China's Biotech Giant Dives into Metabolic Disease Arena with Strategic Acquisition

Chongqing - Zhifei Biological, renowned as China's "King of Vaccine Agency in China," announced on November 23 that it would acquire 100% equity in Polaris Biology. This acquisition signals Zhifei Biological's intent to integrate and bolster its capabilities in the biotech industry landscape.

Zhifei Biological is a Chongqing-based biological company known for importing foreign vaccines into China. (Photo/Zhifei Biological)

Polaris Biology is a biopharmaceutical enterprise focusing on metabolic diseases such as diabetes and obesity. Its GLP-1 drug, recombinant semaglutide, is currently in Phase III clinical trials and is at a leading stage in China. In addition, the company has five other candidate drugs in clinical stages.

GLP-1, or glucagon-like peptide-1, is a peptide that stimulates insulin secretion and inhibits glucagon secretion. These drugs were initially developed for treating type 2 diabetes in adults. Later, the Danish pharmaceutical company Novo Nordisk expanded its GLP-1 drugs to the weight loss domain, especially with the global sales growth of its second-generation product, semaglutide, becoming a sensation worldwide.

As a weight loss drug, semaglutide mainly works by suppressing appetite and enhancing satiety to reduce calorie intake. The U.S. FDA approved it for controlling blood sugar in adults with type 2 diabetes in 2017 and for long-term weight management in 2021. It is sold under the brands Ozempic (injection) and Rybelsus (pill) for diabetes treatment and as Wegovy for weight loss.

Currently, in China, semaglutide is only approved for diabetes and is a prescription drug. Public records show that besides Polaris Biology, other companies like Huadong Medicine, Livzon Group, United Laboratories, and Qilu Pharmaceutical are also conducting Phase III clinical trials of semaglutide. The market competition in this field is expected to intensify in the future.

According to official information from Zhifei Biological, the company intends to integrate Polaris Biology into its operations through this transaction, extending its business scope to cover metabolic diseases such as diabetes and obesity, thereby entering the therapeutic biopharmaceutical field.

Jiang Rensheng, the actual controller of Zhifei Biological, known as "Chongqing's richest man," has actual control over Polaris Biology, making this acquisition a related transaction.

Two years ago, due to its association with COVID-19 vaccines, Zhifei Biological's stock price once soared to a historical high of 153.06 yuan per share, with a total market value of 360 billion yuan. However, following the receding pandemic and increased competition in agency products, the company's gross margin continued to decline, along with its stock price. Facing the crisis of declining profitability, finding the next performance support point has become one of the company's main tasks.

According to financial reports, in the first three quarters of this year, Zhifei Biological achieved a revenue of 39.272 billion yuan, a year-on-year increase of 41.15%; the net profit attributable to shareholders of the listed company was 6.53 billion yuan, a year-on-year increase of 16.46%.

Looking at the revenue structure, Zhifei Biological heavily relies on its agency business. In the first half of 2023, the company achieved a revenue of 24.445 billion yuan, of which the agency products accounted for 23.583 billion yuan and its own products for 0.859 billion yuan, making the agency products 96% of the total revenue.

The company continues to develop its agency business. On October 9 this year, Zhifei announced an exclusive distribution and joint promotion agreement with GSK, becoming the exclusive importer and distributor of the latter's recombinant shingles vaccine in mainland China. Over the next three years, the total minimum purchase amount is 20.64 billion yuan.