On August 18 this year, LUZHU BIOTECH-B (02480) released an announcement disclosing that its core product LZ901 demonstrated superior cellular immunogenicity and better safety profile compared to GlaxoSmithKline's (GSK) Shingrix® in head-to-head clinical trials for adults aged 50 and above. The positive key clinical data from LUZHU BIOTECH's core product directly stimulated secondary market sentiment. On August 18 and 19, LUZHU BIOTECH posted consecutive gains of over 8% for two trading days, with the stock price reaching a peak of HK$28 during this period, hitting a new high for the company's share price in nearly 15 months.

However, even with this development, LUZHU BIOTECH's market trading activity remains sluggish. Observations show that since 2024, LUZHU BIOTECH's stock liquidity has experienced a cliff-like decline. Over the current 21-month period, there have been 11 months where monthly trading volume did not exceed 200,000 shares. Even with the major positive disclosure from the company's core product, LUZHU BIOTECH's single-day trading volume on August 19 was only 69,600 shares, though this represented its highest single-day volume since August. Since August, there have been only 8 trading days where LUZHU BIOTECH's single-day volume exceeded 20,000 shares, with the lowest single-day volume during this period being merely 400 shares. From a trading volume perspective, LUZHU BIOTECH remains on the verge of being forgotten by the market.

**Multiple Financial Indicators Declining, Core Product Becomes "Lifeline"**

For Hong Kong Stock Connect 18A companies, the most suitable shortcut to provide market liquidity is naturally "Stock Connect inclusion," but after the market cap calculation method changed from average month-end market cap during the review period to average daily market cap during the review period, the inclusion threshold for small-cap stocks has increased to over HK$9 billion. While LUZHU BIOTECH's market cap has risen somewhat this year, its current market cap is only approximately HK$5 billion, far short of the "Stock Connect inclusion" threshold. Therefore, the company can only rely on its own fundamentals to attract market attention.

According to LUZHU BIOTECH's latest disclosed 2025 interim report, the company still has no commercialized products, with current period main business revenue remaining at zero. Other income was HK$4.85 million, down 50.2% from HK$9.73 million in the same period of 2024, mainly due to reduced government subsidies. Meanwhile, other expenses for the current period increased from HK$190,000 to HK$590,000, an increase of 209.5%.

However, the company's net loss for the current period continued to narrow to HK$77.57 million, down 29.4% year-on-year, while R&D investment decreased 37.5% year-on-year to HK$50.273 million. The continued decline in R&D investment reflects both that the company's core product development has entered later stages and that the company's cash reserves may no longer support continued expansion of cash-burning research and development.

The financial report shows that LUZHU BIOTECH's cash and cash equivalents totaled HK$99.219 million for the current period, down 29.20% year-on-year. To stabilize the company's daily R&D and operational cash flow, the company also increased financing during the period, with bank borrowings reaching HK$196 million, a substantial 269% increase year-on-year.

Clearly, before commercialization, LUZHU BIOTECH's fundamentals are lackluster, which is why its core shingles product has always been pinned with high hopes. During the reporting period, the head-to-head clinical data readout between LZ901 and GlaxoSmithKline's Shingrix® is considered the key to opening LUZHU BIOTECH's commercialization market.

From a mechanism of action perspective, LUZHU BIOTECH's LZ901 employs innovative recombinant protein technology with antigen molecular structure innovation, forming technological complementarity and competition with GlaxoSmithKline's (GSK) Shingrix® (recombinant protein technology + adjuvant innovation) and BCHT's Ganweixin™ (live attenuated technology).

In comparative trials with Shingrix®, LZ901 significantly outperformed Shingrix® in both CD4+ T cell response rates and CD8+ T cell response rates, at 83.0% and 46.8% respectively, compared to Shingrix®'s 58.1% and 8.8%. In terms of safety data, LZ901's adverse reaction incidence rate was only 41.1%, far lower than Shingrix®'s 87.9%, with Grade 3 adverse reaction incidence rate at only 0.7% compared to Shingrix®'s 6.0%.

The above data indicates that LZ901 has significant advantages in cellular immune levels and safety. The high safety profile is expected to significantly reduce AEFI reporting rates after future product launch, making it more likely to gain favor in terminal markets and helping to substantially improve vaccination compliance. Previous market assessments suggested that since Shingrix® could rapidly replace Zostavax with superior clinical performance, LZ901 would undoubtedly have the potential to accelerate domestic substitution of Shingrix after launch.

However, the biggest challenge for LZ901's commercialization may lie in facing a blue ocean market that still requires market education.

**"Market Education" Costs May Become the Biggest Obstacle**

A key factor why shingles vaccines were previously favored by investors lies in the therapeutic characteristics of this indication and the continuously growing patient population. Currently, shingles treatment mainly relies on antiviral and analgesic drugs, with no specific drugs targeting shingles. Globally, commonly used antiviral drugs for shingles treatment include acyclovir, valacyclovir, famciclovir, and brivudine, with acyclovir being the first-line choice.

These drugs require relatively long treatment durations, needing continuous use for 7-10 days, during which patients must endure prolonged suffering, and complications may not be completely eliminated even after medication. Vaccination remains the most effective and feasible preventive measure.

On the other hand, according to BMJ Journals data, shingles incidence rates across countries show similar trends with age changes. The global annual incidence rate of shingles in the general population is approximately 3-5‰, with shingles incidence rates rising sharply after age 50. The incidence rate in 60-year-olds increases to 6-8‰, while 80-year-olds have incidence rates as high as 8-12‰.

Driven by factors including continued population aging, increasing numbers of shingles cases, and improved public vaccination awareness, the global shingles vaccine market is projected to grow to $12.6 billion by 2030.

According to US CDC data, shingles vaccination rates among adults over 60 in the United States continuously climbed from 6.7% in 2008-2016 to 33.4%. After Shingrix received US FDA approval in 2017, vaccination rates experienced a stable period before rising again, growing to 41.10% in 2021. Shingrix sales reached £3.446 billion in 2023, with a CER growth rate of 17%.

Market penetration is precisely the biggest challenge facing domestic shingles vaccine companies. Due to relatively weak vaccination awareness among China's middle-aged and elderly population, low awareness of this vaccine, and high vaccine prices, this product has extremely low penetration in China. This problem continues to this day.

Data shows that in the second quarter of 2025, there were no batch release records for domestic shingles vaccines (compared to 1 batch in the same period last year). For the entire first half of the year, domestic shingles vaccine batch releases totaled only 6 batches, down 77% year-on-year. All batch release products were GSK's recombinant shingles vaccine (Shingrix), down 88% year-on-year. In contrast, BCHT's live attenuated vaccine had no batch release records in the first half of this year.

This indicates that the current shingles vaccine market remains dominated by GSK, and overall domestic shingles vaccine supply has significantly contracted compared to the same period last year.

To further open the market and improve commercialization levels, LUZHU BIOTECH would need to join peers like BCHT and GSK in increasing market promotion efforts after LZ901's launch, potentially even further surrendering profits to customer groups with certain spending capacity but relative price sensitivity, improving terminal market price acceptance.

Currently in China, GSK's Shingrix® is priced at approximately RMB 1,600 per dose, requiring two injections for a total cost of about RMB 3,200. BCHT's Ganwei is priced at RMB 1,369 per dose, requiring only one injection. According to LUZHU's previous prospectus disclosure, LZ901's retail price is expected to be approximately RMB 500-800 per injection, requiring two injections for a total cost of RMB 1,000-1,600.

To compete with Shingrix in the existing market, LUZHU BIOTECH's pricing for LZ901 may tend more toward the lower end of the range, which could further compress the company's early commercialization profits.