As the new crown epidemic rages around the world, China and the United States are stepping up vaccine research, and the experimental monkey has become a scarce resource, which can be said to be "a monkey is difficult to find" in the United States and China. On June 10, the news of "hoarding monkeys" of many leading domestic pharmaceutical companies rose to the first place in Weibo hot search, which aroused widespread concern in the market and also reflected the current shortage of domestic experimental monkeys.
It is also this hot search that pushes the "Monkey Mao" Zhaoyan new drug into the spotlight again.
Zhitong Finance APP learned that at the end of April this year, Zhaoyan New Drug announced two cash mergers and acquisitions, with a total expenditure of 1.805 billion yuan. The two companies acquired by Zhaoyan New Drug are mainly engaged in the breeding and sales of laboratory model animals.
Around the world, the only thing that can make the model animal industry a leader is the Charles River that started by acquiring thousands of rat cages on farms. The acquisition of "Hoarding Monkey" by Zhaoyan New Drug has also made the distance between it and the Charles River further.
The Chinese version of the Charles River
As the earliest private enterprise engaged in the pharmacology and toxicology evaluation of new drugs in China, Zhaoyan New Drug has become one of the largest institutions engaged in preclinical safety evaluation services for drugs in China through years of development. It is also the fourth CXO company to be listed in Hong Kong after WuXi AppTec, Kanglong Chemical And co-ordination and Tigermed.
Zhitong Finance APP learned that Zhaoyan New Drug was established as early as 1995, after more than 20 years of development, it is currently the first professional new drug preclinical safety evaluation institution in China that has passed the US FDAGLP inspection, and is the only professional new drug preclinical safety evaluation institution with international AAALAC (Animal Welfare) certification, China CFDAGLP certification, EU OECDGLP certification and South Korea's MFDSGLP certification qualifications.
It is worth mentioning that at present, there are only 31 institutions in China that have obtained GLP certification from the State Food and Drug Administration, and only two CROs, including Zhaoyan New Drugs, have obtained the certificates required for the GLP research of all ten types of drugs.
In addition to the above acquisition of two domestic laboratory model animal breeding and sales companies, the most important strategic expansion of Zhaoyan New Drug in recent years is the acquisition of Biomere in the United States in 2019.
The West Coast-based company specializes in drug screening and efficacy assessment, and is one of the few scarce companies in the United States that can conduct primate testing. It is precisely because of the acquisition of Biomere that Zhaoyan New Drug can have a GLP laboratory on the West Coast of the United States.
The pace of acquisitions that have gradually attracted market attention from Zhaoyan new drugs makes it easy to recall the fortunes of global CRO giant Charles River.
Charles River is the world's largest early-stage drug contract research organization, with its headquarters in Massachusetts, USA. Charles River is a giant with laboratories, production and laboratory animal breeding facilities in many countries around the world, and about 20,000 employees worldwide. It is due to the diversification of its preclinical CRO business through step-by-step acquisitions and mergers.
From 2008 to 2012, Charles River acquired Newlab BioQuality AG, a company engaged in MIR preclinical services, Cerebricon, Ltd in Piedmont and Finland, as well as Accugenix, the world's leading provider of contract microbiological identification tests in accordance with cGMP.
Following the acquisition of Argenta and BioFocus in 2014, Charles River officially positioned itself as a full-service, early-stage contract research organization (CRO) and acquired ChanTest, a leading provider of cardiac risk assessment and ion channel screening, in the same year. Since then, in 2015-2021, Charles River has acquired nearly 20 enterprises and research laboratories, further enhancing its global security assessment and CDMO service capabilities.
At present, Charles River mainly has three major business units: experimental animal model and service, drug discovery and safety evaluation, and production support. On February 16, 2022, Charles River announced its full-year 2021 financial results, with full-year revenue of $3.54 billion.
According to the Zhitong Finance APP, the drug discovery and safety assessment business (DSA) is the main source of revenue for charles river. In 2021, Charles River's DSA revenue was $2.11 billion, an increase of 14.7 percent, or 59.6 percent of total full-year revenue. The margin on the DSA segment increased from 17.7% in 2020 to 19.3% in 2021.
Compared with charles river, the business structure of Zhaoyan New Drug is somewhat single. For a long time, its proportion of drug preclinical research services has been higher than 90%. In contrast, the total revenue from clinical services and other businesses and laboratory animal supply does not exceed 5% of total revenue. However, this has also achieved a high level of gross profit that Zhaoyan New Drugs has maintained.
The order price of Zhaoyan new drug is a cost-plus method, and the gross profit margin is basically maintained at more than 50%, with slight fluctuations every year. In addition, due to the low cost of domestic manpower and material procurement, as well as Zhaoyan's own primates, its gross profit margin in the past two years has been higher than that of the Charles River.
It is worth mentioning that according to the latest 2022 first quarter report, the gross profit margin of Zhaoyan New Drug reached 51.69%, compared with the annual gross profit margin of 48.51% in 2021, and exceeded the annual gross profit margin of 2020 by 51.18%.
The reason why it is compared with the gross profit margin in 2020 is because the price of experimental monkeys has not yet increased in 2021. After the 2021 experimental monkey price increase, the gross profit of Zhaoyan new drug in 2022 returned to the previous level, indicating that the company has transferred the gross profit margin pressure brought about by the experimental monkey price increase to downstream customers.
Although there is a large volume difference between Zhaoyan new drugs and charles river, in terms of development path, the overall direction of zhaoyan new drugs and charles rivers is roughly the same.
In terms of technology, Zhaoyan New Drug is continuing to strengthen research and development support for innovative drugs and original innovations of new technology platforms. In the first half of 2021, the cell and gene therapy orders were signed totaling about 120 million yuan, an increase of more than 35% year-on-year, and the evaluation of the first STAR-T cell, TIL cell and non-tumor target CAR-T cell drugs in China is underway. Orders and demand for mRNA and siRNA platform projects increased significantly, increasing by more than 60% year-on-year.
It can be seen that similar to Charles River, Zhaoyan New Drug is pursuing vertical integration in the pharmaceutical R&D outsourcing industry chain, which can not only provide customers with more convenient one-stop service, but also an effective way to build their own competitiveness and enhance profitability.
In terms of production capacity, in 2021, Zhaoyan New Drug will put into operation the new production capacity of 7,500 square meters of animal houses in Suzhou, and begin the expansion and construction of the second phase of the project, with a total planned increase of 25,000 square meters of construction area; In Wuzhou, Guangxi, it is planned to add 565 acres of experimental monkey breeding base, with the ability to raise 15,000 experimental monkeys; In Guangzhou and Chongqing, more than 150,000 square meters of new facilities were built to build new safety assessment centers. The layout and expansion of multi-regional production capacity in china will meet the medium- and long-term expansion needs of Zhaoyan new drugs.
The security market is expanding
Back in charles river, the company has grown from a single laboratory to a global support network for model animal research, drug discovery and safety assessment, and drug manufacturing manufacturing services in 70 years. In addition to its continuous acquisitions and mergers and acquisitions to expand its volume, it is also related to the huge innovative pharmaceutical market it faces.
According to the Zhitong Finance APP, charles river currently has more than 100 factories and facilities in more than 20 countries around the world. In 2021, Charles River participated in the study of > 85% of new drugs approved by the US FDA, including 100% of central nervous system drugs; > 90% of tumor drugs; 75% of cell and gene therapy drugs.
It can be seen that the strategic positioning of charles river is mainly focused on coordinating global resources and applying a multidisciplinary perspective to solve the unique challenges of different types of customer products. This is the main reason why its revenue and non-GAAP earnings per share have tripled since 2015.
The growth of the domestic security assessment market is also based on the growth of the overall innovative pharmaceutical market.
At present, the domestic security assessment market is constantly expanding. From the market space to measure, general chemical first-class drugs and therapeutic biological drugs, pre-clinical declaration of animal safety evaluation; According to the acceptance of the new drug IND of the intranet, that is, from a total of 395 varieties in 2017 to 480 varieties in 2019, the compound growth during the period was 10.24%.
At the same time, with the increase in the price of test animals and the increase in personnel costs in recent years, the order price has also shown an upward trend, taking into account the increase in the number of IND declarations and the rise in order prices, and the logic of "volume and price rising" in the security evaluation market. In terms of industry development, it is the improvement of the domestic innovative drug boom that drives the demand for research and development of the pharmaceutical industry chain to become more and more vigorous, and the low cost of domestic pharmaceutical research and development leads to the transfer of foreign pharmaceutical research and development industry chain to China.
From the perspective of market space, general chemical drugs and therapeutic biological drugs need to be evaluated for animal safety before declaration. According to the statistics of IND acceptance, the number increased from 395 varieties in 2017 to 480 varieties in 2019, with a compound growth of 10.24% during the period; At the same time, with the increase in the price of laboratory animals and the increase in personnel costs in recent years, the order price has also shown an upward trend, and the growth rate of the domestic CRO and security evaluation market will be more obvious considering the number of IND declarations and the increase in order prices.
According to the data, the size of the mainland CRO market in 2019 was about 6.8 billion US dollars, and it is expected to reach 22.2 billion US dollars in 2024, with a compound growth rate of about 26.5% during the period. At the same time, the market size of non-clinical safety evaluation of mainland drugs in 2019 was $410 million, and it is expected to reach $2 billion in 2024, with a compound annual growth rate of 36.5%.
With the overall pharmaceutical innovation environment in China improving, the business volume of CRO enterprises has grown rapidly, which is the main reason for the shortage of experimental monkeys.
When CRO companies carry out the business of non-clinical safety evaluation of drugs, the experimental model is the key to it. In recent years, the rise in the price of crab-eating monkeys in the domestic market has also directly affected the cost of these enterprises. Due to the continuous rise in the price of crab-eating monkeys, in the recently released 2021 annual report, the raw material costs of many DOMESTIC CRO companies have increased to varying degrees. "Hoarding monkey" is also to alleviate the pressure on raw materials.
However, it is worth noting that the so-called "monkey famine" will not have a significant negative impact on the domestic innovative drug industry in the short term. From the perspective of price factors, in the process of research and development of a new drug project, the amount of experimental monkeys is generally about 60, even according to the average unit price of 200,000 yuan / only, the highest cost is only 12 million yuan, compared with the current domestic large-scale biological innovation pharmaceutical companies often hundreds of millions of yuan or even billions of yuan of biological drug research and development costs, the actual impact or still limited.