Life science industry chain and pharmaceutical equipment: the highlight track of the next decade

1. The upstream of the "life science industry chain" mainly includes biochemical reagents, equipment and consumables

1) Biochemical reagents: chemical reagents due to low technical and production barriers, domestic products have price advantages, and import substitution has been basically realized; The biological reagent department started late in China, and the current domestic imported products account for about 80% of the market. With the further optimization of product quality and further enrichment of types, domestic substitution is accelerating related companies such as Novizan, Bypsyth, Yiqiao Shenzhou and Feipeng Bio-matter.

2) Equipment: most of them belong to sophisticated equipment, at present, the basic use of imported products in China, but there are many excellent manufacturers, are making breakthroughs in related technologies and complete machine production, the future is expected to occupy a place, the relevant companies are Suzhou microflow nano, Dongfulong and Chutian Technology

3) Materials and consumables: low-value laboratory consumables have basically achieved domestic self-sufficiency, and some core materials such as nano-microspheres have also begun to be replaced by domestic, related companies have Nano Technology.

Policy support drives the rapid development of industry norms. Since 2016, the national level has included the construction of scientific research conditions to strengthen large-scale scientific instruments and equipment, laboratory animals, scientific research reagents, and innovative methods to ensure research and development into the 13th Five-Year National Innovation Plan, and then issued relevant opinions or plans every year to strengthen basic scientific research construction. This shows that the government attaches great importance to scientific research investment, and China is striving to become a world-class scientific research level.

China is investing in life sciences at a CAGR well above the global average. In 2020, the global life science research investment is 160.1 billion US dollars, and China's life science investment is 94.8 billion yuan, accounting for about 9.2% of the total global investment, which is still a big gap compared with developed countries in Europe and the United States. From the perspective of growth, the five-year CAGR of China's life science research funds (2016-2021) is 16.32%, and the five-year CAGR of the world is 6.27% in the same period. The growth rate of China's capital investment far exceeds the global average, reflecting that China's life science field is in a period of rapid growth. In the future, driven by the active encouragement of basic research by national policies and the continuous empowerment of capital, we believe that capital investment is still expected to maintain a growth rate of 10%+.

At the same time as the accumulation of biological innovation technology in the world, it also opens up the market space of the upstream industry chain of life sciences, and domestic enterprises are expected to create demand from the supply side through high-quality development in the fields of scientific research instruments, life science polymer consumables, biological reagents, and realize domestic substitution and globalization by relying on the response ability and cost advantage of Chinese manufacturing. Open the golden decade of domestic life science industry chain. The specific track mainly includes life science polymer consumables, biomedical upstream production equipment, biological reagents and so on. The high-end instrument industry is expected to accelerate the realization of domestic substitution under the strong support of national policies and realize the autonomy and control of the life science industry chain.

2, the development of biological reagents is in the ascendant, the sword refers to the star

According to the user type of biological research reagents, it can be divided into two categories: industrial users and scientific research institution users. Industrial users generally use biological research reagents for product testing or research and development; Scientific research institutions generally use biological research reagents for teaching or scientific project research, and have high requirements for the detection efficiency, accuracy and quality standards of biological research reagents. In 2019, calculated by the investment capital of biological scientific research reagents, the proportion of users in scientific research institutions in China is 72.4%, and the proportion of industrial users is 27.6%. According to the category of biological scientific research reagents, it can be divided into three categories: molecular, protein and cell, and the market size of the three is about 5:3:2.

It is expected that in 2023, China's biological research reagents can reach 26 billion yuan, and the high-end biological reagents are still mainly imported, and the domestic enterprises are more dispersed due to the small scale competition pattern. Biological reagents are currently dominated by foreign enterprises, domestic enterprises started late, weak technology and brand, small market share, lack of scale benefits, and customers are widely distributed and dispersed, the average order volume is small, it is difficult to achieve batch production and circulation of products.

The vigorous development of the life science field has brought vitality to the biological research reagent market. The increase in funding for life science research has provided a good support for the development of the biological reagent industry, which accounts for about 10-15% of the total capital investment in the life science field. Compared with the world, the development of biological scientific research reagents in China is relatively late, but it has maintained a rapid growth trend in recent years, with a CAGR of 17.1% from 2015 to 2019, which is much higher than the global 8.1% in the same period.

Technological progress drives the demand for biological reagents. Since the 1960s, there have been flow cytometry, enzyme-linked immunosorbent assay, Western blot, enzyme-linked immunodot method and other technologies. The maturity of these experimental technologies and methodologies has generated a large number of needs for supporting biological reagents. With the advent of the second generation of high-throughput sequencing technology in 2000, the corresponding high-throughput sequencing library reagents began to appear in large demand. In recent years, with the application of CRISPR technology, Cas9 nuclease kits have begun to be launched. In the future, with the continuous development of new technologies in the field of life sciences, the corresponding demand for biological reagents will continue to expand, and the market size of biological reagents will continue to expand.

According to Sullivan data, the application scenarios of molecular biological reagents are rich, and the market size is expected to exceed 10 billion in 2024. Molecular biological reagents mainly refer to the types of reagents needed in the experiments of nucleic acids and small molecules, among which various molecular biological enzymes are mainly, such as PCR/qPCR series, reverse transcriptase, endonuclease, modification enzymes, cloning point mutations, etc. Molecular biological reagents are widely used in scientific research, high-throughput sequencing, in vitro diagnosis, biomedicine, animal quarantine and other fields, and their application ductility is strong. At the same time, the market size of various segments is growing rapidly, driving the demand for molecular biological reagents to grow rapidly.

In 2019, the market size of molecular biological reagents is about 6.9 billion yuan, and the scale of molecular biological scientific research reagents is expected to grow at a CAGR=12.3% from 2019 to 2024, reaching 12.4 billion yuan in 2024. At present, the competition pattern of domestic molecular reagents is relatively scattered, Novizan occupies the leading position in China, accounting for about 4%, and the remaining 55% market share is mostly divided by other domestic reagent production companies with smaller volumes, and the market concentration is not high on the whole, and the industry needs to be re-integrated. Secondly, imports account for a relatively high proportion. The total market share of the four foreign-funded enterprises, such as Thermo Field of the United States, Kagger of Germany, Roche Takara and BioRad of the United States, is 41%. However, due to changes in the international situation, exchange rate fluctuations and other factors, there are risks of rising prices and tight supply of imported products. The global spread of the new coronavirus epidemic in 2020 has further exacerbated the supply shortage of biological reagents, and the localization of the supply chain has attracted more and more attention from domestic scientific research institutions and enterprises, and China's biological reagent industry has received unprecedented development opportunities.

The protein biological reagent track is small and beautiful, and the growth momentum is sufficient. Recombinant proteins are proteins that use the DNA sequence of a specific gene as a template. According to the mechanism of action, it can be roughly divided into recombinant proteins and antibodies. Antibodies refer to immunoglobulins that can bind specifically to Kangtuan, accounting for a relatively high proportion, about 2/3, mainly for immune reactions.

Recombinant proteins are widely used in biological drug development, basic research and in vitro diagnostic reagents. Of the top 10 drugs by global sales in 2019, seven are biologic drugs, including monoclonal antibodies and fusion proteins. The market demand of monoclonal antibody drugs is huge, and recombinant protein is one of the important reagents for the study of monoclonal antibody drugs. In scientific research, recombinant proteins can be used in many aspects, such as structural analysis, cell culture, cell induction, differentiation, enzyme function study, substrate, reference, etc. 60%-80% of the cost of diagnostic reagents is the raw material of diagnostic reagents including diagnostic enzymes, antigens and antibodies, among which a part of diagnostic enzymes and antigens is recombinant proteins.

The scale of domestic recombinant protein market is growing rapidly. With the active research and development of biological drugs and the in-depth exploration of life science mechanisms, the global market for recombinant protein biological research reagents has grown from $500 million in 2015 to $800 million in 2019, and the market size is expected to reach $1.5 billion in 2024. The overall market of recombinant protein biological scientific research reagents in China grew from 400 million yuan in 2015 to 900 million yuan in 2019, and the market size is expected to reach 1.9 billion yuan in 2024, with a CAGR of nearly 20% in 9 years, and the industry scale is growing rapidly.

Domestic substitution of recombinant protein is feasible. From the research and development strength, brand influence and other aspects, domestic reagent production enterprises and international well-known enterprises still have a big gap, China's recombinant protein scientific research reagent market is still mainly occupied by foreign brands. In 2019, the first and second place in China's recombinant protein reagent market were R&D Systems and PeproTech, accounting for 36% of the market share, and the top two domestic enterprises, Yiqiao Technology and Bypsyth, accounted for less than 10%. Secondly, the market competition pattern is still relatively fragmented, and 55% of the market share is divided by various small companies. However, at present, the product quality of the first echelon of domestic enterprises has been equal to the international first-class products, and the future domestic enterprises are expected to gradually form scale effects by relying on the increasingly rich SKU and brand reputation, and accelerate domestic substitution.

3, high-end instruments and equipment is the first position of life science industry chain localization

Scientific research instruments billions of gold track need to be developed by domestic enterprises. According to EMR statistics, the global high-end scientific research instrument market is expected to reach 300 billion yuan in 2025, with a compound growth rate of about 9.6%. Analytical instruments are an important component of scientific research instruments, accounting for about 45%, of which mass spectrometry is the most important instrument type in analytical instruments, according to the statistics of the Ministry of Science and Technology of China, the value of mass spectrometry instruments belonging to domestic scientific research institutions accounts for the highest proportion of about 20%.

Scientific instruments are the cornerstone of scientific research and technological innovation, an important guarantee for economic and social development and national defense security, and are related to the country's long-term political and economic status, so promoting the healthy and high-quality development of the industry is an important strategy for major countries in the world. In the past ten years, the Ministry of Industry and Information Technology, The State Council, the Development and Reform Commission and other organs have successively issued relevant policies, emphasizing the importance of developing domestic scientific research instrument industry and vigorously supporting the strategic direction of industry development.

Mass spectrometry continues to evolve as a powerful method and analytical tool for detailed analysis of particles and molecules. Applications of the technology span all areas of the life sciences, including basic discovery research projects, food and environmental testing, clinical applications, materials science, and drug and biotherapeutic development. In 2018, the global mass spectrometer accounted for 65% of the biomedical and scientific research fields.

The components of the mass spectrometer mainly include inlet, ion source, mass analyzer, ion detector and data system.

In recent years, China's mass spectrometer market continues to expand, according to statistics, as of 2020, China's mass spectrometer market size reached 14.22 billion yuan, 2010-2020 compound growth rate of 17.77%. North America, Europe and China are the main distribution areas of mass spectrometers, which are closely related to scientific research and pharmaceutical activities in the region. At present, the domestic mass spectrometer market is still dependent on imports, and the mass spectrometer import amount has reached 6.7 billion US dollars in the past three years, and the localization rate is about 5%.

Consumables play an indispensable role in the "life science industry chain". Life science polymer consumables are widely used in various medical and experimental operation application scenarios, involving a wide range of products, including cell culture consumables, molecular biology consumables, filtration/purification experimental consumables, microbiology experimental consumables, instrument and equipment special consumables, reagent consumables, etc. Corresponding to the industry end, including gene sequencing, assisted reproduction, laboratory consumables, in vitro diagnostic consumables, specimen collection and processing.

Throughout the world, the rapid development of various fields of biomedicine has led to the rapid and stable growth of the demand for life science polymer consumables, and it is expected that the global life science polymer consumables market will be about 45 billion US dollars in 2025, with a CAGR of about 13.8%. Due to high industry barriers, China's localization rate in the field of high-end life science polymer consumables is currently less than 5%. The main track of the application side includes customized consumables for IVD instruments, life science experiment consumables, assisted reproductive consumables, gene sequencing consumables, specimen collection and processing. Among them, IVD track concentration is the highest, CR4 reached 50%, so the demand for consumables is the most concentrated, which is conducive to the rapid volume of suppliers, and the IVD market space in the Asia-Pacific region is large, it is expected that the compound growth rate of more than 15% in the next five years, and the incremental space of the consumables market can be expected.

Quality racetracks enjoy high added value and policy immunity embrace high returns. The medical diagnosis and scientific research field pay much more attention to the quality of consumables than the procurement cost, and the negative results caused by the quality of consumables such as the deviation of diagnostic results, the loss of high-value sample reagents, and experimental errors are the essential differences. Due to the uneven quality of domestic consumables suppliers, the market share of domestic consumables has been low, and few suppliers can enter the supply chain of international giants. Therefore, the polymer life science consumables industry has high gross profit, domestic and global share is very low attributes, the current life science polymer supplies supply with first-mover advantage suppliers will fully enjoy the polymer consumables production capacity to the domestic trend dividend, quickly open the domestic and global life science consumables blue ocean market. The ODM model of life science polymer consumables is similar to the CDMO industry of pharmaceuticals, and the globalization of the consumables industry is deeply rooted in the international supply chain market. Consumables suppliers face the downstream brands in the field of medical experiments, the value of consumables is relatively low in the downstream products, and the price of consumables depends more on supply and demand. Therefore, the life science consumables industry has policy immunity properties.

The epidemic has opened a golden window for local enterprises to cut into the international supply chain of plastic consumables. Since 2020, the world has entered the era of epidemics, and various industries have been generally affected by the epidemic. The United States USITC revealed that the production capacity of polymer life science consumables related to COVID-19 testing is seriously insufficient, and the production capacity cannot be immediately improved. The most prominent contradiction between supply and demand is the pipette head, the mold needs to be imported from abroad, which takes about 20 weeks, the automatic production equipment also needs additional deployment, and the construction cycle of the new production line is 8-14 months. This will lead to a prolonged pipette shortage in the United States and potentially the same short-term problem worldwide. As of March 2021, the plastic life science consumables imported by the United States continued to rise, of which China's share increased significantly after maintaining stability, in sharp contrast to the trend of cotton swabs, reagents and other data rising first and then falling.