CXO didn't save? The last "low penetration, high growth" path

The downturn in the CXO sector in the past two years has made the discussion that "CXO has passed its

Someone Inside OS: Huh? What is this?

There is no forever chicken dog ascension plate, CXO's second half, there are still a lot of structural opportunities to dig.

In addition to CGT therapy (cell and gene therapy), CXO has another "low penetration, high growth" segment: ADCs (antibody-coupled drugs).

The MNC giants have decided that there will be the next blockbuster in the ADC field, such as K drug

ADCs also show such potential, with global ADC sales of nearly $5 billion in 2021 and an average compound growth rate of about 30%

Domestic pharmaceutical companies are not to be outdone, Huadong Pharmaceutical said that in the next three years, no less than 10 ADCs will be established, and the head companies such as Cinda, Hengrui, Baekje, Qilu, etc.

According to the statistics of Pharmaceutical Cube, there are currently more than 400 ADCs in the world, of which more than 200 have

The agency predicts that the global ADC drug market size will exceed $

Domestic ADC CDMO as a completely blank market at present, calculated by 15% of the market size, at least nearly 10 billion outsourcing market (endogenous + overseas order transfer), is obviously from the 0-1 stage

To take a typical example of CDMO: Jiuzhou Pharmaceutical has bound Novartis as a big customer, and the cardiovascular blockbuster drug Noxinto alone (sales of 2.

Therefore, ADC CDMO is a CXO subdivision track that is destined to break out, and the logic is very clear

The first is the complexity of the supply chain and the barriers
to diverse production capacities.

ADC drugs typically consist of three parts, including antibodies (Mab), linkers (Linker), toxins (Drug), and payloads are considered
.

The complex structure determines the difficulty
of its production.

In a way, producing one ADC drug is equivalent to the amount of work
that goes into producing three drugs.

From past experience, ADC R&D pharmaceutical companies need to work with at least three CDMO: one for antibodies (often obtained by CHO cell fermentation), one for Linker connectors (chemical synthesis), and one for toxins (partial chemical synthesis or chemical synthesis of starting materials after extraction from natural sources).

The technical capabilities required for these three parts are also different, so it involves three different production workshops, generally produced separately in multiple sites, and most of the R& D companies in ADC do not have the production capacity
in three areas at the same time.

Secondly, synthesis is also a core issue, that is, the development
of bio-coupling processes in the production process of ADC.

The design and development of ADC drugs is not a simple combination of antibodies, connectors and cytotoxins, on the one hand, it is necessary to choose the appropriate combination to optimize the overall efficacy and safety when designing; On the other hand, in the production process, the connection between small molecules and large molecules requires the use of biological coupling technology, which has a certain threshold and difficulty
.

The importance of this technology is reflected in the uniformity of ADC drugs, all FDA-approved ADCs in the past 10 years have existed in the form of isomeric mixtures of ADCs, including naked antibodies, connectotoxins, DAR too high and too low ADCs, which is a manifestation
of poor drug uniformity.
(For example, high DAR often causes rapid plasma clearance, and ADCs with low DAR are less active and more toxins affect safety)

With the maturity of the fixed-point coupling technology, the separation and purification process after the coupling reaction and the analysis of the product batch will separately eliminate the unqualified by-products and test and evaluate the ADC products, so as to ensure the uniformity of
the products.

Furthermore, the development
of ADC analysis methods should be considered.

Industry insiders pointed out that the workload of ADC drug analysis methods is often more than
twice that of ordinary monoclonal antibodies.

Compared with monoclonal antibodies, the structure of ADC drugs is more complex, and CDMO needs to analyze and evaluate the key attributes of the product, DAR value, drug load distribution, unconnected naked antibody, charge variant, drug distribution, hydrophobicity, etc.
of the product using different evaluation & detection
methods.

Finally, it is actually a test
of CDMO's comprehensive ability.
In addition to the above three challenges, service providers need to have a series of software and hardware capabilities
such as mature lyophilized preparation technology and technology, high-viable compound processing, and perfect supply chain system.

The choice of domestic ADC R&D enterprises is divided into two factions: some large pharmaceutical companies choose to build their own production capacity, choose to complete the series of steps of "bio-coupling → preparation filling" in their own workshops, while the production of antibodies, connectons and toxins is outsourced to CDMO; The other part opts for a more asset-light operation, outsourcing all production to CDMO
.

In a non-"end-to-end" model, the ADC drug DNA to IND phase typically takes 24-30 months
.

"End-to-end" one-stop-shop CAPABILITy CDMO companies have become the mainstream choice for ADC R&D pharmaceutical companies, which can significantly reduce the time-consuming
time of DNA to IND.

But in fact, CDMO companies that look through the domestic CDMO listed companies can provide integrated capabilities covering the production and development of biological macromolecules, chemical macromolecules, antibody coupling and other links CDMO enterprises are very scarce
.

1.
WuXiXi

WuXi Confederation is a joint venture between WuXi Biologics (60%) and WuXi AppTec (40%), WuXi AppTec's macromolecular and small molecule production bases are in Wuxi and Changzhou, and the distance between the two places is 1 to 2 hours, realizing the provision of the entire supply chain within 200 kilometers and avoiding the risks
caused by the supply chain as much as possible.

In 2020, WuXi United launched the WuXiDAR4™ technology platform with independent intellectual property rights, which greatly increased the proportion of the final ADC product DAR4 (4 payload molecules per monoclonal antibody), which not only improved the coupling efficiency, but also improved the uniformity of ADC products (the following figure refers to the technology successfully making the DAR4 ratio reach 85%)
.

WuXi United has developed an innovative purification strategy that reduces production costs and residual impurity levels, and applies DOE to improve the coupling process, increasing yield
while ensuring consistency and product quality.

In addition, WuXi Min Helian also has a linker and toxin research and development, and a GMP production platform
for conjugate drugs.

According to the company, ADC drugs can complete the DNA to IND in 15 months on the WuXi And Helian platform, which greatly shortens the traditional development time
of 24-30 months in the industry.

By the end of 2021, WuXi Union has provided R&D and end-to-end bio-coupling CMC services for more than 100 partners around the world, and there are currently 60 ADC drugs in the CMC stage developed on the WuXi Lian platform, of which 22 IND declarations have been successfully completed, and 6 projects have entered the late clinical trial stage (including 2 clinical Phase III projects).

2.
Dongyao Pharmaceutical

Founded in 2009, Dongyao Pharmaceutical co.
, Ltd.
is a research and development and industrialization platform integrating antibodies and ADC drugs, the company not only holds an independently developed HER2 ADC pipeline TAA013 (clinical phase III trial completed), relying on the development of the product, the company has established a set of advanced ADC technology platform and commercial production platform
.

(Source: Dongyao Pharmaceutical 2022 Interim Results)

From solving the problem of multi-vendor outsourcing of ADC CDMO, Dongyao Pharmaceutical provides a solution that is superior to most CXOs
.

The company has established an antibody CMC production platform in the same plant area, with OEB-5 level isolator linkage production line, GMP standard bio-coupling workshop, which can provide ADC milligram to kilogram scale process development, and kilogram level production capacity can match key clinical to commercial production needs
.

In July 2021, Dongyao Pharmaceutical announced a strategic cooperation with Brilliant Pharmaceutical on ADC CDMO services, and the company will focus on monoclonal antibody production and ADC drug CMC process development, coupling, preparation filling, and provide preclinical research to commercial scale production services; Brilliant Pharmaceutical can develop and provide intermediates such as linkers and payloads according to customer needs
.
Both companies are located in the Suzhou Industrial Park, less than 10 kilometers apart, enabling "one-stop" end-to-end delivery of services
.

According to public data, monoclonal antibody drugs can be completed from DNA to IND in 12 months of development on the company's platform, and ADC drugs are generally in 14-18 months, which is similar to the time of drug combination;

Compared with most CXO companies, Dongyao Pharmaceutical has industry-leading experience in ADC CDMO, and has good potential
at both the elasticity of business growth and the customer base.

Dongyao Pharmaceutical also has the whole process experience from research and development, process development, clinical trials, registration and approval to commercial production, especially for customers with Sino-US dual reporting needs, and can also support smooth declaration
.

In December 2021, Dongyao Pharmaceutical's CDMO/CMO cash income was 53.
69 million yuan, the amount of new orders exceeded 100 million yuan, and the order volume of ADC projects accounted for 59%, showing a rapid growth trend
.
At the same time, the latest 2022 interim performance report shows that the net operating cash of Dongyao Pharmaceutical is 24.
241 million yuan, compared with -93.
624 million yuan in the same period last year, achieving the first positive turn, which undoubtedly means that the company's self-hematopoietic ability is significantly improving and reducing its dependence on
market financing.

In addition, the company already has more than 9 ADC projects of production experience, including the pipeline of clinical phase III, which will attract more customers to choose Dongyao
in the future.

3.
Haoyuan Medicine

Haoyuan Pharmaceutical began to build an ADC R&D platform in 2013 and is one of the earliest CXO companies in China to carry out ADC drug research
and development.
The company successfully helped Rongchang Biotech's RC-48 to be listed in June 2021, and the project is also the first new anti-cancer drug
in China to declare a clinical ADC class.

The company mainly provides CMC and CDMO services related to the small molecule chemistry part of ADC drugs, covering the research and development of toxins (Payload), linkers ( Linker ) and payloads (Payload-Linker) research and development, process optimization, process verification, registration declaration, GMP industrialization and other aspects
.

At present, the company has accumulated more than 500 kinds of synthetic experience in various types of small molecules related to ADC, and completed multiple Clinical Registration Declarations
for Customers.

(Haoyuan Bio CDMO Service Overview)

In 2021, the number of ADC projects of the company was 80, an increase of 247.
83% year-on-year, and the sales revenue increased by 321.
45% year-on-year; More than 340 cooperative customers, an increase of 332.
5% over the previous year;

In June this year, Haoyuan Bio (40%) and Zhenge Bio (60%) established Zhen Hao Bio, establishing a supply chain ecology
within 50 kilometers of Shanghai's Pudong New Area.
Zhenhao Bio has advantages in process development and coupling technology, proficient in lysine and cysteine coupling process development technology, the introduction of international new patent coupling technology, such as ThiomAb™ fixed-point coupling, non-natural amino acid fixed-point coupling, etc.
, familiar with the coupling technology and purification, preparation process development technology
.

Conclusion: Although the short-term volume of ADC CDMO's business is not large for several companies in the head, for some small and medium-sized CXOs, if you seize this wave of opportunities from 0 to 1 and bind enough potential ADC molecules, in the long run, the company may be a powerful accelerator
from 1 to 10.

Therefore, there is no shortage of excess return points in the future of CXO, the key lies in how investors tap and grasp
.