Not all innovative drugs have a future

Beginning in the second half of 2021, the era of "innovative drugs squeezing the bubble" predicted by Zhu Xun, an immunologist and professor at Jilin University in the past few years, is very obvious
.

In the pharmaceutical industry for more than 20 years, Zhu Xun, who is also a researcher, manager, entrepreneur, and investor with multiple identities, witnessed that after Bi Jingquan took office as Director of the National Medical Products Administration in 2015, the policy began to break the ice, and innovative drugs entered the rapid approval process.
Channels and domestic and foreign supervision have begun to integrate, and capital and talents have rapidly flowed into the new drug research and development field that has been silent for several years
.

The Science and Technology Innovation Board and Hong Kong 18A provide opportunities for capital to flow in, increase in value, and withdraw

Entrepreneurs were brought to the track where anti-tumor drug targets were clustered together, and entered the game of high valuations, constant financing, and drumming to spread flowers
.

He also saw capital's distortion of the nature of medicines as "special commodities"
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The landing of innovative drugs does not pass doctors to patients, but becomes a string of codes on the Sci-tech Innovation Board or the Hong Kong Stock Exchange

At the hottest moment of the innovative drug track, Zhu Xun began to "blast" the bubble era of innovative drugs, calling on participating scientists, entrepreneurs, doctors, capital and CRO companies to self-discipline
.

But in an era of carnival, it is out of fashion to call on practitioners to "self-discipline
.

" Some people in the industry jokingly called Zhu Xun an "angry youth," but they did not deny that some of the problems he saw were real problems

In the past few years, when the capital was shining in, Zhu Xun’s prediction was just like a correct nonsense in the hearts of some practitioners
.

But in 2021, this "useless truth" has really become a "prophecy

But in 2021, this "useless truth" has really become a "prophecy

At the end of last year, the Science and Technology Innovation Board changed its rules and ushered in the "most stringent new delisting regulations", requiring listed companies to "make profits four years after listing
.

" In the following six months, pharmaceutical companies preparing to go on the sci-tech innovation board in the Mainland either voluntarily withdrew their applications or were rejected.

Pessimistic arguments have also begun to emerge.
Some people believe that the field of innovative drugs is no longer a snowy slope with a snowball that is getting bigger and bigger, but an upcoming "avalanche
.

"

In contrast to this extreme pessimism, Zhu Xun has become an optimist who is optimistic about the future
.

In his eyes, the progress in China's medical field in the past two decades is tremendous, even if it is full of bubbles, it is worthy of recognition

The progress in China's medical field over the past two decades has been tremendous, even if it is full of bubbles, it is worthy of recognition

01 Crisis moments of China's innovative drugs

Deep Blue View : An industry has no sense of crisis, often because it is still in a relatively comfortable moment
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Early warning crisis of people, sometimes as crying "wolf" of the child
.
The point is, have you seen any tragic stories so far?

Deep Blue View

Zhu Xun : This is the fun of the innovative drug field.
It is not like some other Internet outlets, such as shared bicycles.
A clear ending can be seen in one or two years
.

Zhu Xun

In the field of medicine, especially innovative drugs, the cycle of growth is very long, and the cycle of death is also very long
.
In the early stage of a drug's research and development, even people who know about drugs can hardly predict the subsequent development and need to show it step by step
.
Some failures will not end in 3-5 years; some projects or companies that are doomed to fail will not die for a while
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There is only one measure of the success of an innovative drug company: Is the product on the market? Does the sales have market share? Is there enough sales?

A company that does not make money, no matter how large it is, is not a big company
.
Which of the world’s top big companies are not making money? Look at Apple, don’t you make money? Most of the global mobile phone profits are in its hands
.
Look at the top 10 pharmaceutical companies in the world.
It is not tens of billions of dollars in sales revenue, billions of dollars in profits.
This is a truly successful company, and this is a truly big company
.

But now the companies that are considered more successful in China's innovative drug investment field mainly refer to companies that have enough ability to raise money and can quickly IPO
.
Most of these companies are "large companies in market capitalization, but in fact small companies
.
"

Of course, most of China's innovative drug companies have been established for a relatively short period of time, and there will still be certain development time and opportunities in the future
.
Those companies that can successfully raise funds for many times can raise a sum of money on Nasdaq, and it will not be spent; raise a sum of money in Hong Kong 18A, and it will not be spent; finally, they can raise a sum of money on the Mainland Science and Technology Innovation Board; If the company's transformation from a cost center to a profit center cannot be completed before the money is spent, its story will be difficult to continue
.
I have a hunch that many companies will face the risk of this embarrassing situation in the near future
.

Deep Blue View : How does that count as a normal story?

Deep Blue View

Zhu Xun : Drugs are not ordinary consumer products.
In addition to drug research and development and production, its benign ecology should have four roles: hospital platform, professional doctors, patients as consumers (patients are not the only payer), payers ( Commercial insurance or medical insurance)
.

Zhu Xun

However, capital has distorted this ecology .
Numerous biotechs were established, invested, and projected, CROs participated in research and development, and doctors invested in clinical trials.
However, the drugs finally produced could not find a market and a buyer in China
.

But capital has distorted this ecology

Another particularity of medicine is its high degree of heterogeneity.
It cannot be dominated by one product
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It is impossible for medicines to be controlled by a single software, chip, or screen resolution, nor can it be controlled by a single lens
.
This drug is not another drug.
Antihypertensive drugs cannot lower blood sugar, and antibiotics cannot fight tumors; antitumor drugs cannot treat diseases in other fields.
Regarding the treatment of new crowns, none of the drugs can completely cure the new crowns; in terms of clinical needs, humans have seven or eight Thousands of genetic diseases require treatment, but so far, there are only dozens of genetic diseases that can be effectively treated
.

With the aging of human beings, the medical model will also change.
The average life expectancy of human beings is increasing, but the healthy life span of the population has not increased with it-which means that the days of human diseases will be longer and longer
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Innovative drug products should be made around the clinical needs of human diseases, but now, at least the current state of research and development of new drugs in China that I see does not meet this original intention
.

Everyone is now focusing on which product can be IPO, especially the me too drugs and biosimilars that get together; there are also some license in projects, which only cost a larger price to license in Greater China Rights.
In China’s current medical insurance Under the current payment situation, even if many companies that only introduce Greater China rights successfully IPO, the challenge of completing the business closed loop will face huge uncertainty
.

Deep Blue View : Will the most tragic ending be the death of a large number of innovative pharmaceutical companies? Or will more tragic things happen?

Deep Blue View

Zhu Xun : Innovative pharmaceutical companies fend for themselves.
It is a process of squeezing the bubble.
This is not the worst outcome
.

Zhu Xun

The situation I don't want to see the most is that the entrants use innovative drug projects as a tool for collecting money; all entrepreneurship becomes a capital game, drumming and spreading flowers, and even Ponzi schemes
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The situation I don't want to see the most is that the entrants use innovative drug projects as a tool for collecting money; all entrepreneurship becomes a capital game, drumming and spreading flowers, and even Ponzi schemes
.

Who will take the last shot? The Ponzi scheme will always fall.
When that day arrives, some entrepreneurs will also be cut leeks
.
If capital cannot make money in China's innovative drug market, it will stay away from the innovative drug field for a long time-this is the situation I am most worried about
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If the payment end (capital) of an innovative drug is a pool that is gradually drained, it will have a devastating blow to the development of the industry; if the capital is far away from the innovative drug field for a long time, only rely on the national innovation special funds , It is impossible for this field to develop continuously
.

Deep Blue View : On July 2nd, CDE (National Medical Products Administration Center for Drug Evaluation) issued new regulations, requiring the development of anti-tumor drugs to be clinically value-oriented.
Has the top-level design been aware of some of the problems in the development of innovative drugs?

Deep Blue View

Zhu Xun : As early as July last year, CDE has issued a policy regarding oncology drugs "clinical value-oriented" ("Technical Guidelines for Clinical Trials of Anticancer Drug Combination Therapy").
In fact, the basic connotations of the two are the same.
, But the same policy did not arouse the attention of the industry last year, and some problems had not yet appeared at that time
.

Zhu Xun

In August last year, there were not so many pd1s on the market.
There was no state negotiation on the price of pd1
.
A few years ago, no one listened to the criticisms.
This was precisely the cruelty of the industry—there was a long period of false prosperity
.

This is precisely the cruelty of the industry-there has been a long period of false prosperity
.

Although in July, I disagreed with Li Jin (the director of the Department of Oncology Medicine, Oriental Hospital Affiliated to Shanghai Tongji University)’s call for oncology drug clinical trials to "strict entry and strict exit", I am very grateful to him for raising the problems in the review of oncology drugs in China.
Objections
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(Note: Deep Blue View did an interview with Zhu Xun at that time, see " Behind the Innovative Drug Mania: Capital, Entrepreneurs, CRO, Clinicians-All Participants Are Pushing Hands! ")

(Note: Deep Blue View did an interview with Zhu Xun at that time, see " Behind the Innovative Drug Mania: Capital, Entrepreneurs, CRO, Clinicians-All Participants Are Pushing Hands! ")

This is a "new outfit of the emperor" that many people know well.
At least Li Jin was not silent and did not take unreasonable phenomena for granted
.

Deep Blue View : Actually you and Li Jin are "Allied Forces", why were you so angry at his speech at that time?

Deep Blue View

Zhu Xun : I have never denied Li Jin's criticism of oncology drug clinical trials
.
But the solution he proposed is not conducive to the development of innovative drugs
.
According to his plan, the review center is required to increase the approval of oncology drugs to strictly control the first phase of clinical trials.
This plan will allow China to regress the approval of new drugs and return to a situation where "only experts have the final say"
.

Zhu Xun

For the past 20 years, I have been a member of the National Advisory Committee on New Drugs, and I am fully aware of the strength of expert opinions: in the preclinical stage, the mechanism of some potential drug candidates cannot be verified, especially drugs in the field of immunity, even in animal tests.
It is also difficult to directly extrapolate to people
.
Therefore, some candidate drugs that have undergone pre-clinical research and development must quickly enter the clinical trial stage, but the standard for entering the clinical trial stage must not be lowered, and the standardization must be strictly required
.

From the first phase to the second phase, the safety of the drug is the main focus, and the third phase is mainly for the efficacy
.
However, in the past ten years or so, due to the improvement of treatment standards, more and more varieties have failed in Phase III clinical trials
.
It is to "clinical value as the center"
.

Seeing the problem, we can't do nothing; but we can't put forward a worse plan to kill all this field
.

Deep Blue View : What is a better solution? Is the top-level design change enough? After 2015, the blowout development of innovative drugs was also brought about by the introduction of policies
.

Deep Blue View

Zhu Xun : Only the introduction of policies is far from enough
.
Strong law enforcement is also needed .
The 722 clinical data verification in 2015 cannot be pushed at all without strong enforcement measures
.
At that time, even clinical data was falsified, and there was no industry self-discipline
.

Zhu Xun

In fact, CDE's proposal of "centering on clinical value" is not only applicable to oncology drugs, but also the most basic requirement for clinical trials of all new drug development; even so, it still requires the cooperation of strong law enforcement and judicial institutions
.

Of course, we also need to spread the law with great fanfare and advocate self-discipline and abiding by the law
.

Deep Blue View : What is most lacking in the development of innovative drugs in China? Before, there was a lack of capital and talents, but now?

Deep Blue View

Zhu Xun : Before, there was a mainstream argument that China's slow development in the field of innovative drugs was due to lack of money and lack of people
.
This statement is very one-sided
.

Zhu Xun

The sustainable development of the innovative drug field depends on three points: First, a scientific, standardized, stable, and transparent regulatory system is needed.
This drug regulatory system has been gradually established since 2015, but from legislation to law enforcement, justice, and law popularization.
, It is still a long time to comply with the law from the bottom of my heart, but at least, the regulatory system has gradually been in line with international standards
.

Second, good protection of intellectual property rights is required.
With long drug R&D cycles, large investments, and high risk of failure, intellectual property rights are particularly important
.
China used to have administrative protection and protection of traditional Chinese medicine varieties.
It should give way to systematic intellectual property protection, including the patent linkage system, etc.
Otherwise, companies and investors would not be willing to invest heavily in innovative drugs
.

Third, there must be an appropriate medical insurance payment system
.
Only with an appropriate medical insurance payment system can the innovative drugs that have been heavily invested in research and development have market share and sales, and enterprises can get returns that are in line with business logic rather than capital market logic
.

In terms of the policy environment for the development of innovative drugs, we can look at the United States
.
Now the innovation in the global pharmaceutical field is actually mainly paid by the US payment system (medical insurance)
.
Patent protection in the United States began more than 200 years ago
.
It is precisely because of these policies that the United States attracts major pharmaceutical companies from all over the world to it
.

If China's medical insurance payment system cannot support the development of innovative drugs in China, going overseas is an indispensable choice for most innovative drug companies, even though most of our pharmaceutical companies still lack international competitiveness
.

02 "There are about 80% of generic drugs on the market, and even 90% of new drugs are difficult to gain market share.
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02 "There are about 80% of generic drugs on the market, and even 90% of new drugs are difficult to gain market share.
"

Deep Blue View : We found a data that in 2020, pharmaceutical investment of more than 500 million yuan, raw materials and preparations only account for 4%, but innovative drugs are as high as 56%
.
However, more than 80% of prescription drugs for Chinese people are generic drugs
.
This means that generic drugs are still the basic medicine for Chinese people, but funds are no longer in this field
.

Deep Blue View

Zhu Xun : Not only in China, more than 75% of the prescription drugs in the world are generic drugs
.
The director of the US Food and Drug Administration, each new incumbent, encourages companies to produce generic drugs because the medical burden in the United States is too heavy
.

Zhu Xun

There is no doubt that the world needs high-quality cheap generic drugs
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A generic drug with a score of 75 to 80 is sufficient to solve the basic medical problems of most diseases
.
Due to the huge price advantage, there are about 80% of generic drugs on the market, and even 90% of new drugs are difficult to gain market share
.

In China, the proportion of generic drugs in prescription drugs will be higher, and the proportion of generic drugs in sales will also be much higher than in developed countries
.
China's generic drug companies are still the basic market of Chinese medicine
.
Those innovative pharmaceutical companies that have recently launched products on the market, how many Chinese are using the new drugs of these companies? Can two or three million people use the drugs of these companies? They are promoted by capital to go public, and they have not really solved the problem of common people's drug use
.

Making high-quality generic drugs must be an unchangeable direction
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Making high-quality generic drugs must be an unchangeable direction
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In China, “high quality” means that consistency evaluation must be done, and then the price will be cut down through centralized procurement
.
In the case that the entire national medical insurance cannot significantly increase investment in the short term, the only way to drastically reduce the price of generic drugs and the proportion of generic drugs in the payment of this drug can only be through the way of vacating cages for birds
.
But in this process, it will have a huge impact on traditional manufacturing companies, not only affecting the company, but also keeping capital away from the generic drug field
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If pharmaceutical companies themselves are not willing to invest in generic drugs, capital is even less willing to do so
.
The situation in developed countries is more serious than at home
.

Deep Blue View : We wrote an article "The Sad Past of Chinese Generic Drugs" , which mentioned the dilemma faced by traditional pharmaceutical companies
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Deep Blue View "The Sad Past of Chinese Generic Drugs"

Zhu Xun : You should put a quotation mark on "sorrowful", it is actually "the last carnival"
.

Zhu Xun

Before the national drug collection, the life of Chinese generic drug companies was very good.
Their life was too comfortable, a bit similar to "boiling frogs in warm water
.
" There was a saying before, "If you want to be a county head, you have to set up a pharmaceutical factory.
" Selling medicine is the fastest way to get rich in China
.
There are not as many generic drug companies globally as there are in China
.
There are only three or four hundred generic drug companies in the United States and a few thousand in China
.

Generic drugs are called generic drugs in the United States
.
Although the global sales of generic drugs are large, their sales are low, because once they become generic drugs without intellectual property protection, the prices of drugs need to be calculated at cost
.
Just look at the production, the cost of medicine is almost zero
.
More costs are in the sales channels.
Therefore, in the centralized procurement of domestic generic drugs, some varieties are less than 10% off, but the company still makes a profit, indicating that there is a problem with our previous pricing system
.

Some traditional pharmaceutical companies will definitely be eliminated
.
The remaining is king.
There are more than 6,000 generic drug companies in China, and it may be reasonable to eventually eliminate 1,500 to 2,000 companies
.

Some traditional pharmaceutical companies will definitely be eliminated
.

Deep Blue View : No company is willing to be eliminated
.
Do you sympathize with these obsolete generic drug companies?

Deep Blue View

Zhu Xun : Poor people must have something to hate
.

Zhu Xun

I went to a city in the north not long ago to participate in a forum in the field of medicine
.
The city’s pharmaceutical companies had a brilliant wave at the end of the last century.
Tens of millions of advertising expenses and hundreds of millions of sales have become the routines of local pharmaceutical companies, among which patented medicines and health products have spread all over the country
.

At present, the pharmaceutical factories in the city basically have a large factory area, large gates, large halls of administrative office buildings, large workshops, large warehouses, and everything you see is large-but unfortunately the output value is not large enough.
The profit is not much
.

Many domestic companies came to this conference, as well as some local pharmaceutical companies
.
In the margins of the meeting, most of the people who came to exchange and ask questions were companies from other places, and only a few local pharmaceutical companies were interested in communicating with experts, scholars or other companies
.

On the way to the airport, I gave a voice message to the organizer of this meeting and an official with a more general view
.
I spoke for about ten minutes, expressing my disappointment .
The official was also very helpless.
The city that used to be rich in pharmaceutical companies is still continuing the logic of yesterday, and the concept is relatively lagging behind
.

In the past so many years, it has been too easy for pharmaceutical companies to make money.
Without the barriers and costs of intellectual property rights, they can live a good life only by focusing on marketing
.
As a result, our pharmaceutical industry has been "running off the field", playing with ourselves
.

As early as six or seven years ago, I have already pointed out the dilemma facing generic drugs: they must transform to make high-quality and cheap generic drugs
.
At present, the state's centralized procurement has caught pharmaceutical companies that were only good at engaging with hospitals and doctors by surprise
.
If the products of those traditional pharmaceutical companies cannot pass the consistency evaluation and cannot enter the centralized procurement, the future is worrying
.
For those traditional pharmaceutical companies that do not have new product upgrades, if someone buys them now, it may be a way out to sell them as soon as possible
.

03What  should we do in the future?

03What  should we do in the future? What should we do in the future?

Deep Blue View : Waiting to be eliminated is not a "way out", it is just an ending
.
In addition to being "eliminated" for innovative pharmaceutical companies and generic pharmaceutical companies, what other futures can they actively choose?

Deep Blue View

Zhu Xun : M&A or cooperation between large domestic pharmaceutical companies and innovative drug companies is one way out
.
Most innovative drug companies only have one or two products.
Building a marketing team for these two products is costly and challenging
.
Throughout the world, only a handful of Biotech have successfully developed into Biopharma, let alone bigpharma
.
Therefore, Biotech should seek cooperation with traditional pharmaceutical companies with channel and market advantages
.
After the VIC (VC+IP+CROs) model developed by Biotech, VICP (VC+IP+CROs+Pharma) will become more and more mainstream
.

Zhu Xun

Traditional companies also need to use innovative drug companies' products to upgrade
.
Large pharmaceutical companies must strengthen their BD capabilities.
Otherwise, if their R&D capabilities are not strong, their sales capabilities have already been maximized, and follow-up development is a state of "no bullets
.
" If the best CEO cannot become the best BD, it is difficult to achieve the best business
.

Now Hengrui's Sun Piaoyang has begun to pay attention to BD, but many traditional pharmaceutical companies find it difficult to achieve this.
They lack sufficient knowledge of what they will lose in the future
.

Many traditional pharmaceutical companies find it difficult to achieve this because they lack sufficient knowledge of what they will lose in the future
.

As for who to merge and whom, it depends on the value of the markets of both parties and the minds of the holders of both parties
.

Deep Blue View : (M&A and cooperation) This way out is logical, but it is difficult in reality
.

Deep Blue View

Zhu Xun : The two corporate cultures are different
.
Traditional pharmaceutical companies will face cultural conflicts when acquiring innovative drug companies, and mergers and acquisitions are difficult to succeed
.

Zhu Xun

Traditional pharmaceutical companies generally emphasize low cost and sales capabilities
.
After acquiring an innovative drug company, staff salaries will increase by 3 to 4 times, and marketing expenses will increase by 10 times.
Generally speaking, traditional companies will find it difficult to accept such cooperation
.

For many companies in China, there is a lack of a merger and acquisition culture.
In this process, both parties are "preferring to be a chicken's head, not a phoenix tail
.
"

Deep Blue View : If a company does not want to be listed, capital enters, or mergers and acquisitions, it wants to make medicine honestly, what kind of medicine should it make?

Deep Blue View

Zhu Xun : There are three types of products available in the pharmaceutical field.
One is high-quality, low-priced, and even "cheap" generic drugs.
This is a reality and trend that Chinese generic drug companies cannot reverse in the next step
.

Zhu Xun

The second category is the latest drugs with better efficacy, including those imported from overseas.
These latest results need to be quickly introduced into China, as well as some Fast follow and me-too drugs.
Most of these drugs should still be patented.
Period
.
Medicines within the patent period allow them to enjoy a high price, otherwise they have no incentive to invest
.

The third part is a large number of innovative drugs that meet clinical needs
.
Among human diseases, medicines can only solve some common and frequently-occurring diseases.
There are more genetic diseases, degenerative diseases, and proliferative diseases, and there is no cure for them
.

When tumor-targeted drugs appear, the tumor has changed from incurable disease to a chronic disease.
A large number of tumor patients can complete the entire tumor pathogenesis process.
New problems caused by the new process still need to develop new drugs
.

Real innovative drugs are extremely important.
They are the source of all me-too drugs and fast-follow drugs, as well as reference products for generic drugs
.
But that is also a game that only a few people can play
.

A truly innovative drug must be the world's first.
Like Columbus discovered the New World, the second person who discovered the New World is not an original innovation; the second is international recognition; and third, it must have sufficient market share and sales
.
In a niche market in the field of orphan drugs, a total of 1 billion U.
S.
dollars are sold globally a year, which can account for 500 million, which has a market share of tens of billions than others, but the sales of 1 billion drugs show their value
.

Innovative drugs must win at the end, not at the starting point; the sign of this end should be sales and market share.
In a larger sense, market share is more important
.

end

end

Management guru Peter Drucker once said, "In turbulent times, the biggest threat is not the turbulence itself, but the continuation of yesterday's logic"
.

For China's pharmaceutical industry, this is not only a time of turbulence, but also a time of opportunity
.
In an age full of opportunities, the greatest opportunity is not the opportunity itself, but to break the logic of yesterday, control the logic of today, and gain insight into the logic of tomorrow
.

For China's pharmaceutical industry, this is not only a time of turbulence, but also a time of opportunity
.

In the next ten years, China will complete the all-round restructuring of the pharmaceutical industry, the business model of the pharmaceutical industry will be transformed, and the key links of drug research and development, production and sales will gradually be standardized, stable and mature; The "Made in China" trilogy will be brilliant; the protagonist of the drama must be variety (cheap, high-quality generic drugs), variety (to obtain the latest and best medicines in a timely and economical manner), variety ( Innovative drugs that meet current unmet clinical needs)
.

The future has come
.
Yesterday’s logic is long gone, and today’s logic is gradually difficult to adapt to the long-term future of innovative drugs
.
How much do you know about the logic of China's medicine tomorrow?