Finance Association, May 14 (Reporter He Fan) As a major product agent of Zhifei Biotech (300122.SZ), whether the imported MSD nine-valent HPV vaccine will be impacted by domestic brands in the future is the primary concern of investors during today's results conference. In response, Jiang Rensheng, chairman of the company, said that there is a lot of room in the HPV vaccine market, and more manufacturers participating in the promotion will help the company. Regarding the financial issues investors are concerned about, Li Zhenjing, the company's financial director, believes that the company's high-ranking accounts receivable and inventory growth in the first quarter were due to the expansion of sales and business scale. In addition, the company also explained issues such as the status of independent product development.

According to financial reports, in 2023, Zhifei Biotech's batch issuance volume of the nine-valent HPV vaccine reached 36.55 million, an increase of 136.16% over the previous year. However, the nine-valent HPV vaccine, which has achieved sales volume, may have strong competitors this year. The industry generally predicts that Wantai Biotech's nine-valent HPV vaccine is expected to be approved for marketing in 2024 as soon as possible.

In response, Jiang Rensheng believes that there is still a lot of room in the HPV vaccine market. First, the WHO issued a global strategy to accelerate the elimination of cervical cancer, and China also issued an action plan to speed up HPV vaccination. Second, there are about 320 million school-age women aged 9-45 in China. Based on batch issuance, the vaccination rate is currently around 21%, and nearly 250 million people still need to be vaccinated. Third, if the HPV vaccine is approved domestically for male indications, the number of people who need to be vaccinated is even greater than that of women, and there is great potential.

In terms of countermeasures, Jiang Rensheng added that the company will first step up publicity efforts to let everyone understand that getting the HPV vaccine is essential to prevent cervical cancer. Furthermore, the vaccine awareness rate and vaccination rate should be raised. In the future, with the launch of the domestically produced nine-valent HPV vaccine, I hope more manufacturers can participate in the promotion, which will also be helpful to Zhifei Biotech. Not that domestic products won't help once they are made; after all, there is still so much room. Second, MSD is advancing the registration process. If successful, the company will actively carry out publicity and promotion work on the male indication market.

In terms of proxy products, since January 1 of this year, Zhifei Biotech has exclusive import and distribution rights for the GSK shingles vaccine. The current batch issuance volume and sales issues of this major product have attracted much attention.

“Since the first batch of recombinant shingles vaccine was issued in early March this year, 25 batches of this product have been issued.” The company's director, Qin Fei, revealed the relevant situation of this product.

Jiang Rensheng, on the other hand, said that the company has now covered more than 10,000 outpatient clinics and is preparing to cover about 30,000 routine outpatient clinics across the country on this basis. At the same time, it will increase online and offline science publicity on the harms of shingles, increase consumers' willingness to get vaccinated, and carry out academic promotion to be recognized by professionals.

Furthermore, Jiang Rensheng said that in the future, the company will accelerate the launch of its own products. This year, the quadrivalent influenza virus lysis vaccine is expected to be approved, and efforts are being made to launch products such as the diploid rabies vaccine, the 15-valent pneumococcal conjugate vaccine, and the quadrivalent influenza conjugate vaccine by 2026. It is expected that the number of independent products sold within the next 5 years will more than double that of now.

At the same time, investors are also concerned about financial issues related to Zhifei Biotech, such as the declining gross profit margin. According to the annual report, the company's gross margin in 2023 was 26.92%, and the overall gross margin and the gross margin of agent types declined year-on-year.

In response, Li Zhenjing explained that the decline in product gross margin is mainly due to changes in the agent product structure. The gross margin level of each product itself varies, causing the overall gross margin of agent products to fluctuate. This trend will not necessarily continue. What is certain, however, is that fluctuations in gross margin will not affect the company's profitability and actual operations.

Investors are also worried about the company's rising accounts receivable. By the end of 2023, the company's accounts receivable reached 27.059 billion yuan, an increase of 6.445 billion yuan over the end of 2022. By the end of this year's quarterly report, accounts receivable had climbed to 30,029 billion yuan.

Li Zhenjing believes that the increase in the company's accounts receivable is mainly due to the increase in the company's sales scale. However, the company's repayment situation is good. In 2023, the company's sales revenue was 52.9 billion yuan. If the repayment period is calculated on an average of 6 months, plus tax, it is exactly the same as the book balance at the end of the accounts receivable period. Judging from the historical data of companies and industry companies, the chance of bad debts is small. With the exception of the COVID-19 vaccine, the number of accounts receivable turnover days from products other than the COVID-19 vaccine has remained stable at 150-160 days.

Li Zhenjing also said that the increase in inventory in the first quarter of this year is consistent with the expansion of the company's business scale. Due to the batch issuance system for biological products, the time is about February-March. In addition to the delivery time to various districts and counties for disease control, the overall inventory turnaround time takes 3-4 months. Another reason is that the company purchased the agent's recombinant shingles vaccine in the first quarter, and the minimum purchase amount agreed in the 2024 contract was 3.44 billion yuan.