Once a high-flyer due to its distribution rights for Merck's HPV vaccine, Chongqing Zhifei Biological Products Co., Ltd. (300122.SZ) is now confronting its most severe operational crisis since listing, with an estimated net loss attributable to shareholders exceeding 10 billion yuan for 2025, marking its first annual loss since going public.
Since the third quarter of 2024, Zhifei Biological has suffered operational losses for six consecutive quarters, primarily due to weaker-than-expected sales of its core products amid an industry-wide demand adjustment, compounded by fierce competition from the rise of domestic HPV vaccines. The agreement renewal with Merck, once seen as a guarantee for future performance, has now become a massive inventory burden.
Against a backdrop of high accounts receivable and mounting short-term debt repayment pressure, Zhifei Biological plans to apply for a 10.2 billion yuan syndicated loan to replenish funds, pledging core assets from the company and its major shareholders' family as collateral to weather the downturn.
According to its earnings forecast, Zhifei Biological expects a net loss attributable to shareholders of 10.698 billion to 13.726 billion yuan for 2025, a staggering decrease of 780% to 630% year-on-year, compared to a profit of 2.018 billion yuan in the previous year. It also anticipates a net loss after extraordinary items of 10.554 billion to 13.541 billion yuan, down 780% to 630% from a profit of 1.991 billion yuan a year earlier.
The company attributed the expected loss to a deep industry adjustment caused by declining public vaccination willingness and increased vaccine hesitancy. Specifically, two main factors were cited: significantly lower-than-expected sales of its primary products, leading to substantial year-on-year performance pressure; and the recognition of substantial inventory and credit impairment provisions based on the prudence principle to truthfully reflect the company's financial status, as the net realizable value of inventory fell below its book value due to market demand changes and products nearing expiration, while expected credit losses on accounts receivable were assessed based on their aging.
Established in 2002 and listed on the Shenzhen Stock Exchange on September 28, 2010, Zhifei Biological is an integrated biopharmaceutical enterprise engaged in the R&D, production, sales, distribution, and import/export of vaccines and biological products. As of the first half of 2025, the company had 15 marketed products, including one conditionally approved product, covering vaccines for diseases such as meningitis, cervical cancer, pneumonia, influenza, rotavirus, and shingles, as well as solutions for tuberculosis infection diagnosis, prevention, and treatment, targeting populations from infants to adults.
Operational losses began in the third quarter of 2024. In Q3 and Q4 2024, the company's operating revenue was 4.528 billion yuan and 3.283 billion yuan, respectively, plunging 69.46% and 75.94% year-on-year, with net losses attributable to shareholders of 84 million yuan and 132 million yuan, severely dragging down full-year performance. For the full year 2024, Zhifei's operating revenue halved to 26.07 billion yuan, while net profit attributable to shareholders plummeted 74.99%.
The pressure continued into 2025. Net losses attributable to shareholders for Q1 to Q3 2025 were 305 million yuan, 292 million yuan, and 610 million yuan, respectively. Based on the cumulative loss for the first three quarters, the projected loss for Q4 2025 could exceed 12 billion yuan, indicating six consecutive quarters of operational losses, with a severe deterioration in Q4 2025, resulting in the first annual loss since listing.
Zhifei Biological's revenue comes from self-developed and distributed products. Self-developed products include ACYW135 vaccine, AC conjugate vaccine, Hib vaccine, AC polysaccharide vaccine, and 23-valent pneumococcal polysaccharide vaccine. Distributed products include Merck's quadrivalent HPV vaccine, 9-valent HPV vaccine, pentavalent rotavirus vaccine, imported 23-valent pneumococcal polysaccharide vaccine, inactivated hepatitis A vaccine, and GSK's recombinant shingles vaccine.
As the exclusive distributor of Merck's HPV vaccines in China, Zhifei's journey from billions in profit to billions in loss spanned just four years.
After successfully distributing and promoting Merck's quadrivalent HPV vaccine in 2017, Zhifei rapidly captured the Chinese market. Securing distribution rights for the 9-valent HPV vaccine in 2018 propelled the company onto a fast track of profitability. Driven by the soaring sales of these two products, Zhifei's revenue surged from 1.343 billion yuan in 2017 to 52.92 billion yuan in 2023, while net profit attributable to shareholders jumped from 432 million yuan to 8.07 billion yuan.
In 2023, Zhifei renewed its distribution agreement with Merck, committing to purchase HPV vaccines, pentavalent rotavirus vaccines, and other agreed products during the contract term, with total baseline purchase amounts exceeding 100 billion yuan. Specifically, baseline purchase amounts for HPV vaccines from 2024 to 2026 were set at 32.626 billion yuan, 26.033 billion yuan, and 17.892 billion yuan, respectively. This "fixed procurement" commitment was initially viewed as securing future performance.
Unexpectedly, the market shifted dramatically. The launch of Wantai Biological's domestically produced 9-valent HPV vaccine, with its cost-competitive pricing, broke the foreign monopoly. The ensuing price war severely impacted Zhifei, which relies heavily on its distribution business. In the first half of 2025, revenue from distributed products plummeted 75.16% year-on-year to 4.37 billion yuan, with gross margin dropping 8.61 percentage points to 22.61%. Notably, batch issuance volume for the quadrivalent HPV vaccine was zero, while the 9-valent HPV vaccine issuance volume fell 76.8%.
To help Zhifei digest inventory, Merck announced in February 2025 that it would suspend 9-valent HPV vaccine supplies to China. For self-rescue, Zhifei launched promotional campaigns like "buy two doses, get one free" in cities including Chongqing, Fuzhou, and Xi'an. However, inventory clearance remains below expectations. As of the end of Q3 2025, Zhifei's inventory stood at a staggering 20.246 billion yuan, accounting for over 40% of total assets. Crucially, with a three-year shelf life, a large portion of the 9-valent HPV vaccine inventory risks expiration due to shrinking demand.
Alongside high inventory, accounts receivable remain elevated. As of the end of Q3 2025, accounts receivable reached 12.814 billion yuan, far exceeding revenue for the same period.
With deteriorating cash-generating ability, Zhifei's funding chain is under significant strain. By the end of Q3 2025, total liabilities amounted to 16.786 billion yuan, including 12.885 billion yuan in current liabilities. Short-term borrowings reached 10.318 billion yuan, while cash and cash equivalents were only 2.498 billion yuan, highlighting a substantial gap and intense repayment pressure.
To alleviate funding pressure, Zhifei announced on January 5th its intention to apply for a medium-to-long-term syndicated loan of up to 10.2 billion yuan with a maximum term of three years. According to the announcement, the loan is intended to supplement working capital and optimize existing debt structure, with funds prohibited from being used for fixed asset or equity investments, or in prohibited industries.
The syndicated loan will be led by Agricultural Bank of China's Chongqing Jiangbei Sub-branch as the lead and agent bank, undertaking no more than 20% of the total amount, with the remaining份额 undertaken by 10 other participating banks. The loan is primarily secured by credit, supplemented by pledges and mortgages.
For collateral, Zhifei has pledged all core assets from the company and its major shareholders' family, including full joint liability guarantees from Jiang Rensheng and his spouse, Jiang Lingfeng and his spouse, and subsidiaries Zhifei Luzhu and Zhifei Longkema. The listed company will provide guarantees using its accounts receivable, all equity held in subsidiaries Zhifei Luzhu and Zhifei Longkema, and its industrial plants, office buildings, and construction-in-progress.
Zhifei stated that the syndicated loan will help optimize its debt structure, supplement daily operating funds, accelerate R&D project progress, and promote stable operation and development. Post-financing, the company's debt structure will shift towards medium-to-long-term borrowings, reducing short-term repayment pressure and keeping overall debt risk controllable.
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