(Report Producer/Author: Debon Securities, Chen Tielin, Chen Jin)
1. Innovative Medicines of Chinese Medicine: National Treasures, Ready to Go
Chinese medicine is a treasure of the mainland that has been passed down for thousands of years, and the source of raw materials is rich, and a perfect system has been formed under the original source for many years. Traditional Chinese medicine products mainly contain Chinese herbal medicines, proprietary Chinese medicines and Chinese medicine tablets, which can be divided into plant medicines, animal medicines and mineral medicines according to their sources.
The revenue scale of traditional Chinese medicine manufacturing industry exceeded 600 billion yuan, and the overall income was under significant pressure during the original Source Period. From 2013 to 2016, the revenue of the domestic Chinese medicine industry showed a growth trend, and the market size increased from 632.4 billion yuan to 865.3 billion yuan; with the strict supervision of the Chinese medicine industry, non-compliant Chinese medicine enterprises were cancelled, and unqualified varieties were revoked, the overall income of the Chinese medicine industry began to shrink, falling to 637 billion yuan in 2018; after 2018, the results of the reform of Chinese medicine policies began to appear, the downward trend eased and began to recover, and the slight growth of revenue in 2019 resumed to 651.9 billion yuan In 2020, due to the impact of the epidemic, the overall scale fell slightly to 619.6 billion yuan. With the continuous advancement of the standardization of the Chinese medicine industry and the formation of the Differentiation of the Chinese Medicine Industry, we believe that the Chinese medicine industry is expected to start again.
In recent years, traditional Chinese medicine injections have faced greater market pressure, and the market size of non-injectable dosage forms has gradually expanded. According to the mode of administration, Chinese medicine can be divided into injections, oral preparations, topical agents or patches, etc. Chinese medicine injections exist in the problems of unstable quality of APIs, complex composition, irregular preparation process, imperfect quality standards, etc., so Chinese medicine injections have a higher proportion of adverse reactions in clinical applications.
Traditional Chinese medicine products have application value in many therapeutic fields. According to the statistics of The InnerNet, proprietary Chinese medicines are used in 13 categories of treatment in public sample hospitals, of which proprietary Chinese medicines are used for cardiovascular and cerebrovascular diseases, respiratory diseases, and skeletal and musculoskeletal systems, accounting for more than 50%.
Specifically, proprietary Chinese medicine has unique advantages in the treatment of difficult and chronic diseases, and its application has a multi-field growth attribute. In the future, with the promotion and application of more innovative Chinese medicine drugs with clinical evidence-based medical value, the space will be further opened.
1) Respiratory diseases: The scale of the Chinese medicine market has steadily increased, and it has potential in the treatment of new crown, once again emphasizing the value of Chinese medicine in the respiratory field. In April 2020, Lianhua Qing plague capsules added "light, ordinary type new crown" indications, and were recommended by the fourth to eighth editions of the "Diagnosis and Treatment Plan for Pneumonia Infected by Novel Coronavirus"; in 2021, 3 innovative chinese medicine drugs: Xuan Lung Sepsis Granules, Lung Detoxification Granules and Wet Septic Granules were approved for the prevention and treatment of the new crown. According to the statistical analysis of the Prospective Industry Research Institute, proprietary Chinese medicines have good prospects in the respiratory disease market and are expected to exceed 100 billion yuan in 2026, while innovative Chinese medicine drugs will gradually play an important role.
2) Cardiovascular and cerebrovascular system diseases: the market size of proprietary Chinese medicines exceeds 100 billion. According to the statistics of The Intranet, the total sales revenue of domestic public medical institutions and retail pharmacies exceeded 100 billion yuan, of which the retail pharmacies maintained a growth trend from 2015 to 2019. Affected by the restriction of medical insurance for proprietary Chinese medicine injections, the market size of public medical proprietary Chinese medicines in cardiovascular and cerebrovascular diseases has declined slightly, mainly due to the significant decline in the injection sector (the proportion of traditional Chinese medicine injections in 2019 fell to 55.2%).
3) Urinary tract infectious diseases: Proprietary Chinese medicine has a unique mechanism through the principle of clearing damp heat action. Different from the sterilization mechanism of Western medicine, proprietary Chinese medicine treats urinary tract infections by clearing damp heat, so it has a longer lasting time of action, no drug resistance, and has advantages in the treatment of mild urinary tract infections. From 2015 to 2017, the sales share of proprietary Chinese medicines for the treatment of urinary tract infections increased rapidly, accounting for 71.1% in 2017, and the market size was 6.43 billion yuan.
2. The policy dividend has increased, and the dawn of innovative Chinese medicine has begun to appear
Favorable policies for Chinese medicine are frequent, and we vigorously support the innovative development of Traditional Chinese medicine inheritance. In December 2016, the first Chinese Medicine Law of the People's Republic of China was promulgated, which established a legal basis for promoting Chinese medicine and promoting the development of Chinese medicine. In 2018, the state implemented a hierarchical protection system for Varieties of Traditional Chinese Medicine with stable quality and accurate efficacy. In January 2021, the Notice on Several Policies on Accelerating the Development of Characteristics of the Development of Traditional Chinese Medicine pointed out that it is necessary to optimize the management of the evaluation of traditional Chinese medicines, strengthen interdepartmental linkage, recommend new Chinese medicine drugs that meet the requirements to be included in the rapid review channel, and increase the number of third-party new Chinese medicine drug registration and inspection institutions. In December 2021, the Guiding Opinions on Medical Insurance Supporting the Innovative Development of Traditional Chinese Medicine Inheritance pointed out that it is necessary to give full play to the advantages of medical insurance to support the innovative inheritance and development of traditional Chinese medicine, expand the radiation capacity of traditional Chinese medicine medical institutions, and formulate payment policies that conform to the laws of traditional Chinese medicine.
The new version of the classification of Chinese medicine registration is simplified, and the innovative drugs of Chinese medicine are listed separately. The newly revised "Drug Administration Law" formally simplifies the registration classification of new chinese medicine drugs into three categories: innovative chinese medicine drugs, improved new chinese medicine drugs, and ancient classic Chinese medicine compound preparations. It is worth noting that the new version of the Chinese Medicine Registration Classification lists "Innovative Drugs of Chinese Medicines" separately, further clarifying the concept of innovative drugs of Chinese medicines, covering compound preparations, Chinese herbal medicines and their preparations, new medicinal materials and their preparations. (Source: Future Think Tank)
3. Medical insurance payment end: the pattern is good, and the negotiation advantage is obvious
The inclusion of proprietary Chinese medicines in the medical insurance catalogue has been expanded, and the number of Chinese medicine tablets has been stable as a whole. The number of proprietary Chinese medicines included in the 2017 edition, 2019 edition and 2020 edition of the medical insurance catalogue continued to rise, accounting for about 50%. In 2021, the National Medical Insurance Catalogue included a total of 1374 chinese patent medicines and 892 Chinese medicine tablets. From the perspective of medical insurance payment, the payment performance of varieties in the catalog is better, which supports the steady development of the Chinese medicine market.
In recent years, the pattern of proprietary Chinese medicines in medical insurance negotiations has been good, and the number of negotiations has increased year by year. From 2017 to 2021, the number of proprietary Chinese medicines included in the medical insurance catalogue will gradually increase. In addition, during the 4 medical insurance negotiations during the period, the pass rate of Traditional Chinese medicine was overall high. In 2020, due to the large number of Chinese medicines that passed the formal examination, the pass rate was relatively low, and the negotiation pass rate in 2017, 2019 and 2021 was 62.5%, 95.8% and 83.9% respectively.
In terms of the decline in medical insurance negotiations, the decline in traditional Chinese medicine is relatively mild, and the price pressure is small. The mechanism of traditional Chinese medicine is complex, many varieties are exclusive varieties, and the patent period is long, which has a high barrier to research and development; in addition, the production of traditional Chinese medicine products is affected by the uncertainty of upstream raw material planting and processing, so it has a certain bargaining advantage in terms of price. The decline in negotiations in 2019, 2020 and 2021 is lower than the average decline in Western medicine, and the risk of being affected by price reductions is small. The average reduction in the collection and collection of proprietary Chinese medicines in the 19-liter alliance implemented in December 2021 was 42.3%, compared with the average reduction of the fourth and fifth batches of chemical drug collection by more than 50%, and the average reduction in the second and third batches of collection and collection was more than 70%, and the decline in the collection and collection of proprietary Chinese medicines was mild and the pattern was better.
From 2017 to 2021, the new Chinese medicine drugs listed on the market have entered the medical insurance faster, and 8 have been included in the medical insurance. According to the data of China's public medical institution terminals on the intranet, the total sales of anti-diabetic drugs Mulberry Total Alkaloid Tablets increased by 9650% in the first half of 2021, and the sales of Ling Pharmaceutical's new drug Lianhua Cough Tablets in the first half of 2021 were 2.11 million yuan.
4. Review end: The number of new Chinese medicine drugs approved began to recover, and the proportion of innovative Chinese medicine declarations increased
4.1. The number of new Chinese medicine drug declarations has restarted its upward trend
Overall, the clinical application pass rate of new Chinese medicine drugs has shown an upward trend. The number of applications from 2010 to 2015 was relatively stable. Affected by the announcement of "self-examination of drug clinical trial data" issued by the government in 2015, the number of applications for clinical trials after 2016 is relatively small. Pre-IND submission in 2018-2020 With the advancement of reform, certain progress has been made at the policy and technical guidance levels, which has played a positive role in promoting the research and development of new Chinese medicine drugs. In addition, the evaluation efficiency of Chinese medicines has improved significantly, especially the IND approval rate from 2019 to 2020 has reached 100%, which is 1 times higher than that of 2013, which also shows that the research and development of domestic Chinese medicines has entered the formal, and the quality of new Chinese medicine drugs tends to be standardized.
Since 2010, the number of new Chinese medicine drugs accepted and approved has fluctuated under the industry consolidation, and after 2017, the number of new Chinese medicine drug listing declarations and approvals has gradually recovered. Affected by the strict clinical data of the CDE in 2015, the number of chinese medicine market declarations has decreased significantly, and the number of declarations in 2016 has dropped to the bottom. With the adaptation of the concept of drug review, the research and development and registration review of Chinese medicines have been standardized, and since 2017, the marketing declaration of new Chinese medicines has begun to resume, and the number of new Chinese medicine drugs approved for listing in 2021 has increased to 11 varieties.
The new dosage forms of Chinese medicines approved for marketing are diverse and the treatment fields are rich. From 2010 to 2021, the largest number of new Chinese medicine drugs approved for marketing are granules, capsules, tablets and capsules. After 2015, the approved varieties of dosage forms were further concentrated in granules, capsules, pills, tablets, and ointments, while injections gradually withdrew from the wave of listing. In terms of approved indications, the approved indications of new Chinese medicine drugs are mainly respiratory system, digestive system, endocrine diseases, nervous system diseases, in addition, new Chinese medicine drugs are also used in gynecology, orthopedics, tumors, trauma and other fields of treatment, with diversified application scenarios.
On average, the research and development span of new Chinese medicine drugs is longer than that of chemical drugs, but the review speed has accelerated in the past two years. From 2015 to the present, 86% of the new Chinese medicine drugs listed from 2015 to the time span of more than 10 years from the time of in-service to the market are 86%, while the number of chemical drugs accounts for only 37%; the number of new Chinese medicine drugs with NDA time of more than 3 years accounts for 58%, and the number of chemical drugs is only 14%. Most of the new Chinese medicine drugs that take a long time for clinical research and development are submitted before 2005, and most of the time for submitting NDA is around 2010, which may be due to the extension of the review time due to the requirements of supplementary information in the declaration process; most of the new Chinese medicine drugs with NDA time of less than 2 years are varieties that have submitted marketing applications in recent years, mainly due to the standardization of drug research and development, the standardization of review data and the rapid improvement of the efficiency of the review center.
4.2. The innovation and transformation of Chinese medicines has arrived, and the number of new drugs in the middle and late stages of clinical practice is abundant
The arrow of innovative research and development of traditional Chinese medicine is on the string, and the proportion of innovative drug declarations has increased significantly. The IND registration applications accepted in 2021 are all Class 1 and Class 2 new drugs, and Class 1 applications account for 47.4% in 2020. Before 2021, the 2007 version of the Chinese medicine registration classification standard will be implemented, and the 1, 2, 4, 5 and 6 categories under the 07 version of the standard can be classified as the category of innovative drugs of traditional Chinese medicines, and the 6 new drugs in the IND and NDA registration applications accepted before 2020 account for the largest proportion, followed by the 1 class registration classification (class 1 and 6 correspond to the active ingredients and extracts of medicinal materials that are not listed in China, and the compound preparations that are not listed in China).
As of April 30, 2021, there are 46 drugs in clinical phase III of new Chinese medicine drugs applying for IND from 2005 to 2020, which is expected to take over the NDA submission queue. During this period, 285 varieties of new Chinese medicine drugs submitted for IND applications are in the clinical stage and late stage, of which 239 are in phase II and 46 are in phase III, and the reserves of new chinese medicine drugs in the clinical stage are abundant, and with the advancement of the clinical stage, some varieties will be submitted for NDA applications one after another.
We believe that under the drive of policy, strengthening the linkage of multiple departments such as the Medical Insurance Bureau and the Drug Evaluation Bureau will bring more opportunities for new Chinese medicine drugs represented by innovative Chinese medicine drugs. From the perspective of medical insurance payment, with the increase in the number of new drugs included in the negotiation of traditional Chinese medicine and the expansion of the radiation range that can be used by medical institutions, it will drive the rise of the demand side; from the perspective of the adjustment of the price of access to the negotiation, all departments have fully considered the particularity of the development of traditional Chinese medicine, have a good negotiation style, and consider the continuous optimization of the evaluation of traditional Chinese medicine, which will give birth to the enthusiasm for the research and development of innovative Chinese medicines with clinical value.
5. Analysis of key companies
5.1. Yiling Pharmaceutical: Patented Chinese medicine head enterprise
Based on the theory of innovative network disease, Ling Pharmaceutical guides the research and development of innovative Chinese medicine, and is a domestic patented Chinese medicine head enterprise. The company simultaneously carries out multi-channel research and development of compound Chinese medicine, component Chinese medicine, monomer Chinese medicine, etc., and innovative Chinese medicine covers cardiovascular and cerebrovascular diseases, respiratory system, diabetes, nervous system, tumor, urinary system and other disease areas, and its central cerebrovascular and respiratory system layout is the industry leader. The company has formed 11 patents for traditional Chinese medicines, of which 8 patents chinese medicines have entered the 2020 edition of the medical insurance directory, with complete clinical evidence of evidence-based medicine, which is a strong driving force for the company's performance. In addition, the company actively carries out product academic promotion, and the products have successively entered the expert consensus, providing a solid impetus for future clinical drugs.
In addition to the innovative Chinese medicine sector, the company also lays out the chemical biologics sector and the health industry sector. Chemical and Pharmaceutical Sector The company's wholly-owned subsidiary to Lingwanzhou International has established a layout of domestic and foreign sales network, obtained more than 50 states in the United States drug production license, to create a key intermediate - API - preparation complete CDMO industrial chain, by the middle of 2021 reporting period, the company to the FDA declared 12 ANDA projects, 10 approved; health industry board, the company to the network disease theory as the guide, the application of traditional Chinese medicine herbs, medicinal and food homologous concept to develop a series of health products, Expand the market with the help of media brand effect and online and offline channels.
The company's multiple products occupy a large market share. Among the proprietary Chinese medicines for cardiovascular and cerebrovascular diseases, the company's products TongxinLuo Capsules and GinsengSong Yangxin Capsules ranked 2nd and 5th respectively in the public medical market; Lianhuaqing Fever Capsules ranked 1st in the public medical market in the chinese medicine for cold medicines; and Jinlida Granules ranked 4th in the sales of proprietary chinese medicines for diabetes in the public medical market in 2020.
Yiling Pharmaceutical's revenue grew rapidly, and the gross profit margin remained above 60%. Benefiting from the contribution of Lianhua Qingyi Capsules in the fight against the mild new crown epidemic, the company achieved operating income of 8.78 billion yuan in 2020, an increase of 50.8% year-on-year; and net profit attributable to the mother was 1.22 billion yuan, an increase of 101.0% year-on-year. In 2020, the revenue of the respiratory sector was 4.26 billion yuan, an increase of 149.9% year-on-year. (Source: Future Think Tank)
5.2. Xintian Pharmaceutical: Deeply cultivate innovative Chinese medicine research and development, and equity incentives highlight the determination to develop
The company has been established for more than 20 years, focusing on the research and development of proprietary Chinese medicines, deeply cultivating the research and development of patented traditional Chinese medicines, with 12 exclusive varieties, and establishing an integrated platform from research and development to sales. The company is mainly engaged in gynecological diseases, urinary system diseases, detoxification and detoxification drug research and development, the main products are Kuntai capsules (gynecological diseases), matrine gel (gynecological diseases), Ningbitai capsules (urinary system), summer dry grass solution (detoxification). The company also laid out chemical drug boards, holding company Shanghai Huilun Biological Products injection of ceverox sodium for 2020 new crown special batch drug, to fill the acute lung injury / acute respiratory distress syndrome (ALI / ARDS) treatment gap, is expected to contribute to the company's growth drivers. In addition, the company is the first batch of pilot enterprises of traditional Chinese medicine formula granules in Guizhou Province, and 445 Chinese medicine formula granules have entered clinical research.
The company announced an equity incentive plan in April 2021, highlighting the company's determination to grow. The equity incentive plan proposes to grant 3,170,012 restricted shares to the incentive recipients, of which the first grant part accounts for 88.33% and the reserved part accounts for 11.67%.
Xintian Pharmaceutical's overall performance in the first three quarters of 2015-2021 maintained a growth trend. In the first three quarters of 2021, benefiting from the increase in sales of gynecological products (up 55.7% year-on-year), the performance increased significantly, with operating income of 750 million yuan, an increase of 37.5% year-on-year; and the net profit attributable to the mother was 0.9 billion yuan, an increase of 45.7% year-on-year. The core varieties maintain a steady growth trend.
5.3. Kangyuan Pharmaceutical: leading enterprise in R&D and innovation of traditional Chinese medicine
Kangyuan Pharmaceutical is an important R&D and innovation leader in China, and was rated as the first in the R&D strength ranking of Chinese medicine enterprises in 2021. As of the mid-2021 reporting period, the company has 47 new Chinese medicine drugs and 535 authorized invention patents. The core varieties of treatment areas cover gynecological diseases, respiratory diseases, cardiovascular and cerebrovascular system diseases, orthopedic diseases, etc. The company has 107 varieties listed in the 2020 edition of the national medical insurance directory, including 47 class A, 60 class B, 23 exclusive varieties; a total of 43 varieties into the national essential drug list, of which 6 are exclusive varieties.
Kangyuan Pharmaceutical's operating income declined in 2020 and resumed growth in 2021. 2015~2019. The company's revenue maintained steady growth, suppressed by the epidemic in 2020, the sales volume of prescription drug hot poisoning injection and children's drug Jin Zhen oral liquid declined, in addition, in 2019, the company's other large single product, Ginkgo biloba diterpene lactone glucosamine injection, was included in the national medical insurance directory with a price reduction of 70.35%, and the sales revenue fell significantly compared with the same period. 2021 Resumed growth.
The company continues to increase investment in research and development, and the overall R&D expense ratio maintains a growth trend. In the first three quarters of 2021, the R&D expense was 340 million yuan, and the R&D expense ratio was 13.0%.
5.4. Tasly: Innovative and transformed quality enterprises
Tasly has formed a trinity of modern Traditional Chinese Medicine, Biological Medicine and Chemical Medicine for coordinated development, and the research and development pipeline has continued to upgrade. As of the mid-2021 reporting period, the company has a total of 82 pipelines under development, 40 class 1 innovative drugs, and 17 in clinical phases II and III. In terms of innovative Chinese medicine, the company has laid out a total of 28 innovative Chinese medicines; the phase III clinical application for the prevention and treatment of acute altitude sickness indications of the core variety compound danshen drop pills has been approved by the FDA, and new indications of diabetic reticulopathy have been added in China. In terms of biologics, there are 20 drugs.
The company's net profit has maintained a growth trend in the past two years, and its revenue has declined. Affected by the disposal of Tasly's marketing equity in August 2020, the company's overall revenue decline was driven by the decline in pharmaceutical commercial revenue in 2020 and 2021. In the first half of 2021, the net profit attributable to the mother increased by 46.1% year-on-year, mainly due to the disposal of part of the equity of Tianjing Bio to form a 227 million investment income, and the fair value of the investment company Keji Pharmaceutical's Hong Kong stock listing increased by 100 million.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Featured report source: [Future Think Tank]. Future Think Tank - Official website