(Image generated by AI).

Industry policy adjustments and changes in the market environment have collectively put pressure on many vaccine companies, and the vaccine leader Zhifei Biotech has not been spared.

On the evening of August 29, Zhifei Biotech (300122. SZ) released an interim report, achieving operating income of 18.258 billion yuan in the first half of this year, down 25.31% from the same period last year; the net profit attributable to shareholders of the listed company was 2.234 billion yuan, down 47.55% from the same period last year; The net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was 2.230 billion yuan, a decrease of 47.04% over the same period of last year.

However, the industry adjustment period is often the best test of the resilience of enterprise development. Titanium Media APP noticed that Zhifei Biotech, driven by the two-wheel drive of "technology & market", is still accumulating upward momentum, and the performance inflection point can be expected: driven by the increase in HPV vaccine penetration, age expansion and expansion of male indications, the HPV vaccine market still has potential; With the intensification of China's aging population, the herpes zoster vaccine is about to be increased; Superimposed on a number of self-developed products on the market or into the third phase, it is expected to begin to cash in on the performance.

The HPV vaccine market still has potential

In terms of products, the 9-valent HPV vaccine produced by Merck is still the largest contributor to Zhifei's performance. In the first half of the year, Merck released 18.27 million 9-valent HPV vaccines, a year-on-year increase of 24.48%. Thanks to the contribution of the nine-valent HPV vaccine, in the first half of the year, the company's agency product revenue was 17.592 billion yuan, accounting for more than 95% of the revenue.

(Batch issuance of Zhifei Biotech agent products, source: 2024 interim report).

The 9-valent HPV vaccine can prevent 92% of cervical cancer, and Merck is currently the only manufacturer of the 9-valent HPV vaccine in the world. Looking back, after becoming the exclusive agent of Merck's HPV vaccine in 2017, Zhifei Biotech followed the increase in the penetration rate of the vaccine to achieve rapid growth in performance.

Analysts generally believe that as more companies join the research and development of HPV vaccines and get products on the market, it is conducive to further improving the awareness rate of cervical cancer prevention and the vaccination penetration rate. This means that the HPV vaccine still has great market potential in China.

Haitong Securities mentioned in the latest research report that there are about 320 million women aged 9-45 in China, and according to public information estimates, since the HPV vaccine was launched in China, the overall vaccination rate of HPV vaccine is about 21%, and there are still about 250 million women who have not completed HPV vaccination, of which the vaccination rate of women aged 9-15 is lower, and most women under the age of 15 have not completed vaccination.

In January, Merck announced that the two-dose schedule (0,6-12 months) of its 9-valent human papillomavirus vaccine (Saccharomyces cerevisiae) for women aged 9-14 years had been approved by the Food and Drug Administration. In other words, on the basis of the previous three-dose vaccination schedule for 9-45 year olds, Jiadaxiu 9 (Merck's 9-valent HPV vaccine product) will add a two-dose vaccination schedule for 9-14 year olds, providing more economical and convenient health protection for more women of appropriate age.

At the same time, men of appropriate age can also receive the HPV vaccine, which may become a new increment. At present, Merck is actively promoting the registration of HPV vaccine for men, which can prevent genital warts, anal cancer, penile cancer and oropharyngeal cancer, and help protect their partners.

According to the purchase agreement signed between Zhifei Biotech and Merck, the basic procurement amount of HPV vaccine in 2024 will be 32.626 billion yuan, which is the highest basic procurement amount in recent years. However, in the semi-annual report, Zhifei Biotech also stated that the company carries out agency business according to market changes and product needs, and the annual procurement of agreed products is subject to the written confirmation of the company and its partners.

Lay out a new growth curve

In addition to acting as an agent for Merck's HPV vaccine, Zhifei is also seeking a new growth curve. In October last year, Zhifei Biotech signed an "Exclusive Distribution and Joint Promotion Agreement" with GSK, under which GSK will exclusively supply recombinant herpes zoster vaccine to Zhifei. Since this product is a blockbuster vaccine variety in the world, it is highly anticipated by the market.

According to the data, GSK's recombinant zovirus vaccine is called Shingrix, which was approved by the FDA in 2017 and is mainly used for the prevention of zoster in adults aged 50 and above. Clinical studies have shown a protective efficacy of 97.2% (6 to 11 years) in people over 50 years of age and 91.3% in people over 70 years of age. Synion is the second product to be launched globally after the launch of Merck's Zostavax, which was launched in China in June 2020. In the data of the post-marketing phase IV clinical trial released by GSK in August this year, it was shown that the protective efficacy against adults aged 50 and above in Chinese mainland reached 100%.

In fact, with the aging of China's population, the vaccine market for the elderly has broad prospects, and herpes zoster vaccine is one of the potential varieties. According to the Expert Consensus on Herpes Zoster Vaccine Vaccination (2022), it is expected that by 2035, the number of elderly people aged 60 and above in China will exceed 400 million. As many as 90% of adults have latent varicella-zoster virus in their bodies, with age, the immune function gradually declines, and the risk of developing herpes zoster increases. People who have had shingles in the past also have recurrences after they have recovered.

Benchmarking 100g Biotechnology (688276. SH), its herpes zoster vaccine launched in April last year may reflect the breadth of the domestic market to a certain extent. In 2023, the company's shingles vaccine will achieve revenue of 883 million yuan and sales of 663,500 pieces.

"We assume that the product penetration rate is 2%, 5%, and 10%, and the corresponding market capacity is 32.97 billion, 82.42 billion, and 164.85 billion yuan respectively. From 2024 to 2026, the minimum procurement amount of herpes zoster vaccine will be 3.44 billion yuan, 6.88 billion yuan, and 10.32 billion yuan respectively, with a total procurement amount of 20.64 billion yuan in three years. Haitong Securities Research Report pointed out that the potentially huge market capacity of herpes zoster vaccine and the company's agreed purchase amount reflect the company's optimism about the herpes zoster vaccine market.

In January this year, the company officially took over the promotion and sales of recombinant blistering vaccine, and obtained the first batch of batch issuance certificates in early March. According to the interim report, from January to June this year, the batch release of GSK's recombinant herpes zoster vaccine was 1,606,900.

Of course, it takes time to promote and increase the volume of products, which is one of the reasons for the decline in the company's performance in the first half of the year.

However, Zhifei Biotech has initially shown the strength of its sales channels. As of the end of the first half of the year, the company had a large-scale professional marketing team of 4,749 people, covering 31 provinces and cities, more than 2,600 districts and counties, and more than 30,000 grassroots vaccination sites. Up to now, the recombinant herpes zoster vaccine has covered more than 20,000 end-use units across the country, and the breadth and depth of coverage have been significantly improved.

In addition, Zhifei also has high hopes for the RSV vaccine. According to the Exclusive Distribution and Co-Promotion Agreement with GSK, disclosed in October 2023, GSK will prioritize becoming the exclusive partner of Zhifei Biotech in the joint development and commercialization of any RSV (respiratory syncytial virus) vaccine for the elderly in the cooperation region. GSK's RSV vaccine achieved sales of £1.238 billion in its first year overseas.

Data show that RSV is ubiquitous and contagious worldwide, with children under 5 years of age and the elderly over 65 years of age being susceptible. At present, there is no RSV vaccine approved in China and the R&D progress of local companies is still in the early stage, while GSK's Arexvy is making rapid progress. According to the official website of CDE, GSK's recombinant respiratory syncytial virus (RSV) vaccine (AS01E adjuvant system) has been granted implicit approval for clinical trials.

In the view of Haitong Securities, "if the product is progressing smoothly, it is expected to enter the Chinese market quickly, and due to the large base of the adaptation group, it is expected to become a large single product with annual sales of more than 10 billion yuan." ”

Self-developed products are expected to continue to deliver on performance

Generally speaking, the characteristics of technology as the core and variety as the king of the vaccine industry are very obvious, and the key to the future development of the industry lies in innovation. And from the perspective of the vaccine segment, the current competition in the popular track is fierce, and in the future, enterprises that truly have technological innovation advantages, product strength advantages and industrialization capabilities are expected to break through the competition. Zhifei Biotech, driven by the two-wheel drive of "technology & market", is expected to continue to deliver on its self-developed products after short-term performance pressure.

According to the report, the company has set up three major research and production bases of Beijing Zhifei Luzhu, Anhui Zhifeilong Kema, and Chongqing Zhirui Biomedical Industrial Park, as well as an innovation incubation center in Beijing, and has established a professional R&D team with excellent quality, with 979 R&D personnel, constructed nine R&D platforms, and has participated in more than 40 major projects such as the 863 Program of the Ministry of Science and Technology "Modern Medical Technology" project and the national new drug creation major project. In the first half of this year alone, the company's R&D investment reached 570 million yuan, and since 2019, the cumulative R&D investment has exceeded 4.5 billion yuan, significantly higher than that of its peers.

(Comparison of R&D expenditure between Zhifei Biotech and peers, source: Haitong Securities Research Report).

According to the interim report, in the first half of the year, the company's independent products achieved revenue of 551 million yuan, in addition to the decline in the batch issuance of ACYW135 vaccines, the batch issuance of five varieties such as AC conjugate vaccines increased.

(Batch issuance of Zhifei's independent products, source: 2024 interim report).

At the same time, the company has a rich vaccine R&D pipeline. Up to now, there are a total of 32 independent R&D projects (excluding new crown series projects), and 18 projects are in the clinical trial and registration application stage. Among them, 1 product is in the marketing review stage, 2 products have completed clinical trials, and 6 products are in phase III clinical trials.

For example, the quadrivalent influenza virus split vaccine (pre-filled packaging) has passed the on-site verification of registration and is in the technical review stage, and is expected to be approved for marketing within the year. The quadrivalent recombinant norovirus vaccine (Pichia pastoris) has entered phase III clinical trials, and no vaccine against norovirus has been approved for marketing in the world, and the current research and development progress is at the forefront of the industry. The 26-valent pneumococcal conjugate vaccine has entered phase I/II clinical trials, which is currently the highest price pneumococcal conjugate vaccine in clinical research. If it goes well, it will form synergies with the company's 23-valent pneumococcal polysaccharide vaccine already on the market and the 15-valent pneumococcal conjugate vaccine currently in Phase III clinical trials, covering the 15 serotypes with the highest detection rates in Asia.

In addition, the monkeypox vaccine independently developed by the company has obtained relevant data of animal testing, pharmacy and toxicology tests, and the preclinical research has been basically completed, and the new drug clinical trial communication will be submitted to the State Food and Drug Administration. (Author: Su Qitao).