Since the introduction of the "18A" policy, a large number of biotechnology companies have poured into Hong Kong. From the perspective of R&D mode, there are mainly independent R&D mode, licensing introduction model (license-in) and VIC model (VC+IP+CRO).
Among them, the development process of the authorized introduction model in recent years is worth paying attention to, which has gradually turned cold from the explosion in the early years, and the once sought after has become disliked today.
It is worth noting that judging from the latest economic outlook expectations released by the Federal Reserve a few days ago,The Fed is likely to cut interest rates three times next year. Under the interest rate cut, the biotech sector, which is highly dependent on capital flow, is expected to usher in a significant liquidity improvement, and what will happen to the disliked license-in companies?
Let's start with Zai Lab
License-in is a product introduction method, which means that the "product introducer" pays a certain down payment to the "product licensor", and agrees on subsequent milestone fees (according to the progress of product development) and future sales commissions, so as to obtain the commercialization rights of the product in certain countries (regions).
As we all know, new drug research and development is a high-risk project that burns extremely "money". With the same resources, the license-in model can help pharmaceutical companies enrich their product pipelines, reduce costs and risks, and quickly enter the market.
In the early days, the R&D and innovation capabilities of Chinese pharmaceutical companies were relatively poor, and the R&D funds were not sufficientThis model was once regarded as the most suitable industrial model for the development of innovative drugs in China.
On the rise of the license-in model, Zai Lab (09688HK) has perfectly grasped the opportunity and risen rapidly, and was once regarded as the best "spokesperson" for the license-in model.
In 2016, Zai Lab acquired the rights to niraparib from tesaro and acquired the rights to the product in Chinese mainland, Hong Kong and Macau.
It is understood that standing at the time node in 2016, niraparib is actually a product close to maturity, and the phase 3 clinical trial data announced that year is quite good.
Sure enough, the drug was approved by the US FDA the following year.
With this foundation in place, it is only a matter of time before niraparib is approved for marketing in China. In fact, at the end of 2018, this drug was launched in China.
In addition to Tesaro, Zai Lab has partnered with Sanofi, Bristol-Myers Squibb, GlaxoSmithKline (GSKUS) and other international giants have cooperated to introduce products, which has further opened up the imagination space of market valueThe share price of its U.S. stock has skyrocketed in those years, becoming ten times larger**.
Founded in 2014, Zai Lab has built a pipeline of mid- to late-stage clinical products in just a few years, and has been successful in the capital markets, as if the "Double Ten Law" for new drug development did not exist.
Although license-in has many advantages and can avoid many risks, not all enterprises can use it well. In simple terms,This model has very high requirements for the comprehensive ability of the introducer, including the understanding of the industry, the ability to screen products, the ability to connect product resources, the financial strength, the team's R&D operation ability, etc.
However, in the face of huge interests, there are conditions to be on it, and there are no conditions to create conditions, the license-in model is getting hotter and hotter, and it is slowly being "broken", and the product pipeline with good potential prospects is coaxed, and those who can't grab it retreat to the second, and slowly "pseudo-innovation" has become a new synonym for the license-in model.
The most typical thing is to take a "shell", introduce a few products into the company, and then go public to make money, which is called"Accumulation" type IPO,It's like telling investors, "I'm just cutting leeks while it's hot."
In the early days, innovative pharmaceutical companies generally had a relatively "bleak" life, and losses were common, and under the "18A" policy, Hong Kong ** market has become the most suitable listing location. Although many "game-saving" IPOs have failed, over the years, there are still some relatively outstanding license-in innovative pharmaceutical companies in the biotechnology sector of the Hong Kong market.
How are the license-in innovative pharmaceutical companies performing in Hong Kong?
Many pharmaceutical companies listed in Hong Kong have imported products, and BeiGene (06160HK), Innovent Biologics and other innovative drug leaders are also introduced, but Zai Lab, Genting Xinyao-B (01952HK), CANbridge-B, Antengene-B and other companies rely heavily on the license-in model.
As shown in the figure below, the above companies already have commercial products, which is a relatively advantageous point among many biotechnology companies in Hong Kong stocks, after all, there are still a large number of listed pharmaceutical companies that are still in the clinical stage and do not even have a commercial product.
And the problem is,All of the commercial products of these companies are licensed and introduced. Zai Lab is quite typical, with many commercial products, none of which are developed in-house.
Due to the license-in model, Zai Lab often only owns the rights and interests of the drug in Greater China, and some even only have the rights and interests in a certain region, and a portion of the commercialization revenue is also shared with the licensors. In addition, from the perspective of the indications of the introduced drugs, there are not a few "large indications" that have been approved with a particularly broad market space.
The result isThe products have been introduced, which look good on paper, but the market space for these products is relatively limited, so it is reflected in the performance, and the performance is actually not so bright.
The data shows thatThese companies, even though they have commercial products, have been losing money over the years(Note: Zai Lab data is based on US$1 = 7.)1CNY exchange rate has been converted).
In addition, the strong interest rate hikes in the United States in the past two years have led to tight market liquidity, and biotechnology stocks have ushered in a continuous **, and these pharmaceutical companies with high dependence on the license-in model have also suffered a "knee cut".
Among them,Zai Lab and Genting Xinyao, known as the leaders of the license-in model, have fallen since mid-2021. 37%。
Overall, the stock price performance of Hong Kong-listed innovative pharmaceutical companies in the past two years has been quite weak, and even though pharmaceutical companies that have adopted the license-in model have commercial products, their valuations have not been overvalued, and their stock prices have fallen much less than those of their peers that have not achieved commercialization.
There is no future for the license-in model
Nowadays, there are some people who think that the license-in mode has been "broken" and has no future.
Definitely!The data shows that the amount of license-in projects has decreased significantly compared with a few years ago, but there are significantly more license-out projects.
In fact, some traditional pharmaceutical companies such as Hengrui Pharmaceutical and Qilu Pharmaceutical have also applied this model over the years and have authorized the introduction of some product pipelines, in addition to BeiGene, Innovent Biologics and other innovative drug leaders actually have some authorized products.
It can be seen that the license-in model has still won the favor of some large pharmaceutical companies after a significant "cooling".
At the same time, license-in pharmaceutical companies such as Zai Lab and Genting Xinyao are also gradually transforming, striving for a two-legged approach of "license-in + self-development".
In the final analysis, license-in is only a model in the field of new drug research and development, and what results can be achieved in the end depends on the choice of pharmaceutical companies themselves.
Author: Yan XIV.