Zhifei Revises MSD Deal After Missed Vaccine Goals

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Zhifei Biological Products has revised its vaccine procurement and distribution agreement with Merck Sharp & Dohme, moving away from minimum purchase commitments and adopting a demand-driven, rolling model. The change aims to better align supply with market needs and mitigate operational risks amid declining vaccine demand.

This new arrangement replaces a contract signed in January 2023 and removes the previous minimum procurement obligation of approximately CNY97.9 billion (around USD13.6 billion) for the years 2024 through 2026. The company faced challenges meeting these targets due to slowing demand growth and increased competition from domestic human papillomavirus vaccines.

In a recent regulatory filing, Zhifei announced the signing of a new three-year vaccine distribution and joint marketing agreement with MSD. Once the new deal takes effect, the previous contract will automatically expire. MSD will continue supplying three products: Gardasil 9, a nine-valent HPV vaccine; RotaTeq, a pentavalent rotavirus vaccine; and Pneumovax 23, a 23-valent pneumococcal polysaccharide vaccine.

Under this new agreement, Zhifei maintains exclusive rights to import, co-promote, distribute, and sell these vaccines across mainland China. Instead of binding purchase quotas, supply plans will be based on market demand forecasts and actual vaccination volumes, with Zhifei making flexible, rolling purchases.

This approach aims to improve responsiveness to market fluctuations, reduce operational pressures, and lower overall business risks. The contract is valid until December 31, 2028, with the possibility of a two-year extension through mutual consent.

Since forming its vaccine partnership with MSD in 2011, Zhifei has been the exclusive distributor of MSD’s vaccines in mainland China. The previous agreement from January 2023 required Zhifei to make minimum purchases totaling CNY97.9 billion over three years, including CNY33.5 billion in 2024 and CNY27 billion in 2025.

However, overoptimistic demand projections and the rapid introduction of domestic HPV vaccines made it difficult for Zhifei to meet those targets. Data shows Zhifei’s annual procurement peaked at CNY34.8 billion in 2023 but then declined sharply to CNY26.4 billion in 2024 and further dropped to CNY2.2 billion in 2025.

This easing of purchase obligations did not boost investor confidence. Zhifei’s stock price fell as much as 4.4 percent during trading today before temporarily rebounding above the previous close, ultimately ending the day down 2.2 percent at CNY15.33 (about USD2.10). Since signing the previous agreement, Zhifei’s share value has decreased by nearly 80 percent.