As the Chinese vaccines market undergoes a seismic shift marked by disappointing sales, GSK has extended—but with reduced volumes—an ongoing shingles vaccine partnership with local powerhouse Chongqing Zhifei Biological Products.
GSK has extended its original three-year Shingrix distribution pact with Zhifei in China to now cover 11 years, the British pharma said Thursday.
But what appears to be a positive development for the partners has a concerning element in the form of reduced deliveries per year.
Under the new deal, for the six years between 2024 and 2029, Zhifei expects to purchase altogether 21.6 billion Chinese yuan ($2.97 billion) worth of GSK’s Shingrix, the Chinese firm said in a filing to the Shenzhen Stock Exchange. The exact procurement amount will be adjusted based on the contract and market projections, Zhifei added.
That marked a major step down from the pair’s original deal. When GSK and Zhifei joined hands more than a year ago, Zhifei said it would purchase a minimum of 20.6 billion yuan worth of Shingrix to sell in China over just three years from 2024 to 2026. Clearly, after a year, both companies have realized that their original volume estimate was too optimistic.
“This revised agreement with Zhifei puts our collaboration on a sustainable footing, managing challenges in the macro environment in the near-term, and helping us to reach even more Chinese people with our innovative adult vaccines over the long-term,” GSK’s chief commercial officer Luke Miels said in a statement Thursday.
The Chinese vaccine market took a dramatic turn for Big Pharma companies in 2024. The canary in the coal mine was Merck & Co.’s HPV vaccine franchise Gardasil.
Zhifei made its name serving as the Chinese distributor for Gardasil, which helped Merck surpass AstraZeneca to become the biggest multinational pharma company by sales in China in 2023. The increase was big enough to be cited as a driver for Merck’s overall growth.
But come 2024, during the second quarter, Merck suddenly reported a revenue decline for Gardasil in China. Although sales were up everywhere else, those gains just barely compensated for the loss in China. The disappointing result caused a sharp 9% drop in Merck’s share price during the company’s July 30 report. On an investor call that day, Merck’s CEO Rob Davis noted that the entire HPV market in China was facing challenges, and that it wasn’t a “Merck-specific event.”
Price competition from domestic players and the Chinese government’s anti-corruption campaign targeting hospitals and the healthcare industry were suspected reasons behind Gardasil’s fall, which continued into the third quarter, as Davis warned that it isn’t going to be reversed anytime soon.
GSK felt the pain, too. Despite Shingrix’s rollout in China, the shingles shot saw an overall 10% sales decline in the third quarter.
“A broader slowdown in the economy definitely impacts the market and just the capacity of local governments to then restock and purchase vaccines, which are then subsequently purchased by individuals,” Miels said about Shingrix’s China situation during the company’s third-quarter earnings call.
GSK has so far sold 240 million pounds sterling of the roughly 400 million pounds contracted with Zhifei this year, Miels said.
“If we look at the medium to long term, the partnership has started extremely well,” Miels said of Zhifei. “These are impressive operators, they have got to a far number of points of vaccination than we could ever hope to get to with our infrastructure.”
GSK is now focused on the long-term opportunity in China, he added.
As both Gardasil and Shingrix are managed by Zhifei, the Chinese company saw its third-quarter revenue plummet by nearly 70% to 4.53 billion yuan ($620 million). In the Chinese shingles vaccine market, Shingrix, a recombinant shot, is competing with a live vaccine manufactured by a local firm called Changchun BCHT Biotechnology, while other domestically developed candidates are in phase 3 or earlier-stage trials.
When GSK penned the Zhifei pact last year, the companies said there’s a possibility to potentially expand the partnership to cover GSK’s newer respiratory syncytial virus (RSV) vaccine, Arexvy.
Under the revised agreement, the two have taken their RSV commitment a step forward as Zhifei agrees to engage exclusively with GSK on the commercialization of an RSV vaccine, with an initial term of 10 years.