R&D strength is an important factor for pharmaceutical companies, especially innovative pharmaceutical companies, to win in the "long-distance race" of the industry. Flush data shows that as of April 22, 259 A-share listed pharmaceutical companies have disclosed their operating results in 2023, with a total R&D investment of 81.1 billion yuan, a year-on-year increase of 7.43%, and the growth rate has slowed down from the previous year. Among them, 177 enterprises increased their R&D investment over the previous year, and the number of enterprises accounted for nearly seventy percent. The reporter noted that while innovative pharmaceutical companies generally continue to increase R&D investment, some companies are also optimizing their pipeline layout.
A number of listed pharmaceutical companies will invest more than 1 billion yuan in R&D in 2023
Source: Straight Flush
R&D investment continues to rise
Flush data shows that from 2021 to 2023, among the 493 listed companies in the Shenwan pharmaceutical and biological industry, the total R&D investment of 259 companies that have disclosed their 2023 annual reports is 64.990 billion yuan, 75.491 billion yuan and 81.100 billion yuan respectively, showing a continuous upward trend, with year-on-year growth of 16.16% and 7.43% in 2022 and 2023, respectively.
This is close to the growth rate of R&D investment in the global pharmaceutical industry. According to the report released by Frost & Sullivan in July 2023, the R&D investment of the global pharmaceutical industry will increase from US$241.5 billion in 2022 to US$335.7 billion in 2027, with a compound annual growth rate of about 6.8%.
Specifically, among the above 259 pharmaceutical companies, 144 will invest more than 100 million yuan in R&D in 2023, of which 19 will exceed 1 billion yuan, and Hengrui Pharmaceutical, Fosun Pharmaceutical, and Shanghai Pharmaceutical temporarily rank in the top three, with 6.150 billion yuan, 5.937 billion yuan, and 2.602 billion yuan respectively. The reporter noted that the total R&D investment of the top 20 pharmaceutical companies was 38.346 billion yuan, accounting for 47.28% of the total of 259 pharmaceutical companies, an increase of only 5.79% from 36.246 billion yuan in the previous year, which was lower than the overall growth rate of the industry, and eight of them decreased their R&D investment compared with the previous year.
From the perspective of R&D intensity, Flush data shows that the median ratio of R&D investment to operating income (referred to as "R&D investment proportion") of 259 pharmaceutical companies is 7.33%, higher than 6.36% in 2022 and 5.99% in 2021. Among them, the proportion of R&D investment of 160 enterprises has increased.
In recent years, many companies have continued to increase R&D investment, and the revenue contribution of innovative products has been further enhanced. Hengrui Pharmaceutical disclosed that the company continued to increase innovation efforts and maintain high R&D investment, with a cumulative R&D investment of 6.150 billion yuan in 2023, of which 4.954 billion yuan was spent on R&D. According to the annual report, Hengrui Pharmaceutical's innovative drug revenue in 2023 will reach 10.637 billion yuan (including tax, excluding external licensing income), although it is affected by factors such as changes in the external environment, product price reductions and access difficulties, it still achieves a year-on-year growth of 22.1%. At the same time, the company's generic drug revenue declined slightly during the reporting period.
In 2023, Salubris, a leading cardiovascular drug company with both revenue and net profit attributable to the parent company, will increase its total R&D investment instead of decreasing, exceeding 1 billion yuan, accounting for more than 30% of R&D investment. Flush data shows that from 2018 to 2023, Salubris' total R&D investment will be 804 million yuan, 777 million yuan, 773 million yuan, 691 million yuan, 917 million yuan and 1.047 billion yuan respectively, and the proportion of R&D investment will be 17.28%, 17.38%, 28.21%, 22.61%, 26.35% and 31.13% respectively. However, the capitalization ratio of the company's R&D investment will also increase significantly in 2023, reaching 60.94%. According to the annual report, with the continuous growth of innovative product revenue, as well as the successive approval of a number of innovative products, and the structural changes in the revenue and profit contribution of listed companies, the proportion of innovative products has increased. In terms of generic drugs, as Salubris's former performance pillar products, Taijia's revenue and profit contribution declined.
Remegen, which was listed in March 2022, also invested more than 1 billion yuan in R&D last year, reaching 1.306 billion yuan, an increase of more than 30% from 982 million yuan in 2022, and the proportion of R&D investment decreased from 127.19% in 2022 to 120.62% in 2023. According to the annual report, the company's operating income in 2023 will be 1.083 billion yuan, an increase of 40.26% from 772 million yuan in the same period of the previous year, mainly due to the rapid year-on-year growth in sales revenue and sales volume of the company's two core products that have entered the commercialization stage, Taiai and Aidixi.
Fosun Pharma also said that the optimization of product structure and sales growth brought about by the launch of innovative products were the main driving factors for its performance during the reporting period.
The number of R&D personnel decreased slightly
For the pharmaceutical industry, especially the innovative drug industry, R&D talents, especially high-end R&D talents, are very important. The annual report shows that while the overall R&D investment has grown steadily, the number of R&D personnel of listed pharmaceutical companies has decreased slightly.
Flush data shows that in 2023, the total number of R&D personnel in 259 listed pharmaceutical companies will be 163094, a decrease of 3,708 or 2.22% from 166802 in 2022, but it is still significantly higher than the 116974 in 2020 and 141209 in 2021, of which more than 60% of the enterprises have increased the number of R&D personnel.
In the context of increasingly fierce competition in the global biopharmaceutical industry, the performance of some biopharmaceutical companies and outsourcing service companies is under pressure, and the number of R&D personnel has decreased significantly under the cost reduction and efficiency increase.
WuXi AppTec, a leading CXO (pharmaceutical outsourcing services) company, has experienced a decline in the number of R&D personnel for the first time in recent years. From 2017 to 2022, the number of WuXi AppTec's R&D personnel increased year by year, with 11,721, 13,940, 17,872, 21,942, 28,841 and 36,678, respectively, and 33,657 in 2023, a decrease of more than 3,000. However, the number of R&D personnel still accounts for more than eighty percent, from 2019 to 2023, the proportions are 82.19%, 83.08%, 82.61%, 82.70% and 81.90% respectively.
Although the total number of employees has decreased by more than 7% and the number of R&D personnel has decreased by more than 8%, WuXi AppTec's labor costs are still rising. According to the annual report, the company's main business costs include direct labor, raw material costs and indirect expenses. In 2023, its direct labor increased by 25.60% compared to 2022, and the cost increase was mainly due to service demand and business growth.
The number of R&D personnel decreased by more than half last year. According to the company's 2022 annual report, the company had 262 R&D personnel at the end of the reporting period, accounting for 32.63% of the total number of employees. According to the 2023 annual report, the company had 122 R&D personnel at the end of the reporting period, accounting for 21.98% of the total number of employees.
In addition, due to the adjustment of statistical standards, the number and proportion of R&D personnel in some pharmaceutical companies have changed significantly.
For example, Yunnan Baiyao's 2022 annual report shows that the number of R&D personnel that year was 1,291, accounting for 14.70%. The company's 2023 annual report shows that the number of R&D personnel in 2022 will be 435, accounting for 4.95%, and the number of R&D personnel in 2023 will be 527, accounting for 5.97%. "The company's R&D personnel refer to the personnel directly engaged in R&D activities, as well as the management personnel and direct service personnel closely related to R&D activities. During the reporting period, the statistical caliber of R&D personnel was adjusted, which is consistent with the personnel corresponding to the statistical caliber of R&D expenses in each year. In the past, the company's R&D personnel were counted according to the caliber of technical personnel (the caliber of technical personnel includes power equipment, technical quality, information management, and R&D management). Yunnan Baiyao said in its 2023 annual report.
It is reported that on November 24, 2023, the China Securities Regulatory Commission issued the Guidelines for the Application of Regulatory Rules - Issuance No. 9: R&D Personnel and R&D Investment, which clarified the criteria for identifying R&D personnel and R&D investment in Shanghai and Shenzhen.
Enrich and optimize the pipeline layout
Recently, many places have issued documents to support the high-quality development of innovative pharmaceuticals, and many listed pharmaceutical companies have also stated in their annual reports that they will adhere to innovation and development and continue to increase R&D investment.
"In recent years, with the changes in the development environment of the industry and the comprehensive promotion of the construction of a healthy China, the pharmaceutical industry in mainland China has undergone profound changes, the industrial structure has been continuously optimized, and the trend of innovation-driven transformation is obvious. Guided by clinical value, innovative products with real significance are facing good development opportunities, and the accessibility of innovative drugs is constantly improving. Salubris said in the "2024 business plan" that it will strengthen R&D and innovation to make patented products its main products. The company also mentioned that it will accelerate the process of innovative products going overseas in the next few years.
Shanghai Pharmaceutical said that in terms of biomedicine, the company will give full play to the unique advantages of the integration of "industrial and commercial research and investment", promote the deep integration of innovation chain, industrial chain, capital chain and talent chain, make every effort to build an innovation ecology of the biomedical industry, increase R&D investment, optimize pipeline layout, and accelerate the cultivation of new quality productivity.
It is worth noting that in the face of the pressure on performance caused by huge R&D investment, some innovative pharmaceutical companies pay more attention to optimizing pipeline layout.
"If the company is unable to complete the R&D and registration of new products in time, it will not only affect the recovery of R&D investment in the early stage, but also may affect the realization of future revenues. Ed Biotech said that the company adheres to market demand-oriented, strengthens market research, and ensures that the R&D direction is closely aligned with market demand, and the R&D pipeline can meet the current and future market demand for in vitro diagnostic products. Jindike also proposed that it will steadily promote the review progress of the varieties under development, carry out the clinical research of the products under development that have obtained clinical approvals, accelerate the research and development progress of the products under development in preclinical research, track and reserve new technologies and varieties of innovative vaccines, and optimize and expand the product pipeline layout.
In 2023, Frontier Biotech has adjusted and optimized its R&D pipeline strategy, proposing to "pay equal attention to innovation attributes and cost advantages" to improve the overall efficiency of R&D fund use. The company said that it will continue to explore new technical fields, integrate market potential, drug druggability, and production costs, lay out varieties and technical fields that are currently in the technical blank or are still in the initial stage in China, continue to build a scientific and rich product pipeline layout, consolidate the company's core competitiveness in the field of new drug research and development, and build up the company's medium and long-term sustainable development.
While proposing to continue to adhere to the innovation-driven development strategy and continue to promote R&D, Shutaishen made it clear that "in a certain period of time in the future, due to the continuous promotion of the company's research projects, it is expected to control a certain level of R&D investment". (Reporter Zhang Xiaojie reports from Beijing)
Source: Economic Information Daily