R&D investment continues to grow, pharmaceutical innovation seeks steady progress

Since the reform of the drug review and approval system in 2015, China's pharmaceutical innovation policy environment has improved significantly
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The new "18A" listing regulations for Hong Kong stocks in 2018 and the launch of the Shanghai Stock Exchange's Science and Technology Innovation Board in 2019 have greatly enriched the exit channels for biopharmaceutical investment, and quickly boosted the capital market's enthusiasm for biopharmaceutical investment
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According to the statistical analysis of AiKunwei, the overall financing amount (primary market + IPO) of biopharmaceuticals in 2021 will increase by nearly 3.
5 times compared with 2017 (see Figure 1 for the changes in IPO financing in the medical and health industry)
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However, due to factors such as tightening regulatory policies, changes in the international environment, and repeated outbreaks of COVID-19, China's biopharmaceutical financing has slowed sharply since the fourth quarter of 2021, and the performance of the primary and secondary markets of biopharmaceutical companies has continued to slump
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So, has my country's biomedical investment peaked? What are the investment prospects for the next five years? From the perspective of industrial structure and clinical demand, there is still huge room for development in China's pharmaceutical market
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At present, the gap between China's new drug research and development and the world is gradually narrowing, but problems such as the clustering of targets and the concentration of indications still exist
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Ai Kunwei believes that there are two types of local pharmaceutical companies worthy of attention in the future: First, first-in-class companies participating in global competition
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Such enterprises are anchored in their international positioning, and will continue to move forward in the short term.
In the future, they will lead the international development and innovation breakthroughs of China's biopharmaceuticals
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The second is China's high-quality me-better leading enterprises
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Such enterprises are based on the domestic pharmaceutical market, win by scale in the short term, and gradually transform to innovation in the medium and long term
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The above two types of enterprises will be the main contributors to the upgrading of China's pharmaceutical industry
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At the same time, foreign pharmaceutical companies continue to introduce new drugs into China's pharmaceutical market, which will be conducive to the accelerated innovation and upgrading of China's pharmaceutical industry as competition intensifies
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In the next five years, opportunities and challenges will coexist in the development of my country's pharmaceutical industry
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Broad space for biopharmaceutical development Tripartite funds to support drug research and development In recent years, the speed and intensity of China's policies such as centralized procurement and medical insurance negotiation have continued to exceed expectations.
The core logic behind it is to encourage innovation, improve the quality of drugs and medical devices, and optimize medical insurance spending
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The normalization trend of medical insurance cost control has been set, and although the prospects of commercial insurance are still unclear, China's medical insurance expenditure has shown a trend of "vacating the cage and changing the bird"
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There is still a lot of room for development in China's pharmaceutical market
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According to data from AiKunwei, taking biological drugs as an example, the compound annual growth rate of global biological drug sales has reached double digits in the past ten years, and its market share has increased significantly compared with small molecule drugs
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Although the scale of China's biological drug market exceeded RMB 100 billion for the first time in 2019, it will only account for 14% of the overall pharmaceutical market in 2020, far below the level of 20% to 40% in developed countries and regions
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Innovative biological drugs are mainly concentrated in the treatment fields of tumor, rheumatism, diabetes, etc.
At present, the scale of China's tumor biological drug market is growing rapidly, with a compound annual growth rate of over 30%
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Compared with the United States, the proportion of biological drug sales in various disease fields in China has a large room for improvement
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In the process of upgrading the sales of prescription drugs in China, the localization of imported varieties will also be a major trend
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If enterprises can well undertake technology transfer, effectively integrate supply chains, control production costs, and ensure effective coverage of sales platforms, they will benefit a lot in the future
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According to Aikunwei's statistics, in 2020, China's new drug research and development investment will reach 19 billion US dollars, accounting for 10% of the global drug research and development expenditure.
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However, in terms of the amount of investment, there is still a big gap between China and the United States
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The main sources of funds for China's drug R&D investment are the government, enterprises and the capital market
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In recent years, government R&D investment has generally increased, but due to the impact of the new crown pneumonia epidemic, the financial science and technology allocation in 2020 has declined
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Aikunwei's analysis found that in recent years, corporate R&D investment has continued to increase
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Among them, 2020 will increase by nearly 4 times compared with 2016, but there is still a big gap compared with the United States; R&D expenditure accounts for less than 10% of total revenue, which is also lower than the average level of 16% in the United States
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The enthusiasm for investment in the capital market was once high, and it has recently entered a wait-and-see stage
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On the premise that the regulators of China and the United States maintain good communication, the market will gradually become more rational
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The pharmaceutical market products are anti-economic cycle categories.
Under the influence of the new crown pneumonia epidemic, other industries have contracted sharply, and funds have flowed to biomedicine.
The scale of financing in the primary and secondary markets has reached a record high in the past five years
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At the same time, RMB-funded LPs (investors who provide assets to venture capital companies) have become market leaders, and the fundraising environment has improved significantly
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Rapid development of the three major areas, innovation and development levels continue to improve.
According to Ai Kunwei’s observation and analysis, in recent years, China’s pharmaceutical R&D investment has mainly flowed into the R&D of new cancer drugs, the R&D of macromolecular biological drugs, and the CDMO (contract custom R&D and production organization) industry.
The influx has contributed to the rapid development of these fields
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Research and Development of New Drugs for Tumor Treatment According to the statistical analysis of Ai Kunwei, the level of global drug innovation has been continuously improved in the past 10 years.
2000 species, is a hot research and development hot spot
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Focusing on the research and development of new drugs in China, from the perspective of the distribution of clinical trial indications, the indications of innovative drugs in China are mainly concentrated in tumors, which is the same as the overall global trend
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However, due to differences in ethnicity and living habits, the disease spectrum of Chinese residents is different from that in Europe and the United States, and the unmet clinical needs of our country are driving more and more drug research and development "rooted in China to serve China"
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Macromolecular biological drug research and development Biological drugs can be divided into monoclonal antibody, double antibody, antibody-drug conjugate (ADC) and cell/gene therapy according to different technical routes.

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Monoclonal antibodies At present, the targets of monoclonal antibodies that have been marketed in China are relatively concentrated, and it is expected that more biological drugs with different targets will be launched in the next two years
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In the field of PD-1 and VEGF, the number of biopharmaceuticals that have been marketed in China is ahead of the United States, but there is still a gap between the United States and the United States in other popular targets
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Double antibody and ADC In recent years, domestic enterprises are building differentiated R&D platforms by introducing technologies or adjusting existing technologies
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The R&D process of domestic double-antibody and ADC drugs has accelerated, and a large number of R&D pipeline drugs have entered Phase III clinical trials
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For example, Rongchang Bio's HER2-ADC drug RC48 has been approved for marketing in China in June 2021, and Genting Xinyao's Trop2 ADC drug has also launched a marketing application
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In terms of target layout, in addition to the mainstream HER2 and Tr op2, many emerging targets have become the targets of new drug research and development
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GCT (Gene/Cell Therapy) Chinese companies play a pivotal role in global GCT research and development, and many multinational and local pharmaceutical companies are also actively deploying GCT drug research and development in China
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On February 28, 2021, the BCMA Chimeric Antigen Receptor T cell (CAR-T) product Cil ta-cel, a product of GenScript's Legend Biotech, was officially approved for marketing in the United States, becoming the first FDA-approved drug in the United States.
China's self-developed CAR-T cell therapy products approved by the Administration
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CDMO industry With the rapid increase of innovative drugs, the CDMO industry also shows a trend of rapid development
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China's CDMO industry is accelerating the formation of a unique competitive advantage
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According to data from AiKunwei, at present, China's CDMO market is mainly occupied by small molecule drugs, accounting for about 80%; biologics and gene/cell therapy CDMO will maintain a rapid growth of about 25% to 30%, and the proportion is expected to increase in the future
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The driving force for the development of the CDMO industry mainly comes from the well-established chemical system in China, the dividend of low-cost engineers, the advantages of the industrial chain and the rapid upgrading of technology
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Specifically, small molecule CDMOs benefit from cost advantages, global drug CDMOs are transferred to China, process development expansion and upgrading, and the demand for localization of potential pharmaceutical factories, promote the development of China's CDMO industry
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The driving force for the development of the macromolecule CDMO industry comes from the acceleration of the R&D and commercialization of innovative macromolecule drugs, as well as the engineer bonus brought by the return of overseas technical talents to China
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The development of the GCT CDMO industry has benefited from the rise of new therapeutic areas and the rapid development of GCT technology, the favorable local clinical demand in China, and the need for companies to focus on "rooting in China and serving China"
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Multiple factors drive industry upgrading and differentiation, and returning to the origin of innovation is the development direction.
In the future, funds from the government, enterprises, and capital markets will continue to be invested in the research and development of innovative drugs
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Funds will be more concentrated in companies that have proven their R&D, registration and commercialization capabilities, and the Matthew effect will increase
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From the government's point of view, the field of life sciences will remain one of the main industries encouraged by China in the next five years
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In order to enhance international competitiveness and solve the problem of "stuck neck", the capital investment of Chinese government departments in biomedical research and development will remain stable, mainly for basic research or industrial guidance
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From the perspective of enterprises, with the normalization of medical insurance cost control, market competition will intensify in the future
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The potential risk of lower-than-expected returns from innovative drugs will affect the investment intensity and direction of the company's own funds in R&D
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Traditional leading pharmaceutical companies will make full use of existing products to stabilize cash flow and sales platforms to quickly realize the commercialization of me-better products, move forward steadily, and gradually transform into innovative drugs
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With the improvement of R&D efficiency and strength, R&D-oriented enterprises will continue to invest in the R&D of first-in-class products and actively participate in local and international market competition
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In terms of capital market, both domestic capital and overseas capital in the medium and long term will be optimistic about Chinese biopharmaceutical companies due to the huge potential market
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In the short term, due to the impact of economic friction, investment in US dollar funds may be more cautious
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Due to the decline in expected yield, the market will gradually return to rationality, and the overall capital investment may be concentrated towards the top target
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In general, with the deepening of medical reform, accelerated iteration of new drug research and development, the return of overseas professionals, and sufficient capital support, China's pharmaceutical industry will continue to upgrade and differentiate during the "14th Five-Year Plan" period
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On the one hand, in response to the clinical needs of the Chinese market, companies with superior channel advantages, integrated supply chain and cost control capabilities will rapidly increase market share through product introduction and domestic substitution, and the tens of billions club companies will become stronger; On the one hand, Chinese innovative pharmaceutical companies "rooted in China to serve China" need to move from "general innovation 1.
0" to "selected high-quality innovation 2.
0", and seek innovative drugs with real clinical value in the gradually improved biopharmaceutical R&D ecosystem
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At a time when competition is intensifying, returning to the origin of innovation and promoting differentiated innovation oriented by clinical value is the main theme of the development of China's pharmaceutical industry
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With the support and guidance of government departments, China's pharmaceutical innovation and development will surely reach a new level
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(Contributed by Ai Kunwei)