Dismantling the annual reports of pharmaceutical companies: domestic innovative drugs have risen in terms of product volume

In the past decade, China's pharmaceutical innovation industry has grown rapidly, and it has entered a period of adjustment in sync with the global market, and in this context, the pharmaceutical market has handed over its 2023 report card.

According to the available public data, as of April 8, 230 A-share pharmaceutical companies have disclosed their 2023 annual reports, of which 118 companies have achieved a year-on-year increase in net profit attributable to the parent company, accounting for more than half of the total. Companies in the three sub-sectors of medical devices, chemical pharmaceuticals and traditional Chinese medicine performed outstandingly.

From the financial report data, it can be found that with the support of policies, domestic innovative drugs have entered the harvest period, and a number of high-quality innovative enterprises with global competitiveness have come to the fore, and it has become a new trend to accelerate the layout of the innovative drug market.

According to McKinsey's forecast, the growth of China's innovative drug market is still expected in the next five years, and the market size is expected to increase from the current US$20 billion to US$50 billion, and then become the world's second largest innovative drug market.

An analyst in the pharmaceutical industry of a brokerage told the 21st Century Business Herald reporter that on the one hand, due to the concentrated release of most of the delayed and interrupted treatment needs in 2023, the impact of the new crown epidemic on the medical and pharmaceutical market will gradually recede, and the diagnosis and treatment and pharmaceutical market will return to the pre-epidemic development level; It is also in this context that pharmaceutical companies are returning to clinical orientation in terms of pipeline layout and commercial promotion.

At present, for domestic leading innovative drug companies, the opportunities outweigh the challenges.

Innovative products meet the cash period

In 2023, despite the challenges of the sharp decline in revenue from new crown projects and the difficulty of financing global biotech companies, many pharmaceutical companies still achieved good market performance.

Taking WuXi AppTec as an example, in 2023, the company's revenue will reach 40 billion yuan, reaching 40.341 billion yuan, a year-on-year increase of 2.51%, the net profit attributable to shareholders of listed companies will be 9.607 billion yuan, a year-on-year increase of 9%, excluding the new crown commercialization project, the orders in hand will increase by 18% year-on-year, and the revenue from customers of the world's top 20 pharmaceutical companies will increase by 44% year-on-year. Based on this, WuXi AppTec expects that despite the uncertainty of the external environment, the company's revenue in 2024 will reach 383~40.5 billion yuan.

Although there are many challenges in the current CXO track, many industry players are still firmly optimistic about China's pharmaceutical and CXO market. In particular, Chinese biotech companies are still sticking to their position in the global market, developing innovative products and bringing them to the global market. In addition, companies with sound scientific foundations will continue to attract investment, and early collaborations with global pharmaceutical giants are increasing to unlock the potential of internationalization. For example, in the face of changes in global testing demand, China's IND and NDA activities remain active, cooperation with multinationals is increasing, and the trading environment is more relaxed.

Based on this, it is not difficult to find that the volume of core products has also become a keyword in the financial reports of pharmaceutical companies in 2023. Sunshine Guojian's 2023 financial report said that the company's operating income during the reporting period was 1.014 billion yuan, a year-on-year increase of 22.84%, and the net profit attributable to the owners of listed companies was 295 million yuan, a year-on-year increase of 497.63%. The increase in revenue was mainly due to the accelerated market penetration of YISAIPU's products, which led to sales growth.

Fosun Pharma's financial report shows that its operating income in 2023 will be 41.400 billion yuan, and the revenue of products in the anti-tumor field will be 7.638 billion yuan, a year-on-year increase of 37.99%. Specifically, in 2023, a total of 8 indications of 6 innovative drugs will be approved for marketing, and the revenue of key innovative products such as Hansizhuang (serplulimab injection), Hanquyou (trastuzumab for injection), and Su Kexin (avatrombopag maleate tablets) will maintain rapid growth. During the reporting period, Hansizhuang achieved revenue of more than 1.1 billion yuan, a year-on-year increase of 230.20%, Hanquyou's revenue exceeded 2.7 billion yuan, a year-on-year increase of 58.19%, and Su Kexin's revenue exceeded 900 million yuan, a year-on-year increase of 19.67%.

Talking about the performance in 2023, Wu Yifang, chairman of Fosun Pharma, said in response to a question from a reporter from the 21st Century Business Herald at the performance meeting on March 30 that the company will mainly rely on the performance of the innovative drug market in 2023, and at present, 80% of the company's business is mainly focused on innovative drugs, mainly around antibody drugs, ADC drugs, etc., and small molecule drugs, CAR-T, and RNA track companies also maintain a certain degree of reasonable investment. Among them, anti-tumor accounts for 50% in the field of diseases, and the expansion of indications and combination drugs is still the direction that Fosun Pharma aims at.

Tackling innovation challenges

According to Evaluate Pharma statistics, the global R&D investment in pharmaceuticals will grow by nearly 14.6% year-on-year in 2021. In absolute terms, global pharmaceutical R&D investment increased from US$144 billion in 2014 to US$238 billion in 2021, with a compound growth rate of 7.3%, and it is expected that global pharmaceutical R&D will continue to grow steadily at a growth rate of 2.6% in 2021~2028.

The R&D expenditure of pharmaceutical and biological enterprises in mainland China continued to grow, and the performance of the single quarter still fluctuated. According to Southwest Securities, the R&D investment of mainland A-share pharmaceutical and biological enterprises continued to grow, with a R&D investment of 102.28 billion yuan in 2021, a year-on-year increase of 49%, and then the growth rate slowed down slightly due to factors such as investment and financing, with R&D investment reaching 73.9 billion yuan in 2023Q1~3, a year-on-year decrease of 3.7%, and a single Q3 growth rate of 45.8% year-on-year, a significant decline from Q2.

This is also due to the fact that R&D investment in innovation is not an easy task. Chen Qiyu, executive director and co-CEO of Fosun International, pointed out to the 21st Century Business Herald reporter at the 7th Pharmaceutical Innovation Ecology Conference held on April 9 that the layout of biomedical innovation is currently affected by multiple factors: First, capital, the capital market funds support the supply of the industry, which is binding on enterprises and the entire industry. On the contrary, the tight supply of funds will also push enterprises to be more cautious in making innovation choices—it is precisely because of limited resources that it is required to pay attention to the quality of innovation, differentiation, The second is the global environment, which determines the height of the ceiling and the size of the territory, especially for innovative drugs, the difference in market value is large; the third is the pricing power of the industry in the price game, which determines the value realization of innovative drugs in the Chinese market.

"These aspects of the problem are what companies need to consider comprehensively when making innovative drugs, how many resources there are, how big the market can be, and whether they can make value. Chen Qiyu said that in fact, for innovative pharmaceutical companies, the current difficulties such as capital chain and commercialization are "painful" in the short term, but in the long run, there are greater benefits in a sense, that is, "the ability to 'roll' to a high level".

Focusing on the high-quality development of innovation, in the past few days, Beijing, Guangzhou, Zhuhai and other places have also successively issued policies to support the high-quality development of innovative drugs, and the policies have provided a full-chain guarantee for the R&D, production and promotion of innovative drugs from R&D to application to funding.

For example, Guangzhou pointed out that it directly supports innovation and R&D from the financial level, gives rich remuneration to innovation, increases the income mode of cash flow of innovative drugs and devices, and injects new impetus into innovation. Beijing, on the other hand, uses policies to empower new drug approval + the Pharmaceutical Affairs Committee to enter the hospital to speed up the progress of innovation.

"In the past, the amount of funds was large, and the bottleneck of medical insurance payment had not yet appeared, and biotech enterprises developed rapidly and could make commercial products in a short period of time, but behind the 'fast' was actually more follow-up, repetition and homogenization, without considering internationalization. Now that there are challenges and the industry landscape is changing rapidly, I believe that the duplication of the same target development will still be in the future, but the degree of duplication will not be so high. Chen Qiyu further pointed out that the changes in the industry are the internationalization of innovation capabilities, source innovation, etc., even if they follow innovation, they also emphasize faster, and believe that China's clinical level, basic scientific research capabilities, and innovation capabilities can be quickly iterated to the next stage in the future.

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