In-depth research report on the insulin industry: the era of basal insulin weekly preparation has begun

(Report Producer/Analyst: Huachuang Pharmaceutical Team)

1. Basic concepts of basal insulin

(1) Basal insulin is the cornerstone drug of insulin therapy

Insulin is a protein hormone synthesized and secreted by pancreatic islet β cells by endogenous or exogenous substances such as glucose, lactose, ribose, etc., human insulin (Insulin Human) has two peptide chains, of which the A chain has 11 kinds of 21 amino acids, and the B chain has 15 kinds of 30 amino acids.

Healthy people typically maintain a relatively narrow homeostatic range of blood glucose throughout the day, and physiological insulin is regulated by two modes of secretion to maintain glucose homeostasis:

• Pancreatic β cells secrete insulin in low-frequency pulses in small amounts, accounting for about 50% of the total insulin secretion throughout the day, to regulate hepatic glucose production and lipolysis, i.e., basal insulin secretion, in the post-absorption state (e.g., between meals, at night, and on an empty stomach).
• Postprandial insulin secretion is significantly increased in a high-frequency pulse pattern after meals, which controls the rise in postprandial blood glucose by stimulating peripheral glucose uptake and inhibiting hepatic glucose production, i.e., prandial insulin secretion.

Diabetic patients with pancreatic islet β cells are damaged, and often need to maintain a stable blood glucose level by injecting exogenous insulin to simulate the insulin secretion of normal human body.

Since its discovery in 1921, insulin has been used in clinical practice for more than 100 years, and its development has gone through three stages: animal insulin, recombinant human insulin, and insulin analogues. According to the characteristics of action, the product categories include short-acting/rapid-acting insulin, intermediate-acting insulin, premixed insulin, long-acting insulin, and ultra-long-acting insulin. Long-acting/ultra-long-acting and intermediate-acting insulin (or similars) are used as basal insulin, and short-acting/rapid-acting insulin is used as prandial insulin.

Basal insulin is the cornerstone of insulin therapy. Insulin is the ultimate medication for the treatment of diabetes, and the status of medication is irreplaceable, and basal insulin is the cornerstone of insulin therapy:

First, basal insulin is often used as the starting regimen for insulin therapy. According to the Guidelines for the Prevention and Treatment of Type 2 Diabetes Mellitus in China (2020 Edition) of the Diabetes Branch of the Chinese Medical Association, basal insulin is one of the commonly used starting insulin treatment regimens. The 2022 American Diabetes Association (ADA) standards for diabetes medicine also recommend basal insulin combined with oral hypoglycemic drugs as a commonly used insulin initiation regimen.

Second, basal insulin is also an important part of intensive insulin therapy. Diabetes mellitus is a progressive disease, and for patients with inadequate HbA1c control at initial therapy, intensive regimens should be switched to basal insulin + prandial insulin (1 to 3 times a day) or premixed insulin 2 to 3 times a day. For short-term intensive insulin therapy in patients with newly diagnosed type 2 diabetes, the main regimen includes basal + mealtime insulin injections 1 to 3 times a day, premixed insulin injections 2 to 3 times a day, and continuous subcutaneous infusion of insulin.

Third, patients with poor premixed insulin regimens can be switched to basal insulin regimens. Ran Xingyuan et al. pointed out that in patients with poor glycemic control or large blood glucose fluctuations in the treatment of premixed insulin, the "premixed insulin regimen" can be converted to "basal insulin combined with oral hypoglycemic drugs" or "basal insulin combined with prandial insulin" to better simulate the level of human insulin secretion.

Fourth, basal insulin-based combination preparations are gradually becoming a new trend in treatment. The combination of basal insulin and prandial insulin or GLP-1 receptor agonists has become the current development direction of new insulin products, such as insulin degludec aspart, which can effectively control blood sugar by 1-2 injections per day, and the number of injections is significantly reduced compared with the daily multiple insulin injection regimen, which can be used for insulin initiation and switching regimens. Another example is the combination of basal insulin and GLP-1 with insulin degludec/liraglutide injection, which has a complementary mechanism and can significantly reduce the risk of hypoglycemia and alleviate the obesity caused by long-term insulin injection

(2) Basal insulin has changed three times from generation to generation, and it has not yet crossed the boundary of daily preparation

There are three iterations of basal insulin, and the first generation of basal insulin mainly refers to neutral protamine Hagedorn insulin (NPH) formed by combining human insulin zinc crystals with neutral protamine, but the duration of NPH insulin still cannot meet the 24-hour coverage of the whole day, and it needs to be administered twice a day, and the action curve has obvious peaks, large absorption variation rate, and high risk of hypoglycemia. The second- and third-generation basal insulins are long-acting insulin analogues modified by amino acid substitution and fatty acid acylation technology, and although the action time is significantly longer than that of the first-generation intermediate-acting human insulin, it still needs to be administered once daily and has not yet crossed the boundaries of daily formulations.

Among the four basal insulin analogues in the world, Sanofi's insulin glargine U100 and U300 use an amino acid replacement strategy to extend the half-life, while Novo Nordisk's insulin detemir and insulin degludec use fatty acid acylation modification technology to add fatty acid side chains to improve the action time of basal insulin.

• Amino acid replacement strategies

The amino acid replacement strategy is to adjust the isoelectric point of natural insulin to be close to neutral through amino acid replacement, so that it forms a precipitate in the subcutaneous neutral environment to achieve the purpose of slow release into the blood.

Insulin glargine U100 replaces asparagine at the 21st position of the A chain of human insulin molecule with glycine, and 2 arginine are added at the end of threonine at 30 of the B chain, B31 and B32. Insulin glargine U100 has a half-life of 12 hours and a duration of action of 30 hours.

Insulin glargine U300 is a concentrated dosage form of insulin glargine U100 with identical molecular structure, which leads to a reduction in the subcutaneous reservoir surface area by changing the concentration, thereby prolonging the duration of action. Insulin glargine U300 has a half-life of 19 hours, and the duration of action is extended to 36 hours. Compared with insulin glargine U100, insulin glargine U300 has a lower risk of hypoglycemia and less variability in hypoglycemic efficacy.

Fatty acid acylation strategies

Fatty acid acylation is a half-life extension strategy that Novo Nordisk has been using and has used in insulin detemir, insulin degludec and semaglutide. Fatty acid acylation technology achieves the purpose of slow release and prolongs the action time by attaching fatty acids to the peptide chain of insulin, by enhancing the polymerization ability of insulin analogues and reversible binding to albumin in plasma.

Insulin detemir: Resinine at position 30 of the B chain of human insulin is removed, and a 14-carbon fatty acid side chain is bound to lysine at position 29 of the B chain. Insulin detemir is monohexamer in the preparation, and after subcutaneous injection, it forms a dihexamer through the self-polymerization of fatty acid side chains, and the monomer enters the blood and reversibly binds to serum albumin, thereby prolonging the action time, which is 24 hours. NPH and insulin glargine U100 will form crystals or microprecipitates after subcutaneous injection, while insulin detemir remains soluble and has stable absorption after subcutaneous injection, which can significantly improve the variability of hypoglycemic efficacy.

Insulin degludec: Removes threonine at position 30 of the B chain of human insulin, adds glutamate linker at position 29 of the B chain, and attaches a 16-carbon fatty acid side chain. Insulin degludec is a dihexamer in the formulation, which forms a long chain of polyhexamers after subcutaneous injection, and the monomer reversibly binds to serum albumin after entering the bloodstream, thereby prolonging the duration of action. The half-life of insulin degludec is as long as 25.4 hours, the duration of action is as long as 42 hours, and the action curve is flat and stable. Compared with insulin glargine U100, insulin degludec improved fasting blood glucose, significantly reduced the incidence of hypoglycemia, and had less variability in hypoglycemic efficacy.

(3) Basal insulin occupies half of the market, and large single products continue to emerge

According to Bloomberg data, the market size of insulin analogues in the United States in 2022 will be about 29.16 billion US dollars (terminal price), of which the three basal insulins of glargine, detemir, and deglu account for 58% of the market share. According to the data of Pharmacube, China's insulin analogue market will be about 15.03 billion yuan in 2022, a year-on-year decrease of 28.1%, and the decline in market size is mainly affected by the price reduction of the sixth batch of insulin special centralized procurement, of which the market share of the three basal insulins of glargine, degu and dete, accounts for about 47%.

In 2000, when the global insulin market was still monopolized by Novo Nordisk and Eli Lilly's second-generation recombinant human insulin, Sanofi's insulin glargine (Lantus) was approved by the FDA as the world's first basal insulin analogue. Although Sanofi had no experience in insulin sales at that time, it relied on the strong product strength of insulin glargine to break the monopoly of Novo Nordisk and Eli Lilly on the insulin market and achieve a three-third world in the insulin market.

According to Sanofi's annual report, Lantus' global sales peaked at $6.9 billion in 2015, making it a major product in the field of insulin and even diabetes. In 2015, the company launched Lantus' upgraded product, insulin glargine U300 (Toujeo), and in 2022, Toujeo's global sales revenue was US$1.21 billion, a year-on-year increase of 15.3%.

In 2005, Novo Nordisk launched the company's first basal insulin analogue, insulin detemir (Levemir), which achieved a peak sales of $2.64 billion in the global market, despite the peak effect of insulin detemir and the duration and hypoglycemic effect slightly worse than that of insulin glargine. In 2015, Novo Nordisk launched insulin degludec, which has no peak effect and has a longer duration of action, and the global sales revenue of insulin degludec in 2022 was approximately US$1.40 billion (-4%).

Second, the R&D of basal insulin focuses on prolonging the action time, and the weekly preparation of insulin has achieved a breakthrough

Basal insulin is primarily intended to effectively cover interprandial blood glucose, so the ideal basal insulin should have three characteristics: 1) long duration of action, 2) no peak effect (reducing the risk of hypoglycemia), and 3) low day/intraday variability (titration to a lower fasting glucose target without causing hypoglycemia).

At present, the latest generation of basal insulin analogues, such as insulin degludec and insulin glargine U300, have no peak effect, and their intraday and inter-day variability of hypoglycemic efficacy is also small, and the glucose control effect is relatively stable. Therefore, in order to reduce the number of injections and improve treatment compliance, prolonging the half-life and duration of action has become the core direction of the current research and development of basal insulin analogues.

(1) There are problems of delayed initiation and poor control of basal insulin therapy

At present, basal insulin therapy is faced with severe initiation delay and poor control. According to the recommendations of the Chinese guidelines for the prevention and treatment of type 2 diabetes, patients with type 2 diabetes can start the combination of oral hypoglycemic drugs and insulin if the blood glucose has not reached the control goal (when HbA1c is still ≥ 7.0% after 3 months of adequate oral hypoglycemic drug treatment) on the basis of lifestyle control and oral hypoglycemic drug treatment. However, from a practical point of view, the average HbA1c level of global patients reached 8.9% at the time of initiation of insulin therapy, and the average HbA1c level of Chinese patients was close to 10%, far exceeding 7%, and the delay in treatment initiation was more serious.

同时，患者在经过基础胰岛素连续治疗后也存在明显HbA1c控制不佳的问题。 根据Dídac Mauricio et al.《Glycaemic control and hypoglycaemia burden in patients with type 2 diabetes initiating basal insulin in Europe and the USA》数据，经过3个月和24个月基础胰岛素起始治疗后，欧美国家患者HbA1c水平降至7.0%以下的比例分布为8.1%-28.0%、17.3%-33.4%，仍处在较低水平。

Poor adherence is the core reason for the current suboptimal basal insulin therapy. Patients are initially treated with basal insulin, which is often injected once a day according to the latest generation of insulin degludec or insulin glargine U300. If intensive treatment with prandial insulin is given as diabetes progresses, 2-4 injections per day are required, which are more frequent and can lead to problems such as subcutaneous induration, skin redness, and fat hyperplasia.

Therefore, the side effects of high-frequency injection and long-term injection lead to needle fear in many patients, and it is difficult to effectively implement insulin treatment regimen, resulting in delayed initial treatment and failure to effectively control blood glucose levels, increasing the risk of diabetes complications.

(2) Weekly preparations can improve compliance and reduce the burden of treatment

The emergence of insulin weekly formulations can effectively solve the current clinical dilemma of basal insulin. The transition from daily to weekly insulin dosing means that the frequency of insulin administration can be reduced from 365 to 52 injections per year, and a significant reduction in the number of injections can improve patient compliance, which is expected to overcome the delay in initiation of insulin therapy and reduce the burden of treatment.

Reducing the frequency of injections can significantly improve treatment adherence, as well as in GLP-1. According to the analysis of the STAY study, by comparing the treatment adherence and durability of the GLP-1 week formulation with the daily formulation, after 6 months and 12 months of treatment, the treatment compliance of the GLP-1 week formulation was increased by 23% and 35%, respectively, compared with the daily formulation, and the weekly formulation could significantly improve the treatment compliance and durability. For example, Novo Nordisk's liraglutide injection diabetes indication peaked at about $3.4 billion, while semaglutide injection diabetes indication was approved by the FDA in December 2017, and it took only five years to achieve a sales scale of $9 billion.

(3) A breakthrough has been made in the research and development of basal insulin weekly preparations, and Novo Nordisk is ahead of the curve

At present, only three basal insulin weekly preparations in the world are in clinical trials (there is no progress in phase I clinical trials of Hanmi's two products), namely Novo Nordisk's Icodec insulin (the highest R&D progress in the world is NDA), Eli Lilly's Efsitora alfa insulin (LY-3209590) (the world's highest R&D progress is in phase III clinical trial), Gan & Lee Pharmaceutical's GZR4 (the world's highest R&D progress is a phase II clinical trial).

The action time extension strategy adopted by the basal insulin daily formulation includes two technologies: amino acid replacement and fatty acid acylation, and it is difficult for a single technology to achieve the leap from daily preparation to weekly formulation, so Novo Nordisk and Eli Lilly have adjusted their R&D strategies in weekly formulations (Gan & Lee Pharmaceutical did not disclose the GZR4 action time extension strategy):

• Novo Nordisk: Combines amino acid substitution and fatty acid acylation to achieve precise molecular modification

Novo Nordisk's innovative R&D in the field of diabetes has the characteristics of stepwise and progressive, and the company has comprehensively used two mature technologies of amino acid replacement (insulin glargine design) and fatty acid acylation (detemir and insulin degludec) to achieve a breakthrough in weekly preparations. On the one hand, Icodec insulin continues the fatty acid acylation technology of insulin detemir and insulin degludec, and introduces fatty acid side chains to achieve reversible binding with albumin, and on the other hand, with the help of amino acid replacement technology, Icodec insulin replaces amino acids at the A14, B16 and B25 positions of human insulin to reduce the affinity with insulin receptors, enhance molecular stability and reduce enzyme degradation. Based on the IIIa clinical data of the ONWARDS study, Novo Nordisk submitted a global marketing registration application for Icodec insulin in the United States, the European Union, China and other countries or regions in April 2023, and it is expected to be approved for marketing in major countries and regions around the world in 2024.

Eli Lilly: Effectively extend the half-life with the help of Fc-fusion protein technology

Eli Lilly uses Fc fusion protein technology to extend the half-life of insulin peptides, and Efsitora alfa insulin (LY-3209590) fuses a novel single-chain insulin variant to the human IgG Fc region to form a fusion protein for long-acting purposes. LY-3209590 has a half-life of 17 days, allowing it to be administered once weekly. LY-3209590 is currently in Phase III clinical trials worldwide. In 2021 LY3209590 positive clinical data have been demonstrated in patients with type 2 diabetes, according to its phase II clinical results, after a once-weekly basal insulin injection LY3209590 for 32 weeks, the mean HbA1c reduction level was not inferior to the regimen of once-daily insulin degludec injection, and the LY3209590 group had a lower rate of hypoglycemic episodes and less weight gain.

3. The launch of Icodec insulin is imminent, and the global insulin market may usher in changes

(1) Innovative molecular design, effective extension of action time

• Fatty acid side chains are introduced to achieve strong and reversible binding to albumin

The application of fatty acid acylation modification technology has promoted the development of Novo Nordisk's basal insulin products, peptides with fatty acid side chains added by fatty acid acylation technology can strongly bind to albumin, increase the molecular size of albumin-peptide complexes, reduce the rate of diffusion in tissues after injection and the rate of passing through the capillary wall, and form albumin reservoirs in the circulation, thereby prolonging the pharmacokinetics of peptide drugs.

Icodec insulin also continues the fatty acid acylation technology, its molecular structure removes the threonine at the B30 position of human insulin, introduces a 20-carbon fatty acid as a side chain, and links it with lysine at the B29 position through the oligoethylene glycol γ-L-glutamate linker, the above molecular structure changes can make Icodec insulin achieve a strong and reversible binding to albumin, and its affinity with albumin is 9.5 times higher than that of insulin detemir.

• Three-punt amino acid substitution, reducing insulin receptor-mediated clearance

Icodec insulin is not enough to extend the half-life to meet the need for once-weekly dosing by introducing a 20-carbon fatty acid side chain alone, so Icodec insulin has three amino acid substitutions in the amino acid sequence of human insulin: tyrosine at A14 with glutamic acid, tyrosine at B16 with histidine, and phenylalanine at B25 with histidine, thereby reducing the relationship between Icodec insulin and insulin receptor, IR), the overall three amino acid substitutions can reduce the IR affinity of Icodec insulin molecule by 5.5% compared with that of human insulin, and reduce the insulin receptor binding-mediated clearance. At the same time, the high affinity of the 20-carbon fatty acid side chain for albumin further limited the number of Icodec insulin molecules bound to IR, thereby further reducing the relative affinity of Icodec insulin from 5.5% to 0.03% of human insulin at 1.5% HSA.

• Enhance molecular stability and reduce enzymatic degradation

Amino acid replacement not only reduces insulin receptor-mediated clearance, but also confers better molecular stability of Icodec insulin and reduces the enzymatic degradation of Icodec insulin. At the same time, the amino acid substitution of A14E (A14 tyrosine replaced by glutamic acid) and B25H (B25 phenylalanine replaced with histidine) increased the solubility of Icodec insulin, and when the concentration of the preparation reached 700 U/mL (7 times that of insulin glargine 100 U/mL), it still had good solubility, making the volume of the once-weekly injection dose of Icodec insulin similar to that of the daily basal insulin injection daily for a week.

(2) ONWARDS research has established the status of Icodec insulin king

In December 2020, Novo Nordisk launched the phase IIIa clinical trial of Icodec insulin (ONWARDS study), and the ONWARDS study designed a total of 6 programs, namely ONWARDS 1-6, which included more than 4,347 adults with type 1 and type 2 diabetes worldwide, to comprehensively evaluate the efficacy of Icodec insulin in different types, For the comparison of the efficacy and safety of existing basal insulin in diabetic patients with different treatment backgrounds, all six programs have been completed in 2022 and have met the preset endpoints. In April 2023, based on the IIIa clinical data of the ONWARDS study, Novo Nordisk simultaneously submitted a global marketing registration application for Icodec insulin in the United States, the European Union, China and other countries or regions, and it is expected to be approved for marketing in 2024.

ONWARDS R&D CLINICAL PROTOCOLS ARE DESIGNED TO TAKE INTO ACCOUNT A VARIETY OF BASAL INSULIN ADMINISTRATION SCENARIOS. THE SIX PROGRAMS OF THE ONWARDS STUDY INCLUDED PATIENTS WITH TYPE 2 DIABETES WHO HAD RECEIVED PRIOR INSULIN THERAPY, PATIENTS WITH TYPE 2 DIABETES WHO HAD NOT RECEIVED INSULIN BEFORE, AND PATIENTS WITH TYPE 1 DIABETES, COVERING BASICALLY ALL SCENARIOS OF BASAL INSULIN USE. From the perspective of control drugs, the control group of the ONWARDS study included insulin glargine U100, insulin degludec, and basal insulin analogues (including insulin degludec, insulin glargine U100, and insulin glargine U300), covering the current mainstream basal insulin products.

Excellent clinical data from Icodec insulin have proven to be the optimal solution for current basal insulin regimens:

1) In the ONWARDS 1, 3, and 5 programs, insulin Icodec was better at reducing HbA1c than insulin glargine U100 (-1.55% vs -1.35%), insulin degludec (-1.57% vs -1.36%), basal insulin (including insulin degludec, insulin glargine U100, insulin glargine U300) in patients with type 2 diabetes who had not received prior insulin (-1.68% vs -1.31%) (-1.68% vs -1.31% ), the hypoglycemic effect of Icodec insulin is better than that of the current mainstream basal insulin. In terms of safety, there was no statistically significant difference in the incidence of hypoglycemic events between Icodec insulin and the control groups, and the once-weekly injection of Icodec insulin showed that it was safe and well tolerated.

2) In the ONWARDS 2 and 4 programs, the glycemic lowering effect of insulin Icodec was better than that of insulin degludec (-0.93% vs -0.71%) and non-inferior to insulin glargine U100 (-1.16% vs -1.18%), indicating that there is obvious clinical value in switching the existing treatment regimen to Icodec insulin regimen. In terms of safety, there was no statistically significant difference in the incidence of hypoglycemic events between Icodec insulin and the control groups, and the once-weekly injection of Icodec insulin showed that it was safe and well tolerated.

3) In the ONWARDS 6 program, insulin Icodec in combination with insulin aspart was non-inferior to insulin degludec in combination with insulin aspart in patients with type 1 diabetes mellitus in reducing HbA1c (-0.47% versus -0.51%). In terms of safety, the incidence of hypoglycemic events was higher in the Icodec insulin group.

Through the ONWARDS study, Icodec insulin has demonstrated that it is not inferior to the current clinical use of basal insulin, and the overall safety and tolerability are good, on the basis of being able to greatly extend the dosing cycle and greatly improve patient compliance. Therefore, whether it is for patients starting basal insulin therapy or changing the regimen for existing patients, Icodec insulin is of greater clinical value.

(3) The R&D of IcoSema compound is advancing simultaneously to further extend the life cycle

In terms of R&D strategy, in order to fully tap the growth potential of large single products, Novo Nordisk often carries out compound design around existing products to expand the product life cycle. For example, insulin degludec was approved by the FDA in 2015, and then insulin degludec/insulin aspart and insulin degludec/liraglutide combination were also launched in 2016 to supplement the needs of patients with poor unilateral glycemic control or higher adherence.

In the field of insulin, Novo Nordisk has laid out two combinations: insulin degludec/insulin aspart (trade name: Ryzodeg/Novojia) and insulin degludec/liraglutide (trade name: Xultophy/Novo Yi) on the basis of insulin degludec (trade name: Tresiba/Novo Rich). Insulin degludec's global sales revenue in 2022 is US$1.40 billion (-4%), with a CAGR=5% in 17-22 years. Compared with insulin degludec, Ryzodeg's global sales revenue in 2022 is US$430 million (+69%), with a CAGR=42% in 17-22 years; Xultophy's global sales revenue in 2022 was US$420 million (+6%), with a CAGR = 31% in 17-22 years.

Continuing the idea of insulin degludec/liraglutide combination, the company composed IcoSema with semaglutide and Icodec insulin combination, the former is the star product of Novo Nordisk GLP-1, and the latter is currently the strongest basal insulin weekly preparation. In 2021Q4, Novo Nordisk has initiated the phase III clinical trial (COMMIT study) of IcoSema, and the COMMIT study has designed a total of 3 projects, namely COMBINE 1-3, and according to Novo Nordisk's plan, all three studies are expected to be completed in 2024.

Of particular note is the design of COMBINE 3, a 52-week clinical trial in patients with type 2 diabetes who have previously been treated with basal insulin, to evaluate the efficacy and safety of the once-weekly IcoSema combination with once-daily insulin glargine combined with 2-4 daily injections of insulin aspart. The clinical design of COMBINE 3 suggests that IcoSema will challenge the current basal insulin + prandial regimen of insulin glargine combined with insulin aspart, and if the readout data is positive, it may change the current approach to insulin patients.

(4) Icodec's global sales are expected to hit 10 billion US dollars

We believe that Icodec insulin, as the world's first basal insulin weekly preparation, has achieved a major breakthrough from daily to weekly preparation, which is of epoch-making significance, and Novo Nordisk has a strong insulin sales channel, and the product is expected to replicate the volume trend of insulin glargine in that year.

More importantly, in the context of the current delay in the initiation of insulin therapy and the problem of avoiding injection, even in the European and American markets where insulin education is more adequate, Icodec insulin is still expected to improve the penetration rate and initiation time of insulin therapy. Therefore, the sales expectation of Icodec insulin cannot only be examined by the current global insulin market capacity, in addition to replacing the current insulin treatment regimen, Icodec insulin is more importantly, it is expected to promote the further expansion of the global insulin market. We believe that the long-term market space of Icodec insulin may exceed 10 billion US dollars, and the launch of IcoSema is expected to further increase the sales expectation of Icodec insulin series.

Based on estimates, we expect Icodec insulin to peak sales of US$1.28 billion (approximately RMB 9.2 billion) in China. If you consider the United States, Europe and other overseas countries or regions, the peak sales of Icodec insulin are expected to exceed 10 billion US dollars.

Fourth, domestic insulin broke the game

Due to the emergence of weekly preparation products such as Novo Nordisk Icodec insulin and Eli Lilly Efsitora alfa insulin, especially Icodec insulin may be approved in China in 2024, the market is worried that the listing of basal insulin weekly preparations will have an impact on the basic market of domestic insulin companies such as Tonghua Dongbao and Gan & Lee Pharmaceutical.

However, we believe that in the short term, due to the stickiness of insulin stock and the difference in medical insurance payment, the impact of weekly preparations on the domestic basal insulin stock market may not be obvious. At the same time, Dongbao and Gan & Lee are also actively carrying out innovative research and development, laying out insulin weekly preparations, and expanding into the field of GLP-1, and continuing to improve the diabetes treatment plan. In addition, in terms of internationalization, Dongbao and Gan & Lee are also actively deploying. With the continuous enrichment of product pipelines and sales areas, the revenue of domestic insulin leaders such as Dongbao and Gan & Lee will be more diversified in the future.

(1) The short-term impact of the weekly preparation on the market on the domestic basic disk may not be obvious

Compared with other drugs, new insulin products are relatively slow to replace old products. Compared with the oncology drug EGFR-TKI (epidermal growth factor receptor tyrosine kinase inhibitor), third-generation insulin analogues were marketed in China as early as 2002, but even in 2022, second-generation recombinant human insulin still has a market share of nearly 20%, and fourth-generation insulin degludec was approved in 2017, and its market share in China in 2022 is about 7%. In contrast, oncology drugs iterate faster, with the market share of third-generation EGFR-TKIs rapidly increasing from 1% to 77% six years after being marketed, and the market share of first-generation EGFR-TKIs shrinking from 99% to 19% in 2022.

It is precisely because of the strong stickiness of insulin stock and the difference in the payment of different insulin products by medical insurance that the generational change of insulin is not achieved overnight, and this logic also applies to the upcoming basal insulin weekly preparations.

1. The insulin stock is viscous

The main reasons for the strong stock stickiness of insulin products include: first, changing the insulin brand is prone to blood sugar fluctuations, and patients will not easily change insulin products if the current insulin treatment regimen can control blood sugar smoothly; second, insulin therapy has individual differences, and changing the brand means that blood glucose, blood pressure, blood lipids and other monitoring need to be re-conducted, and the replacement steps are more complicated; third, the supporting injection device is also an important part of insulin therapy, and different brands of injection pens (such as Novo pen, Shulin pen, Xiulin pen, etc.) and injection needles with different parameters (such as 4mm (32G), 5mm (31G), 6mm (31G), etc.) have different user feelings, and the use habits also objectively enhance patients' loyalty to the insulin brand.

2. There are differences in medical insurance payments

At present, the domestic insulin market maintains the coexistence of second-, third-, and fourth-generation insulins, and there are differences in the level of medical insurance payment for different insulins.

The difference between insulin analogues and second-generation recombinant human insulin in medical insurance payment is mainly reflected in two aspects: first, recombinant human insulin entered the medical insurance category B in 2009, and was fully adjusted to medical insurance class A in 2017, and the medical insurance is fully reimbursed, while insulin analogues are currently medical insurance class B, and patients need to pay a certain percentage of their own expenses; second, there are restrictions on the payment scope of each insulin analogue before 2023, such as insulin glargine "limited to type I diabetes patients, and other type II diabetes patients who are difficult to control with medium and long-acting insulinThe application scenarios are restricted, and the latest version of the medical insurance catalogue in 2023 will lift the restricted payment scope of insulin analogues.

Therefore, because there are still significant differences in medical insurance payments between recombinant human insulin and insulin analogues, patients with poor ability to pay may still choose second-generation insulin as their preferred drug regimen.

(2) Weekly preparation of insulin is indispensable

Although in the short term, the impact of basal insulin weekly preparations on the domestic stock market will not be too great, in the long run, the long-acting basal insulin is the core direction of global research and development, and it is also the mainstream of future drug use, so it is indispensable for domestic enterprises to deploy basal insulin weekly preparations.

From the perspective of R&D pattern, there are currently three insulin analogue weekly preparations in China that are in the clinical development stage, namely Novo Nordisk's Icodec insulin, Eli Lilly's Efsitora alfa, and Gan & Lee Pharmaceutical's GZR4. Gan & Lee's GZR4 was approved by the Chinese NMPA to conduct a clinical trial on July 7, 2022, and the first subject in the Phase I clinical trial was dosed in September 2022 and the first patient in the Phase II clinical trial was dosed in September 2023. In the United States, in August 2022, GZR4 received IND approval from the U.S. FDA and was officially approved to conduct Phase I clinical trials.

(3) The layout of GLP-1 is expected to win the inlet traffic

GLP-1 is the first-line insulin administration. Treatment of type II diabetes follows a sequence from oral to injectable, which in turn can be progressively transitioned from GLP-1 receptor agonists to insulin (including the combination of GLP-1 and insulin). GLP-1 has an excellent hypoglycemic effect, and can reduce the risk of hypoglycemia, avoid adverse effects such as weight gain caused by insulin therapy, and the current volume is very rapid. In 2022, there are 4 GLP-1 (differentiated dosage forms) among the top 10 drugs in global diabetes sales, and Novo Nordisk's semaglutide injection was approved for marketing in December 2017, and its global revenue reached US$8.6 billion (+66%) in 2022, making it the largest variety of diabetes drugs. At the same time, GLP-1 has also shown great potential in other endocrinology fields such as weight loss and NASH.

Domestic insulin leaders such as Dongbao and Gan & Lee are actively deploying GLP-1 and are expected to win the inlet flow. Tonghua Dongbao currently has a total of three GLP-1 products under development, of which the liraglutide biosimilar has been approved in December 2023, becoming the second liraglutide biosimilar in China, THDBH120 is a dual-target weekly formulation, and the THDBH110 is oral small molecule GLP-1. Gan & Lee Pharmaceutical's GLP-1 product GZR18 under development has been reported in both China and the United States, and the domestic indications for type II diabetes and weight loss are in the phase II clinical stage, and the main part of the phase I clinical trial has been basically completed in the United States.

In addition, China's GLP-1 R&D track is hot, and the current domestic GLP-1 products under development are extremely rich, and there is no shortage of weekly GLP-1 products, while Dongbao and Gan & Lee have relatively abundant cash assets and have potential M&A opportunities.

• Tonghua Dongbao: Oral and weekly formulations of GLP-1 are advancing rapidly

1) Liraglutide: The company's liraglutide injection was approved by the NMPA for the treatment of type II diabetes in December 2023, becoming the second liraglutide biosimilar to be marketed in China. Clinically, liraglutide can be used alone or in combination with basal insulin (e.g., insulin glargine) for the treatment of diabetes. The company's diabetes channel is mature and has more than 20 years of insulin sales experience, so for Dongbao, the company's liraglutide can be promoted separately or jointly sold with insulin glargine after it is launched, so as to achieve rapid volume with the help of existing channels.

2) THDBH120: THDBH120 injection is a GLP1R/GIPR dual-target weekly preparation, which further improves metabolic stability through molecular design, and plays a synergistic role in promoting blood sugar control, weight loss and regulation of lipid metabolism, so as to meet the clinical needs of diabetic patients with poor treatment effect of single molecular target or compound preparation. At present, the enrollment of the first subject in the phase Ia clinical trial will be completed in December 2023 for the THDBH120 diabetes indications, and it is expected to advance to weight loss, NASH and other indications in the future.

3) THDBH110: THDBH110 capsule is an oral non-peptide, small molecule GLP-1 receptor agonist. The results of preclinical studies showed that THDBH110 capsules had high bioavailability and showed good hypoglycemic properties. In December 2023 THDBH110 first patient enrollment was completed in the phase I clinical trial of capsule type II diabetes indication.

Gan & Lee Pharmaceutical: Zhou preparation GZR18 head-to-head competition semaglutide

Gan & Lee Pharmaceutical's GLP-1 product under development is mainly GZR18 injection. GZR18 is a GLP-1 receptor agonist weekly formulation with up to 94% homology to human endogenous GLP-1. In June 2022, the preclinical research results of GZR18 injection have been published in the European Journal of Pharmacology, an international authoritative academic journal. From the research data, it can be clearly seen that GZR18 has good hypoglycemic and weight-reducing effects in animal models of diabetes, showing good prospects for the treatment of diabetes and obesity.

In June 2023, the company completed the dosing of the first subject in the Phase IIb clinical trial of GZR18 for obesity/overweight weight management. In July of the same year, the phase IIb clinical trial of GZR18 injection in the indication of diabetes announced the comparison of efficacy and safety with semaglutide injection, becoming the first GLP-1 receptor agonist in China to evaluate the efficacy of the drug head-to-head with semaglutide injection. In December 2023, the clinical trial of GZR18 tablets, an oral dosage form of GZR18, for type 2 diabetes was approved by the NMPA. At the same time, in March 2022, the first patient was enrolled in the phase I clinical trial of GZR18 in the United States, and the main part of the trial has been completed.

In addition, referring to the design idea of Novo Nordisk IcoSema (GLP-1 week preparation/insulin week formulation), Gan & Lee Pharmaceutical also has the possibility of combining GZR4 (insulin weekly preparation) and GZR18 (GLP-1 weekly preparation), GLP-1/insulin combination can improve blood sugar, reduce body weight, reduce insulin dosage, and significantly reduce the risk of hypoglycemia.

(4) Enter the international market

Tonghua Dongbao: Cooperate with Jianyou to accelerate the international layout. Since 2003, Tonghua Dongbao has exported insulin APIs overseas, and its products are exported to Poland, Georgia and other European and neighboring Asian countries, and the company has the foundation of international sales. In terms of insulin preparations, the company started the registration of recombinant human insulin in the EU in 2013, and in January 2023, the marketing authorization application of the company's recombinant human insulin injection was accepted by the European Medicines Agency, and the product is expected to be approved for marketing in 2024.

In September 2023, Tonghua Dongbao and Jianyou Co., Ltd. signed a cooperation agreement, according to the agreement, Tonghua Dongbao and Jianyou Co., Ltd. will jointly carry out the development and production of three insulin cooperative products of glargine, aspart, and lispro in accordance with the drug registration requirements of the US FDA, and at the same time, Jianyou Co., Ltd. will obtain the exclusive commercialization rights of the three insulins in the United States after they are launched. In 2020, the FDA has adjusted the marketing application pathway for insulin in the United States from a new drug application (NDA) to a biologics license application (BLA), so under the existing framework, Dongbao's insulin analogues can be submitted for marketing as biologics through BLA (CMC+Phase I PK/PD study).

Gan & Lee Pharmaceutical: Internationalization is progressing rapidly, and the third generation of insulin is about to land in Europe and the United States. Gan & Lee began to promote the international layout in 2005, and as of 2023H1, the company's insulin products have obtained a total of 51 drug registration approvals in 19 overseas countries, and have formed formal commercial sales in 18 overseas countries. In 2013, Gan & Lee Pharmaceutical officially launched the insulin registration project in Europe and the United States, entering the developed markets in Europe and the United States. On December 18, 2018, the Company signed a Production and Supply Agreement with Sandoz. The agreement stipulates that during the term of the contract, Gan & Lee will grant Sandoz the exclusive right to sell insulin glargine, insulin lispro and insulin aspart in the United States, Canada, Europe and other specific regions.

In February 2023, the company's marketing application for insulin glargine was accepted by the FDA, and in June 2023, the U.S. FDA accepted the BLA applications for insulin lispro and insulin aspart. In August and October 2023, the European EMA successively accepted the marketing applications for glargine, aspart, and insulin lispro submitted by Gan & Lee Pharmaceutical. Judging from the pace of filing, the three products are expected to be approved by the FDA in 2024 and officially open sales in developed markets in Europe and the United States. In addition, with the approval qualifications of the US FDA and the European EMA, the company's products may be expected to further accelerate the access speed in emerging market countries.

5. Risk Warning

1. The progress of product research and development is not as expected;

2. China's centralized insulin procurement continues to reduce prices;

3. The competition pattern of overseas insulin market has deteriorated.

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