nondeductible items; (8) Changes in unrecognized tax benefits. PBEs must apply the ASU's guidance to annual periods beginning after December 15, 2024 (2025 for calendar-year-end PBEs). Early adoption is permitted. Entities may apply the amendments prospectively or may elect retrospective application. We adopted the ASU on January 1, 2025, prospectively. We updated our disclosure in accordance with the requirements in ASC 740-10-50-12 in 2025. In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities ("ASU 2025-10"), to improve generally accepted accounting principles by establishing authoritative guidance on the accounting for government grants received by business entities. The amendments establish the accounting for a government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. The guidance is effective for fiscal years beginning after December 15, 2028, with early adoption permitted, and it can be applied using one of the following approaches: (1) a modified prospective approach; (2) a modified retrospective approach and (3) a retrospective approach to all government grants. We early adopted the ASU prospectively on January 1, 2025. The adoption did not have a material impact on our consolidated financial statements or related disclosure. Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. We are currently evaluating the provisions of this ASU. All other newly issued accounting pronouncements that are not yet effective have been deemed either immaterial or not applicable. 59