Chongqing Zhifei Biological Products Co.,Ltd. (300122.SZ) announced a significant revision to its strategic cooperation agreement with Merck on the evening of April 2, signaling a potential shift after nearly two years of financial strain.
The company has officially signed an amended strategic cooperation agreement with Merck, eliminating the previously rigid minimum purchase commitment. Instead, the partnership will transition to a dynamic, rolling procurement model based on market demand. The cooperation term has been extended until the end of 2028, with an option for a further two-year extension.
The fate of Chongqing Zhifei Biological Products Co.,Ltd. has been closely tied to Merck, from its peak as a "vaccine king" earning billions annually to its current projection of over 10 billion yuan in losses for 2025, potentially making it the industry's biggest loss-maker. This fundamental adjustment to the cooperation terms not only reshapes the partnership model but also reflects a necessary restructuring as the golden era for vaccine distribution in China wanes and the supply-demand dynamics reverse.
The removal of the hundred-billion-yuan rigid purchase requirement means Chongqing Zhifei Biological Products Co.,Ltd. has finally shed the "Sword of Damocles" that has been hanging over it for years. Pressures from inventory backlog, capital occupation, and substantial impairment losses are expected to ease temporarily. However, this short-term relief does not equate to a long-term solution. The company's fundamental reliance on a distribution-based business model remains unchanged. It continues to face a dual squeeze from competing domestic 9-valent HPV vaccines and plateauing market demand. The battle for Chongqing Zhifei Biological Products Co.,Ltd.'s breakthrough has only just begun.
**From "Rigid Commitment" to "Flexible Coexistence"**
As a benchmark partnership in the A-share vaccine sector, every clause change in the agreement between Chongqing Zhifei Biological Products Co.,Ltd. and Merck directly impacts its core financial performance.
First, the base procurement amount has been cancelled, replaced by rolling purchases instead of a rigid commitment. This is the most decisive change in the latest adjustment. The original agreement signed in January 2023 stipulated that Chongqing Zhifei Biological Products Co.,Ltd. was required to complete over 98 billion yuan in base procurement from the second half of 2023 to the first half of 2026. This included minimum purchase amounts for the HPV vaccine of approximately 32.626 billion yuan, 26.033 billion yuan, and 17.892 billion yuan for 2024, 2025, and 2026 respectively, constituting a near "rigid bet."
The new agreement removes this clause, replacing it with a system where both parties negotiate procurement plans based on market demand forecasts and actual vaccination rates, proceeding with rolling purchases confirmed by written orders. This means Chongqing Zhifei Biological Products Co.,Ltd. is no longer obligated to bear penalties for failing to meet minimum purchase targets and does not need to stockpile goods blindly to fulfill quotas. The shift moves from a capital-heavy model of acquiring inventory first and selling later to a lighter asset model based on sales-driven procurement.
Second, the product portfolio has been streamlined, focusing on three core products. The new agreement specifies that Merck will supply three products: the 9-valent HPV vaccine (Gardasil 9), the pentavalent rotavirus vaccine (RotaTeq), and the 23-valent pneumococcal polysaccharide vaccine (Pneumovax 23). The 4-valent HPV vaccine and the inactivated hepatitis A vaccine from the original agreement are no longer included.
This adjustment aligns with current market conditions. The market for the 4-valent HPV vaccine has been shrinking under pressure from lower-priced domestic 2-valent alternatives and increasing penetration of the 9-valent vaccine. Removing this lower-margin product allows both parties to focus on higher-value items and also confirms that the 9-valent HPV vaccine remains the cornerstone of their cooperation.
Third, the cooperation term has been extended, shifting from one-sided pressure to shared risk. The new agreement is valid until December 31, 2028, extending the original expiration by nearly two years, with an option to negotiate a further two-year extension, stabilizing long-term cooperation expectations. The announcement clarifies that this adjustment aims to "alleviate the company's operational pressure and reduce risks," signifying the end of a model where Chongqing Zhifei Biological Products Co.,Ltd. solely bore market fluctuations and inventory backlogs. The partnership has transitioned to a collaborative relationship based on shared risk and mutual benefit.
From the perspective of actual performance data, the rigid procurement terms of the original agreement had already become unworkable. In 2023, Chongqing Zhifei Biological Products Co.,Ltd. actually purchased 34.814 billion yuan worth of Merck products, accounting for 96.06% of its total annual procurement. This figure dropped to 26.377 billion yuan (86.94% of total procurement) in 2024 and plummeted to 2.179 billion yuan (59.21% of total procurement) in 2025. The total actual purchase amount over these three years was 63.37 billion yuan.
It is important to note that the new agreement does not affect Chongqing Zhifei Biological Products Co.,Ltd.'s exclusive distribution rights. Merck continues to authorize it to exclusively import, promote, and sell the three products in mainland China, preserving its business independence. This means Chongqing Zhifei Biological Products Co.,Ltd. still holds the essential "pass" for Merck's core vaccines in the Chinese market, but without the heavy burden of capital commitment and inventory pressure.
**Why the Urgent Revision?**
This belated agreement adjustment reflects the harsh reality of Chongqing Zhifei Biological Products Co.,Ltd.'s fall from its peak and serves as a microcosm of the HPV vaccine market's shift from scarcity to a supply-demand reversal.
The company's 2025 performance forecast indicates an expected annual loss of 10.698 billion to 13.726 billion yuan, a year-on-year decrease of 630% to 780%, marking its first significant loss since listing. The core reason for this loss is the complete divergence between the original agreement's rigid purchase requirements and actual market demand.
First, the collapse in performance and substantial asset impairments forced a restructuring of the cooperation terms. Chongqing Zhifei Biological Products Co.,Ltd.'s financial performance has been heavily dependent on its Merck distribution business. After securing exclusive distribution rights for the 9-valent HPV vaccine in 2018, the company's revenue skyrocketed from 1.343 billion yuan in 2017 to 52.918 billion yuan in 2023, with net profit exceeding 10 billion yuan in 2021, making it the "profit king" of A-share vaccine stocks.
However, a sharp downturn began in 2024, with annual revenue halving to 26.07 billion yuan and net profit plunging 74.99% to 2.018 billion yuan. In 2025, the company fell directly into massive losses, with the loss amount far exceeding the total net profit of 2023 and 2024 combined.
The immediate trigger for the profit collapse was a large inventory impairment. As of the end of the third quarter of 2025, the company's inventory stood as high as 20.246 billion yuan, accounting for over 40% of total assets, primarily consisting of Merck's HPV vaccines. With a vaccine shelf life of only three years, a peak expiration period is expected in 2026, necessitating the provision of a huge inventory write-down.
Simultaneously, accounts receivable of 12.814 billion yuan showed deteriorating aging, and combined with credit impairment provisions, further eroded profits. Under the pressure of massive losses, the minimum purchase commitment in the original agreement had become an "impossible task."
Second, the capital chain was nearing its limit, with high debt and low cash flow becoming unsustainable. Under the rigid procurement model, Chongqing Zhifei Biological Products Co.,Ltd. had to advance huge amounts of capital to purchase vaccines, leading to significant capital being tied up. As of the end of Q3 2025, the company's monetary funds were only 2.498 billion yuan, while short-term loans reached 10.318 billion yuan and current liabilities stood at 12.885 billion yuan, indicating a substantial short-term debt repayment gap.
To alleviate the liquidity crisis, the company had to apply for a medium-to-long-term syndicated loan of up to 10.2 billion yuan in January 2026, with the actual controller couple and subsidiaries providing full guarantees, and core subsidiary equity and accounts receivable fully pledged, essentially staking almost all assets to weather the difficult period.
Finally, the HPV market has fundamentally shifted, with the end of monopoly profits due to domestic competition and peak demand. The golden partnership between Chongqing Zhifei Biological Products Co.,Ltd. and Merck was built on the foundation of "9-valent HPV monopoly + explosive demand," but this market logic completely reversed starting in 2025.
On one hand, domestic 9-valent HPV vaccines were approved for market entry, triggering a price war. In June 2025, Wantai Biotech's Cecolin 9 was approved, priced at 499 yuan per dose, only 40% of the imported 9-valent price, directly undermining Merck's pricing system. Multiple other domestic 9-valent vaccines from companies like Walvax Biotechnology and Recbio are in Phase III clinical trials and are expected to launch intensively between 2026 and 2028, completely breaking the import monopoly.
On the other hand, marginal demand continues to decline. Research data from the Chinese Center for Disease Control and Prevention shows that the first-dose coverage rate of the HPV vaccine among Chinese females aged 9-45 was 27.43% in 2024. While there is still a gap compared to the approximately 67% vaccination rate in some European and American countries, coverage in core urban populations is gradually becoming saturated. Coupled with increasing vaccine hesitancy, the industry is entering a period of deep adjustment, and the old logic of profiting simply by stocking up is fading.
Under these multiple pressures, Merck was also compelled to make concessions. For Chongqing Zhifei Biological Products Co.,Ltd., this "unshackling" from Merck is a critical step for survival. The year 2026 is crucial for the company. Its ability to efficiently digest existing inventory, repair its financial statements, accelerate the launch of self-developed products, and build a second growth curve will directly determine its future position in the industry.
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