(Yicai) April 3 -- Zhifei Biological Products said it has revised its vaccine procurement and distribution agreement with Merck Sharp & Dohme, removing minimum purchase commitments and shifting to a rolling demand-based model, as the Chinese firm seeks to reduce operating risks amid weaker vaccine demand.

The new agreement replaces a January 2023 deal and removes the previous minimum procurement requirement of CNY97.9 billion (USD13.6 billion) for 2024 through 2026, after Zhifei struggled to meet the targets due to slowing demand growth and intensifying competition from domestic human papillomavirus vaccines.

Zhifei said in a regulatory filing yesterday that it has signed a new three-year vaccine distribution and joint marketing agreement with MSD, under which the previous agreement will automatically terminate once the new contract takes effect. Merck will continue to supply three products -- Gardasil 9, a nine-valent HPV vaccine; RotaTeq, a pentavalent rotavirus vaccine; and Pneumovax 23, a 23-valent pneumococcal polysaccharide vaccine.

Under the new agreement, Zhifei will retain exclusive rights to import, co-promote, distribute and sell the products in China's mainland. Instead of fixed procurement commitments, the two companies will determine supply plans based on market demand forecasts and actual vaccination volumes, with Zhifei making rolling purchases accordingly.

The adjustment will improve both parties’ ability to respond to market changes, while easing Zhifei’s operational pressure and lowering business risks, the company said. The agreement will run from its effective date through Dec. 31, 2028, and may be extended by another two years upon mutual agreement.

Zhifei has been MSD'S exclusive distributor in China's mainland since their vaccine partnership began in 2011. Under the previous agreement signed in January 2023, Zhifei committed to minimum purchases totaling CNY97.9 billion over three years, including CNY33.5 billion in 2024 and CNY27 billion in 2025.

However, overly optimistic projections for market demand, combined with the rapid launch of domestic HPV vaccines, made it difficult for Zhifei to meet those targets.

Company data show Zhifei’s annual procurement value peaked at CNY34.8 billion in 2023 before falling to CNY26.4 billion in 2024 and plunging further to CNY2.2 billion in 2025.

The eased requirement failed to lift investor sentiment. Zhifei’s shares [SHE: 300122] fell as much as 4.4 percent intraday today before briefly rebounding above the previous close. The stock eventually closed down 2.2 percent at CNY15.33 (USD2.10). Zhifei’s share price has dropped almost 80 percent from the time when the previous agreement was signed in January 2023.

Editor: Emmi Laine