Merck & Co. waves goodbye, while Zhifei Biotech escapes a disaster

Why did Merck & Co. turn a blind eye to Zhifei Bio at a critical moment?

On April 2nd, Zhifei Bio announced: the company has signed a “Revised and Restated Supply, Distribution, and Co-Promotion Agreement” with Merck & Co. The procurement agreement signed in 2023 is now void. The new agreement no longer sets a baseline purchase amount. Both parties will negotiate and confirm expected procurement and supply plans based on market demand forecasts and actual vaccination situations.

According to the old agreement, this year Zhifei Bio was to purchase 17.89B yuan worth of HPV vaccines and a total of 838 million yuan of pentavalent rotavirus vaccines, among others. Before digesting the existing stock, they are forced to acquire a new batch, which will surely push Zhifei Bio into a desperate situation. Fortunately, Merck & Co. is reasonable and no longer requires enforcement of the original agreement.

Over the past year, due to poor sales of HPV vaccines in China, Zhifei Bio is expected to incur losses between 10.7B and 13.73B yuan. As of the end of September, the company had inventory worth 20.25B yuan, with less than 2.5 billion yuan in cash on hand. In January this year, Zhifei Bio, in a bid for self-rescue, had its core assets mortgaged by the controlling family of Jiang Rensheng to secure a 10.2 billion yuan syndicated long-term loan.

As of now, Zhifei Bio’s market value has evaporated by 300 billion yuan from its peak.

Now, Merck & Co. is willing to wait until Zhifei Bio digests its inventory before resupplying, and the cooperation will continue until December 31, 2028. According to the announcement, both parties can extend the cooperation period by another two years, giving Zhifei Bio a temporary breather.

HPV Vaccine Business Collapsing

Merck & Co. actually anticipated a slowdown in the HPV vaccine market but didn’t expect it to happen so quickly. In 2024, when a price war broke out over the bivalent HPV vaccine, Zhifei Bio was still able to fulfill nearly 80% of its previous baseline procurement amount. But in 2025, Zhifei Bio only purchased 2.18B yuan worth of vaccines from Merck & Co., a stark contrast to the agreed procurement amount of 26.96B yuan.

Image source: Zhifei Bio announcement

According to Merck’s financial report, in 2025, sales of the “Gardasil” vaccine in China totaled only $200 million (about 1.38B yuan), a year-on-year decline of 94.29%, with sales in the fourth quarter being zero. Merck & Co. no longer holds an optimistic outlook, indicating that HPV vaccine sales in China will still show a significant downward trend in 2026. The company will wait until Zhifei Bio’s inventory reaches normal levels before arranging shipments.

The immediate problem facing Zhifei Bio is: whether it can消耗完 this batch of inventory.

Zhifei Bio is actually a company known for vaccine sales, with coverage across 31 provinces and over 30,000 vaccination points. In 2011, Zhifei Bio began cooperation with Merck & Co. Over more than a decade, Zhifei Bio has made steady progress in promoting and selling Merck’s HPV vaccines. In 2023, Zhifei Bio’s revenue surpassed 50 billion yuan, making the entire vaccine industry envious.

A leading global HPV vaccine manufacturer partnering with China’s largest vaccine sales company—yet both giants have made misjudgments—this is the most incomprehensible part for the market: in January 2023, Merck & Co. and Zhifei Bio signed procurement orders exceeding 100 billion yuan.

The shelf life of HPV vaccines is only three years. By the end of 2024, Zhifei Bio’s inventory had exceeded 22 billion yuan, accounting for 44.52% of total assets, significantly higher than the usual 20%. After reducing procurement last year, by the end of the third quarter, Zhifei Bio still had inventory worth 20 billion yuan. Returning to normal levels will require消耗一半 of this stock. Based on current sales trends, most of these vaccines will likely be scrapped, and the company will probably have to recognize losses, making the situation very severe.

Vaccine Companies’ Self-Rescue Efforts

Zhifei Bio is representative of vaccine companies, and its situation reflects industry-wide issues. Last year, the domestic vaccine industry was generally sluggish, especially after the 2024 price war, which failed to stimulate demand. Instead, profitable products like flu vaccines and pneumonia vaccines became unsalable.

HPV vaccines fared slightly better; at the end of last year, HPV vaccines were included in the national immunization program. But this still cannot solve the urgent problems faced by vaccine companies, nor save these enterprises.

Since 2023, Waston Biologics, which produces HPV and pneumonia vaccines, has seen continuous revenue declines. Last year, Waston Biologics also started venturing into nutritional health products: first partnering with the U.S. Notitia to develop, manufacture, and commercialize core microbiome analysis, microbiome-targeted transplantation, and nutritional formulation technologies domestically; simultaneously establishing Aisenze Biotech, crossing into natural nutritional products with precise photobiological synthesis. In April 2026, after Century Golden Source’s acquisition, Waston Biologics officially entered the specialized medical food sector, establishing its regional headquarters in Wuxi.

Zhifei Bio has yet to find a way out and stated that in 2026, the company will make every effort to improve operations and strive for more自主产品上市. Since 2025, Zhifei Bio has advanced clinical trials for trivalent and quadrivalent flu vaccines, shingles vaccines, tetanus vaccines, and monkeypox vaccines. Given the current competitive environment, none of these are easy to develop.

However, Zhifei Bio still has a strategy for investments. In the innovative drug sector, Zhixiang Jintai has already gone public independently. Zhifei Bio also invested in Chen An Biotech, aiming at the diabetes and weight loss track. Since January this year, Chen An Biotech’s GIP/GLP-1 dual receptor agonist entered Phase 1 clinical trials, a product targeting the same receptor as Terliparatide; in March, DeGu insulin injection application for production registration was accepted by the National Medical Products Administration.

These two directions seem promising, but the market is tough. Zhixiang Jintai suffered a net loss of 579 million yuan last year; insulin and GLP-1 products are now highly homogenized, and Chen An Biotech’s products are only in Phase 1. Zhifei Bio’s days ahead will not be easy.

Written by: Yang Xixia

Edited by: Jiang Yun Jia Ting

Operations: Twenty Thirteen

Illustration: Visual China

Note: Original content by Jian Shi Ju. Do not reproduce without permission.