The vaccine industry is awaiting an opportunity, a turning point. For all vaccine leaders, the previous logic of domestic substitution is being disproven, and innovation is the hope for the future. Therefore, when innovation becomes a common industry consensus, the spring of the vaccine industry will arrive.
In 2008, Shenzhen Kangtai Biological Products Co.,Ltd. reached an important turning point through strategic restructuring with Beijing Minhai Biotechnology. After the restructuring, Kangtai transformed from a single hepatitis B vaccine producer to a diversified, international vaccine company, subsequently launching 13-valent pneumococcal vaccine, 23-valent pneumococcal vaccine, quadruple vaccine and other products, achieving its goal of breaking out from the hepatitis B vaccine category.
With multiple blockbuster vaccine products, Kangtai's performance grew dramatically, with revenue increasing from 122.5 million yuan in 2012 to a peak of 3.652 billion yuan in 2021, a nearly 30-fold increase. Excellent performance also made it highly sought after in the capital market, with Kangtai's market value once exceeding 170 billion yuan in 2020.
However, in recent years, Kangtai's situation has gradually deteriorated. From a performance perspective, after reaching peak revenue of 3.652 billion yuan and net profit of 1.263 billion yuan in 2021, Kangtai's performance began to decline, with net profit even posting a loss of 132.7 million yuan in 2022.
In the first half of this year, Kangtai achieved revenue of 1.392 billion yuan, up 15.82% year-over-year, slightly higher than the 1.052 billion yuan revenue in the first half of 2021. However, net profit was only 37.53 million yuan, plummeting 77.3% year-over-year, compared to 336.6 million yuan in the first half of 2021 - now reduced to mere "scraps."
Due to continued performance decline, Kangtai's capital market performance has also been poor in recent years. As of the latest close, Kangtai's total market value has fallen below the 20 billion yuan threshold. From its historical peak, Kangtai's stock price has shrunk by over 85%, with market value evaporating by more than 150 billion yuan.
**Vaccine Giant Falls from Grace**
Looking at the longer cycle, since 2021, Kangtai's performance and stock price have both been poor, especially in terms of performance. From net profit perspective, Kangtai's net profits from 2021 to 2024 were 1.263 billion yuan, -132.7 million yuan, 861.3 million yuan, and 207.3 million yuan respectively, showing extreme volatility.
While the decline of COVID-19 vaccines was certainly an important factor in Kangtai's performance and stock price retreat, the main reason was the fierce price war sweeping the entire vaccine industry.
Currently, Kangtai's products are divided into national immunization program and non-national immunization program categories, with non-national immunization program vaccines being the main revenue products, achieving 1.304 billion yuan in revenue in the first half, accounting for 93.7% of total revenue.
In terms of specific products, Kangtai's non-national immunization program vaccines cover a wide range, including 13-valent pneumococcal conjugate vaccine, freeze-dried human rabies vaccine (human diploid cell), 23-valent pneumococcal polysaccharide vaccine, inactivated COVID-19 vaccine (Vero cell), recombinant COVID-19 vaccine (Y25 adenoviral vector), acellular DPT-Hib combination vaccine (quadruple vaccine), and Hib conjugate vaccine, among others.
However, despite having numerous vaccine products, Kangtai could not escape the massive impact of vaccine price wars amid the domestic vaccine price reduction wave.
Although having multiple products, Kangtai's revenue mainly comes from four core products: quadruple vaccine, hepatitis B vaccine, 13-valent pneumococcal vaccine, and human diploid cell rabies vaccine. Among these four products, except for hepatitis B vaccine, the other three core products all saw significant declines in batch release volumes in the first half of this year.
For example, the 13-valent pneumococcal vaccine, as one of the world's largest single vaccine products, saw batch releases drop 44.31% year-over-year in the first half.
Among the four products, the human diploid cell rabies vaccine had the greatest impact on Kangtai. According to data, as a newly approved product for Kangtai that only began formal sales in April 2024, this product broke the exclusive advantage of Changchun High & New Technology Industries (Group) Inc.'s Changhua Bio in this category. In its first year of approval, it achieved batch releases of 3.3726 million doses, almost catching up with Changhua Bio's 3.8976 million doses.
Unfortunately, the domestic rabies vaccine market growth is slowing, and China has multiple approved rabies vaccine companies including Liaoning Chengda Biotechnology Co., Ltd., Jiangsu Rongante Biological Technology Co., Ltd., Changhua Bio, and Hualan Biological Engineering, Inc., making competition equally fierce. Therefore, rabies vaccines also struggle to bring significant incremental growth to Kangtai.
Currently, amid vaccine commoditization, Kangtai's situation is becoming increasingly difficult, which is also reflected in its interim report. Besides the significant decline in net profit, Kangtai's accounts receivable have been rising year by year.
As of the first half of this year, Kangtai's accounts receivable balance reached 2.913 billion yuan, up 4.54% from the end of June last year, with the proportion of total assets also rising to 20.62%. For vaccine companies, rising accounts receivable indicates sales difficulties, forcing them to accept payment delays to successfully sell vaccines.
Of course, this is not the first time Kangtai has faced payment delays. In 2024, Kangtai's accounts receivable reached 2.787 billion yuan, accounting for over 44.64% of current assets, with the 2.787 billion yuan already exceeding Kangtai's full-year 2024 revenue.
Meanwhile, the accounts receivable turnover ratio was as low as 0.951, with accounts receivable turnover days extending to 378.4 days. This means Kangtai collects payments less than once per year, with accounts taking over a year on average to be collected.
**"Going Global" Difficult as Solution**
From an external perspective, Kangtai's current predicament stems from price wars launched by various vaccine companies to compete for market share amid industry product homogenization. However, looking internally, the reason Kangtai fell into price wars, or struggled to break through vaccine price competition, relates to its lack of competitive moats.
In the past, due to strict regulation and high R&D difficulty, vaccine industry competition was not sufficient, and vaccine companies could often "make easy money" with just a few mature products, as was the case with Kangtai.
However, as HPV vaccines entered the domestic market, vaccine industry rules were rewritten, with various vaccine companies no longer satisfied with their small territories, rushing toward popular vaccines seeking to grab market share.
However, vaccine products developed by vaccine companies are mostly minor innovations or direct imitations, without fundamental innovation. Kangtai's human diploid cell rabies vaccine, one of its four core vaccines, is a clear example of minor innovation.
According to data, current mainstream vaccines use traditional "five-dose" vaccination, while Kangtai is the first domestically approved "four-dose" method, having obvious compliance advantages. As mentioned above, relying on this innovation, Kangtai's human diploid cell rabies vaccine achieved batch releases of 3.3726 million doses in its first year of approval, almost matching Changhua Bio's 3.8976 million doses.
However, such minor innovations lack disruptive potential and inevitably fall into homogeneous competition predicaments. Moreover, with many rabies vaccines already on the market, price wars were predetermined.
From expense perspective, Kangtai's R&D expenses are not particularly high, showing "light R&D, heavy marketing" characteristics. In 2024, Kangtai's R&D expenses were 508.1 million yuan, while sales expenses were 887.2 million yuan. Although this R&D spending is not low, compared to numerous innovative pharmaceutical companies, Kangtai as a vaccine leader still appears insufficient in R&D investment.
Perhaps seeing that domestic vaccine price wars are difficult to resolve in the short term, Kangtai has turned its attention to overseas markets. According to media reports, Kangtai is expanding overseas to develop incremental markets, focusing on Southeast Asia, South Asia, Middle East and other regions, prioritizing emerging markets and developing countries with rapid population growth and large vaccine demand.
Its main overseas product is the 13-valent pneumococcal conjugate vaccine, with the company having signed cooperation agreements with over ten countries including Indonesia, Pakistan, and Turkey. The 23-valent pneumococcal vaccine, varicella vaccine, quadruple vaccine and other marketed products have also established cooperation with India, Nicaragua and other countries.
However, breaking through difficulties via overseas expansion faces considerable challenges. The interim report shows that Kangtai's export revenue in the first half was only 20.02 million yuan, accounting for just 1.44% of total revenue, with export business "struggling to gain momentum."
Currently, we often say the domestic vaccine industry is trapped in extreme internal competition, with major vaccine companies operating on the edge of break-even. However, there is a harsh reality: the four global vaccine giants Pfizer, GlaxoSmithKline, Merck, and Sanofi control nearly 90% of global market share.
For Kangtai, in the highly technical vaccine industry, only by truly mastering innovation capabilities can there be possibility of escaping internal competition predicaments.
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