news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

21st Century Business Herald reporter Ji Yuanyuan reports from Shanghai

Innovative drugs face many uncertainties from drug discovery to preclinical trials, clinical trials and commercial launch. Coupled with the influence of factors such as the complex and changing external economic environment and the rational return of the capital market, the return rate of innovative drug companies has received increasing attention.

The first half of 2024 has come to an end. Despite many challenges, the pharmaceutical industry has not slowed down its pace in the research and development of innovative drugs, bringing hope to patients around the world. The hardships and challenges behind this cannot be ignored. Data released by the National Medical Products Administration (NMPA) show that as of June 30, 2024, NMPA has approved a total of 109 new drug applications (NDAs). Compared with the first half of 2023, the total number of NDA approvals has increased by 5. Among the approved new drugs, there are 64 chemical drugs, 39 therapeutic biological products and 6 traditional Chinese medicines. According to the registration category, there are 27 Class 1 innovative drugs, 16 chemical drugs, 8 therapeutic biological products, and 3 traditional Chinese medicines.

At present, products with technological innovation and clinical value are always needed by the market, demonstrating the potential for development. New breakthroughs continue to emerge in the fields of traditional macromolecular drugs, small molecule targeted drugs and monoclonal antibody drugs, and a lot of progress has been made in technological innovation and clinical progress. For example, approved domestic innovative drugs include the world's first MEK inhibitor tolametinib capsule for the treatment of NRAS mutation advanced melanoma, the world's first JAK inhibitor golixitinib for the treatment of peripheral T-cell lymphoma, and the first domestic drug targeting ROS1 for the treatment of non-small cell lung cancer, anectinib fumarate.

But approval is only the first step. For innovative pharmaceutical companies, facing a complex development environment, continuously combining and optimizing existing resources and improving operational quality are the keys to achieving sustainable development.

Chen Jinhao, head of IQVIA China's management consulting department, said in an interview with a reporter from 21st Century Business Herald that to become a pharmaceutical power and a leading R&D base, China must have soil suitable for pharmaceutical R&D. One of the major problems is that funds are limited, so it is necessary to save money, which is an unavoidable link. Every pharmaceutical company must understand the market and product value earlier, and then maximize the target value. In the past environment, small steps of innovation were enough, but now it is a highly competitive environment, and only products that the market really needs will have value.

"What companies need to consider is which project to introduce or which project to start developing, and they need to understand market demand very well." Chen Jinhao believes that innovative pharmaceutical companies' choice of product pipelines is a bit like a game, and they must plan for the follow-up when making a choice.

Investing heavily in "innovation"

In the past six months, a number of innovative drugs have been approved by regulatory agencies. These new drugs have shown significant therapeutic effects and safety in clinical trials, providing new treatment options for many previously incurable diseases. The approval of these new drugs not only demonstrates the progress of medical technology, but also brings more hope to patients.

According to data disclosed by NMPA, 27 Class 1 innovative drugs were approved in the first half of 2024, an increase of 4 compared with the same period last year. In terms of the distribution of disease treatment areas, the number of approved anti-tumor drugs still accounts for the largest proportion, 36.7%, the same as in the first half of 2023; compared with 2023, drugs for the treatment of nervous system diseases jumped to second place, accounting for 14.7%; drugs for the treatment of endocrine and metabolic diseases accounted for 11.9%.

According to data from MinEnet, among the top 20 countries in the world for new drug R&D projects, China's innovative drug R&D capabilities have increased rapidly, and the number of innovative drug pipelines is second only to the United States. Domestic innovative drugs under development are concentrated in small molecule targeted drugs represented by tinib drugs and large molecule drugs represented by antibodies. The sales of terminal tinib drugs (protein kinase inhibitors) and antibody drugs in China's public medical institutions increased from 9 billion yuan and 8.6 billion yuan in 2017 to 29.3 billion yuan and 46.5 billion yuan in 2023, respectively. Among them, the growth rate of antibody drugs in recent years has maintained double digits, demonstrating strong growth potential. The proportion of both in oncology drugs has grown from more than 31% in 2018 to nearly 70% in 2023, which shows a huge change in the drug structure.

China has become the world's second largest pharmaceutical market, and accelerating innovative research and development has become the main theme. However, the research and development of innovative drugs is not easy. From R&D investment to market promotion, every link is full of challenges. An analyst in the pharmaceutical industry of a securities company pointed out to a reporter from 21st Century Business Herald that the research and development costs of innovative drugs are high, often requiring hundreds of millions of dollars in investment and several years. Moreover, even if the drug is successfully developed, it still needs to undergo rigorous clinical trials and regulatory approval before it can finally be marketed.

This also means that it is crucial for innovative pharmaceutical companies to make a reasonable investment layout. Chen Jinhao also pointed out that in the past few years, China has ushered in a favorable environment for promoting the development of innovative drugs, which has led to a large influx of private equity (PE) funds after the opening of the Hong Kong and Shanghai capital markets, and investors have flocked to invest money. This situation also happened in the United States 30 years ago, and now it is actually getting back on track.

"In the PD-1 market in the United States, there are only five products in total, while China has sixty or seventy. How can such a return on investment be reasonable? You can imagine that more than 60 companies have invested. Are all investments reasonable? At first, everyone invested in a large number of them, but now the market has begun to return to rationality and found that not all investments are reasonable. For VC and PE, they have begun to re-evaluate the actual value. Therefore, pharmaceutical executives need to realize that the situation has changed." Chen Jinhao said frankly that in the past, many companies believed that as long as they had good drugs, the market would definitely accept them. But in fact, they did not necessarily really understand the market demand.

"Overconfidence can lead to companies becoming overconfident and believing they can grow from biotech to big pharmaceutical companies. However, in the European and American markets, there are only a handful of companies that have truly grown from biotech to big pharmaceutical companies in the past 30 years." In Chen Jinhao's view, biotech should focus on research and development, while pharma should focus on commercialization. There is an essential difference between the two. Scientists need to realize that funds are limited and most of the cash should be used for research and development rather than over-commercialization. Companies need to get back on track, become research and development platforms, and use better models for commercialization.

Market pain points frequently emerge

With the continuous development of medical technology, new treatment methods continue to emerge, and patients need more choices. At the same time, the fierce market competition has put pressure on innovative pharmaceutical companies. At present, traditional pharmaceutical companies and emerging biotechnology companies are also actively seeking innovative breakthroughs, which has intensified market competition. In such an environment, innovative pharmaceutical companies need to continuously improve their R&D capabilities and market competitiveness in order to remain invincible in the fierce market competition.

But survival is not easy. A series of difficult questions remain to be answered: How many of China's biotechs are truly FIC (First-in-Class) and BIC (Best-in-Class)? How many are licensed me-too and me-better? In such a competitive market, can these licensed me-too and me-better survive? How many local biotech companies now have strong R&D platforms that can support their income? How many biotech companies have truly grown into large companies? How many biotech companies will eventually be acquired by large pharmaceutical companies...

Talking about the above pain points, Chen Jinhao believes that the adjustment of the entire market is inevitable. "To be honest, I think about 40% to 50% of biotech companies will either be acquired, eliminated naturally, or acquired. Whether the entire market can support so many me-too and me-better projects is a question. The remaining companies will either become a strong R&D platform or be acquired and become part of a multinational or local pharmaceutical company."

In this process, companies are also required to clarify their positioning, whether to focus on R&D platforms or become part of large pharmaceutical companies. Market adjustments and screening will help these companies find the most appropriate development path.

Chen Jinhao pointed out that fundamentally, the DNA of many start-ups is often shaped by one or two scientists who are very strong in a certain scientific research field. Such DNA prompts companies to focus on the construction of R&D platforms.

However, as companies grow, they need to think about how to build a diversified product portfolio (multi-portfolio) in this field. Since the sales team focuses on how to sell more products with fewer resources, this is a problem that all sales platforms need to consider. But for scientists, they may be more focused on deepening a platform or technology, but this does not mean that they can naturally have a diversified product line.

"There are relatively few opportunities to transform from a single and in-depth R&D platform to a company (Biopharma) that can support a diversified product portfolio and successfully commercialize it. This requires the company to not only maintain its technological leadership, but also have sufficient soil and resources in commercialization to support its expansion. Once a company has such capabilities, it can start to build a sales team and bring products to market through various channels." Chen Jinhao believes that in this process, the company's strategy must revolve around its core competency and gradually expand outward. If a company's core business is limited to one niche, it may be difficult for it to become a Biopharma with a broad influence. On the contrary, companies that can take root in multiple fields and continue to expand their product lines are more likely to achieve this goal.

In order to avoid market risks, many Biotech companies choose to diversify their investments to avoid a situation where the failure of individual product lines will lead to a total loss. "Many start-ups will be kidnapped by capital. If they develop slowly and small, they may become large-scale pharmaceutical companies. However, explosive development will make them unable to control what they can do, leading to some decisions that may not be wise, and finally forming an unmanageable situation." Chen Jinhao said that diversification of investments is good in some cases, but if you don't see clearly which project is suitable for the company and which project is valuable in the market, then even if you reach the end of the IPO, it will not support its valuation.

How to break through?

Some people believe that the biopharmaceutical industry will be reshuffled in 2023, and the ice will melt in 2024, and the industry will still be on the road to recovery.

However, judging from the transaction and investment and financing cooperation data, the pharmaceutical industry is still some distance away from recovery. According to the data from Pharmaceutical Cube, in the first half of 2024, there were 630 investment and financing events in the primary market of China's medical and health sector, a year-on-year decrease of 27.8%, and the total financing amount was 42.16 billion yuan, a year-on-year decrease of 1.1%.

This is also because there are many challenges in the current market. IQVIA analysis believes that at present, the market cost control model is changing. In the past 20 years, China has mainly controlled medical expenses through medical insurance, but in the future it will gradually turn to a market-oriented and more natural cost control method. This method will be more in line with market laws and reduce the price pressure brought by medical insurance negotiations. At the same time, the matching degree between R&D and market demand needs to be paid attention to. Companies need to understand every value of the market and products earlier in order to better position products and formulate market strategies. This includes understanding what types of products the market really needs to avoid wasting resources.

In addition, funding issues and cost control issues need to be addressed. In order to become a pharmaceutical power, China needs to have a strong R&D foundation, but this needs to be done under strict fund supervision to encourage more funds to flow to R&D rather than inefficient links. Government policy support is also crucial to the development of innovative pharmaceutical companies. For example, by providing a better policy environment and reducing administrative intervention to promote the independent development of enterprises. In addition, multinational pharmaceutical companies also face challenges and adjustments in their operations in the Chinese market, such as selecting partners and optimizing pipeline layout. These factors will affect the survival and development environment of innovative pharmaceutical companies.

In the current market situation, from the perspective of the development of different global economic systems and medical environments, how can Chinese innovative pharmaceutical companies meet the challenges they are facing, and how can they survive the market cycle and move forward steadily? In this regard, Chen Jinhao believes that "efficiency" is very important in the Chinese market. First, the efficiency of investment requires understanding where to invest and using funds where they are needed most; second, each project has room for optimization. Now there are many AI technologies and digital means. Enterprises need to think about whether AI can be used to screen molecules, diseases, and patients in research and development; third, before investing, you need to understand your product attributes very clearly, understand which markets the product is suitable for, whether it is made in China or the international market, and whether there is a channel. For executives of start-ups, this is a huge challenge, which requires a comprehensive understanding and a good match.

"On the one hand, focusing on efficiency means understanding the characteristics of your products and your core competitiveness. Don't try blindly, but be clear about the direction your product portfolio should develop in. On the other hand, careful planning means being very cautious when dealing with funds. Steady development is better than explosive expansion. This is easier said than done for companies, so I think real professional managers and founders need to take a long-term view of company development and not act blindly for short-term benefits," Chen Jinhao emphasized.

The road to innovative drug research and development is not always smooth. From the initial R&D concept to the final market promotion, every link is full of challenges and uncertainties. With the continuous development of medical technology, new treatment methods continue to emerge. Patients need more choices, and pharmaceutical companies need to maintain market competitiveness through continuous innovation.

In such an environment, innovative pharmaceutical companies need to continuously improve their R&D capabilities and market competitiveness in order to remain invincible in the fierce market competition.