Market cap exceeds $85 billion! The 'big brother' of vaccines remains unafraid of declining performance.

The pharmaceutical industry is still "suffering" at the bottom, but the dawn has appeared.

As the worst-hit sector in the pharmaceutical track, the vaccine industry has seen most companies' stock prices drop by more than 40% in 2024. As a high-barrier industry, such a decline in the vaccine sector has clearly exceeded the fundamentals of these companies.

The root causes of the industry's continuous decline, apart from the sharp drop in demand after the pandemic, are the severe internal competition among industry players over a few major products, which has led to overall market concerns about the sector.

As is well known, there is a significant generational gap between domestic vaccine companies and their European and American counterparts.

After 2018, the domestic vaccine industry began a wave of localization, and domestic vaccine companies started to reap the benefits, with Zhifei Biological being the biggest beneficiary as the former industry leader.

In 2024, Zhifei Biological's stock price has continued to decline despite no major changes in its fundamentals, with a year-to-date drop of over 54%.

Faced with such a decline, Zhifei Biological has taken measures like share buybacks to hedge, but the market remains unconvinced. The underlying reason is market concerns that the future launch of 9-valent HPV vaccines by other manufacturers will significantly impact its performance.

However, it is worth noting that Zhifei Biological not only distributes Merck's 9-valent HPV vaccine but also GSK's shingles vaccine. It is reported that this shingles vaccine was the world's third best-selling vaccine in 2023, after HPV and 13-valent pneumococcal vaccines, contributing $4.359 billion to GSK that year. This means that even if domestic 9-valent HPV vaccines are launched in the future, the current impact on Zhifei Biological is relatively small.

Apart from Zhifei Biological, companies like Kangtai Biological, Walvax Biotechnology, and CanSino Biologics have also suffered significant impacts, with stock price declines mostly exceeding 80%. Clearly, part of their decline is a direct market response to sharp drops in performance, while another part stems from price wars caused by intense competition over major products.

The vaccine industry itself does not have many options left—aside from going global, the remaining path is to end internal competition and consolidate or acquire single-product R&D efforts among industry players.

However, both options present considerable challenges. For the vaccine industry, the trend of rushing into R&D for major products has indeed become a headache. Yet, industry innovation relies on smooth market financing, which has now become a shackle for the sector.

From an industry perspective, not all companies are suffering in this competitive environment. Wantai Biological, under Zhong Shanshan, stands out as an exception.

On July 11, Wantai Biological released its 2024 interim performance forecast, showing expected net profit attributable to shareholders of 240 million to 290 million yuan, down 1.46 billion to 1.41 billion yuan year-on-year (a decline of 85.90% to 82.96%). Adjusted net profit is projected at 58 million to 70 million yuan, down 1.57 billion to 1.55 billion yuan year-on-year (a drop of 96.43% to 95.69%).

Despite this sharp decline in performance, Wantai Biological's stock price has remained unaffected. Statistics show its year-to-date drop is only 9%, with a market cap exceeding 85 billion yuan. The key support for its stock price is its 9-valent HPV vaccine.

Previously, Wantai Biological relied mainly on its 2-valent HPV vaccine as an industry leader. However, after Walvax's 2-valent HPV vaccine entered the market, prices plummeted within two years due to fierce competition. Thus, even if Wantai Biological successfully launches its 9-valent HPV vaccine, at least four competitors—Walvax Biotechnology, Recbio, CanSino Biologics, and Shanghai Bovax—are already in Phase III clinical trials.

From this perspective, Wantai Biological does not hold a significant advantage, yet the market still assigns it a high valuation, indicating recognition of its development logic. In terms of product pipelines, companies like Walvax and Kangtai are more diversified than Wantai Biological, yet their valuations lag far behind. This suggests the vaccine industry is severely undervalued—while future price wars are inevitable, the sector's decline has already exceeded the problems posed by company fundamentals.