5 pharmaceutical companies were allowed to imitate new crown oral drugs for free Industry: partial public welfare attributes, limited profit margins

The news that 5 pharmaceutical companies were allowed to produce and imitate Merck's new crown oral drugs for free directly triggered the relevant stocks.

On the morning of January 21, e company reporters called Fosun Pharma, Brilliant Pharma, Via Biologics, and Aidi Pharmaceutical respectively, but they could not be connected. Among them, the stock price is sealed word for word, and the phone of the securities department may have been exploded by investors, and the reporter has called many times in the call.

After 11 o'clock in the morning, the stock prices of related stocks have fallen. Industry insiders believe that the authorization of generic drugs is mainly supplied to low- and middle-income countries, partial public welfare attributes, and the profit space brought to the company is limited.

Brilliant Pharmaceutical issued a risk warning announcement at noon, saying that the new crown oral drug imitation license is a non-exclusive license; the licensed area is 105 low- and middle-income countries/regions, excluding China; the pricing of the product is expected to be lower than the original research product or the selling price in other middle- and high-income countries, and the specific price and production cost cannot be determined, and the future performance impact cannot be predicted.

Related stocks rushed higher and fell back

According to Reuters, the Medicines Patent Pool (MPP) announced on January 20 that it has signed agreements with 27 generic drug manufacturing companies to produce and supply high-quality, affordable Merck oral anti-coronavirus drug Moldupiravir generic drugs for 105 low- and middle-income countries around the world.

According to the agreement, a total of five Chinese pharmaceutical companies were shortlisted for the agreement, Fosun Pharma, Bo Rui Pharma, Shijiazhuang Longze Pharmaceutical and Shanghai Disano were licensed to produce MONUUPIRAVIR APIs and finished drugs at the same time, and Langhua Pharmaceutical, a subsidiary of Via Bio, was allowed to produce MORNUPIRAVIR APIs.

Neither Merck nor its partner Ridgeback Biotherapeutics, nor Emory University in the United States, which invented the drug, receive royalties from the Mmolupiravir sale of MPP sublicensors. In other words, the above 5 Chinese pharmaceutical companies can imitate Merck's COVID-19 oral drugs for free.

Affected by this news, in the early session of January 21, the related concept stocks opened sharply higher.

As of press time, Brilliant Pharmaceutical has sealed the limit of the rise and fall, and the A-share Fosun Pharmaceutical has risen by more than 7%. Eddy Pharmaceutical, which has a stake in Longze Pharmaceutical, opened with a stop price and the stock price fell back, closing up to 13.43% as of noon, and the intraday gain narrowed to near 7%.

Hong Kong stocks related to the rise and fall, Hong Kong stock Fosun Pharmaceutical once rose more than 12%, as of press time the rise narrowed to 3.8%; Via Bio once rose more than 35%, as of noon the rise has narrowed to near 16%.

At the same time, affected by this, the new crown pneumonia test index fell by 5%, and 22 of the 26 concept stocks closed down. Meikang Biology, Anke Biologics, Sino Biologics, Xilong Science, Kehua Biology and other stocks fell more than 5%.

The vaccine sector also fell sharply, with the Wind Vaccine Index closing down 2.91% in early trading, with 14 of the 17 concept stocks falling. Changchun Gaoxin continued to fall to a halt, and North China Pharmaceutical fell more than 9%.

5 companies where to start?

Among the five pharmaceutical companies that have been approved to produce, Fosun Pharma, Bo Rui Pharma and Wei Bio are all listed companies, and Eddy Pharmaceutical, a shareholding company of Longze Pharmaceutical, is also a listed company.

From the perspective of main business composition, Fosun Pharma is a comprehensive pharmaceutical company, with pharmaceutical manufacturing and research and development accounting for more than 70% of revenue, and medical diagnosis, medical equipment and medical services accounting for about 27%. Via Bio is a foreign-funded enterprise that mainly produces Western medicine.

Brilliant Pharmaceutical and Aidi Pharmaceutical are both enterprises in Jiangsu. Eddy Pharmaceuticals owns human crude protein, HIV diagnostic equipment and reagents. Brilliant Pharmaceutical mainly produces antifungal, antiviral and immunosuppressive drugs.

According to the enterprise investigation data, the business scope of Shijiazhuang Longze Pharmaceutical is mainly based on the research and development, production and sales of APIs, tablets, granules and capsules.

Obtaining the generic drug production license authorization of Merck's new crown oral drug requires pharmaceutical companies to have certain production and research and development capabilities.

It is understood that production capacity reserves, high-quality production capacity, research and development capabilities, regulatory completeness and financial status are important criteria for MPP assessment.

The evaluation process is divided into two phases: the first phase is where panel members evaluate EOL in the context of unknown applicants, and the second phase is weighted with the highest average score.

Zheshang Securities Research Report pointed out that obtaining MPP authorization is a manifestation of the applicant company's global compliance production capacity, benefiting from the supporting advantages of China's chemical industry and the accelerated expansion of compliance production capacity. Chinese APIs and CDMO companies are expected to deepen their influence in the global pharmaceutical supply chain.

From the perspective of the internationalization of APIs and preparations, the sales of the company after the authorization depend on the international sales network and supply chain management capabilities of each company. Therefore, the impact of this incident on the company's performance will depend on the production capacity reserves of these companies and the establishment of international sales teams.

In the industry: partial public welfare nature, limited profit margins

In the context of the surge in related stocks, industry insiders are cautious, believing that free licensing of Merck's COVID-19 oral drugs will not bring too many profits to companies.

Wang Jun, a senior pharmaceutical industry analyst, believes that of the 5 approved domestic pharmaceutical companies, 4 are only FOUNDRies and 1 is to provide APIs. Because the final drug market is supplied to low- and middle-income countries, it is more public welfare, so the profit margin is limited.

According to the agreement, the above five enterprises will be licensed to produce merck oral antiviral generic drugs free of charge, which will be supplied to 105 low- and middle-income countries to promote the affordability and accessibility of oral anti-coronavirus drugs in low- and middle-income countries and help local epidemic prevention and control.

Citing preliminary estimates from drugmakers, an MPP official involved in negotiations with drugmakers is expected to cost about $20 for a five-day 40-pill molnupiravir course in poorer countries. That's well below the $700 per course the U.S. agreed to pay. But it's double what the World Health Organization (WHO)-backed project to procure COVID-19 drugs and vaccines worldwide initially estimated.

Analysts at Guosheng Securities said that after the current signing of the agreement, Merck will do technology handover with authorized companies and provide technology packages to enterprises. The enterprise then conducts the research and development of APIs and preparations according to the technical package, and submits a PQ application to the WHO after research and development.

After submitting a PQ application for permission, pharmaceutical companies may not need to go through on-site verification to sell their products to 105 countries.

A spokesperson later said some of the companies covered in the deal could start deliveries as early as February.

The reason for reaching out to low-income countries is that low vaccination rates in low-income countries still have large numbers of people in low-income countries who are exposed to the risk of COVID-19 infection.

The data shows that the average vaccination rate is currently 60% globally, the average vaccination rate in high-income and middle-income countries is more than 75%, and the average vaccination rate in low- and middle-income countries is also 50%, but the average vaccination rate in low-income countries is only 9.5%.

Prior to granting the MPP, Merck had licensed the Molnupiravir patent to 13 generic drug companies in India, similarly restricting its use at a stage when COVID-19 was classified as a public health emergency to improve access to the drug. From the beginning of January 2022, generic drugs in India are gradually on the market, and the pricing in India is about 18-20 US dollars per course.

Analyst: Focus on the epidemic prevention and control supply chain

The number of confirmed covid-19 cases scattered around the world is still rising, and the proportion of confirmed cases overseas in Olmi kerong is also rising. At present, the world's leading pharmaceutical companies have made progress in the research and development of new crown drugs, and related drugs will be put into the market one after another, and analysts recommend paying attention to the growth of related drugs.

Analysts at Guojin Securities believe that the normalization of the epidemic situation and the expectation of influenza are optimistic about the oral release of new crown drugs. Based on the treatment mechanism, the accessibility and economy of oral drugs, we continue to be optimistic about the application prospects of oral small molecules of new crown drugs.

A variety of oral COVID-19 drugs at home and abroad are about to enter the volume stage, and we can pay attention to three subdivisions in the supply chain: (1) the original research supply chain continues to increase supply chain supply; (2) through the rights grant of the MPP platform, generic drug companies and supply chain enterprises obtain the rights and interests in the production and sales of generic drugs; (3) the domestic new crown oral drug layout is rich, and research and development is gradually advancing.

At present, there are two small molecule drugs approved by EUA in the world, namely Merck and Pfizer.

There are also a number of domestic therapeutic drugs in the clinical stage, among which Junshi Biology, Pioneering Pharmaceutical, and Real Biology are leading.

There are also a number of inhibitors in the early clinical stage, and the progress of drugs involving Frontier Biology, Simcere Pharmaceuticals, and Guangshengtang continues to attract attention.