Innovative medicine in China: A choice between two paths

Two modes

The growth path of Chinese pharmaceutical enterprises can often be summarized into two types:

For regular biotech, the path is license in + CRO + VC.

This model was pioneered by Zai Ding Medicine - not directly from the laboratory source to find innovative drug products, but to buy outside. With the help of capital, Re Ding used the license in model to quickly introduce the early pipeline, and then used the large-scale patient group and mature CRO companies in China to rapidly promote clinical and commercialization, and then negotiated into medical insurance.

After Tripod medicine, this model to play to the extreme, is OKvision and Genting Xinyao. Within two or three years of their establishment, they were quickly listed on the Hong Kong Stock Exchange.

The follow-up development of this kind of biotech is not difficult to imagine: the high probability is to "sell" to a large drug company, and the best of them will have the opportunity to be promoted to biopharma.

For companies known to the outside world as "generic drugs", the path is different: at the time of innovation, they still insist on doing generic drug preparations, and will choose to focus on one or two large products, with the power of "explosive" curves.

Huiyu Pharmaceutical, Qilu Pharmaceutical is the same. In the "4+7" urban volume procurement pilot in 2018, Huiyu Pharmaceutical's pemetrexed disodium for injection won the bid, thus entering the fast track of development.

And Qilu Pharmaceutical's Ankeda is also a big hit. After entering the medical insurance in 2017, it took just over a year for Ankeda to enter the top ten drug lists in the hundred bed compound, and its sales reached 1.8 billion yuan in 2020.

Do innovative drugs and do generic drug companies, because of the different growth soil, each has its advantages and disadvantages.

A large amount of capital poured into the field of innovative drugs, capital is often impatient, the pursuit of short speed, the license in the price of crazy grab, but the bubble is obvious. Who will clean up the mess after the Great Leap Forward? After the vicious competition will there be a chicken? This will be a problem for many biotech and VC companies for the foreseeable future.

By contrast, doing generic drugs is a solid thing, with a solid "chassis." Low trial and error cost; In the context of collective mining, commercial realization is easy.

In fact, starting from generic drugs has always been a good way to go, most pharmaceutical companies such as Hengrui, Tianqing are also so. The supply-side reform in 2015, not only changed innovative drugs, the addition of ICH and generic drug consistency evaluation are good for the generic drug industry in all dimensions, the quality has come up, but also better go out, there is an improvement in industry concentration.

On the other hand, there has been no patent cliff phenomenon in China for a long time, but the payment side reform led by the Medical Insurance Bureau has introduced a government-led market-oriented competition in a collective way, accelerating the overdue "patent cliff", so that many drugs in China also have a great space for generic drug replacement, and the market ceiling has a qualitative improvement.

Only in the past two years, because of the expectations of collection, compared with innovative drugs, the generic drug industry has been shrouded in a "price reduction" expectation, funds dare not invest, companies are also very careful layout, and the valuation of generic drugs is significantly lower than that of innovative drug companies.

But is there necessarily a clear and unbridgeable line between innovative and generic drugs?

Use imitation to foster creation

On October 26, 2021, Huiyu Pharmaceutical, a cancer drug company that exploded in the first batch of collective mining, officially landed on the science and Technology innovation board, and in this "large generic drug" that everyone thinks, its prospectus disclosed some details of transformation and innovation:

The company's innovative drug team has nearly 100 people, and is still growing at a high speed, including 41 master, 19 doctor, 8 overseas returnees, master and doctoral ratio of more than 60%, and the leader graduated from Cambridge, Harvard, Peking University and other world-renowned institutions.

Huiyu Pharmaceutical, founded in 2010, has been quietly doing innovative drugs, in addition to the above mentioned, but also from overseas industry to dig a lot of cattle, such as SNTA in the United States responsible for a FIC innovative drug team management and drug development senior director Chen Shoujun, and Eli Lilly's chief scientist and senior research consultant Wei Tao.

Unlike many companies that rely on financing to survive, Huiyu's continued investment in innovative drug research and development comes from the success of its generic drugs.

From 2018 to 2020, Huiyu Pharmaceutical's operating income was 54 million yuan, 707 million yuan and 1.364 billion yuan, respectively. In 2020 alone, Huiyu Pharmaceutical's net profit exceeded 340 million yuan. It is reported that when it was not profitable, Huiyu Pharmaceutical invested a large part of its income into innovative drug research and development. This is especially true after profits are made.