--- title: "After clearing the inventory worth tens of billions: ZHIFEI-BIOL's operating cash flow turns positive, a new cycle quietly begins" type: "News" locale: "en" url: "https://longbridge.com/en/news/290958664.md" description: "ZHIFEI-BIOL expects a net profit loss of 14.723 billion yuan attributable to shareholders in 2025, mainly due to a 12.766 billion yuan inventory impairment of Merck's nine-valent HPV vaccine. Despite facing significant losses, the company's operating cash flow has turned positive, and the chairman stated that the most difficult period has passed. ZHIFEI-BIOL is developing through a \"self-research + market sales\" dual-drive approach, and after clearing out the 10 billion yuan inventory, a new cycle has quietly begun" datetime: "2026-06-26T11:18:08.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/290958664.md) - [en](https://longbridge.com/en/news/290958664.md) - [zh-HK](https://longbridge.com/zh-HK/news/290958664.md) --- # After clearing the inventory worth tens of billions: ZHIFEI-BIOL's operating cash flow turns positive, a new cycle quietly begins In early June this year, at the shareholder meeting of ZHIFEI-BIOL, Chairman Jiang Rensheng remarked on the challenging year for this vaccine leader: "2025 will be very difficult, but we have ultimately come through." In 2025, domestic vaccine leader ZHIFEI-BIOL delivered its first major loss annual report since going public, with a net profit attributable to shareholders of a loss of 14.723 billion yuan. The impairment of inventory for Merck's nine-valent HPV vaccine alone amounted to 12.766 billion yuan. Market opinion once attributed this loss to a rigid procurement agreement worth hundreds of billions signed in 2023, viewing it as a misstep in the company's aggressive expansion. However, from the perspective of long-term corporate development, looking back to 2023, was that procurement agreement with Merck really a mistake? **From an unknown entity to the "King of Vaccines," an underestimated history of elevation** To understand ZHIFEI-BIOL's current situation, one must first grasp how high it once stood. Reviewing the development history of ZHIFEI-BIOL reveals a clear characteristic of "independent research and market sales" walking on two legs. Since its inception, the company has placed a high emphasis on independent research and development, establishing its first research and production base—Beijing ZHIFEI Green Bamboo—in 2003, and initiating the research and industrialization of its own products. By around 2007 and 2008, it successively launched independently developed products such as the AC combined vaccine, HIB vaccine, and quadrivalent meningococcal polysaccharide vaccine. At the same time, ZHIFEI-BIOL focused on building its own marketing team. Thanks to the deep clinical medical expertise and accumulated knowledge of epidemiology of the actual controller of ZHIFEI-BIOL, the company signed an exclusive agency agreement with Lanzhou in 2002 to represent the AC group meningococcal polysaccharide vaccine, achieving impressive sales performance. ZHIFEI-BIOL continuously reinvested the profits gained from market sales into research and development, forming a virtuous cycle of "market feeding back into research and development, research driving the future," achieving sustainable development for the enterprise. In 2010, ZHIFEI-BIOL became the first privately-owned vaccine company to be listed on the Shenzhen Stock Exchange. The following year, ZHIFEI-BIOL signed its first cooperation agreement with Merck, agreeing to exclusively represent the measles, mumps, and rubella (MMR) vaccine and the 23-valent pneumococcal polysaccharide vaccine in mainland China, marking the beginning of a friendly cooperation lasting fifteen years. The real turning point occurred in 2017 and 2018. Merck's quadrivalent HPV vaccine and nine-valent HPV vaccine were successively approved for listing in China, and ZHIFEI-BIOL secured exclusive agency rights for these two products in mainland China due to its excellent commercialization capabilities. The market response was almost instantaneous, with revenue in 2017 reaching 1.343 billion yuan, a year-on-year increase of 201%; in 2018, revenue soared to 5.228 billion yuan, a year-on-year increase of 289%; net profit attributable to shareholders jumped from 430 million yuan in 2017 to 1.451 billion yuan in 2018, an increase of over 235%. In 2022, ZHIFEI-BIOL's subsidiary ZHIFEI Longke Ma's recombinant novel coronavirus protein vaccine (CHO cells) was approved for conditional listing. By 2023, ZHIFEI-BIOL's total operating revenue surged to 52.963 billion yuan, setting a historical performance peak Since then, ZHIFEI-BIOL has risen to the top of the A-share vaccine industry. The value of ZHIFEI-BIOL's "technology & market" dual-driven model has been validated, with abundant cash flow generated from its agency business and international experience accumulated through cooperation with top global pharmaceutical companies providing crucial support for the accelerated iteration and scale expansion of the company's independent R&D system. After years of accumulation, ZHIFEI-BIOL has established three major research and production bases: Beijing ZHIFEI Lvzhu, Anhui ZHIFEI Longkema, and Chongqing Chen'an, as well as the Beijing Innovation Incubation Center and Chen'an Innovation Center, building a research and development system covering seven major technology platforms, including polysaccharide-protein conjugates, recombinant proteins, and mRNA. This comprehensive multi-technology platform layout has made ZHIFEI one of the few domestic biopharmaceutical companies capable of developing multivalent vaccines, tumor vaccines, respiratory vaccines, tuberculosis vaccines, and drugs for metabolic diseases. It maintains a leading position in the industry in terms of the reserve of domestic innovative vaccine pipelines and the speed of industrialization, filling the gap in the research and development of several scarce vaccine varieties in China and establishing its position in the first tier of comprehensive domestic vaccine enterprises. At the same time, ZHIFEI-BIOL has established the most extensive commercialization network in the country, covering all 31 provincial-level administrative regions, over 2,600 districts and counties, and more than 30,000 grassroots medical and health service points. Through its self-built logistics system, cold chain distribution reaches township health centers, ensuring constant temperature storage and transportation throughout the vaccine's journey, guaranteeing efficient and compliant circulation of vaccine products, and forming a channel barrier that is difficult for the industry to replicate. This mature commercialization system has supported the past volume of imported vaccines and provides ready channels for the rapid penetration of self-developed vaccines into the national market, which is a core advantage that most small vaccine companies with only single R&D capabilities cannot replicate in the short term. As of now, ZHIFEI-BIOL has formed a complete closed-loop system for vaccine R&D, production, and sales, firmly establishing its position in the first tier of the domestic biopharmaceutical industry. Its product matrix is also very clear, mainly divided into two categories: agency-imported vaccines and self-developed vaccines, covering common infectious diseases such as cervical cancer, meningococcal disease, pneumonia, influenza, and shingles, while also laying out drugs related to tuberculosis infection diagnosis, prevention, and treatment, constructing a diversified epidemic prevention product system, making it the most enriched in R&D pipelines among domestic private vaccine enterprises. It can be said that in the process of China's vaccine industry transitioning from "catching up" to "running alongside," ZHIFEI-BIOL has transformed into one of the core forces of independent innovation in the biopharmaceutical industry, and its role and status are no longer comparable to a decade ago. **Hundred Billion Procurement Agreement: A Choice in an Era of High Dividends** In January 2023, the demand for universal HPV vaccination exploded, and the imported nine-valent vaccine became hard to obtain, with no competing products available domestically. ZHIFEI seized the opportunity to renew a significant procurement agreement with Merck: it was agreed that from the second half of 2023 to 2026, the basic procurement amount for HPV vaccines would be approximately 98 billion yuan. From the perspective of the industry in 2023, this rigid agreement makes logical sense: the domestic gap for the nine-valent HPV vaccine, the scarcity of imported sources, and the large eligible vaccination population make locking in long-term supply and securing exclusive distribution rights the optimal business choice to maintain leading market share and ensure long-term profitability. Most companies in the industry at that time predicted that the dividends from imported HPV vaccines would continue for a long time However, the market is often changing rapidly. The domestic bivalent, quadrivalent, and nonavalent HPV vaccines have been successively approved, significantly diverting demand in the self-paid HPV market. Coupled with changes in public vaccination willingness and increased vaccine hesitancy, the supply-demand pattern has reversed. In response to market changes, ZHIFEI-BIOL and Merck have reached a consensus to adjust the procurement and supply rhythm of HPV vaccines for the year 2025. In 2025, ZHIFEI-BIOL recognized an inventory impairment and contract performance impairment of 13.618 billion yuan, of which the impairment for HPV vaccines alone was 12.766 billion yuan, resulting in a net loss attributable to the parent company of 14.723 billion yuan for the year. This significant loss is not a collapse of the company's operational capabilities, but rather a one-time revaluation of existing imported vaccine assets under the cyclical changes in the industry, as well as a concentrated liquidation of the old agency profit model. **The detoxification process has been completed: the financial fundamentals are changing** The one-time large impairment seems costly, but in fact, it is a thorough reduction of burdens for ZHIFEI-BIOL, allowing it to start anew. Since 2025, several core financial indicators of ZHIFEI-BIOL have continued to improve, and it has restructured its cooperation model with its two major partners, indicating substantial changes in its fundamentals. In 2024, ZHIFEI-BIOL engaged in in-depth discussions with GSK and reached a consensus to adjust the strategic cooperation agreement in December 2024, allowing for dynamic adjustments of product procurement based on actual market demand. In the same year, ZHIFEI-BIOL amicably negotiated with Merck to suspend the procurement of HPV vaccines for 2025, and in April 2026, signed a revised and restated supply, distribution, and co-promotion agreement with Merck, where both parties will dynamically assess and adjust the procurement and supply volume of the agreed products based on market demand. Operating cash flow is the most direct signal. Starting from the first quarter of 2025, ZHIFEI-BIOL's operating cash flow has remained positive for five consecutive quarters, with a net operating cash flow of 5.167 billion yuan for the year, a year-on-year increase of 222.33%. In the first quarter of 2026, the operating cash flow was 278 million yuan, indicating that its terminal sales collections have continued to improve, and the company's self-sustaining ability has returned to a stable state. Inventory reduction is another key signal. In 2025, ZHIFEI-BIOL recognized a one-time impairment of 13.618 billion yuan for inventory, reducing inventory from 22.244 billion yuan at the beginning of 2025 to 3.573 billion yuan at the end of the first quarter of 2026, which means that the company's inventory pressure has basically been cleared, and the de-inventory process has been substantially advanced. In terms of accounts receivable, it has continuously decreased from 30.1 billion yuan at the end of March 2024 to 10.925 billion yuan at the end of the first quarter of 2026, falling for nine consecutive quarters, significantly releasing bad debt risks. The optimization of the debt structure provides ZHIFEI-BIOL with a longer strategic window. The 10.2 billion yuan syndicated loan obtained at the beginning of 2026, along with the 2.5 billion yuan financing quota from the sci-tech innovation bonds, has replaced a large amount of short-term debt with medium- to long-term liabilities, compressing short-term borrowings from 8.594 billion yuan to 560 million yuan, while long-term borrowings have increased accordingly. This structural adjustment has alleviated the urgent pressure of short-term debt repayment for ZHIFEI-BIOL, allowing necessary time and space for the commercialization of self-developed products **Self-Research** **Enters** **Harvest Period** **: Dual-Track Layout Opens New Growth Cycle** Losses are in the past; how to move towards the future is the most core proposition for ZHIFEI-BIOL at present. The answer is transformation through self-research. In recent years, ZHIFEI-BIOL has maintained an average annual R&D investment of over 1 billion yuan, reaching 1.436 billion yuan by 2025, accounting for 16.03% of revenue. The research pipeline includes a total of 41 products, covering seven major matrices: respiratory, digestive, tuberculosis, tumor-related vaccines, multi-valent vaccines, adult vaccines, and metabolic drugs. Currently, five core products have submitted applications for listing, among which the 15-valent pneumococcal conjugate vaccine is about to become the highest-priced second-line pneumococcal vaccine available in the country, and six other products are in the phase III clinical trial stage. It is expected that multiple self-developed products will intensively enter the commercialization stage in the next two years, marking a substantial harvest phase in ZHIFEI-BIOL's strategic transformation to an "innovation product-driven" enterprise. On this basis, the profit structure has shown positive changes. By 2025, ZHIFEI's self-research product revenue is expected to reach 1.187 billion yuan, with a gross profit margin as high as 70.62%, significantly higher than the negative gross profit margin of agency products. The increase in the proportion of high-margin self-research business will fundamentally optimize the company's profit model. It is worth mentioning separately the strategic significance of ChenAn Biology. By increasing capital to hold ChenAn Biology, ZHIFEI-BIOL will extend its business territory into the field of metabolic diseases such as diabetes and obesity, laying out GLP-1 class drugs. Against the backdrop of explosive growth in the global GLP-1 market, this "prevention & treatment" dual-track path is a differentiated attempt by ZHIFEI-BIOL compared to traditional vaccine companies. From the perspective of the domestic industry environment, multiple objective data prove that the innovative vaccine track has long-term stable growth potential. The latest institutional research report shows that in the first quarter of 2026, the overall batch issuance of the vaccine industry reached 875 batches, a year-on-year increase of 14.1%. This reflects a steady recovery in market basic immunization demand, with ZHIFEI-BIOL and Wantai Biological Pharmacy maintaining a steady pace in the fields of HPV and shingles. In addition, the HPV vaccine has officially been included in the national immunization program, and seven departments, including the National Health Commission, are jointly promoting related public awareness campaigns, which will continuously enhance public awareness of preventive vaccination, opening up broad market space for related vaccine products. Supported by open policies, Chinese vaccines are actively participating in global public health governance, creating a favorable external environment for ZHIFEI-BIOL's international layout. In terms of global layout, several innovative products from ZHIFEI-BIOL have shown leading potential. The Fucus Sonnei Shigella bivalent conjugate vaccine has initiated phase III clinical trials in Bangladesh, and the 26-valent pneumococcal conjugate vaccine has started phase I clinical trials in Australia, with significant year-on-year growth in overseas revenue expected by 2025 According to a research report by Southwest Securities, ZHIFEI-BIOL is actively promoting the sales of self-developed products, such as the AC polysaccharide vaccine and the quadrivalent meningococcal polysaccharide vaccine, bringing new momentum to the company. It is expected that the revenue growth rates for 2025-2027 will be 10%/20%/20%. The cyclical changes in the industry are a norm for the development of biopharmaceutical companies, and short-term pain is often a necessary stage for companies to complete industrial upgrades. From the management's perspective, even with the foresight of changes in the HPV track, the billion-yuan procurement agreement in 2023 remains an inevitable choice for ZHIFEI: the agreement secures a share of the industry's golden cycle, which in turn brings research and development capacity, national channels, an international system, and a complete self-developed pipeline, completing the fundamental transformation from a "vaccine distributor" to a "comprehensive innovative biopharmaceutical company." The rapid growth cycle of the old HPV agency has come to an end, and a new self-developed commercialization cycle is beginning. For this company, which has been in the Chinese vaccine industry for over twenty years, relying on the industrial foundation accumulated over the years, emerging from the pain and entering a new development stage may just be a matter of time ### Related Stocks - [300122.CN](https://longbridge.com/en/quote/300122.CN.md) - [MRK.US](https://longbridge.com/en/quote/MRK.US.md) - [GSK.US](https://longbridge.com/en/quote/GSK.US.md) - [603392.CN](https://longbridge.com/en/quote/603392.CN.md) - [GSK.UK](https://longbridge.com/en/quote/GSK.UK.md) - [GSK.WI.US](https://longbridge.com/en/quote/GSK.WI.US.md) ## Related News & Research - [15:11 ETAbu Dhabi Announces Partnership with MSD to Advance Operational Excellence and Expand Access across the Region](https://longbridge.com/en/news/290730659.md) - ['Master key' vaccine technique may 'prevent next pandemic': researchers](https://longbridge.com/en/news/290762731.md) - [07:30 ETReplicate Bioscience Awarded Grant to Advance srRNA Vaccine Candidates for Tuberculosis](https://longbridge.com/en/news/290287930.md) - [Capstone Energy+ expects SG&A to trend to the high teens over 12 to 18 months as it targets 5 ppm liner delivery by year-end](https://longbridge.com/en/news/290899103.md) - [Aker BioMarine backs Antarctic Peninsula marine protected area spanning 455,957 sq km](https://longbridge.com/en/news/290955582.md)