The company has pared its annual losses but faces high costs and competitive challenges to deliver its voluntary vaccine into a tight market

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Key Takeaways:

• The biotech slashed its R&D costs by nearly 29% last year and shrank its annual loss by around 10% ahead of the planned vaccine launch
• But bank borrowings surged, pushing the gearing ratio up from 18.7% to 36.5%

China's vaccine industry has been battling through a tough year, as dwindling demand and price wars have pushed some leading suppliers into the red. Beijing Luzhu Biotechnology Co. Ltd. (2480.HK) is now preparing to launch its core product, a shingles vaccine, into this troubled market.

How best to navigate the competitive environment for new vaccines is a key question for the company. Its latest earnings report released in mid-March suggests the strategy for now is to sharply rein in R&D costs and other expenses to limit its losses.

The results did not offer much of a booster shot as Luzhu Biotech prepares for the expected launch this year of its recombinant herpes zoster vaccine against shingles, a painful condition triggered by the chickenpox virus.

The firm announced a loss of 150 million yuan ($22 million) for 2025, 10.6% smaller than the deficit it reported a year earlier. Research and development spending fell nearly 29% to 96.48 million yuan, benefiting from lower clinical expenses after Phase Three trials for the flagship shingles vaccine were largely completed. The company also slashed administrative expenses by 20% to 51.79 million yuan.

However, the cost controls could not contain the blow from shrinking government grants and bank interest. The amount logged as other income nearly halved from the previous year, falling 48.4% to 11.03 million yuan. Meanwhile, the balance of other gains and losses turned from a net positive of 11.82 million yuan in 2024 to a loss of 4.22 million yuan in 2025, hit by a drop in fair value prices for financial assets and rising impairment losses on property, plant and equipment.

On the plus side, Luzhu Biotech said it expected its main vaccine candidate, targeting the virus that causes shingles, to gain Chinese regulatory approval and land on the market in the second half of this year.

The earnings report disclosed that China's National Medical Products Administration had already checked the clinical trials and inspected manufacturing facilities for the product, LZ901, which has shown promise as a competitor to the current market-leading shingles vaccine. Luzhu Biotech completed a head-to-head comparative study last year against GSK's benchmark vaccine, Shingrix, which found the Chinese product delivered a superior immune response and safety profile for patients aged 50 or above, the Chinese company said.

In the run-up to the expected launch, Luzhu Biotech brought a newly built R&D facility in Yizhuang, Beijing, into operation last August, and plans to start trial runs at its Beijing production facility as early as the second half of 2026. The marketing groundwork is also being laid, as the financial report recorded sales and distribution expenses of approximately 758,000 yuan for the first time, along with the addition of 11 commercialization staff.

Voluntary vaccines under pressure

However, the vaccine is about to enter a crowded and challenging market for inoculations that must be funded by the recipients themselves. Several prominent producers have reported losses or sharply reduced earnings for 2025, including Zhifei Biological (300122.SZ), Wantai Biological (603392.SH), BCHT Biotech (688276.SH) and Kangtai Biological (300601.SZ).

Demand for optional vaccines such as HPV or flu shots that fall outside the state immunization program has fallen sharply, and a glut of similar products has intensified price wars, with the cost of a trivalent flu shot falling as low as 5.5 yuan per dose.

The shingles vaccine is facing similar challenges, with two products already available in China. GSK's Shingrix is a recombinant vaccine distributed by Zhifei Biological, while a rival product, Ganwei, is a live attenuated vaccine developed by Baike Biotech.

Although GSK's Shingrix is a blockbuster in the global market, with sales exceeding 3.56 billion pounds ($4.77 billion) in 2025, the Chinese pricing strategy has been aggressive. From the second quarter of 2025, Shingrix was offered on a "buy one, get one free" promotion, effectively cutting the cost of a standard two-dose regimen from over 3,200 yuan to around 1,650 yuan.

Baike Biotech quickly followed suit, slashing the price of its vaccine to between 30% and 80% of the original cost. Even so, sales continued to struggle. Its confirmed sales volume for the first nine months of 2025 came in at minus 65,400 doses, meaning large stocks of sold but unused vaccines nearing expiry were returned.

Luzhu Biotech's LZ901 will face intense price pressure and weak demand, while also requiring hefty investment to develop and promote sales. The company held around 96.9 million yuan in bank balances and about 324 million yuan in financial assets at the end of last year, bringing total available resources to roughly 420 million yuan. However, this cushion is largely supported by debt. Total bank borrowings surged from 54.91 million yuan at the end of 2024 to 260 million yuan, while the gearing ratio increased from 18.7% to 36.5%.

Although Luzhu Biotech still commands a market value of around HK$4.9 billion ($630 million), its daily turnover has dwindled to as little as tens of thousands of Hong Kong dollars. This reflects market caution about the near-term outlook. Investors will keep a close eye on the shingles vaccine launch, to judge whether the product can get differentiating traction and sustain profit margins in a fiercely competitive marketplace.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.