Zhifei Biological Secures Exclusive RMB 20.64 Billion Distribution Deal with GSK for Shingrix and RSV Vaccine Rights, Shares Surge by 20%

On October 9, 2023, Chongqing Zhifei Biological Products Co., Ltd. announced that it had signed the "Exclusive Distribution and Co-Promotion Agreement" with GSK. Chongqing Zhifei Biological Products Co., Ltd. obtained the exclusive distribution rights for the shingles vaccine Shingrix (Xin An Li Shi®) and secured priority commercialization rights for the RSV vaccine.

Regarding the recombinant shingles vaccine, the agreed term of the agreement between both parties is from October 8, 2023, to December 31, 2026, lasting for 3 years. If all parties agree, the partnership may be extended.The total minimum annual procurement amount agreed upon by both parties is 20.64 billion yuan.

Affected by this news, Chongqing Zhifei Biological Products Co., Ltd.'s stock price opened significantly higher in the morning session on October 9, and once hit a 20% limit-up. By the afternoon closing, the company's stock price had risen by 19.9%, with a total market value of 140.2 billion yuan.

Herpes zoster is an acute infectious skin disease caused by the varicella-zoster virus. Its incidence continues to rise with age. So far, there has been no effective treatment drug, and vaccination has become the only way to prevent and control this type of disease.

As of now, four shingles vaccines have been marketed globally. Among them, Shingrix, developed by GlaxoSmithKline (GSK), is a recombinant subunit adjuvanted vaccine that requires two doses. Its mechanism involves combining the antigen glycoprotein E with the adjuvant system AS01B.Approved by the FDA for marketing in 2017, and received NMPA approval to enter the Chinese market through a fast-track review in May 2019. To date, Shingrix has been approved for marketing in 33 countries/regions.

According to GSK's financial report, in the first full year after Shingrix was launched (2018), its global revenue exceeded 1 billion US dollars; in 2020, Shingrix sales exceeded 2.7 billion US dollars. According to the latest disclosed annual report data, Shingrix's total revenue in 2022 reached 3.2 billion US dollars, a year-on-year increase of 72%. Among this, growth in China exceeded 100%. Excluding COVID-19 vaccines, it ranked third in the global vaccine list that year. In the first half of 2023, Shingrix achieved sales of 1.713 billion pounds. GSK expects that by 2026, Shingrix’s global sales will reach approximately 4 billion pounds (4.875 billion US dollars).

GSK's announcement shows that, starting from January 1, 2024, Chongqing Zhifei Biological Products Co., Ltd. will have the exclusive import and distribution rights for Shingrix in China.The focus is on promotion and service through its coverage of 30,000 vaccination sites across China.

In August this year, GSK announced positive data from the Phase IV efficacy trial (ZOSTER-076) of Shingrix in China for the first time. The trial evaluated the preventive effect of Shingrix against shingles via intramuscular injection in adults aged 50 and above in China, as well as the immunogenicity and safety of Shingrix administered intramuscularly in a two-dose regimen. This trial included nearly 6,000 patients with a two-year follow-up.Data showed that participants who received Shingrix did not develop any cases of shingles, with a protection rate of 100%. The safety and efficacy were consistent with the results of GSK's pivotal Phase III trials ZOE-50 and ZOE-70 (with a protection rate of 97% over four years of follow-up).

In contrast, the efficacy of Merck's live attenuated vaccine Zostavax decreases as the age of the test group increases. Its protection rate is around 70% for the 50-59 age group, drops to 64% in the 60-69 age group, further declines to 41% in the 70-79 age group, and is only 18% for those aged 80 and above.

Notably, Zostavax accumulated nearly $6 billion in sales over nearly 14 years from its market launch to its eventual discontinuation, while Shingrix surpassed this scale in just four years, making the shingles vaccine a highly anticipated blue ocean market in the global vaccine industry.

According to relevant papers, 90% of adults carry the varicella-zoster virus (VZV), which can be reactivated with age. Public data shows that China's population aged 65 and above is rapidly increasing, with the proportion expected to rise from 6.8% in 2000 to 23.6% in 2050. According to estimates in related papers, there are approximately 6 million cases of shingles annually in China, a number expected to grow with the aging population. According to Sullivan’s statistics, the vaccination rate for shingles among China’s population aged 50 and above is 0.1%, compared to 5.2% in the EU and 26.8% in the US, indicating significant room for growth in the penetration rate of shingles vaccines in China.

This year, the first China-produced shingles vaccine developed by Baike Biotechnology has been approved for marketing. Companies such as Wantai Biologic, Walvax Biotechnology, Luzhu Biotech, and including Chongqing Zhifei Biological Products Co., Ltd., are developing shingles vaccines through different technological pathways, making market competition increasingly fierce.

In addition to the herpes zoster vaccine, the agreement also stipulates that GSK will have the exclusive right to be the preferred partner for the co-development and commercialization of any RSV vaccine for the elderly within the cooperation region with Chongqing Zhifei Biological Products Co., Ltd.

RSV is a common respiratory virus that is widely present globally, primarily infecting individuals with weaker immune systems such as infants, young children, and the elderly. It is regarded as one of the three major respiratory diseases and is one of the most important pathogens causing acute lower respiratory tract infections (ALRTI) in children under 5 years old worldwide. Previously, treatments for RSV infection mainly focused on antiviral and symptomatic therapies, with fewer specific drugs available. Palivizumab, which has not yet been introduced for clinical use in China, is the only preventive medication for high-risk pediatric patients.

According to data from灼识咨询, the global market size for RSV drugs (including both treatment and preventive drugs) is expected to grow from $1.8 billion in 2020 to $12.8 billion by 2030, with a compound annual growth rate (CAGR) of 21.4%. The RSV drug market in China is projected to increase significantly from $5.2 million in 2020 to $1.5 billion by 2030, reflecting a CAGR of 75.8%.

GSK's RSV vaccine Arexvy was approved for marketing by the FDA on May 3 this year, becoming the world's first marketed RSV vaccine for the prevention of lower respiratory tract disease (RSV-LRTD) caused by RSV infection in adults aged 60 and above. On June 19 this year, Arexvy officially received clinical approval in China. As the RSV vaccine with the earliest approval during the same period and outstanding comprehensive efficacy, it may occupy a place in the Chinese market in the future.

Recently, the Arexvy vaccine has been approved by Japan's Ministry of Health, Labour and Welfare for the prevention of RSV (Respiratory Syncytial Virus) disease in adults aged 60 and above. This is the first RSV vaccine approved in Japan for the elderly.

It is worth emphasizing that GSK is the second MNC that Chongqing Zhifei Biological Products Co., Ltd. has partnered with. Since April 2011, Zhifei Biological has been collaborating with Merck on market promotion, and for many years has been responsible for the import, promotion, and sales of its vaccine products in mainland China.

On January 21, 2023, after friendly negotiations, Chongqing Zhifei Biological Products Co., Ltd. and Merck renewed the "Supply, Distribution and Co-Promotion Agreement." This agreement primarily renews the base procurement amount for five vaccine products that Merck has obtained marketing approval for in mainland China, based on the previous agreement. During the validity of the agreement, the company will continue to purchase agreed products such as HPV vaccines and pentavalent rotavirus vaccines from Merck as per the terms.The total basic procurement amount of the agreement products exceeds 100 billion yuan.。

The most crucial part of this cooperation is the currently hard-to-obtain HPV vaccine. According to the announcement, the comprehensive basic procurement plan for the HPV vaccine under the agreement is set at 21.406 billion yuan for the second half of 2023, 32.626 billion yuan for 2024, 26.033 billion yuan for 2025, and 17.892 billion yuan for 2026. Adding the previously announced basic procurement amount of 6.26 billion yuan for the first half of 2023, the total basic procurement amount for the HPV vaccine over four years reaches 104.217 billion yuan.

Currently, the competition for domestically produced HPV vaccines, especially the nine-valent vaccine, is intense. In October 2022, the CDE released the "Technical Guidelines for Clinical Trials of Human Papillomavirus," which is expected to shorten the time to market for some domestically produced vaccines under development. A brokerage's pharmaceutical research team pointed out that, considering the expected approval and market launch of domestically produced nine-valent vaccines around 2025, the HPV vaccine distributed by Chongqing Zhifei Biological Products Co., Ltd. on behalf of Merck will likely continue to dominate the market in the short term.

During the cooperation with Merck, Chongqing Zhifei Biological Products Co., Ltd. saw a significant increase in the batch release volume of its main products. According to financial reports, in the first three quarters of 2022, the company's batch release volume for the quadrivalent HPV vaccine was 11.81 million doses, a year-on-year increase of 158%; the nonavalent HPV vaccine batch release volume was 12.28 million doses, a year-on-year increase of 128%. The pentavalent rotavirus vaccine batch release volume was 6.22 million doses, and the 23-valent pneumococcal vaccine batch release volume was 1.02 million doses. In 2021 and 2022, the company’s actual procurement amounts were 16.562 billion yuan and 22.675 billion yuan, respectively, which were 42.69% and 75.22% higher than the agreed procurement amounts.

With a strong sales network and capabilities, Chongqing Zhifei Biological Products Co., Ltd. has firmly secured a monopolistic position in the import and operation rights of blockbuster vaccines. It has successively partnered with two major vaccine giants, Merck and GSK, obtaining the sales rights for HPV vaccines and shingles vaccines, as well as the priority cooperation rights for RSV vaccines.

In addition to collaborating with vaccine giants, Chongqing Zhifei Biological Products Co., Ltd. has frequently established cooperative relationships with overseas enterprises in recent years, including Indonesia's PT BioFarma, the Netherlands' Intravacc, and Cytiva. Its development strategy of "technology & market" dual drivers has not only facilitated breakthroughs in performance but also strengthened and enhanced its independent research and development capabilities, making it one of the leading companies in China's vaccine industry.

References:

1.Zhang Z et al. The incidence of herpes zoster in China: A meta-analysis and evidence quality assessment. Hum Vaccin Immunother. 2023;19(2):2228169.