The plummeting demand for Merck & Co.’s HPV vaccine Gardasil in China has forced the New Jersey drugmaker to rework its arrangement with its partner in the country, Chongqing Zhifei Biological Products.
The companies have agreed to remove minimum purchase commitments and use a rolling, demand-based supply model for the three Merck vaccines that Zhifei distributes in China. In addition to Gardasil, Zhifei distributes rotavirus shot, RotaTeq, and pneumococcal vaccine Pneumovax 23.
The adjustment of the arrangement between the companies enhances their ability “to respond to market fluctuations in a synergistic manner, while simultaneously alleviating” Zhifei’s operational pressures and mitigating its risks, the Chongqing-based company explained in a regulatory filing.
The companies were operating under a multiyear deal, which specified a total procurement commitment of 97.9 billion Chinese yuan ($14.2 billion), running from 2023 to 2026. The new arrangement will run until the end of 2028. Zhifei, which was established in 1995, has been Merck’s distribution partner since 2011.
The first trace of a demand shortfall for Gardasil in China came in 2024, when Merck reported a decline in vaccine sales, which reached the market in 2014.
After a 3% decline in sales for Gardasil in 2024, the shortfall hit with full force in 2025, as its sales plummeted from $8.6 billion to $5.2 billion, for a 39% drop-off, with Merck blaming competition in China for cheaper alternatives.
For China specifically, Zhifei reported that its total procurement of all Merck vaccines had fallen sharply from 34.8 billion yuan in 2023 to below 2.2 billion yuan last year, compared with a minimum procurement amount of 26 billion yuan set for Gardasil alone under the original deal between the two companies.
The changing vaccine landscape in China also forced Zhifei to adjust its distribution deal with GSK in 2024, as the companies agreed to an extension of their partnership but at reduced volumes.
Zhifei has felt the pinch, with its revenue peaking in 2023 at $7.4 billion before falling by more than 50% each of the last two years.