Where should the "water sellers" of the pharmaceutical industry transform and upgrade?

In the blink of an eye, 1/4 of 2022 has passed.
There have been sporadic outbreaks in many parts of the country, and the epidemic prevention situation is still severe, bringing many uncertainties to the economic recovery
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Focusing on China's pharmaceutical industry, in the face of high-level repeated innovative products, investment is gradually becoming more rational, and the "innovative drug" research and development hot bubble driven by capital is gradually bursting, and the pharmaceutical industry pattern will also usher in transformation and upgrading in the development
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CRO companies are also known as "water sellers".
As service providers in the pharmaceutical industry, they are bound to be affected by industry development and changes
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Since 2019-nCOV, more and more capital has paid attention to the pharmaceutical field and has continued to support it; policies such as review and approval of innovative drugs, medical insurance negotiation, and volume-based procurement have forced pharmaceutical companies to transform, and domestic innovative drugs have emerged one after another, including pharmaceutical companies Under the hostage of vitality and capital expectations, they have invested in new drug research and development
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In the context of industry expansion, the CRO business model is sought after by the booming Biotech companies, while traditional pharmaceutical companies are also urgently seeking new breakthroughs due to the lack of mature new drug research and development platforms
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WuXi, Asymchem, Tigermed and other CRO companies have accelerated their development by taking advantage of pharmaceutical innovation.
In July last year, WuXi AppTec's share price climbed to a record high of 172.
49 yuan, and its total market value exceeded 500 billion yuan
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Time is an investor's best teacher
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In the second half of the year, the realities of "Me too" product R&D and listing, the high failure rate of original innovation, and the difficulty in realizing high returns in the short term by exchanging price for quantity, have cooled down the investment in pharmaceuticals
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From continuous blessing to accelerated escape, in just a few months, the bubble blown on the capital side was punctured
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This makes it difficult for many companies to adapt
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BeiGene's science and technology innovation board broke, and Inke Medical gave up its Hong Kong stock IPO.
Pharmaceutical companies forced to calm down must re-examine the road of research and development
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Passing on to the CRO industry, WuXi AppTec, Asymchem, Tigermed, etc.
all experienced large-scale reductions in the second half of 2021.
On February 11, WuXi AppTec’s share price, which used to be 100 times the price-earnings ratio, fell to around 81.
82 yuan, with a significant market value.
Shrinking more than 200 billion yuan
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Encourage high-quality innovation, and the transformation and upgrading of the pharmaceutical industry is imminent.
Where should the "water sellers" go? What is certain is that innovation and specialization are the future development themes of the CRO industry
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Innovation: From following innovation to leading innovation The pharmaceutical industry is ultimately a competition of innovation capabilities
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As the pharmaceutical industry moves from low-end to high-end, CRO companies also move from low-end to high-end
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In the future, the industry will be further transformed and upgraded, and CRO will also need to advance to a high-level, innovation is paramount
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The moat of a CRO enterprise lies in its R&D capabilities, especially projects developed for new process technologies require sufficient professional R&D capabilities
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WuXi Biologics has deployed cell and gene therapy in advance, and related sectors have become new fulcrums for business development; its ADC technology platform, bispecific antibody technology platform and other patented technology platforms/unique advantages, it is reported that it has obtained 40 ADC projects worldwide
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From following innovation to leading innovation, CRO companies firmly occupy the market through differentiated competition
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CROs will inevitably fall into a passive position if they are always led by pharmaceutical companies and develop when customers need them
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To help original new pharmaceutical companies, CROs also need to speed up innovation, deploy innovative process development and clinical trial design in advance, and lead pharmaceutical companies to innovate through professional innovative services to meet customers’ higher requirements for new drug R&D services
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"One-stop" service for the whole industry chain With the continuous improvement of the overall level of the global CRO industry, the competition in the industry has become increasingly intensified
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Looking at the development of the global CRO industry, most of the giants started from a certain business at the beginning of their establishment, and continued to build a "one-stop" platform for their business and improve their customer service capabilities through business expansion or mergers and acquisitions in the upstream and downstream fields
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The "one-stop" service capability of the whole industry chain is the foundation for establishing the competitive position of CRO enterprises in the industry
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WuXi AppTec has always implemented the strategy of "following the molecules".
The chemical business segment has achieved an "integrated, end-to-end" CRDMO business.
The strong demand for orders will accelerate its sales revenue growth in 2021, and the revenue growth rate will nearly double year-on-year.

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In recent years, Boji Pharma has continued to improve the "one-stop" CRO service capability of the whole process of new drug research and development, and has successively invested in the construction of a drug evaluation center and a drug CDMO production base
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The "one-stop" service can expand the scale of preclinical and clinical research businesses, increase customer dependence and customer stickiness, and have positive significance for corporate development and innovative service models
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Retain technical talents and do a good job in enterprise management Talent team building includes not only the training of R&D personnel and technical personnel, but also the retention of talents, especially technical talents
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Technical talents are responsible for the front-line work of CRO, which is the core link of the high-end service capability output of enterprises, and directly determines the quality of project handover
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Only by continuously accumulating experience in front-line work can technicians effectively deal with various emergencies
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Experienced technicians ensure that the project can be delivered on time, the quality of the project is stable and the deviation is controllable
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Only when the project is done well can it win the trust of customers and increase customer retention.
As a service-oriented enterprise, a stable and retained customer source is the cornerstone and ultimate goal of the company's development
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The flow of talents reflects problems in enterprise management.
Retaining technical talents is a means, and the purpose is to do a good job in enterprise management
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The liquidity of the CRO platform will lead to many problems.
First, the continuous training of new employees will waste time and labor costs; second, the time and quality of project delivery cannot be guaranteed.
If things go on like this, corporate problems will eventually be exposed
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Taking talent retention as the assessment goal and doing a good job in enterprise management can enhance the flexibility of CRO services and achieve long-term stable growth
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Professional division of labor shapes brand power It needs to be emphasized here that professional division of labor ≠ high division of labor
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The operation mode of high division of labor (pipeline operation) is not directly related to the quality of clinical research, but leads to the lack of quality control in key links in some projects
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In addition, the division of labor is becoming more and more detailed, resulting in higher and higher communication costs, and the proportion of meaningless management costs continues to increase
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The clinical research plan is the most critical document in a project, which truly guarantees the quality of work.
The clinical research staff in each position need to be very familiar with the entire clinical research plan
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The management of clinical research should be based on the clinical research plan, and the specialized division of labor in clinical research should be based on disease types or indications, rather than procedures
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Many CROs are already doing this, for example, they have dedicated oncology teams
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Such division of labor is worth learning from.
Domestic CRO companies should take advantage of differentiated competition opportunities to establish their own brand power and go global
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Long-term investment to incubate original innovation Incubation of original innovation through long-term investment will become the future trend in the field of pharmaceutical investment
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The national "14th Five-Year Plan for the Development of the Pharmaceutical Industry" proposes to focus on promoting the innovation and transformation of the pharmaceutical industry
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Shen Nanpeng, founder of Sequoia China, said in an interview, "Pharmaceutical innovation must have a long-term investment mindset, and promote the transformation of the industry from following innovation to source innovation, guide innovative pharmaceutical companies to jump out of traditional inherent thinking, and break research and development constraints
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New targets/drugs will be given priority to clinical resources to jointly incubate original innovations
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” Due to the professionalism and participation of the CRO industry, it is more accurate to predict the success of the project, and then using its own funds to bet in advance, its benefits are better than getting together It is easier to compete with latecomers in the CRO space
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At one point, WuXi’s investment income accounted for two-thirds of the company’s revenue
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Tigermed invested 9.
8 billion yuan to participate in the industrial fund last year, which is equivalent to 5 years of accumulation based on its net profit of 1.
75 billion yuan in the previous year.

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Postscript The essence of the existence of CRO companies is to help pharmaceutical companies avoid detours, reduce R&D costs, and improve R&D efficiency and success rate
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In the process of transformation and upgrading, CRO companies should keep their own positioning in mind, build a corporate moat through innovative R&D and talent barriers, do a good job in corporate management, maintain a differentiated competitive advantage, and be an accelerator for new drug R&D in the pharmaceutical industry
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