The long-term struggle of the business, and has a considerable growth rate, why does the generic drug business of Sihuan Pharmaceutical say that it is necessary to sell?

At present, China's pharmaceutical industry is experiencing an unprecedented shock, on the one hand, it is a sense of oppression like suffocation, and a considerable proportion of backward pharmaceutical companies are destined to be eliminated by history, and on the other hand, innovative drugs are showing a burning trend
in China.

Spin-offs, integration, sales and other adjustment actions will become the norm of pharmaceutical companies in this period, in the turbulent situation, who adjusts the faster, the firmer the strategic determination, who is more likely to win the victory
of the era of innovative drugs.

Spin-off of "cash cows"

Recently, Sihuan Pharmaceutical issued an announcement that it intends to propose to sell some or all of its generic drugs and other non-core traditional medicine businesses and assets that have not met performance expectations or are not in line with long-term strategic goals due to the impact of changes in the pharmaceutical industry and policies, and the sale will be gradually completed
in the next 12-24 months.

This is a major event for Sihuan Pharmaceutical, and in 2021, the revenue of Sihuan Pharmaceutical's generic drug business segment reached 2.

In the past development, Sihuan Pharmaceutical has accumulated a large number of generic drug products
.

In addition, there are heavy generic drugs such as moxifloxacin hydrochloride sodium chloride injection and clopidogrel bisulfate tablets, which provide a steady stream of cash flow
for Sihuan Medicine.

Source: Sihuan Medicine's official website

The long-term struggle of the business, and has a considerable growth rate, why does the generic drug business of Sihuan Pharmaceutical say that it is necessary to sell?

It turned out that as early as ten years ago, Sihuan Pharmaceutical began to lay out innovative drugs
.

Xuanzhu Bio's pipeline focuses on tumor, metabolism, anti-infection, digestion and other fields, covering small molecules, monoclonal antibodies, double antibodies, double antibodies-ADC, fusion proteins, protein degradation and other cutting-edge technologies, with more than 20 product pipelines;

Huisheng Biologics was incubated in 2014 and focuses on the field of diabetes and complications, with nearly 40 product pipelines
.
The product line covers a full range of second-, third- and fourth-generation insulin and analogues, as well as a number of new hypoglycemic drugs
.

Sihuan Pharmaceutical incubation of these two companies, in the past two years began to enter the sprint stage, Xuanzhu Biology has become one of the most comprehensive companies in the domestic breast cancer track layout, CDK4/6 inhibitor piroxinil has entered the phase III clinical stage, the only domestic proton pump inhibitor (PPI) annalprazole sodium enteric-coated tablets, has entered the listing application stage
.

The second SGLT-2 inhibitor of Huisheng Bioproduction plus papagliflozin has submitted a marketing application; Application for listing of insulin aspart injection, insulin aspart 30 injection and insulin aspart 50 injection has been accepted; The fourth generation of insulin de gluten has completed clinical phase III trials; Degu Mendong double insulin was approved for clinical trials, and the research and development progress ranked first in China
.

Relying on the blood transfusion of the generic drug business, in fact, Sihuan Pharmaceutical has been doing well, as of the end of 2021, Sihuan Pharmaceutical has cash and cash equivalents of about 5.
682 billion yuan, with a debt ratio of 12.
6%, and its finances are very stable
.
Coupled with the exclusive agent of botulinum toxin products have begun to put the amount, it can be said that Sihuan Pharmaceutical is not short of money
.

Therefore, it is somewhat difficult to understand the divestiture of the generic drug business of Sihuan Pharmaceutical, but it seems that the divestiture of the declining business and the focus on the core business seem to be becoming a trend
.

The frequency of MNC business adjustment has accelerated

The divestiture of the generic drug business of more than 200 billion yuan in revenue of Sihuan Pharmaceutical can already be regarded as a big event in China
.
However, compared with the spin-off and integration of a number of multinational large pharmaceutical companies ("MNC"), it is simply a small witch
.

In recent years, under the background of accelerated changes in the pharmaceutical environment, many multinational pharmaceutical companies have begun to adjust their development strategies, such as Novartis, Roche, Lilly, GSK, Takeda, Pfizer and other enterprises
.

In July alone, the "slimming" action of multinational pharmaceutical companies occurred several times
.

At the beginning of the month, Novartis' generic drug business unit Sandoz said that Novartis will decide to divest or sell Sandoz at the end of this year; In mid-October, Sanofi struck a deal with Neuraxpharm to sell 17 drugs to Neuraxpharm, including two portfolios for central nervous system diseases, pain and vascular diseases, among others
.

If you stretch the time span a little longer, you will find that these multinational pharmaceutical companies have long begun to actively accelerate the "slimming" and adjust their business
.

Since 2019, Takeda Pharmaceutical has been in a state of "selling and selling", from the sale of the prescription drug Xiidra for dry eye disease to Novartis for $5.
3 billion in May 2019 to the $320 million deal with Hefei Haisen Pharmaceutical in December 2020, Takeda has completed more than 10 business divestitures, achieving the financial goal
of divesting more than $10 billion of non-core businesses.

Others, such as AstraZeneca's successive sale of its blockbuster drugs Crestor, Eklira and Duaklir; Merck divested women's health, biosimilars and some mature drugs into the new company O'Calon; Sanofi split off the API company EUROAPI and listed independently; The first three transferred the production and sales rights of Chinese mainland cola pitor preparations to Fosun Pharma; As well as the earlier Pfizer's independent formation of the generic drug business into Pfizer Puqiang, etc.
, these events show that the adjustment of the generic drug business of multinational pharmaceutical companies is accelerating
.

Image source: Photo Network

2020 is a key node, a very important reason is the outbreak of the epidemic, which has changed the global market environment, thus affecting the layout
of multinational pharmaceutical companies.

In summary, multinational pharmaceutical companies have divested pipelines to focus on the main business more and more frequently, and their new direction is also obvious, tumor immunity will become the next cash flow, neuroscience field has become the potential field that everyone has laid out and is looking forward to developing, in addition to this mainstream direction, there are many pharmaceutical companies are also paying attention to the direction
of rare disease therapy.
These layouts are closely related to today's technological advances, such as gene therapy is mainly used in the field of
rare diseases and genetic diseases.

In China, multinational pharmaceutical companies are facing a more complex and stressful situation, which makes the strategy of these MNCs more aggressive, and selling, shutting down and exiting has become the norm
for business in China.
After profits are compressed and the market narrows, divestitures become inevitable
.

Generic drugs into hot potatoes?

In the past two decades, especially after entering 2010, almost all Chinese pharmaceutical companies have experienced a period of crazy expansion, which is a time when
generic drugs can make money lying down.

However, after entering the era of collection and mining, the bloody rain and wind struck, and even strong people like Hengrui Pharmaceutical were also hit hard, not to mention those small pharmaceutical companies
.
Once the core variety collection loses the standard, it will be a devastating blow
.
After the blow, the first thing these pharmaceutical companies do is often to sell assets to blood
.

Xinlitai is a typical microscopic sample
that has been hit hard by collection.

In the era of generic drugs, the core product of Xinlitai is "Taijia", which imitates the clopidogrel
originally developed by Sanofi.
At that time, China's patent law was not yet perfect, and Xinlitai became the lucky one of the times, and it was listed
before the original research drug landed in China.
Relying on this variety, Xinlitai landed on the capital market in 2009; By 2013, Taijia's annual sales had exceeded 1.
5 billion yuan, accounting for 64.
46%
of its total revenue that year.

Until the first half of 2019, after Xinlitai's revenue reached a historical peak of 2.
356 billion yuan, there was no follow-up
.
Because in the 2019 national collection, Taijia unexpectedly lost the
bid.
The loss of the bid made its 2020 financial figures miserable
.
Xinlitai's operating income in 2020 was 2.
739 billion yuan, a year-on-year decrease of 38.
74%; Net profit attributable to the mother was 0.
61 billion yuan, a year-on-year decrease of 91.
49%, of which Taijia's revenue decreased by 59.
97%
year-on-year.

Starting from 2020, Xinlitai has successively packaged and sold unnecessary generic drugs, from dapoxetine hydrochloride, erlotinib hydrochloride, rivaroxaban, imatinib mesylate, to recombinant human follicle hormone-CTP fusion protein injection in research varieties
.

Source: Xinlitai official website

In the era of collection, generic drugs are negative assets have become the consensus of the industry, and transformation is a problem
that many domestic pharmaceutical companies are thinking about.
But the question is, in this fiercely competitive "battle", which transformation path should generic drug companies choose to successfully break through?

From the current transformation direction of major generic drug companies, there are mainly several main transformation paths:

First, to develop vertically and integrately, expand to the upstream API field, realize the integration of the industrial chain, and create cost advantages, such as Huahai Pharmaceutical and Puluo Pharmaceutical; The second is to work in the direction of non-medical insurance business, such as entering the field of medical beauty; The third is to develop in the direction of innovative drugs, which is the main choice of large pharmaceutical companies, such as Hengrui Pharmaceutical, Chia Tai Tianqing, etc.
; The fourth is the layout of high-end generic drugs, first generic drugs, improved new drugs or biosimilars, which is the main choice of small and medium-sized generic drug companies, such as Fuyuan Pharmaceutical
.

As for which path will succeed, in turbulent times, everything is still uncertain
.

epilogue

In fact, focusing on being a generic drug company is not unprofitable, the price of collection covers the industrial cost and logistics cost of the drug, and because the marketing link is simplified, the management cost of the entire process has also dropped significantly, if the process of refined management, while opening up overseas markets, China's generic drugs sold to the majority of developing countries, this may not be a way
out.
How to develop in the future, Yaozhi Network will continue to pay attention
to.