While it may be a well-acknowledged status-quo for most developing countries, a few Chinese firms have dared to change this in the 21st century, and while some failed memorably, some could manage to survive with the help of the state and the expanding market in the mainland.

China’s state-imposed immunization program created some state-backed, local level giants. Still, capital’s focus has been concentrating on private vaccines in the last years, including HPV, influenza and meningococcal disease, where Chinese companies are striving to compete with overseas raiders.

A way to go in revenue generation

Mainland watchers should not be deceived by the recent jump in capital forays in the industry. Chinese vaccine stocks are still nascent, with no guarantee to survive in the long term.

The private vaccine market, meanwhile, is primarily dominated by privately-owned vaccine companies with stronger research and development capabilities compared to state-owned ones, found CIC, supporting the development of new and innovative vaccines. Yet they’re very far from making as much as their overseas contenders, thus they’re lagging behind in R&D investments on a global scale.

All the four largest Chinese vaccine makers’ revenues combined are far from catching up with GlaxoSmithKline’s vaccine segment revenue only (GSK: NYSE), dramatically showing the extent of the global oligopoly in the vaccine market, as well as proving how premature and inefficient the Chinese vaccine makers are. 

GsK is the world’s largest immunobiological product maker with Sanofi (EPA: SAN), Merck & Co (MRK: NYSE) and Pfizer (PFE: NYSE).

With the increased awareness, rising wealth and disposable income, Chinese demand for these foreign firms and high-quality vaccines have soared in the last two years.

Amongst the Chinese trailblazers, Zhifei Biological (300122:SH), has been manufacturing and developing immunobiological products for common issues in China, including meningococcal disease and Haemophilus influenza type b (Hib) bacteria. The total sales revenue for the meningococcal vaccine in China is expected to be around CNY 3 billion, almost 10% of the entire private vaccine market. Meanwhile, the firm is the sole distributor of Merck’s HPV vaccine Gardasil: a blockbuster product that is the second-largest revenue source for Merck, it claimed. 

Another Chinese vaccine maker worth mentioning, Hualan Biological (002007:SH), one of the most rooted private vaccine makers which were founded in 1982, is known for its influenza A (H1N1) and recombinant Hepatitis B vaccine. The company is one of the largest suppliers of both private and public vaccines in China. 

Influenza, meningococcal, rabies, pneumonia and HPV made up at least half of the private vaccine market in 2019. Some of them had increasing popularity, while some showed a stable demand.

The HPV vaccine, for instance. The market in the mainland is growing for it, unprecedentedly. The sudden awareness promoted by NGOs and government meant many learned about the possibility of preventing cervical cancer with a simple vaccine. Yet the abrupt jump in demand brought about excess demand, as well. Some Chinese vaccine makers have tried to break the foreign dominance in the market and a Xiamen-based company, Innowax, even received a green light from the National Medial Product Administration (NMPA), Chinese regulatory head for medical products. 

A gradual increase in the market share of Chinese private vaccine makers is expected to be observed in the mainland. 

Shedding light on Chinese vaccine makers after Covid-19

Not dozens, but hundreds of vaccine makers around the globe announced a pipeline for the new coronavirus in a moving statement of solidarity against one of the most extensive and pervasive pandemics in centuries, including behemoths Sanofi and Johnson & Johnson (JNJ: NYSE).

Numerous Chinese companies, naturally, joined the race. Cansino Biologics (6185:HKEX), Tianjin-based biotech which previously developed an Ebola-vaccine and Walwax Biotechnology (300412:SH), known for its pneumococcal and meningococcal vaccines are amongst private companies that deserve to be kept tabs on.

Although the mission to develop the vaccine first was already militarized and being approached as a national security issue, private vaccine makers were quickly soaked with capital by investors, in a move to put a price tag on a possible catastrophe.

At the beginning of January, while Chinese media was mentioning a “rumor” and a “mysterious Sars-like virus” named “Wuhan pneumonia” by some, Chinese A-share investors started to price the vaccine makers. Most of them outperformed the CSI300 Index.

"It could be an antiviral, synthetic antibody, or a vaccine; any of these would be a breakthrough for the coronavirus crisis and reduce the complication rate, transmission rate or mortality rate. Yet it is s too early to say something viable," said the genetic scientist Monica Sleumer to EqualOcean. “By looking at their track record and previous pipelines, it is nearly impossible to foresee what type of vaccine maker will develop the breakthrough,” she said in answer to the question asked by the EqualOcean analyst.

Besides the very particular circumstances of Covid-19, health expenditure in China as a share of GDP from 2008 to 2018 increased from 4.5% to 6.5% from 2005 to 2018, and it was around 10% in the EU average in 2018, and 11% in Japan in the same year. There is still massive room for expansion in China and a plethora of long-term investment opportunities in the country’s private vaccine scene.

The increasing availability of high-quality and innovative vaccines, favorable state policies for developing novel drugs, and increasing wealth are the primary long-term driving forces behind the expansion in the private vaccine market.