In a landmark deal, China’s leading vaccine manufacturer, Zhifei, has inked an agreement with British pharmaceutical giant GlaxoSmithKline (GSK) to obtain exclusive distribution rights for GSK’s highly sought-after shingles vaccine, Shingrix, in China. This strategic partnership, valued at an impressive £2.5 billion ($3.05 billion), signifies Zhifei’s commitment to expanding its presence in the world’s second-largest pharmaceutical market. The deal comes amidst a flurry of Western pharmaceutical companies making strategic moves to tap into China’s burgeoning healthcare sector.
A Boost for Shingrix Sales and Expanded Accessibility in China
Shingrix, GSK’s flagship medicine, has consistently ranked as the company’s top-selling product. The partnership with Zhifei aims to supercharge Shingrix’s growth, with GSK setting an ambitious target to more than double its sales to over £4 billion ($4.88 billion) by 2026. Luke Miels, GSK’s Chief Commercial Officer, highlighted Zhifei’s impressive track record in enhancing access to essential medications in China. He cited Zhifei’s prior collaboration with Merck & Co to distribute the Gardasil vaccine for human papillomavirus (HPV) as a successful precedent they aimed to emulate.
This partnership is set to significantly expand the availability of Shingrix across China, with the vaccine becoming accessible in more than 30,000 locations, a substantial increase from the current 9,500 locations. Notably, in China, vaccines can only be accessed at these designated locations, unlike in most other countries where vaccines are available at hospitals, doctors’ offices, and health centers.
Implications and Future Prospects
The agreement, scheduled to commence on January 1st, has garnered substantial market attention. Zhifei’s shares surged by as much as 20% to 58.40 yuan ($8.00), marking their highest level since March 27. GSK shares also witnessed a positive uptick of 1.2% by 0812 GMT, nearing their session peak. Shingrix, the focal point of this partnership, reported £1.7 billion in sales during the first half of the year, reflecting a remarkable 20% year-on-year growth.
Analysts at JPMorgan noted that this deal would significantly de-risk GSK’s Shingrix sales in China over the next three years, potentially leading to a substantial 6% upgrade in consensus Core Earnings per Share (EPS) forecasts for 2026. Additionally, Zhifei has granted GSK the “right of first refusal” to be their exclusive partner for the co-development of a respiratory syncytial virus (RSV) vaccine for older adults in China. This development aligns with GSK’s strategy to ensure growth amid patent expiries and declining revenue from its existing bestsellers by the end of the decade.
In a related context, GSK’s RSV vaccine, Arexvy, recently launched in the United States, garnering a promising start and appearing to outpace Pfizer’s competing vaccine for RSV. A GSK shareholder even expressed that if the strong momentum continued through September, the consensus estimates for Arexvy’s 2023 sales, currently at approximately £215 million, might be significantly underestimated.
This groundbreaking partnership between GSK and Zhifei reflects the evolving landscape of global pharmaceutical collaborations, positioning both companies to capitalize on the immense potential within China’s pharmaceutical market while advancing their respective healthcare agendas.
