In the cold winter of medicine, Big pharma turned on the leak picking mode

The era of big pharmaceutical companies bucking the trend and bottoming out Biotech is coming.

On February 8, CSPC Pharmaceutical Group issued an announcement to complete the acquisition of 100% of the equity of Zhuhai Zhifan, the parent company of Guangzhou Mingkang Biologics, and CSPC will inject 154 million yuan into Mingkang Biologics.

Mingkang Biological sold itself, and the veteran pharmaceutical company Stone Medicine took over, naturally taking what it needed. And that's just the beginning.

In the past 2021, the entire biopharmaceutical industry has fallen into an ice cave, and the breakdown has become the norm for Hong Kong 18A companies. According to Choice data, 15 of the 20 biotech B IPOs listed in 2021 broke on the first day, with a break rate of 75%.

The cold sentiment is transmitted from the secondary market to the primary market, and many people predict that the financing window of biomedicine is closing. And this is a fatal blow to many Biotechs.

In the research and development of innovative drugs, although money is not omnipotent, it is impossible to have no money. As the saying goes, the situation is stronger than the people. Many Biotech had to give up the illusion of becoming Big pharma and chose to hug Big pharma's thighs for the winter.

In the bitter winter, biotech's bargaining power has declined rapidly, and the discourse power of large pharmaceutical companies has increased rapidly.

Next, we should see more and more pharmaceutical companies take action, partnering with Biotech or directly acquiring Biotech.

/ 01 /

Local Big pharma's acquisition of Biotech is booming

Domestic pharmaceutical companies, accustomed to going it alone, began to seek cooperation to cope with the cold winter of biopharmaceuticals.

Since last year, local Big pharma has begun to change its combat style and choose to join hands with local innovative pharmaceutical companies. For example, Hengrui joined hands with Yingli Pharmaceutical and Wanchun Pharmaceutical, and CSPC joined hands with Corning Jereh. Under the cold winter of biopharmaceuticals, these large local pharmaceutical companies with grain in their hands began to leak local Biotech.

Just on February 8, local Big pharma and Biotech completed another hand-in-hand. CSPC Group announced the completion of the acquisition of 100% of the equity of Zhuhai Zhifan, the parent company of Guangzhou Mingkang Biologics, and according to the agreement, CSPC Group will inject more than 154 million yuan into Mingkang Biologics.

Zhuhai Zhifan owns a 51% interest in Mingkang Biologics, and the overall valuation of CSPC's acquisition of Mingkang Biologics is 302 million yuan.

Founded in 2000, Mingkang Biotech is a Biotech engaged in the research and development, production and sales of biological drugs; CSPC Pharmaceutical Group is a typical Big pharma, with a number of heavy products such as Enbipu and Encun.

CSPC's acquisition of Mingkang Bio is not difficult to understand. For CSPC, the core pipeline of Mingkang Bio is perfectly compatible with the product layout of CSPC Group.

The core product of Mingkang Biology is the self-developed third-generation specific thrombolytic drug Ming Fule, which has been listed in China in 2015 for the treatment of thrombolysis in patients with acute myocardial infarction within 6 hours of onset, and its indications for cerebral infarction thrombolysis are also in Phase III clinical trials.

Stroke is the first major disease of death in China, acute ischemic stroke (acute cerebral infarction) is the most common type of stroke, accounting for about 70%, within 6 hours of the onset of intravenous thrombolysis and endovascular treatment is currently the most effective treatment. At present, the domestic thrombolytic drug market sales are mainly based on the first and second generation products, and the third generation of products has a large alternative space.

CSPC's blockbuster single product Enbipu is also a drug used to treat stroke. This product was acquired by CSPC Pharmaceutical Group and generated sales of RMB6.5 billion in 2020, contributing one-third of the Group's revenue.

However, in 2022, Enbipu is about to face the arrival of the patent cliff, and CSPC Pharmaceutical Group urgently needs new products to make up for the gap caused by the decline in sales of Enbipu in the future, and Mingfule undoubtedly has great potential.

For Mingkang Biology, selling itself may be its best choice in the cold winter.

Although Mingkang Biology did not disclose specific data, according to a previous report by Jinyang Network, Mingfule did not sell too well after listing, and Mingfule, which was approved for listing, faced a series of problems such as bidding, hospitalization, and promotion difficulties after it really entered the market. Presumably, in today's cold winter of biopharmaceuticals, Mingkang Biology's life will only be more difficult.

Backing on the CSPC Group will make these problems solvable. In terms of funds, according to the 2021 interim report, the cash on the account of CSPC reached 8 billion yuan; in terms of product sales, through the cardiovascular drug sales channels built by Enbipu, CSPC can help Ming fule to quickly increase the volume.

One needs a new product, one needs money, and the two are a hit- and well-matched.

In fact, there have been more and more cases of cooperation between domestic local pharmaceutical companies in recent years. Just on February 5, the emerging medical technology company "Jianshi Medical" announced the completion of the acquisition of Jiecheng Medical, the latter's transcatheter aortic valve (TAVR) is the first product in China to be approved for marketing.

Trapped in the dispute between management and investors' business philosophy, the development of Jiecheng Medical was once hindered. And this merger and acquisition may bring new vitality to Jiecheng Medical.

/ 02 /

The leak-picking moment of big pharmaceutical companies

In the past few years, due to the blessing of policies, the help of capital, the catalysis of the epidemic, under the favorable conditions of time, place and people, China's biopharmaceutical industry has ushered in the most brilliant years, and in just a few years, thousands of Biotechs have been born in China's pharmaceutical industry.

However, the good times are not long, since last year, the collection pressure superimposed on the innovative drug volume, the biopharmaceutical market has cooled rapidly, and the listing has become the norm, once the pessimism of the secondary market is transmitted to the primary market, it may lead to the biopharmaceutical financing window.

If the biopharmaceutical financing window is closed, pharmaceutical companies that have not yet achieved profitability will be under tremendous pressure, and they will have to choose to slow down the pace of development or be forced to sell their rights after burning up their money.

This is not alarmist. There are not a few people in Biotech who are overstretched. This means that without capital transfusion, there are not many Biotechs that can survive.

Specifically, according to Choice data, as of the first half of 2021, in terms of cash reserves/operating cash flow ratio during the year, the cash on the books of 14 18A companies cannot last for two years; if the term is extended to 3 years, this number will increase to 19, accounting for nearly 40% of the overall 18A companies.

For most Biotech, staying alive is the number one priority today. And they do not have many choices, either focus on improving the research and development capabilities of innovative drugs and strive to become Bio pharma, or be merged and reorganized by large pharmaceutical companies to become part of the comprehensive pharmaceutical companies, otherwise they are likely to disappear in the cold winter.

Once the capital is lost, Biotech without hematopoietic ability will become Bio pharma, and it will be difficult to ascend to the sky. In this case, the easiest way to do this is to hold the thigh of the native Big Pharma.

With the volatility of the biopharmaceutical market, most of the current Biotech valuations are at a low level, which is a good time for Big Pharma to pick up leaks.

In addition to CSPC Pharmaceutical Group, as of the first half of 2021, Hengrui Pharmaceutical, Cinda Bio and China Biopharmaceuticals have 12.509 billion yuan, 11.164 billion yuan and 8.028 billion yuan lying on their accounts, respectively. Big pharma, who is not short of money, also needs to obtain potential drugs through Biotech and quickly expand its pipeline to show its strong innovation ability, rich pipeline reserves, and more blockbuster drugs to the outside world.

The cash on the books was plentiful enough to buy a lot of pipelines and acquire a lot of Biotech. On July 14, 2021, Cinda Bio announced the introduction of three BCR-ABL inhibitors from Yasheng Pharmaceutical; on August 23, Corning Jereh and CSPC Group reached a cooperation agreement on Her2 double anti-KN026.

The big pharma and biotech's vertical and horizontal alliance has just begun.

/ 03 /

The story of the rise of overseas pharmaceutical companies,

It will be staged in China

In fact, the vertical and horizontal alliance of pharmaceutical companies before is not uncommon, and it can even be said that mergers and acquisitions are the only way for large pharmaceutical companies to develop. Looking back at the history of the birth of large pharmaceutical companies in the United States, it is a history of mergers and acquisitions.

Pharmaceutical companies have used mergers and acquisitions to rapidly expand their product pipelines, and the operation of obtaining new drugs abounds. Typical examples such as Roche through the acquisition of Genentech, access to the "troika" in the field of oncology. There are also immunotherapy drugs Darling K drug and O drug are developed by Bio Tech, and Big pharma obtained it during the merger and acquisition process.

On the contrary, in China, there was very little cooperation between the domestic Big pharma and Bio tech, and the few cooperations basically occurred between the local Bio tech and the foreign Big pharma.

This is not difficult to understand. On the one hand, there are not many real innovative drugs in China, most of the innovative drugs are fast follow, such innovations you can do he can also do, the buyer will not pay high prices, cooperation naturally can not be talked about.

On the other hand, almost all Biotech wants to be the next Baekje, Cinda. Coupled with the enthusiastic pursuit of capital, Biotech is the darling of the market in the past few years, and the right to speak is in the hands of Biotech.

Just as the so-called feng shui turns, since 2021, the wind direction has changed rapidly, the bargaining power of Biotech has declined rapidly, and the discourse power of large pharmaceutical companies has increased rapidly. For many Biotechs, the question at hand is not whether they can become Big Pharma, but how to survive.

Among the many Biotechs, only a very small number are destined to break through the cocoon and become butterflies. Some market participants have predicted that the opportunity window for Biotech to Big Pharma has closed, and there will not be more than 10 Big Pharma in China in the future.

Time shifts easily, and when you wake up from a dream, the situation today is that most Biotechs can no longer be proud. From the perspective of the development path of biomedicine in the United States, future mergers and acquisitions, restructuring, upgrading and transformation will be the helpless move of many Biotech.

At the same time, for the market, this is also a process of survival of the fittest, innovative pharmaceutical companies with core technologies will still be favored by capital, but those innovative pharmaceutical companies that will only tell stories and pseudo-innovation will disappear. And those who seize the opportunity, Big Pharma, will also take the road of mergers and acquisitions to go further.

Let's see what happens next.