Examining the reasons behind the performance decline reveals that it's not solely due to external market conditions, but the company's own strategic decisions also bear significant responsibility.
On the evening of August 18, Chongqing Zhifei Biological Products Co.,Ltd. (300122.SZ), once a "star" in the vaccine industry, delivered a dismal half-year report. Data shows that during the reporting period, the company achieved operating revenue of 4.919 billion yuan, down 73.06% year-over-year; net profit attributable to shareholders was -597 million yuan, representing a turnaround to losses.
Notably, this marks Chongqing Zhifei Biological Products' first half-year loss since its listing in 2010. This means the company has continued its losing streak that began in Q3 2024, spanning four consecutive quarters. Regarding the loss, the company explained in its half-year report that it was influenced by multiple factors including declining public vaccination willingness and changing market demand.
As Merck's exclusive distributor in China, Chongqing Zhifei Biological Products not only saw consecutive years of soaring performance during the peak sales period of Merck's HPV vaccines in the Chinese market, but also became the market cap leader in the vaccine sector.
However, over-reliance on distribution business also planted hidden risks for Chongqing Zhifei Biological Products. With market demand fluctuations and intensifying competition creating a resonating effect, the company's performance plummeted from the second half of 2024, with concentrated outbreaks of inventory accumulation and cash flow constraints. The once-glorious "king of vaccine distribution" now faces severe challenges brought by industry changes.
**Distribution Model Falters, Dragging Down Performance**
Chongqing Zhifei Biological Products listed on the Shenzhen Stock Exchange on September 28, 2010, as an international, full-industry-chain high-tech biopharmaceutical enterprise integrating vaccine and biological product R&D, production, sales, distribution, and import-export.
According to financial reports, affected by declining public vaccination willingness, changing market demand, and other multiple factors, Chongqing Zhifei Biological Products experienced significant declines in both revenue and net profit in the first half of this year: operating revenue of approximately 4.919 billion yuan, down 73.06% year-over-year; net profit attributable to parent company of -597 million yuan, down 126.72% year-over-year; non-GAAP net profit of -620 million yuan, down 127.79% year-over-year.
Thus, Chongqing Zhifei Biological Products set an embarrassing record since its listing: first half-year performance loss, marking the fourth consecutive quarter of losses.
By product segment, the company's proprietary products achieved revenue of 500 million yuan, down 9.27% year-over-year, with gross margin declining 8.06% year-over-year. In terms of batch release volume, during the reporting period, AC conjugate vaccine and Hib vaccine decreased by 58.10% and 66.46% respectively year-over-year, while the 23-valent pneumococcal vaccine, which was only approved in September 2023, had zero batch releases in the first half.
For distribution products, revenue in the first half was 4.37 billion yuan, down 75.16% year-over-year, with gross margin declining 8.61% year-over-year. During the reporting period, except for some growth in pentavalent rotavirus vaccine batch releases year-over-year, quadrivalent HPV vaccine and inactivated hepatitis A vaccine both had zero batch releases, while nonavalent HPV vaccine and imported 23-valent pneumococcal vaccine batch releases decreased by 76.80% and 32.32% respectively. The company's distributed GSK recombinant shingles vaccine batch releases declined by 64.24%.
For a long time, Chongqing Zhifei Biological Products' revenue has been highly dependent on sales of Merck's quadrivalent and nonavalent HPV vaccines.
Since successfully securing distribution rights and promoting Merck's quadrivalent HPV vaccine starting in 2017, Chongqing Zhifei Biological Products rapidly opened the Chinese market; it then secured distribution rights for the nonavalent HPV vaccine in 2018. Leveraging the continued volume growth of these two star products, Chongqing Zhifei Biological Products achieved leapfrog growth in performance.
Historical financial reports show that from 2018 to 2023, nonavalent HPV vaccine batch releases were 1.2161 million, 3.3242 million, 15.4772 million, and 36.5508 million respectively; quadrivalent HPV vaccine batch releases were 3.8003 million, 5.5487 million, 7.2194 million, 8.8025 million, 14.0284 million, and 10.3434 million respectively. The data shows that from 2018 to 2023, nonavalent vaccine batch releases showed an upward trend, reaching their peak in 2023. It was also in that year that the company's distribution product revenue reached 51.885 billion yuan, accounting for 98.05% of total revenue, with HPV vaccines as core products once being "extremely difficult to obtain," demonstrating their explosive sales popularity.
From 2017-2023, Chongqing Zhifei Biological Products' revenue jumped from 1.343 billion yuan to 52.92 billion yuan; net profit also surged from 432 million yuan to 8.07 billion yuan. In capital markets, Chongqing Zhifei Biological Products was also highly favored, with market cap once breaking through 350 billion yuan, becoming the market-recognized "vaccine white horse."
With cyclical and structural economic changes, industry adjustments, and increasing vaccine hesitancy, public vaccination willingness declined. Starting from the second half of 2024, its distribution business encountered a "Waterloo," with performance plummeting. Entering 2025, the downward trend has not reversed, with operating performance under continued pressure.
In January and April this year, China's National Medical Products Administration approved Merck's quadrivalent and nonavalent HPV vaccines for use in males aged 16-26. Merck has also actively expanded into the male market. However, current data shows that despite the enormous potential of the male market, it's difficult to fill the sales gap caused by female market saturation in the short term.
High sales expenses and surging financial costs have made Chongqing Zhifei Biological Products' performance even worse. In the first half of this year, sales expenses reached 1.044 billion yuan, virtually unchanged from 1.106 billion yuan in the same period last year. Financial expenses reached 145 million yuan, up more than 6-fold from 5.96 million yuan in the same period last year.
**Inventory Accumulation, High Liquidity Risk**
Examining the reasons for performance decline reveals that it's not solely due to external market conditions, but the company's own strategic decisions also bear significant responsibility.
Leveraging its partnership with Merck, Chongqing Zhifei Biological Products saw soaring performance. At its peak in 2023, the company renewed a hundred-billion procurement agreement with Merck: committing to purchase nearly 98 billion yuan worth of HPV vaccines by 2026. This decision was once viewed as a confident move demonstrating channel control and market insight, but it quickly exposed massive misjudgment in the short term, dragging the company into heavy operational risk.
In February this year, Merck announced a suspension of HPV vaccine supply to China, expected to last at least until mid-year. Merck stated this was "due to overall market environment, weak demand, and high channel inventory," and would gradually resume based on subsequent sales performance.
In fact, Chongqing Zhifei Biological Products' persistently high inventory levels were not built in a day. During the process of increasing HPV vaccine batch releases year by year, corporate inventory levels also increased significantly and remained at high levels for years. Financial report data shows that from 2020-2024, the company's biological product inventory was 16.628 million doses, 53.573 million doses, 39.917 million doses, 42.096 million doses, and 36.537 million doses.
From the data, Chongqing Zhifei Biological Products' biological product inventory peaked in 2021, which was also when the company's stock price began its continuous decline. The company's market cap has shrunk dramatically by 85% from its peak of 350 billion yuan to over 56 billion yuan.
Subsequently, despite fluctuations, it has maintained relatively high levels overall. As of the end of the reporting period, company inventory reached 21.001 billion yuan, up 34.25% from the same period last year, accounting for 45.73% of total assets, meaning nearly half of the company's assets are occupied by inventory.
Through the half-year report, inventory of 21.01 billion yuan includes finished goods of 20.74 billion yuan, accounting for 98.7%. Additionally, Chongqing Zhifei Biological Products' inventory turnover days increased from 165.6 days in the first half of last year to 1,104 days this year. Since vaccine products typically have a shelf life of only 2 years, such massive inventory scale faces enormous impairment risk. Once vaccines expire, they can only be disposed of as medical waste.
Notably, Chongqing Zhifei Biological Products' monopoly position of imported nonavalent vaccines in the Chinese market has been broken. In June this year, Walvax Biotechnology's nonavalent vaccine was approved for market, becoming the first domestically-produced nonavalent HPV vaccine to receive approval. This product is priced at less than half of Merck's nonavalent HPV vaccine price. Predictably, Chongqing Zhifei Biological Products may face greater challenges in the nonavalent vaccine market.
From the first half of this year's situation, Chongqing Zhifei Biological Products is making every effort in collections, though pressure on this metric remains significant. As of the end of the reporting period, the company's accounts receivable still reached 13.52 billion yuan.
Meanwhile, the company's liquidity situation is also precarious. As of the end of H1 2025, the company's cash and cash equivalents were only 2.566 billion yuan, while short-term borrowings reached 13.96 billion yuan and non-current liabilities due within one year were 150 million yuan, totaling over 14 billion yuan. Compared to the company's debt scale of over 10 billion yuan, cash and cash equivalents are insufficient, with high liquidity risk looming.
On July 14, Chongqing Zhifei Biological Products held its first extraordinary shareholders' meeting of 2025. The meeting, combining on-site voting and online voting, approved the "Proposal on Corporate Bond Issuance Plan." The company plans to issue corporate bonds not exceeding 6 billion yuan for investment in technological innovation, repaying interest-bearing debt, and supplementing working capital.
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