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Is this a phoenix rising from the ashes or a dim departure?
On January 12, 2026, Chongqing Zhifei Biological Products Co.,Ltd. (300122.SZ) released an earnings forecast that shocked investors: it anticipates a net loss of 10.698 billion to 13.726 billion yuan for 2025, representing a staggering year-on-year decline of 630% to 780%.
This figure signifies that after experiencing a cliff-like drop in profits during 2024, Zhifei Biological's performance has continued to plummet into an abyss.
Looking back, Zhifei Biological once created an earnings myth by distributing Merck's HPV vaccine. Following the launch of the quadrivalent HPV vaccine in China in 2017, the company's revenue sustained rapid growth, surging from 10.6 billion yuan in 2019 to 52.9 billion yuan in 2023—a fourfold increase in just four years—with its market capitalization once exceeding 360 billion yuan.
However, behind this brilliance lay hidden structural risks. An over-reliance on its distribution business exposed a critical vulnerability when the market environment underwent a dramatic shift.
The Demise of the Distribution Myth The most direct cause of Zhifei Biological's severe earnings decline is the contraction of its distribution business for Merck's HPV vaccines. The HPV vaccine was the absolute pillar of the company's revenue and profits. In 2024, revenue from distributed products accounted for a massive 94.61% of the total, while revenue from self-developed products constituted a mere 5.39%. Confronted with weak demand for HPV vaccines in the Chinese market, Merck announced in February 2025 that it would suspend supplies to China until at least mid-year, later extending this suspension twice. In its August 2025 earnings report, Merck stated it was "reassessing supply arrangements for 2026," and as of now, has not announced a resumption of supplies. This decision directly led to a sharp plunge in the batch release volume of Zhifei's HPV vaccines. In the first half of 2025, the batch release volume for the quadrivalent HPV vaccine had dropped to zero, while the volume for the nine-valent HPV vaccine plummeted by 76.8% year-on-year.
After being halved in 2024, distribution revenue continued its freefall in the first half of 2025, reaching only 4.37 billion yuan, a severe year-on-year decrease of 75.16%.
This dramatic shift is the result of several converging factors. Firstly, market demand has become saturated. HPV vaccination coverage in China has risen from less than 1% in 2018 to 28% in 2025, indicating the market has entered a stage of competition for existing customers. Furthermore, the inclusion of HPV vaccines in the national immunization program, offering free bivalent HPV vaccinations to girls aged 13 born after November 10, 2011, starting from November 10, 2025, has further squeezed the market space for paid vaccines. Secondly, domestic substitution is accelerating. In June 2025, Wantai Biologics' (603392.SH) domestically produced nine-valent HPV vaccine received approval for launch, priced at just 499 yuan per dose—less than 40% of the price of the imported Merck vaccine (1,338 yuan per dose). Additionally, nine-valent HPV vaccines from other companies like Recbio and CanSino Biologics are in Phase III clinical trials, intensifying market competition. Thirdly, pressure from volume-based procurement and price cuts. In the 2024 Shandong provincial tender for bivalent HPV vaccines, Wantai Biologics' "Cecolin" was quoted at just 27.5 yuan per dose, a drastic 91.6% drop from its initial launch price of 329 yuan. Zhifei Biological has already initiated promotional activities like "get one shot free with one purchased" in some regions, indicating that the effects of price reductions are already spreading.
Finally, vaccination willingness is declining. Zhifei Biological explicitly mentioned in its 2025 earnings forecast: "Influenced by factors such as decreased public willingness to vaccinate and increased vaccine hesitancy, the vaccine industry is undergoing a deep adjustment."
More critically, Zhifei Biological is grappling with immense inventory pressure. In early 2023, the company renewed its promotion agreement with Merck, which included a base procurement amount for vaccines—approximately 27 billion yuan for the full year 2025. However, the distribution revenue for the first half of 2025 was less than 5 billion yuan, falling far short of the agreed amount.
Shrinking market demand has led to severe inventory accumulation. By the end of the first half of 2025, Zhifei Biological's inventory scale had ballooned to 21.014 billion yuan, accounting for 45.75% of total assets, a sharp increase from under 9 billion yuan at the end of 2023. Over 20 billion yuan of this consists of inventory goods, primarily HPV vaccines. With an HPV vaccine shelf life of 36 months, this inventory faces increasing expiration risks over time. In the first half of 2025, the company provisioned 70.19 million yuan for inventory depreciation. According to the annual earnings forecast, the scale of inventory impairment for the full year will be far greater. Given the current inventory levels, this large provision is unlikely to be the last. Simultaneously, accounts receivable present a serious challenge. Due to China's "single invoice" system for vaccine sales, these receivables are primarily from local CDC centers, which have long repayment cycles. As of the first half of 2025, the company's accounts receivable reached 13.518 billion yuan, constituting 29.43% of total assets. The 2025 interim report showed that the proportion of receivables aged over one year increased from about 24% at the start of the period to nearly 45% by the end.
In its earnings forecast, the company stated that it would recognize impairment provisions for inventory whose net realizable value fell below its carrying amount in 2025, and would also recognize credit impairment losses for accounts receivable based on their aging. Impairment has become another key factor contributing to the 2025 loss. With products unsold and payments uncollected, cash flow is severely constrained. By the end of the third quarter of 2025, the company's short-term borrowings had soared to 10.3 billion yuan, with long-term borrowings at 3.1 billion yuan and bonds payable at 500 million yuan. Interest expenses for the first three quarters of 2025 rose to 240 million yuan, while monetary funds stood at only 2.5 billion yuan, indicating significant debt pressure.
Faced with the precipitous decline of its distribution business, Zhifei Biological is accelerating its transition towards R&D. Announcements indicate several advancements in its self-developed pipeline during 2025.
Some promising developments can be identified here. For instance, the quadrivalent influenza virus split vaccine obtained its drug registration certificate and was approved for market launch in March 2025. The 15-valent pneumococcal conjugate vaccine has completed Phase III clinical trials, and a market application has been submitted, with potential approval expected in the second quarter of 2026. As of March 2025, no other 15-valent pneumococcal conjugate vaccines had been approved for market launch in China. Late-stage clinical products include the quadrivalent meningococcal conjugate vaccine, which has completed Phase III trials and is reportedly the world's first such vaccine. Additionally, the therapeutic BCG vaccine, bivalent dysentery conjugate vaccine, and human diploid cell rabies vaccine have all entered late-stage clinical development. The 26-valent pneumococcal conjugate vaccine, in early-stage clinical trials, is described as the highest-valency product of its kind developed domestically to have entered the clinical stage, having initiated Phase I trials in Australia. Furthermore, the company's self-developed ZFA02 adjuvant technology platform achieved a breakthrough. Both the trivalent and quadrivalent influenza virus split vaccines utilizing the ZFA02 adjuvant have been approved for clinical trials. As of May 2025, no adjuvanted influenza vaccines had been approved for market launch in China. Beyond vaccines, in March 2025, Zhifei Biological invested 593 million yuan in cash to acquire a 51% stake in Chen'an Biotech, extending its business into the currently hot GLP-1 weight-loss drug market. Chen'an Biotech's Liraglutide Injection (for diabetes) has been submitted for market approval; its Semaglutide Injection (for diabetes) has completed Phase III trials; its Semaglutide Injection (for weight loss) is in Phase III trials; and its GLP-1/GIP dual-target receptor agonist CA111 has been approved for clinical trials. Currently, only Eli Lilly's Tirzepatide, targeting the same pathway, is marketed in China. Self-developed innovation is key to this transformation, yet it remains Zhifei Biological's weakest link, as the core competence under the previous distribution model was its "sales network." Following the fade-out of the COVID-19 vaccine windfall, Zhifei Biological has struggled to find new blockbuster products to fill the gap, leading to a sharp drop in revenue from self-developed products after 2021. In the first half of 2025, revenue from its own products was less than 500 million yuan, accounting for only 10% of total revenue—a limited contribution, indicating a long road ahead before it can provide effective support.
Compared to peers, the competitiveness of Zhifei Biological's self-developed products appears somewhat lacking. Its market share for the AC conjugate vaccine is being squeezed by competitors like Luoshi Biologics and Walvax Biotechnology. The progress of key projects like the 15-valent pneumococcal vaccine and quadrivalent influenza vaccine has been slower than expected, only gradually reaching the market in 2025. Its self-developed nine-valent HPV vaccine lags approximately two years behind Wantai Biologics'. In 2024, Zhifei Biological's R&D expenditure was 1.4 billion yuan, accounting for 5.3% of revenue—a level that is evidently insufficient within the innovative pharmaceutical industry. Furthermore, in its distribution segment, domestic substitution for HPV vaccines is accelerating. In the newly entered GLP-1 field, it faces formidable competition from international giants like Novo Nordisk. While the cooperation with Merck remains stable in the short term, the long-term partnership is inevitably subject to change as the market landscape evolves. These are the challenges Zhifei Biological is currently confronting or will face in the future.
Phoenix涅槃 or Dim Departure? Behind the multi-billion-yuan loss, Zhifei Biological is undergoing its most severe test since inception. The transition from a "super distributor" to an "innovative vaccine enterprise," while a defined strategy, is being forced to accelerate by harsh realities. The distribution model once brought growth but also sowed the seeds of structural risk; independent innovation, though a long and arduous path, represents the only viable route to rebirth. Whether the former king can navigate through this cycle will be revealed in time.
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