GSK signs shingles vaccine deal with China’s Zhifei for around $3 billion

By Maggie Fick and Andrew Silver

LONDON/SHANGHAI (Reuters) – China’s largest vaccines company Zhifei will pay British drugmaker GSK 2.5 billion pounds ($3.05 billion pound) for the exclusive rights to distribute GSK’s shingles vaccine in the world’s No.2 pharmaceuticals market.

The deal is one of a series of moves by western pharmaceutical firms to seize a bigger share of China’s market, including announcements from companies such as AstraZeneca.

The vaccine, named Shingrix, is GSK’s top-selling medicine. The deal with Zhifei is part of its efforts to reach more than 4 billion pounds ($4.88 billion) in sales by 2026, GSK said.

GSK said Zhifei has a strong track record of driving access to innovative vaccines in China and has significant scale. The deal will result in the vaccine being available in more than 30,000 locations across China, up from 9,500 currently.

Zhifei will purchase volumes of Shingrix with a value to GSK worth 2.5 billion pounds over an initial three-year period, GSK said.

The agreement is set to start on Jan. 1. Zhifei shares were up as much as 20% to 58.40 yuan ($8.00) following the filing, their highest since March 27. GSK shares were up 1.2% by 0812 GMT, near their session high.

Shingrix is currently GSK’s biggest product and strongest growth driver, taking in 1.71 billion pounds in first-half sales, up 20% from a year prior.

JPMorgan analysts said in a note that the announcement “de-risks GSK’s Shingrix China sales for the next three years” and holds the potential for as much as a 6% upgrade to 2026 consensus Core EPS (Earnings per Share) forecasts.

GSK’s statement also said that Zhifei has granted it the “right of first refusal to be their exclusive partner for any co-development of an RSV vaccine for older adults in China”.

The company launched its respiratory syncytial virus (RSV)vaccine, called Arexvy, in the United States after it was approved by regulators in May.

Barclays analysts said in a note last month that the first five weeks of prescription data showed that the vaccine’s launch was off to a strong start and that GSK appeared to have the lead over Pfizer’s competing vaccine for RSV.

A GSK shareholder then told Reuters that if the strong start was maintained through September, it would mean consensus estimates for 2023 sales of Arexvy, at about 215 million pounds, are “way too low”.

GSK is banking on Arexvy being its next blockbuster medicine, part of its efforts to ensure growth as it faces a combination of patent expiries and declining revenue from its current bestsellers by the end of this decade.

($1 = 0.8192 pounds)

($1 = 7.2960 Chinese yuan renminbi)

(Reporting by Maggie Fick in London and Andrew Silver in Shanghai, additional reporting by Eva Mathews in Bengaluru and Lucy Raitano in London; Editing by Savio D’Souza and Louise Heavens, Kirsten Donovan)