Report Producer:China Securities Construction Investment
The following is an excerpt from the original report.
1. The logic of vaccine companies going overseas has emerged, and blockbuster products are expected to continue to increase in volume.
1.1. Fierce domestic competition + broad overseas market space, and the logic of vaccine companies going overseas has emerged.
There are a large number of domestic vaccine companies, and the pipelines tend to be homogeneous.
China's vaccine market is developing rapidly, and the number of vaccine companies is growing rapidly. China's vaccine market has shown a rapid development trend in recent years. According to Frost & Sullivan's estimates, the size of China's vaccine market will reach 125.1 billion yuan in 2022 and is expected to reach nearly 383.5 billion yuan in 2031, with a compound growth rate of 133%。At the same time, with the continuous development of vaccine-related technological innovation and policy support for innovative vaccine R&D, more companies are investing in vaccine-related R&D and production. In addition, the capital market is enthusiastic about investing in the vaccine industry, the number of listed vaccine companies continues to grow, and the financing of companies in the primary market is active.
The seedling market has further shrunk, and the product pipeline of the second type of seedling tends to be homogeneous.
The penetration rate of first-class seedlings has reached a high level, and the short-term development of the market is relatively stable. In the past, the main products in the vaccine market were various immunization program vaccines, and the main vaccination population was infants and young children. In recent years, with the high penetration rate of immunization program vaccines, the number of newborns has continued to decline in recent years, and the birth rate has further declined, it is expected that the development of the first-class vaccine market will remain stable in the future.
The product pipeline tends to be homogeneous, and the popular varieties are pushed. With the gradual shrinking of the first-class vaccine market, all vaccine companies are focusing on the layout of first-class vaccines, and their development paths basically follow the marketed products or pipelines under development of large overseas vaccine companies, and the pipeline layout tends to be homogeneous. Popular varieties such as cervical cancer vaccine and pneumococcal conjugate vaccine have been laid out by many companies. As China's first-class vaccine market is still in the development stage, the awareness of population vaccination is still low, and a lot of market education is still needed, and it is difficult to improve the market scale in the short term, and the future market competition pattern is expected to become fierce.
There is a shortage of vaccine supply in overseas markets, and the self-sufficiency rate in some areas is low.
There is a global shortage of vaccines** and the market is in poor health. According to the "2022 Global Vaccine Market Report" released by the WHO, there are supply risks for a variety of vaccines worldwide, mainly due to the low number of vaccine manufacturers, the low variety of vaccines that have passed the WHO PQ certification or EUL, the high concentration of **, the relatively new products (relatively insufficient supply in the short term) or very mature (low production willingness of manufacturers), etc. For these vaccine varieties, more manufacturers need to be involved** globally to alleviate the shortage in the vaccine market**.
A number of vaccines have been included in multi-country immunization programmes. By the end of 2022, 163 of the WHO's 194 Member States had included pneumonia conjugate vaccine (PCV) in their national immunization programmes; 127 Member States have included HPV vaccine in their national immunization programmes, including 14 countries that have newly introduced the vaccine. Due to the relatively small number of manufacturers of PCV and HPV vaccines, the inclusion of PCV and HPV vaccine manufacturers in immunization programmes in many countries will bring a relative imbalance between supply and demand, and more suppliers will need to participate.
The vaccine self-sufficiency rate in some areas is low, and many countries** are willing to build local vaccine production capacity. The global vaccine market is unevenly distributed regionally between supply and demand, with some regions supplying vaccines almost exclusively from manufacturers headquartered outside the region, which can cause serious public health concerns in the event of an emergency. Looking at 2022, 99% of vaccine products in Africa and 94% of vaccine products in the Eastern Mediterranean region were produced by manufacturers based in other regions**. In contrast, Southeast Asia and the Western Pacific region have the highest proportion of vaccines from the same region, at 79% and 78%, respectively, due to the relatively large number of merchants. Therefore, many places around the world hope to achieve vaccine self-sufficiency by building local vaccine production capacity.
The global new crown epidemic has further promoted the R&D and production capacity of vaccine companies in developing countries, and Chinese vaccine companies represented by China Biotech and Sinovac Biotech have also occupied a place in the international market. With the further improvement of the R&D and production capacity of these vaccine companies, European and American manufacturers will face greater challenges in the future.
During the epidemic, exports were mainly new crown vaccines, and the follow-up mainly relied on conventional vaccines. During the new crown epidemic, domestic vaccine companies have achieved a breakthrough in vaccine going overseas with the help of new crown vaccines, and the export volume and value of human vaccines have increased significantly in 2021. Since 2022, as the global demand for new crown vaccines has become saturated, the volume and value of vaccine exports have dropped significantly, and subsequent exports mainly rely on conventional vaccines.
1.2. The way of international entry is diversified, and the export of products to the sea is expected to accelerate in the future.
The international entry method is diversified and can be differentiated. The process of an enterprise entering the international market is the process of implementing the international business strategy of the enterprise that penetrates its own resources, such as technology, capital, brand or management experience, into the host country or region through a variety of investment methods. The mode of enterprises entering the international market can be divided into three categories: 1) ** type entry mode: direct export or indirect export of the enterprise's own products; 2) Contract-based entry model, including a variety of subdivision models, the biggest advantage is that only intangible assets are authorized, and there is almost no additional investment; 3) Equity entry mode, in which the biggest advantage of the joint venture is that it can break through some of the best investment barriers and at the same time form complementary advantages with the joint venture party; Brownfield and greenfield investments have their own advantages and disadvantages. On the whole, the company's international entry method needs to be analyzed and selected according to the company's business advantages, market conditions and policy conditions.
PQ certification can help to quickly open the international market, and the number of domestic enterprise certifications is small.
PQ certification can help domestic enterprises quickly open the international market and improve the level of enterprise production system. WHO PQ (WHO Prequalification) accreditation, which is the full name of the World Health Organization's commercial prequalification, was opened in 2001 and aims to expand the access to priority drugs, ensure the efficacy and safety of internationally procured drugs, and serve patients in developing countries. The advantages of participating in PQ certification are: 1) becoming a leading UN procurer; 2) After a one-time review by WHO, it can be listed in multiple developing countries to improve the efficiency of listing; 3) Participate in PQ pre-certification to get the assistance of expert consultants to quickly improve the enterprise system to the international level.
The PQ certification process is long and needs to be modified according to the requirements. The WHO PQ process is mainly divided into: 1) review of application materials; 2) the vaccine samples were sent to two WHO laboratories for testing; 3) WHO's ** and experts conduct on-site inspections of production plants. The overall process time is about 12 months (excluding the time for the manufacturer to take corresponding actions according to the requirements), and the manufacturer needs to transform the production line according to the requirements of the WHO, and the overall time and cost need to be invested.
The number of PQ certifications for Chinese vaccine companies is relatively small. Up to now, a total of 11 vaccines from 7 companies in China have obtained WHO PQ certification, and the overall progress is relatively slow, mainly because: 1) The premise of WHO PQ certification is that China's vaccine regulatory system must be recognized by it, and China only passed the evaluation for the first time in 2011. 2) During the new crown epidemic, the focus of vaccine companies has shifted to the new crown vaccine, which has slowed down the internationalization process to a certain extent. 3) In order to meet the requirements of WHO PQ, enterprises need to carry out project rectification and equipment transformation of their own production lines, which requires a certain amount of time and investment.
International procurement is an important battlefield, and the planning cycle is long.
International procurement is an important battlefield, and the share of overseas giants is relatively concentrated. In the non-COVID market, four major players (Merck, GlaxoSmithKline, Sanofi, Pfizer) occupied.
In the revenue structure of overseas vaccine giants, the contract value of the United Nations Children's Association (UNICEF) can reach an average of 300 million to 500 million US dollars per year, accounting for about 5%-10%, and the proportion of serum in India is as high as 30%-60%. Entering the G**i market is conducive to the long-term participation of enterprises in the market access of G**i's "graduated" countries, as well as paving the way for the company's subsequent pipeline products in these countries.
The characteristics of the vaccine industry and the procurement rules of the international market dictate a long planning cycle. To participate in and influence the G**i's vaccine investment strategy (VIS) in advance, companies need to communicate with the WHO and G**i about the status of their pipeline at least 7-8 years in advance. The 2025-2030 VIS window of opportunity is in 2023, and companies that miss the early communication window will fall into a more passive situation in 2025-2026.
Single country access has unique advantages, and the choice of ** enterprises has become the mainstream.
The access of a single country can provide a better level of excellence and improve the profitability of the company's overseas business. Because vaccine companies after passing the WHO PQ need to provide lower vaccine products to international organizations, combined with the relevant investment in the early stage of passing the PQ, they cannot provide considerable performance and profit contribution to the enterprise in the short term. In contrast, through negotiations with a single country, the product can be listed after the review of the local drug regulatory department, so as to enter the ** procurement market or private market, which can provide more objective products and volume, which can improve the profitability after going to sea, and has become the main product export method chosen by vaccine companies.
Individual country access needs to understand the country's access requirements, and choose the best enterprise to become the mainstream. Due to the different drug review processes and related R&D, production and marketing of vaccines in different countries, it is necessary to have an in-depth understanding of the drug review system of the target country. At present, domestic vaccine companies mainly cooperate with local pharmaceutical companies, authorizing partners to promote the import, distribution, sales and drug substance of export products in the local area**.
Vaccines go overseas from the export of finished products to the upstream and downstream of the value chain. With the continuous advancement of vaccine companies' overseas business, the overseas action is also accelerating and deepening in the upstream and downstream of the value chain.
From a single bilateral registration of finished products for export to the transfer of filling technology, overseas factory construction and commercial production, overseas clinical trials, overseas cooperative research and development or authorization of early varieties, etc., the whole chain has gradually transitioned from downstream to upstream and downstream, and some enterprises have carried out cooperation with overseas partners in the whole industry chain.
The export of products to the sea is expected to accelerate in the future, and the internationalization model tends to be diversified. Limited by PQ certification and policy restrictions, the internationalization strategy of Chinese enterprises is mainly based on the export of finished vaccines, and the export amount and quantity are relatively small. With the accumulation of rich international experience and resources during the new crown epidemic, the importance of internationalization has increased, and the WHO announced in August 2022 that China has passed the evaluation of the National Regulatory System (NRA) for vaccines with upgraded standards, China's vaccine system is further in line with international standards, and the export of products to overseas is expected to accelerate in the future. And in the future, the internationalization model will tend to be diversified, from finished products to localized production, such as Walvax Biotech in Morocco, Indonesia and other countries will first carry out finished product cooperation, and at the same time start technology transfer, after completing the technology transfer and meeting the conditions for semi-finished product cooperation, transition to semi-finished product cooperation and localized production, in order to adapt to the local national development strategy.
2. The Stone of Other Mountains - the internationalization strategy of vaccine giants.
Vaccine giants have strong international expansion capabilities and rich expansion experience. Compared with Chinese companies, international vaccine giants such as Pfizer, Sanofi Pasteur, GlaxoSmithKline and Merck have achieved country coverage with multiple demographics and consumption environments, and have rich and diversified experience in international promotion. On the whole, the overseas market of vaccine giants is one of the important revenues of the vaccine sector, and each company has carried out cooperation with international organizations. In the Chinese market, different enterprises have different ways of market development, and cooperation with domestic enterprises has become one of the ways adopted by many enterprises.
GSK: Overseas revenue remained stable, and overseas revenue from blistering and influenza vaccines increased.
International pharmaceutical companies covering a number of ** fields have continued to grow strongly. GlaxoSmithKline (GSK) is an international pharmaceutical, biological and health care company headquartered in London, UK, covering the fields of anti-infection, central nervous system, respiratory, gastrointestinal metabolism, oncology and vaccines. In 2022, the company achieved revenue of 293£2.4 billion, up 19% year-on-year. According to the performance forecast, the company's overall revenue in 2023 is expected to increase by 12% and 13% year-on-year at constant exchange rates.
Revenues outside Europe and the United States accounted for more than 20%, which has remained stable in recent years. From the perspective of GSK revenue structure, the company's main revenue is currently in the US market, accounting for more than 50% since 2019, and in the remaining markets, the market share of the European market and other regions is close, and the revenue of other regions outside Europe and the United States has maintained more than 20% in recent years. Income from other regions increased from 16 in 2017£9.1 billion to £18 in 2022£1 billion at a CAGR of 14%, the growth rate remained stable.
The year-over-year decline in revenue from other regions in 2022 was mainly due to the high base of vaccine-related revenue in 2021.
The revenue of traditional vaccines outside Europe and the United States is relatively high, and the overseas revenue of herpes zoster vaccine and influenza vaccine is on the rise. In terms of categories, traditional vaccines (including diphtheria, tetanus, and vaccines, hepatitis vaccines, MMR-varicella vaccines, rotavirus vaccines, pneumococcal polysaccharide vaccines, bivalent cervical cancer vaccines, etc.) accounted for the highest proportion of revenue from other regions outside Europe and the United States, accounting for 66 percent of revenue in 20227%。Since 2020, the revenue of traditional vaccines in other regions has declined year-on-year, mainly due to the global new crown epidemic and the impact of new crown vaccination on routine vaccination. The revenue of other varieties from other regions outside Europe and the United States is relatively low, and the revenue of herpes zoster vaccine and influenza vaccine from other regions has shown an increasing trend in recent years, reflecting the strong demand for vaccination worldwide.
GSK: Signed a ** agreement with Zhifei Biotech to promote the domestic sales of herpes zoster vaccine.
China: Streamlining the vaccine team to focus on innovative drugs and vaccines. GSK entered the Chinese market in 1992 and currently has 2-valent HPV vaccine, recombinant herpes zoster vaccine and other products in China. Under the pressure of reducing costs and increasing efficiency, GSK began to streamline its domestic vaccine team, merging the HPV vaccine and herpes zoster vaccine product lines and sales teams in China at the end of 2021, while laying off some employees and senior management. After divesting its consumer healthcare business in 2022, GSK began to focus on innovative drugs and vaccines.
Signed a ** agreement with Zhifei Biotech to promote the domestic sales of herpes zoster vaccine. GSK's shingles vaccine, Shingrix, was officially launched in China at the end of June 2020, with domestic sales of 600 million yuan in 2021 and a year-on-year revenue growth of more than 100% in 2022. With the launch of domestic herpes zoster vaccine and the gradual increase in volume, the company's products are facing competitive pressure. In October 2023, GSK announced a collaboration with Zhifei Biotech for its shingrix vaccine, including marketing, promotion, import and distribution activities in Chinese mainland. With the help of Zhifei's sales system, it is expected that GSK herpes zoster vaccine will be further increased in China. In addition, Zhifei has also become the exclusive partner for the co-development and commercialization of GSK respiratory syncytial virus (RSV) vaccine for the elderly.
GSK: Localized production in India with a rich layout of vaccine products.
Indian market: from export products to local production, the layout of vaccine products is abundant. GSK's presence in India can be traced back to 1924 when it was established as a wholly-owned subsidiary. Initially, the company only did export business in India, but after India restricted the import of vaccines in 1955, the company set up a factory in India in 1958, and continued to expand the market and production scale through the acquisition of similar companies. Today, GSK has more than 30 production facilities in India, and India has become a major source of GSK's revenue and profits. In terms of vaccines, the company has 10 vaccine products for infants, adolescents and ** in India.
Establish a complete ** chain locally and use its own team to sell. In terms of chains, as of 2023, the company has 26 warehouses and 6,000 merchants in India. GSK has clear requirements for the selection and compliance of the first business provider, and includes a third-party supervisory agency to strengthen risk control. The company also participates in cross-industry forums such as the Pharmaceutical Manufacturers of India (OPPI) and the Pharmaceutical Ingredients Convention (CPHI) to improve the sustainability of the **chain. In terms of sales, the company adopts its own team sales and trains the team of medical representatives.
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