Can the flag of Hengrui still fly?

19 In August, Sun Piaoyang took over as chairman for one month and ten days, and Hengrui announced 202 1 that the net profit in the first half of the year increased by 0.2 1%, which was close to zero growth.

Hengrui's predecessor was Lianyungang Pharmaceutical Factory, which was established in 1970. Sun Piaoyang served as the factory director at 1990. At that time, the profit of the pharmaceutical factory was only 80 thousand yuan. It is under the leadership of Sun Piaoyang that Hengrui Pharma has developed from a small pharmaceutical factory to the king of pharmaceutical companies in China, with a market value of over 600 billion yuan.

June 5438 +2020 10, 62-year-old retired as chairman of Hengrui, and general manager Zhou took over. However, in the following more than a year, Hengrui encountered unprecedented challenges, and its market value dropped from a high level to only 290 billion yuan. At present, the company has not clearly shown the momentum of getting rid of the predicament. In the face of investors' questions, Sun Piaoyang said that the sudden decline of generic drugs and the gradual rise of innovative drugs are the difficulties that traditional pharmaceutical companies in China will experience.

In the era of innovative medicine, will the flag of Hengrui continue to fly?

The Return of Sun Piaoyang

When Sun Piaoyang announced that he would take charge of Hengrui again, he didn't explain why. However, according to the vice president of a pharmaceutical company with a large number of shares in Hengrui, Sun Piaoyang came back because the company was in danger of stalling. For about a year and six months after he left, the medical carrier seemed to be exercising in a rough sea.

From June, 5438 to October, 2020/kloc-0, Hengrui Pharma's abiraterone acetate, S-/kloc-0 capsules, trimetazidine hydrochloride sustained-release tablets and albumin paclitaxel won the bid, and the average price dropped by more than 70%.

In June 2020, six drugs involved in the third batch of centralized procurement began to be implemented, and the sales revenue in the first half of this year decreased by 57%.

In March, 20021,the main innovative drug product PD- 1 began to implement the negotiated price of medical insurance, with a decrease of 85%. Coupled with many problems such as the difficulty of entering the hospital and the different implementation time of medical insurance in different places, the sales revenue showed negative growth.

In April, the Ministry of Finance and the National Medical Insurance Bureau jointly conducted a penetrating audit of 77 pharmaceutical companies, and Hengrui was fined.

In June, the results of the fifth batch of centralized procurement were announced. Hengrui Pharma failed to win the bid for heavy injections twice, or lost the market share of public hospitals of more than one billion yuan. In addition, most of the six varieties that won the bid have lower prices.

In July, the Center for Pharmaceutical Administration (CDE) of the State Administration of Pharmaceutical Products issued the Guiding Principles for Clinical Research and Development of Anti-tumor Drugs Oriented by Clinical Value (Draft for Comment), and the market value of Hengrui evaporated by 30 billion yuan.

At this time, people found that the market value of Hengrui fell by half from a height. Until the release of the interim report in August, Hengrui's net profit in the first half of the year was about 2.668 billion yuan, up 0.2 1% year-on-year, almost zero growth. The next day, Hengrui shares showed a rare daily limit.

Many people have anticipated the results of the interim report. An analyst said that as far as generic drugs are concerned, Hengrui's failure in winning the bid is "changing his life", and its products already have a high market share. Winning the bid does not necessarily mean an increase in market share, but it does mean a sharp drop in prices; On the other hand, the main innovative product PD- 1, after the national medical insurance negotiations, the price dropped by 85%. In addition, the implementation time of medical insurance varies from place to place, and it is difficult to enter the hospital, and it is difficult to increase the volume in a short time.

In the face of investors' questions, Sun Piaoyang said that generic drugs are falling off a cliff, and innovative drugs are gradually increasing, which is a problem that all generic drug enterprises in China will encounter in the process of transformation. Facing today's situation, he is not surprised at all. "We are still assured that everything is developing in a spiral, not in a straight line."

Hengrui puzzle

The more successful the old era is, the greater the pressure the new era faces.

In 20 18, the National Medical Insurance Bureau, a super buyer, carried out five batches of centralized drug collection, covering 2 18 drugs and involving thousands of products.

As the industry leader, Hengrui has selected 65,438+08 varieties of generic drugs out of 28 varieties that have entered the national centralized procurement catalogue since 2065,438+08, and the average bid price has dropped by 72.6%, which is a great pressure on performance.

Facing the pressure of policy and competition, Hengrui objectively needs to continuously increase investment in innovative R&D, including R&D personnel, but now the profit is close to zero growth, and innovative drugs can't make up for this loss at present.

For the future of Hengrui, Sun Piaoyang once expressed in some public occasions: First, high-end preparations are exported overseas; Second, breakthrough innovative drugs are listed in China; Third, truly original innovative drugs are listed on the global market.

At present, Hengrui has achieved the first two goals, with 265,438+0 products listed in Europe, America and Japan. Since the first innovative drug Aricoxib was listed in 2065,438+065,438+0, at present, there are 8 innovative drugs listed in China, and dozens of innovative drugs are under study.

Part of Hengrui's latest adjustment is the departure of many salespeople in the generic drug business line.

Sun Piaoyang said at the investor conference that in the past, the sales team expanded too fast, which was redundant. There are too many levels in some places, and some places are inefficient. On the other hand, most generic drugs don't need so many salespeople after collection.

In the era of flying flags, this is a team that Hengrui is proud of and can fight hard. An industry insider said that the core competencies of pharmaceutical companies are divided into R&D capabilities and sales capabilities. In the early years, when everyone was copying, the industry was not talking about R&D ability, but sales ability.

Supported by strong sales, Hengrui has created the most successful pharmaceutical company in China in the era of generic drugs, and is also called "the first brother of medicine" in the industry. The data shows that from 2000 to 2020, Hengrui's revenue increased by 57 times, with a compound annual growth rate of 22%; The net profit increased by nearly 100 times, with a compound annual growth rate of 26%.

Sun Piaoyang graduated from China Pharmaceutical University with a bachelor's degree and joined Lianyungang Pharmaceutical Factory in 1980s. He became the factory director from 65438 to 0990. He judged that pharmaceutical companies must rely on independent research and development to build their core competitiveness, so he began to form his own R&D team.

From 65438 to 0992, he bought the first tumor drug ifosfamide from the Institute of Pharmacy of China Academy of Medical Sciences, and gradually established a research and development team in the process of digestion and absorption technology. Ifosfamide was approved for marketing on 1995, passed FDA certification in the same year, and became a star product after marketing. Lianyungang Pharmaceutical Factory has also become a leading pharmaceutical company in the field of anticancer drugs. 1996 The revenue of pharmaceutical companies exceeded 100 million. 1997 pharmaceutical factory changed its name to Hengrui Pharma.

In the 1990s, the largest variety in China's pharmaceutical market was antibiotics, and the market for cancer drugs was so small that big pharmaceutical companies were unwilling to do it. Because of the large molecular structure and complicated synthetic route, small enterprises can't do it because of technical threshold. In this context, Hengrui chose cancer drugs as the research and development direction, and gradually set up its own generic drug research and development team, which has certain generic drug research and development capabilities.

In the new century, if China wants to join the World Trade Organization, it must protect intellectual property rights. Sun Piaoyang realized that if he continued to make generic drugs, either the drugs within the patent protection period could not be copied, or the popular varieties after the patent protection period could be copied by all enterprises, and the competition would be fierce. Although innovative drugs have high risks and high investment, they have high returns. He chose innovation.

In 2000, Hengrui was listed on the Shanghai Stock Exchange, with a financing of about 480 million yuan and an investment of nearly 300 million yuan to establish a research and development center in Shanghai, marking the beginning of the transformation of Hengrui's research and development direction from imitation to innovation. Combining imitation and innovation, generic drugs solve the problem of eating, and innovative drugs solve the long-term development problem.

In the communication and discussion in the industry, many people use "Sun Shengda" to describe Sun Piaoyang. Judging from the time when he stepped down as chairman, Sun Piaoyang laid a good foundation for the further development of Hengrui. On the one hand, Hengrui is still a strong generic drug; On the other hand, in the field of innovative drugs, new drug achievements are constantly emerging, R&D investment remains high, and the proportion of R&D investment in sales has increased as a whole.

According to the insiders, if there is a company in China that can compete with multinational pharmaceutical companies and grow into a world-class BigPharma, it is most likely Hengrui.

China is a big country of generic drugs, with 4,000 or 5,000 pharmaceutical companies, which are "many, small, scattered and chaotic", but until 20 16, the total R&D investment of national pharmaceutical companies was still less than that of the largest pharmaceutical companies in the world.

20 15, the policy environment has changed. The State Council issued "Opinions on Reforming the Examination and Approval System of Drugs and Medical Devices", which opened the curtain of the reform of the examination and approval system of drugs and medical devices. Its core is to improve the quality of drugs, and its main goal is to establish a scientific and efficient examination and approval system.

This is called the spring of innovative medicine industry in the industry, and with it, emerging biopharmaceutical enterprises and innovative medicine enterprises emerge one after another under the impetus of capital. For Hengrui, the change from imitation to innovation has been compressed by the innovation tide driven by policy and capital.

For example, Baekje Shenzhou was founded 10 years ago, with accumulated financing exceeding 3 1 100 million yuan; R&D investment in four years is about 20 billion yuan, far exceeding Hengrui; And the process from clinical to commercialization is also very fast, and three innovative drugs have been harvested so far.

For another example, a number of emerging and innovative pharmaceutical companies, such as Cinda Bio, Junshi Bio and Zaiding Pharmaceutical, have gradually grown. Most of these new talents and international pharmaceutical companies have the authorization to "bring in" and "go out" and can cooperate in research and development, production and sales of a drug. "Strong alliance" will accelerate this process.

Hengrui is ambitious. Sun Piaoyang has laid out innovative drugs since its listing. At present, the proportion of innovative drugs in income is increasing. In the first half of this year, it achieved sales revenue of 5.207 billion yuan, up 43.8% year-on-year, and has contributed nearly 40% of the total revenue. But to achieve a virtuous circle, Hengrui needs time.

Sun Piaoyang told the investor conference that all generic drugs should be collected, and innovative drugs will produce the most results in the coming year. Both tumor and non-tumor will be the harvest time. After they came out, they participated in the national medical insurance negotiations and then increased the quantity, so (Hengrui) adjusted 1-2 years to recover.

China innovation

Sun Piaoyang was right.

It is a process from imitation to imitation innovation and then to the era of original innovation in the domestic pharmaceutical industry.

Wu Yifang, chairman and CEO of Fosun Pharma, also said at the recent performance exchange meeting that centralized procurement has indeed brought a great impact to the industry, and several large varieties of Fosun have also been affected, but it is impossible to expect to "sleep" on the abnormal dividend of generic drugs.

Fosun Pharma did not announce the respective proportions of innovative drugs and generic drugs in this year's interim report, but Wu Yifang said that the revenue of newly listed products will be about 17.3% after two years, and this proportion will continue to rise in the future. "The contribution of innovative drugs is a great contribution."

For Hengrui, we must successfully transform and realize this leap, otherwise there is no way out.

After the investors' meeting, Sun Piaoyang made more public appearances than before. First, he attended the cooperation signing with Wanchun Medicine on August 26th, and then on August 3rd1,the secretary of Lianyungang Municipal Party Committee awarded Hengrui a reward of 1. 1 100 million yuan at a meeting.

The cooperation with Wanchun Pharmaceutical is a new initiative. Hengrui will make an equity investment of 654.38+billion yuan in Wanchun Pharmaceutical Subsidiary, and pay the down payment and milestone payment of no more than 654.38+03 billion yuan for the joint development and exclusive commercialization rights of the latter drugs in Greater China.

This is a week after Sun Piaoyang publicly stated that he "does not rule out the acquisition of some new technologies", so this transaction is also regarded as a new breakthrough for Hengrui. In fact, as a large local pharmaceutical company, Hengrui began to acquire drugs at the beginning of this year to expand its own pipeline and accelerate the pace of internationalization.

In February this year, Hengrui subscribed for 6.67% shares of Yingli Pharmaceutical with self-raised funds of US$ 20 million, and obtained the joint development and exclusive commercial rights of a drug of Yingli Pharmaceutical's subsidiary in Greater China.

According to the Economic Observer, Hengrui is still carrying out more "buy buy Buy" cooperation, and the existing cooperation is close to the announcement stage. For Hengrui, holding hands with biotechnology companies can not only supplement the channels of self-research and innovation, but also combine drugs with their own products, and also give play to the advantages of commercialization and directly share sales.

Since July, the personnel adjustment has mainly focused on the sales team, followed by some R&D projects that are not innovative enough. Judging from the main clinical R&D pipelines published by Hengrui in the form of attached tables, the main focus is still anti-tumor, and other fields include diabetes, rheumatism immunity, anti-infection, cardiovascular and hematology, among which several projects have entered the third phase clinical trial. In other words, the harvest period is within one or two years.

Some analysts believe that although Hengrui has a number of new technology platforms with independent intellectual property rights, such as proteolytic targeted chimera (PROTAC), molecular gel, antibody drug conjugate (ADC), bispecific antibody, gene therapy, mRNA, bioinformatics, translational medicine and so on. Many smaller biotechnology companies have advantages in product progress and technological leadership.

According to the internal survey data of Hengrui Pharma, Zhang Lianshan, senior deputy general manager of Hengrui Pharma and president of global R&D, thinks that what Hengrui Pharma needs to do now is to move forward the target, and at the same time, formulate the indications of drugs that have been listed or will be listed soon, so as to reduce the impact of centralized collection of generic drugs.

Sun Piaoyang said that Hengrui should constantly establish new technology platforms, and many pilot bases of new technology platforms will be built soon.

"Don't sell, or will rise. After all, Hengrui has so many new drugs and the precipitation of sales team. " The vice president replied.