If it weren't for the compulsion of life, who would want to sell their sons and daughters.
This year is the first year that China has become the birthplace of pharmaceutical innovation, and according to PharmaCube data, in 2023, the total value of China's innovative drug license out (domestic to foreign) transactions will exceed 35 billion US dollars, an increase of more than 27% over 2022. The underlying reasons are not only the ideal narrative of self-research and progress and innovation, but also the realistic tragedy of difficult investment and financing, and blood transfusion with BD down payment.
Some biotechs sell their core pipelines cleanly, and although they survive, they have to start all over again.
In 2024, the surging endogenous growth momentum of the pharmaceutical industry will encounter two cold realities.
The overseas capital winter is coming to an end, with CXO, XBI, and IBB soaring since November 1, while the IPO and refinancing blockage of domestic unprofitable innovative pharmaceutical companies has no end timetable. In the context of the scientific and technological struggle between major countries, this will damage the vitality of China's biotechnology for a long time.
Many people have not noticed that the income and expenditure of basic medical insurance on the official website of the Health Insurance Bureau will no longer publish year-on-year growth data from October. With the disappearance of the low base effect, medical insurance expenditure is expected to return to high single-digit growth in 2024 (2018 2022 medical insurance expenditure CAGR6%）。Of course, the state has done its best to maintain the growth rate of health expenses close to twice the GDP growth rate.
Under the conditions of tight balance in the investment, financing and payment environment, the battle for stock and structural increment will be more fierce, and 2024 will present an extremely differentiated situation, allowing us to quickly overlook the possibilities of the new year from cold to hot.
Less than 1 billion market capitalization
The number of Hong Kong-listed 18A companies with a market capitalization of less than HK$1 billion increased to 9, accounting for 17% of the biotech companies with the B logo. Referring to the 424 innovative pharmaceutical companies listed through the NASDAQ IPO from 2004 to 2018, the proportion of no longer existing has reached 47%, and 37% of the surviving companies have a market value of less than US$100 million.
After nearly half of the biotechs disappeared, the U.S. innovative drug industry is not finished, but stronger, so there is no need to be sentimental. In order to form a normal metabolic (exit) ecology of domestic biotechnology, it is necessary to expand the market value structure below HK$1 billion to lower the threshold for mergers and acquisitions and allow the pipeline to realize monetized flow.
There is no need to be pessimistic about biotechs below HK$1 billion, as long as the cash reserves are abundant, the pipeline has clinical value, and there is an opportunity to reinvent itself. Moreover, 1 billion Hong Kong dollars no longer constitutes a capital threshold for large domestic comprehensive pharmaceutical companies.
Wait calmly for the end
Kintor is calmly waiting for its own end.
Once 10 times in 5 months, it became the king of global pharmaceutical stocks, and even in the subsequent long journey, it was full of power, and there were about 10 single-day ** opportunities of more than 10%.
Compared with the highest point of 89 yuan, it has fallen by 98%.
How many mistakes can biotech make?Kintor Pharmaceutical has experienced 3 phase III clinical failures, proxalutamide has failed to rub the heat of the epidemic, and now even the basic disk of prostate cancer and hair loss has been lost. In 2023H1, the loss is 200 million yuan, the cash reserve is 700 million yuan, and the loan is 100 million yuan within one year or as required.
Is there still a miracle that changes one's life against the sky?
When the stock price of Kintor Pharmaceutical soared, it did not make a penny of income from the new crown epidemic, and the charm of the capital market is that painting cakes can satisfy hunger, and the money calculated is more valuable than the money in hand.
In the field of biotechnology, with the upgrading of the ability of a few bosses and the operation team behind them, it is now difficult to see through the pie. In a science that follows evidence, any high-end bureau will eventually be exposed, and the early clinical data will be irregular or watery, but the unblinding of phase III registration clinical trials will fly out of the black swan.
How hard is it to have a billion large single products?
2024 is the real commercial verification period for biotech, and we may find how difficult it is for a single product to cross the 1 billion threshold
With the tilt of the payment policy to innovative drugs, the sales peak of long-term and large varieties will be marginally improved, but before the qualitative change occurs, the ** model of 1 billion to 5 billion is too idealistic.
There have been red flags in the commercialization process of Biotech, and some star drugs that have been on the market for about 3 years have shown signs of stopping climbing. Zai Lab's core product, ZEJULA, a PARP inhibitor, just crossed the $1 billion mark in 2022, with sales falling by 3% quarter-on-quarter in Q3 20233%。Remegen's ADC drug vedicitumab was approved for marketing in June 2021, and it is far from the 1 billion mark, and the total sales of vedicitumab + tetanercept in the first three quarters of 2023 are 7700 million yuan, the price paid is 5400 million yuan in sales expenses.
Remegen is a confusing company with two IPOs, but the current cash can only last for half a year, with a loss of 10 in the first three quarters of 2023300 million yuan, monetary funds + transactional financial assets 7900 million yuan, autoimmune blockbuster drug tetanercept or ophthalmic blockbuster drug RC28 may have to seek external BD to supplement cash flow.
The biotech stall in the middle and waist is too large, and once the hematopoietic capacity does not keep up with the consumption, the possibility of a class fall cannot be ruled out.
Defensive assets
In 2024, traditional pharmaceutical companies will go big**.
Strong commercial liquidity and abundant cash flow are the basic plates, and some traditional pharmaceutical companies have evolved in essence, and have learned almost the ways and routines of biotech, and are increasingly mature in pipeline project approval and BD capabilities.
There are three main innovation models for traditional pharmaceutical companies.
First, represented by BAHEAL Pharmaceutical and CMS, based on the deep insight into the terminal medical scene, the front-end pipeline project was established under the guidance of commercial genes. BAHEAL Pharmaceutical Group assumes the role of an industrial investor and incubator, and has a wide range of innovative drugs, high-end medical devices, and basic research platforms, cultivating and maturing innovative products, giving priority to the delivery of one to listed companies, which are basically isolated from innovation risks and obtain long-term growth momentum from the continuous injection of innovative products.
The second is represented by Hengrui Pharmaceutical, which has a full layout of all high-prosperity tracks of innovative drugs, including ADC, GLP-1, autoimmunity, Alzheimer's disease, and gout, and the progress is leading.
The third is to form a stable structure of innovative drugs (GLP-1, ADC), medical cosmetology (full product line), and industrial microorganisms, represented by Huadong Medicine.
Blood products rely on resource endowments and rigid demand attributes, and the faucet is not only a leader, but also an oligopoly, and will become a defensive asset across the cycle.
There will be strong market demand for first-class generics and biosimilars that focus on parity substitution and sinking markets. The performance growth rate of the sector represented by generic drugs has stabilized, and the profit scale is expected to reach the highest point since centralized procurement in 2023. The performance growth rate of Baicheng Pharmaceutical, Sunshine Nuohe, the leading generic CRO companies, and the abundant orders in hand also verify the logic of stable profitability of generic drug companies and not affected by the investment and financing environment. Some generic drug companies are upgrading to generic drugs, holding large single products of innovative drugs, and further increasing their ability to resist risks.
ADC continues to be the hottest
The hottest innovative drugs in 2023 belong to ADC" has analyzed that some ADC products of Chinese companies already have BIC advantages.
Now we have all seen that the ADC assets that have entered the top three in the world in China have been almost snatched up by MNC.
According to InscienceWeTrust Bioadvisor, in the past two years, all MNCs in oncology except Roche have completed ADC introduction transactions. China Biotech became the world's leading early-stage ADC asset**, with total down payments in 2023 for China Biotech ADC out-licensing deals five times higher than in 2022 (US$5.7 billion vs. US$1.2 billion).
Dr. Jun Tang, founder of InscienceWeTrust Bioadvisory, expects ADCs to continue to be the hottest field in oncology in 2024 and beyond.
The new EGFR ADC drug MRG003 has been granted fast-track status by the FDA for advanced or metastatic nasopharyngeal cancer, and the new TF-targeted ADC drug MRG004A for **pancreatic cancer has been granted orphan drug designation by the FDA.
The head pattern is preliminary
In 2015, China entered the first year of innovative drugs, and after 10 years of fog and scuffle, the heads of various subdivisions are becoming clear.
The new generation of innovative pharmaceutical companies has shown a pattern of two giants. BeiGene's innovative drug revenue in 2024 will surpass that of Hengrui Pharmaceutical, and if it can balance R&D and finance, its market value is expected to surpass that of Hengrui Pharmaceutical. Innovent Biologics has demonstrated superior clinical development efficiency, and its marketing authorization application was accepted first in the domestic KRAS G12C new drug competition stalemate. Innovent may be one of the fastest in China to enroll patients, and during the Phase III patient recruitment period, CRAs (clinical monitors) may be on business trips seven days a week, working in the hospital until 12 o'clock every day. Headhunters come to dig up these CRAs, and the CRAs who have gone out can get a referral fee of $3,000 for each CRA that they introduce to a project team and successfully join them.
On December 26, Innovent Biologics launched a phase III clinical trial of GLP-1 dual-target ** drug Masdutide to challenge semaglutide head-to-head.
There are a number of high-prosperity tracks for innovative drugs, and only a few of them are analyzed below, and the comprehensive pharmaceutical companies with a wide layout will not be repeated.
The leaders in the field of hematological tumors are InnoCare and Ascentage Pharma, which are characterized by a large number of existing patients, long survival, and a long sales ramp-up period of drugs, which is easy to give birth to explosive models.
The head of the nephrology field is Genting Xinyao and SanReno Pharmaceutical, which is characterized by a large patient base and most of them are under the age of 35, and there is an urgent need to avoid kidney failure.
The head of the autoimmune field is Kangnuoya, Akeso, Sunshine Guojian, InnoCare, Zai Lab, Zelgen Pharmaceutical, Quanxin Biologics, the characteristics of this track are that there is a comorbidity rate between autoimmune diseases, and an innovative drug can even ** about 10 indications, once the first indication is approved, it may become a cluster bomb, and in 2024, the first domestic interleukin family and the first domestic new JAK inhibitor drug will be approved for marketing.
In the field of Alzheimer's disease, there is a gap in expectations, and the layout of domestic drugs is weak, and the commercial value of clinical diagnosis may be higher. In a recent article of Science**, it was mentioned that in order to ensure the safety of Alzheimer's disease, the cost of the whole process of examination is 3 times the cost of medicine. The gold standard for Alzheimer's disease detection is PET CT brain scintigraphy or cerebrospinal fluid detection, but cerebrospinal fluid detection requires puncture, and low-invasive PET CT brain scintigraphy will become the mainstream. Blood biomarker testing is the latest trend, which is less invasive, less costly, and more accessible, combining three blood markers, amyloid plaque, tau pathology, and nerve damage, to identify and evaluate the biological changes associated with Alzheimer's disease. Yahuilong, Nuovezan, Hotgen Biotech, Jinyu Medical and Dian Diagnostics are laying out the AD blood testing reagent and diagnostic service market. In 2024H1, the approval of Eli Lilly's targeted A monoclonal antibody donanemab will be a catalyst for the track.
Pharmaceutical biology is about to surpass banks and become the largest in the market value of the A-share industry, with a complex and changeable reality, the coexistence of extreme cold and heat, and the symbiosis of risks and opportunities, and 2024 will be an important node.