Recently, Hualan Vaccine (301207.SZ), a domestic influenza vaccine manufacturer, released its 2024 annual report: the company achieved revenue of 1.128 billion yuan, a year-on-year decrease of 53.21%; net profit attributable to the parent company was 206 million yuan, a year-on-year decrease of 76.10%; net profit attributable to the parent company after deducting non-recurring items was 120 million yuan, a year-on-year decrease of 84.12%.

Regarding the rapid decline in performance this time, Hualan Vaccine pointed out that due to multiple factors such as the reduction in influenza vaccine prices, fluctuations in vaccination rates among the public, changes in market demand and declining sales, the company's business development and profitability were under great pressure, resulting in a significant decline in performance in 2024.

Quadrivalent influenza vaccine is in full competition, and the price war has begun

It is worth noting that Hualan Vaccine's main sales product is influenza vaccine, and its product structure is relatively simple. The annual report shows that the revenue of influenza vaccine is 1.073 billion yuan, accounting for 95.14% of the total revenue, a year-on-year decrease of 55.34%; among them, the number of batches of quadrivalent influenza vaccine issued (batches) decreased by 23.86%. Hualan Vaccine pointed out that the company adjusted the price of quadrivalent influenza vaccine products in June 2024, and the price of main products was reduced by about 30%.

The influenza vaccines used in my country include live attenuated vaccines and inactivated vaccines; according to the virus types covered by the vaccine, there are trivalent and quadrivalent influenza vaccines, and as mature vaccine varieties, there are many companies involved. The companies that have been approved for the trivalent influenza vaccine include Sinopharm Group China National Biotec Group Shanghai Institute of Biological Products, Chengdu Olin Biotechnology Co., Ltd., Sinopharm Group's Changchun Institute, Sinovac Biotech, Dalian Yalifeng, Hualan Biotech and Sanofi Pasteur; the companies that have been approved for the quadrivalent influenza vaccine include Sinopharm Group's Changchun Institute, Wuhan Institute, Shanghai Institute, Hualan Vaccine, Beijing Sinovac, Jindik Biotech and other companies.

In May last year, Sinopharm took the lead in reducing the price of quadrivalent influenza vaccines. On May 20, Jiangsu Province adjusted the supply prices of some vaccines. Among them, the winning bid price of the quadrivalent influenza virus split vaccine of Sinopharm Group's Changchun Institute, Wuhan Institute and Shanghai Institute dropped from 128 yuan/piece to 88 yuan/piece, a price reduction of 31.25%. Previously, the supply price of the quadrivalent influenza vaccine had been maintained at more than 100 yuan.

Later, on the evening of June 4 last year, Hualan Vaccine announced that starting from June 5, the price of its quadrivalent influenza vaccine products would be adjusted down: quadrivalent influenza virus split vaccine (adult dosage form, prefilled 0.5 ml/vial) was reduced to 88 yuan/vial; quadrivalent influenza virus split vaccine (adult dosage form, vial 0.5 ml/vial) was reduced to 85 yuan/vial; quadrivalent influenza virus split vaccine (child dosage form, prefilled 0.25 ml/vial) was reduced to 128 yuan/vial.

Less than a day after Hualan Vaccine’s announcement, Beijing Kexing also announced on June 5 that it would reduce the price of its quadrivalent influenza vaccine products. After adjustment: the adjusted price of quadrivalent influenza virus split vaccine (prefilled dosage form, 0.5 ml/vial) is 88 yuan/vial; the adjusted price of quadrivalent influenza virus split vaccine (vial, 0.5 ml/vial) is 78 yuan/vial.

Hualan Vaccine's first batch of quadrivalent influenza virus split vaccines were approved for marketing as early as 2018, making it the first company in China to be approved to produce quadrivalent influenza vaccines; in June 2020, Beijing Kexing's quadrivalent influenza virus split vaccine was approved for marketing by the National Medical Products Administration, becoming the sixth company in China to be approved to produce quadrivalent influenza virus split vaccines; on May 29, 2022, the first batch of quadrivalent influenza virus split vaccines produced by Shanghai Institute of Sinopharm Group obtained batch release certificates and were approved for marketing; in June 2023, the first batch of quadrivalent influenza virus split vaccines produced by Wuhan Institute and Changchun Institute obtained batch release certificates.

Hualan Vaccine pointed out in its financial report that from 2018 to 2020, the company's annual batch release of influenza vaccines was 8.523 million doses, 12.934 million doses and 23.153 million doses, respectively, of which the batch release of quadrivalent influenza vaccines was 5.122 million doses, 8.361 million doses and 20.624 million doses, respectively, ranking first in China. From 2021 to 2024, the company's influenza vaccine batch issuance continues to maintain its leading position in China.

According to statistics from FluTheApocalypse, my country's influenza vaccine issuance volume in 2024 is 418 batches. Among them, Hualan Vaccine issued 76 batches of influenza vaccines, accounting for 19%, ranking second; Beijing Kexing Biotech issued the largest number of batches, 80 batches, accounting for 20%.

Industry insiders pointed out that as more and more companies join the competition, Hualan Vaccine has gradually lost its first-mover advantage. The domestic influenza vaccination rate is about 3%, far lower than the level in Europe, the United States and East Asia. Price reduction has become the choice for latecomers to seize the market.

160 million yuan of bad debt reserves were set aside, and there may be a risk of recovering accounts receivable

Hualan Vaccine also bluntly stated in its financial report that its product structure is relatively single. It pointed out that in recent years, the sales revenue of influenza vaccines has accounted for more than 90% of its operating income, and the company's vaccine products have a relatively single structure. If there are unfavorable fluctuations in market demand or increasing competitors, or if there are unfavorable situations in the company's product sales and promotion, such as changes in vaccine regulatory policies, changes in the willingness of vaccine recipients to be vaccinated, and product promotion strategies that cannot adapt to market changes, and if the market demand does not increase or the above-mentioned adverse effects are difficult to eliminate, the company is at risk of shrinking its existing market share and declining sales due to its single product structure, which will in turn affect the company's continued profitability.

As for the countermeasures, Hualan Vaccine stated that in February 2023, the company's rabies vaccine and tetanus vaccine had obtained the "Drug Registration Certificate" and are carrying out production and sales. At present, the company is working hard to promote the research and development and production application of multiple vaccines such as group A and group C meningococcal polysaccharide conjugate vaccine, adsorbed acellular pertussis (three-component) diphtheria and pertussis combined vaccine, freeze-dried type b Haemophilus influenzae conjugate vaccine (Hib vaccine), recombinant herpes zoster vaccine, influenza virus mRNA vaccine, and mRNA respiratory syncytial virus vaccine (RSV vaccine). With the investment and use of the raised funds, the company's research and development process will continue to advance steadily, and the projects under development will be listed in the future.

However, the rabies vaccine mentioned has also entered the stage of price war. On August 28, 2024, the Hubei Provincial Drug and Equipment Centralized Procurement Service Platform showed that Hualan Vaccine's freeze-dried human rabies vaccine (Vero cells) took the initiative to reduce the price by about 40% to 127 yuan-129 yuan per piece. According to Southwest Securities' research report, even after the price reduction, the price of Hualan Vaccine's product of more than 120 yuan is not low, because the prices of the same products of many companies are already below 100 yuan.

In addition to the fierce competition in the pipeline, it is worth noting that its financial report shows that the company's accounts receivable in 2024 were 1.437 billion yuan, a year-on-year decrease of 27.78%, and its accounts receivable to profit ratio was as high as 699.44%. Some people believe that the company may have a large risk of recovering accounts receivable.

The financial report also shows that as of December 31, 2024, the book value of Hualan Vaccine's accounts receivable was 1.598 billion, and 160 million yuan of bad debt reserves had been set aside.

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