The local Biotech wave is vigorous and the multinational MNC wolves are waiting for the traditional pharmaceutical companies. How to break the situation?

"The current domestic pharmaceutical market has formed a "three-legged

Traditional pharmaceutical companies are the absolute main force in the pharmaceutical market.

In this "involvement" in a race against time, traditional pharmaceutical companies must not only withstand the threats from domestic biotech and multinational giants, but also realize the transformation and upgrading from imitation to innovation while doing generic drugs

01 Sailing against the current

The transformation of traditional pharmaceutical companies is on the line

Traditional pharmaceutical companies because the Central Purchasing defeat into business difficulties, the Salubris with Huadong Medicine can be said that the famous "seriously injured"

Fortunately, it is never too late to innovate and transform

Suffering heavy losses in centralized procurement, Xinlitai began to increase investment in new drug research and development.

Not only to stop R&D investment in low-end generic drugs and biosimilar drugs, Xinlitai also announced in 2020 that it will transfer 52,300,800 shares of the company to CITIC Lyon Asset Management Co.

Similar to Xinlitai's approach, Huadong Medicine is also adjusting its existing product structure, cleaning up and eliminating generic drugs with low barriers and low commercial value

At the same time, Huadong Medicine is also looking for new profit growth points

Xinlitai and Huadong Medicine are only in business difficulties due to the failure of centralized procurement, and are typical microcosms of traditional generic pharmaceutical companies that are getting out of the quagmire through transformation.

Indeed, centralized procurement is subverting the traditional sales model and competition model.

But transformation is not easy

The main limitations of the current transformation of traditional pharmaceutical companies to innovative pharmaceutical companies are the reserve of talents, lack of experience, and the construction of R&D platforms

The main position of generic drugs in pharmaceutical companies will gradually be replaced by innovative drugs.

On October 9, 2019, Sun Piaoyang, Chairman of Hengrui Pharmaceuticals, announced at the start-up meeting that day: Hengrui has cut off all the projects under research on generic drugs! Focus on innovation! ! For a time, public opinion was in an uproar.
According to statistics from Ernst & Young, from the 2018 revenue data, generic drugs still contributed 86% of Hengrui Pharmaceutical's revenue, and innovative drugs only accounted for 14%
.
However, the short-term pain caused by Hengrui Pharmaceutical's more resolute and vigorous policy towards generic drugs made Sun Piaoyang more resolute in his attitude towards generic drugs
.
In fact, at the end of 2018, Hengrui was determined to stop some generic drug projects that have entered the late stage of consistency evaluation, and only make innovative drugs and high-end generic drugs with core values, and quickly transform before the policy is forced
.

Independent R&D tests the comprehensive capabilities of pharmaceutical companies, including R&D investment, R&D personnel reserves, and pipeline layout
.
After the transformation and development of innovative drugs, Hengrui's current R&D investment accounts for 17% of sales
.
According to statistics, Hengrui has obtained a total of 82 clinical approvals for innovative drugs in 2020, of which 6 major research projects have entered the phase two-thirds clinical stage
.
On January 4 this year, Hengrui Pharmaceutical's R&D headquarters project announced the official start, which is expected to speed up the development of new products, improve independent R&D capabilities and technological innovation capabilities, and build an innovation system
.

"It can be seen that there are many types of transformation in the current industry, such as transformation and innovation, becoming a generic drug company like Teva, transforming non-medical insurance and general health fields, or becoming a CXO in the pharmaceutical industry chain.
.
.
" The drug manager said, "Among the many transformation methods, the transformation and upgrading from imitation to innovation is the most common method, and it is also the most important way out for most traditional pharmaceutical companies, because innovative drugs are indeed more promising
.
"

From a policy perspective, the state has issued a series of policies to encourage drug innovation and increased payment for innovative drugs, which has further accelerated the expansion of the domestic innovative drug market
.
Whether it is the reform of drug review and approval, China's accession to ICH, or the full implementation of the marketing authorization system, they are all moving closer to the international mainstream regulatory system, and constantly clearing the roadblocks for Chinese pharmaceutical companies to innovate
.

Driven by this wave of innovation, local pharmaceutical companies have embarked on the road of innovation and transformation.
Transformation and upgrading have become the top priority for traditional pharmaceutical companies.
Perhaps the biggest doubt in the market is: Is it possible for traditional pharmaceutical companies to engage in innovation?

02 Speed ​​up "turn around"

The answer is yes
.

It is an indisputable fact that R&D is emphasized, and quality and innovation are an indisputable fact.
The investment of domestic pharmaceutical companies in R&D has changed significantly
.
According to previous statistics from the E-pharmaceutical manager, from 2016 to the first half of 2020, although the number of listed biopharmaceutical companies increased by only 40, the R&D investment has soared from 23.
151 billion yuan to 35 billion yuan, such as Hengrui, CSPC, and China Biopharmaceuticals.
Leading domestic companies such as pharmaceuticals, R&D investment accounted for more than 10% of revenue
.

"Pharmaceutical companies with innovative core competitiveness can embark on a better development track in the increasingly competitive market
.
" said the head of research and development of a pharmaceutical company
.

In fact, compared to Biotech, traditional pharmaceutical companies bet on innovative drug development and have unique advantages
.
Compared with innovative pharmaceutical companies that need to raise funds everywhere to support research and development, traditional pharmaceutical companies often have strong financial strength and have more "trial and error" opportunities
.
But the development of new drugs is not so simple
.

It takes a billion dollars to successfully develop a new drug, and it also takes ten years
.
The "Double Ten" law of medical innovation determines that money is not the most important factor
.

The current pharmaceutical industry is like a rapidly rotating gear.
Whether it is the growing emerging biotech or the eye-catching multinational MNC, it is impossible to wait in place for the transformation of traditional pharmaceutical companies
.
How to use the capital advantage to quickly and efficiently expand the pipeline of innovation and R&D is what more traditional pharmaceutical companies in the transitional period are thinking about
.

“Independent research and development, acquisition of new drug projects in the form of equity or asset acquisition, and license-in are all traditional models for current new drug research and development
.
” According to the aforementioned R&D person in charge, in the transformation options of traditional pharmaceutical companies, license-in is becoming Currently one of the ways for domestic traditional pharmaceutical companies to rapidly expand their product pipelines
.

According to incomplete statistics from E-pharmaceutical managers, in 2020, Chinese pharmaceutical companies have reached over 35 license-in product transactions, and the cooperation model covers the introduction of individual products to technology platforms.
It is a well-deserved license-in new year
.
Entering 2021, the license-in model will continue to heat up
.

For the continued hot License-in, the person in charge of the BD business of a domestic pharmaceutical company believes that stepping up the layout of the innovative drug track is a must for major pharmaceutical companies in the transitional period.
The quality of the license-in will test the BD team.
"Selection" vision
.

Take Qilu as an example.
License-in has become one of the important ways to expand the product pipeline in recent years
.

In May of this year, a clinical trial application for CEND-1 for injection submitted by Qilu Pharmaceutical was accepted
.
CEND-1 is a potential "first-in-class" anti-cancer therapy developed by Cend Therapeutics
.
In February 2021, Qilu obtained the exclusive rights to the drug candidate in Greater China through a cooperation of up to 235 million U.
S.
dollars
.
It is worth noting that within one year of the conclusion of this transaction, Qilu Pharmaceutical has conducted four license-in transactions
.

Not only Qilu, but many established pharmaceutical companies including CSPC and Yangzijiang are accelerating the pace of license-in
.

In March of this year, CSPC announced a number of license-in transactions: License-in BPI-7711 in the form of a 200 million yuan shareholding doubled and obtained the priority negotiation right of CDK4/6 inhibitor BPI-1178; with 70 million yuan Get the commercialization right of CM310 and become the listing license holder (MAH) by the way of down payment and the milestone of up to 100 million yuan, and paying a sales commission.
.
.

"The smooth transformation of a company is also affected by the layout of the product line
.
" Unlike innovative drug companies, traditional pharmaceutical companies in the transition period have to combine their existing product features to make layouts.
"Whether it is independent R&D innovation or project introduction, The transformation of traditional pharmaceutical companies must rely on their own advantages and competitive tracks to avoid blind cross-field research and development
.
” said the head of the aforementioned pharmaceutical company's research and development
.

This can be seen in the license-in layout of Yangtze River
.

Earlier this year, Shanghai Haini Pharmaceuticals, a subsidiary of Yangtze River Pharmaceuticals, and Daewong Pharmaceuticals of South Korea reached a strategic cooperation license agreement for the Chinese market on the new gastrointestinal P-CAB inhibitor Fexuprazan
.
Haini Pharmaceuticals will obtain the R&D, sales and supply rights of Fexuprazan, a new generation of proton pump inhibitor (PPI) developed by Daxiong Pharmaceutical Co.
, Ltd.
for the treatment of gastroesophageal reflux disease
.
Haini Pharmaceuticals will pay Daewong Pharmaceutical Company up to 380 billion won ($338 million), including 20.
4 billion won ($18 million) milestone payments and other expenses
.
Haini Pharmaceuticals is responsible for the clinical development and approval procedures of Fexuprazan, and Yangzijiang Pharmaceuticals is responsible for the entire market sales
.

Yangtze River is the main force in the sales of proton pump inhibitors.
However, with the approval of a variety of new acid-suppressing drugs and the inclusion of PPI injections into volume procurement, the market for proton pump inhibitors has become more competitive and profit margins have continued to be squeezed
.
As one of the main manufacturers of pantoprazole, a proton pump inhibitor product, Yangtze River is also under pressure to choose to introduce a highly competitive new drug, which may cause new waves to the domestic PPI inhibitor market
.

Although the license-in model is hot, the development cycle of new drugs is long and there are many uncertain factors
.
There are still risks in introducing innovative drugs through authorization .

Traditional pharmaceutical companies also favor the expansion of product lines in the field of innovative drugs through acquisitions and equity stakes in new companies
.

In April this year, Huadong Medicine completed two acquisitions in succession
.
On April 19, Huadong Medicine reached a cooperation with Nuo Ling Bio, a new generation of antibody coupling technology with independent intellectual property rights, and held a 10.
45% equity in Nuo Ling Bio with a total of 35 million yuan
.
Regarding the shareholding in Nuolin Biology, Huadong Medicine stated that Nuolin Biology’s patented platform technology has important strategic significance for Huadong Medicine to create a closed loop of the ADC drug industry chain ecosystem and can form a strong synergy with the existing product pipeline
.

Only one week later, on April 26, Huadong Medicine acquired 75% of Zhejiang Doer Biotechnology Co.
, Ltd.
for RMB 487.
5 million.
Doer Bio focused on the development of multi-domain-based multi-specific innovative fusion proteins, antibody drugs, and Polypeptide drugs to meet unmet clinical needs in tumor, metabolism, ophthalmology and other fields
.
Obviously, Doyle Biotech focuses on the research and development of drugs in the field of tumor and metabolism, which is highly compatible with the areas where Huadong Pharmaceutical Co.
, Ltd.
focuses on research and development
.

The establishment of a subsidiary company focused on innovation is also one of the operating methods for traditional pharmaceutical companies to transform and innovate
.
For example, Fosun Pharma has deployed innovative drugs through the establishment of subsidiaries.
Among them, domestic biosimilar drugs such as Han Likang and Hanqu You of Fuhong Hanlius were successively approved in 2019 and 2020; HLX03 listing registration application was approved; HLX04 listing registration application was approved Acceptance.
.
.
The current innovative R&D achievements of Fosun Pharma are also gradually fulfilling
.

Obviously, there are many ways for traditional pharmaceutical companies to transform
.
But it is always the same: to keep its place in the wave of innovation
.

For countless local companies that are in the stage of transformation and upgrading, the support of policies, the pooling of talents and the influx of capital have brought China's pharmaceutical industry into an era of competition
.
In the face of the continuous rise of domestic biotech, multinational pharmaceutical companies continue to deepen the situation in China, the transformation of traditional pharmaceutical companies is difficult, and the model that once relied on generic drugs to generate revenue is gone.
How innovative drugs can support corporate development is of vital importance
.
As Zhang Lianshan, President of Hengrui Pharmaceutical R&D, said, China’s past innovation foundation was relatively weak.
We need to give the entire industry, especially traditional companies, more patience to let them grow
.

On the whole, in the future of China’s pharmaceutical market structure, on the one hand, local pharmaceutical companies will continue to dominate the domestic generic drug market; on the other hand, local companies at the top will quickly enter the innovative drug market, and the combination of imitation and innovation will gradually shift.
Combine creation and imitation
.
Local leading pharmaceutical companies are gradually transforming and upgrading to innovative drug companies through independent research and development, authorized introduction, mergers and acquisitions, etc.
, from imitation to innovation
.