Several CXO Head Companies Outperform Expectations, Cell Gene Therapy Brings Cdmo "Water Seller"

? ? ? Recently, a number of CXO (pharmaceutical R & D and production outsourcing enterprises) enterprises such as poten, Yaoming Kant and Jiuzhou Pharmaceutical Co., Ltd. have released the performance forecast of 2021 interim report. For example, in the first half of 2021, after excluding the impact of new business on net profit, the net profit attributable to parent company was 261 million yuan, with an increase of 78.65%.

It is understood that the performance of many CXO enterprises in the first half of the year exceeded expectations, mainly because the impact of the domestic epidemic situation was basically relieved during the reporting period, and the service income of clinical research and other cros (contract research organizations) increased year-on-year. Zhu Guoguang, an analyst at Soochow securities, believes that the strong logic of CXO industry is due to the strong trend of global innovative drugs and the increase of outsourcing rate; The strong CXO plate effect is mainly due to the internationalization of business, large market space, and not completely constrained by the domestic market; All kinds of innovative drugs are in full bloom, and the competition is not obvious; The industrial chain is widely distributed with numerous targets.

At the same time, in Zhu Guoguang's view, cell gene therapy is expected to return to the gold mining craze, bringing cdmo (customized research and development and production of pharmaceutical contracts) "water seller"“ From the industrial point of view, the application of new technologies, new indications, accelerated commercialization of CGT products, and the expected superimposition of industry onshore attributes of local products will drive the prosperity of relevant domestic cdmo industries. From the perspective of enterprises, process optimization and cost control are the pain points at the production end, and cdmo suppliers are expected to improve the penetration rate. From an investment point of view, cell gene therapy cdmo is similar to macromolecular cdmo, but it is more explosive. "

A chairman of an innovative pharmaceutical company told the 21st century economic report that at the level of drug research, the next generation of biotherapy represented by gene cell therapy is developing rapidly. About 80% of the world's top 20 pharmaceutical companies are in the field of gene cell therapy.

Dong Xiaoyan, founder and chairman of Wujiahe gene technology, pointed out in an interview with 21st century economic reporter that cdmo enterprises can better help pharmaceutical enterprises optimize process and control costs, and gradually turn "skyrocketing drugs" into "civilian drugs".

Many pharmaceutical enterprises achieved better than expected

As of August 16, among the more than ten CXO enterprises listed in China, five companies, including Yaoshi technology, Medici, yaomingkant, boten and kailaiying, have published semi annual reports. In addition, Jiuzhou pharmaceutical, Zhaoyan new drug and KANGLONG Huacheng have respectively published semi annual performance increase reports in 2021.

For example, in the semi annual report period of Yaoshi technology, the operating revenue was 621 million yuan, an increase of 35.24% over the same period of last year; Non net profit was 145 million yuan, an increase of 77.16% over the same period of last year; In the half year of 2021, yaomingkant realized a business income of 10.537 billion yuan, an increase of 45.70% compared with the first half of 2020; Net profit was 2.127 billion yuan, up 88.05% year on year.

In the first half of 2021, the company's operating revenue reached 1.256 billion yuan, a year-on-year increase of 35.73%; The non net profit was 201 million yuan, up 69.99% year on year. If the impact of the new business on the net profit was excluded, the net profit attributable to the parent company was 261 million yuan, with an increase of 78.65%.

According to the analysis of Caixin securities, the performance of CXO enterprises including yaomingkant exceeded the expectation, mainly because the impact of domestic epidemic situation was basically relieved, and the income of clinical research and other cro services increased year on year.

In Zhu Guoguang's opinion, the reason why CXO industry logic is strong is that CXO plate effect is also strong. Among them, cdmo business growth is strong. For example, the cdmo business income of Wuxi apptec in the first half of the year increased by 66%.

In fact, with the gradual development of specialization in the global pharmaceutical industry, the cdmo model is developing more rapidly in CXO enterprises. Compared with CMO (contract processing outsourcing), it mainly accepts the entrustment of pharmaceutical companies to carry out customized production services. The (cdmo) mode has both customized R & D capacity and production capacity, It can provide integrated services from preclinical research to commercial production. From the perspective of pharmaceutical enterprises, cdmo has become the long-term strategic choice of pharmaceutical enterprises, which is conducive to improving the opportunities of commercialized production orders of innovative drugs. With high technology added value and large profit margin, it can enhance the comprehensive ability of enterprises in cooperation with customers.

At present, the global new drug research and development is undergoing structural changes. New drug R & D is dominated by multinational pharmaceutical companies and gradually evolved into joint leadership of new drug R & D institutions and multinational pharmaceutical companies, and new drug R & D institutions are gradually becoming the main source of innovation.

In the financial report of the first half of 2021, boten mentioned that 50% of the 24 new compounds listed in 2010 came from new drug R & D institutions, which increased to 64% in 2018; In 2010, there were 12 new compounds from new drug research and development institutions in Zhongyuan research and Development Institute. In 2018, the number of new compounds increased to 38, with an increase of 217%. In the stage of drug application and listing, biotechnology companies and multinational pharmaceutical companies have been equal in 2018, accounting for 47% and 44% respectively.

This change directly drives the growth of outsourcing demand, because new drug research and development institutions mainly operate in the light of assets mode. Due to the high risk of new drug research and development, new drug research and development institutions generally do not easily build their own capacity. Especially in the early stage of drug development, they mainly rely on outsourcing service institutions to provide professional services, on the one hand, they can reduce the initial investment costs, and on the other hand, they can reduce the initial investment costs The purpose of risk control, more importantly, is to help the professional platform to promote the drug development process quickly and efficiently.

At the same time, the success rate of drug R & D is reduced, which makes pharmaceutical enterprises more willing to outsource.

According to iqvia's global trends in R & D overview through 2020, the overall success rate of global drug R & D has been declining since 2015. The comprehensive success rate of drug R & D in 2020 is 9.8%, which is slightly higher than 8% in 2019, but still lower than the average level in the past decade.

Cdmo enterprises can reduce the asset investment risk of drug R & D for pharmaceutical companies, and more importantly, improve R & D efficiency. In recent years, some large pharmaceutical companies have announced the closure or sale of their own API plants, which also further released the signal that the internal manufacturing of traditional pharmaceutical companies began to tilt outward.

The vitality of China's pharmaceutical industry also drives the demand for cdmo in the domestic market. Since the reform of drug regulatory system was launched in 2015, the innovation vitality of domestic pharmaceutical industry has been continuously released, the regulatory system and policy have been constantly improved, and gradually integrated with international standards. According to the report "global trends in R & D overview through 2020", the number of pipelines under study held by companies headquartered in China accounted for 12% of the global early clinical pipelines in 2020, and only 3% in 2015.

In addition, according to the data of the State Food and drug administration, China approved 21 innovative drugs in the first half of 2021, which has exceeded the number of innovative drugs approved in the whole year of 2020, setting a new record for the review of innovative drugs in China.

These will become an important driving force for the continuous expansion of the market size of the cdmo industry. At the same time, various enterprises are also strengthening their competitive advantages and improving their R & D service ability and business undertaking ability. For example, the R & D investment of boten increased by 105.67% over the same period of last year; The R & D investment of Medici increased by 77.04% year on year; The R & D investment of Carlin increased by 50.68% year on year.

Gene cell therapy brings cdmo rich "water seller"

For the growth of cdmo business in the first half of the year, many securities companies described it as "significant funnel effect". For example, on August 17, Huajin Securities said that Jiuzhou pharmaceutical had "sustained high growth rate of cdmo business with significant funnel effect"; On August 16, Tianfeng securities research and development newspaper said that the "funnel-shaped" pipeline structure of boten shares tended to be stable, bringing demand and order increment for business development.

At the same time, many securities companies also believe that cell and gene therapy cdmo is worth looking forward to. Zhu Guoguang said in the research report that cell gene therapy is rich in cdmo "water seller".

At present, the next generation of biotherapy represented by gene cell therapy is developing rapidly. According to Pharma R & D annual review 2021 released by pharmapprojects, there are 1589 active pipelines under research in 2021, an increase of 316 over 2020; Car-t cell therapy has developed 612 active pipelines and entered the top ten hot research and development fields for the first time; There are 847 active pipelines in the research of stem cell and other related cell therapies, 106 more than in 2020. At present, about 80% of the world's top 20 pharmaceutical companies are in the field of gene cell therapy.

Guosheng Securities pointed out that according to the estimation of coherentmarket insights, the market scale of gene cell therapy was about 6 billion US dollars in 2017, and it is expected to reach 35 billion US dollars in 2026, which is far faster than the overall growth rate of the drug market.

Dong Xiaoyan, founder and chairman of Wujiahe gene technology, pointed out in an interview with 21st century economic reporter that there are high barriers in the production of cell gene therapy, and cdmo enterprises can achieve empowerment through specialized division of labor: the production of cell gene therapy can be divided into three relatively independent parts: plasmid engineering, virus engineering and cell engineering, which are involved in cell line construction and cell culture, It can complement with pharmaceutical enterprises in technology and avoid the high iteration speed of current technology in the field of cell gene therapy, which will cause greater risk to the enterprise's early investment.

At the same time, Dong Xiaoyan also pointed out that cost control is the fundamental driving force for the development of cell gene therapy cdmo industry. Pharmaceutical enterprises can control relevant costs through cdmo suppliers, such as improving the efficiency of virus vector transduction and improving car-t cell yield; Improve the process to reduce the failure rate and R & D time consumption; Through production transfer, reduce labor costs, and ultimately help to reduce the patient's payment price.

Guosheng Securities believes that the current gene cell therapy can be compared with the monoclonal antibody biological drugs ten years ago, but there are more clinical pipelines and higher barriers. Domestic first mover enterprises are still in the process of technical capacity building, so enterprises such as boten Co., Ltd. have certain first mover advantages.

It is understood that in 2020, boten will quickly enter the cdmo track of gene cell therapy. In April 2021, Suzhou poten introduced the strategic investment of hilltop, with a total financing of 400 million yuan, which promoted the rapid development of cdmo business of gene cell therapy.

During the reporting period, Suzhou boten obtained 9 new project orders, involving an amount of 54.66 million yuan. By the end of the report period, Suzhou boten had 12 customers and 14 orders. In May 2021, Suzhou boten and Kaidi biological reached a strategic cooperation. As an exclusive cdmo partner, Suzhou boten will provide CMC research and development services for many car-t projects of Kaidi biological.

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