Health & Beauty

On June 28, Gloria, one of the leading domestic small molecule CMO (contract production outsourcing) companies, submitted a listing application to the Hong Kong Stock Exchange. This means that after WuXi AppTec, Tigermed Pharmaceuticals and Kanglong Chemicals, domestic or Add another "A+H" CXO company,

Gloria's main business is to provide pharmaceutical companies with new drug R&D and production services. Its customers include well-known domestic and foreign pharmaceutical companies such as Merck, Pfizer, AbbVie, Eli Lilly, Zai Lab, and Cinda Biotech.

In recent years, China's drug R&D and production outsourcing services are ushering in a golden period of development, and the market size has maintained rapid growth, which is higher than the global level. According to Frost & Sullivan, from 2016 to 2021, China's CRO+CMO market is expected to maintain an average annual compound growth rate of 30.8%, which is much higher than the global average of 9.5%. In terms of links, the pre-clinical stage is expected to maintain an average annual compound growth rate of 19.7%, and the clinical and production outsourcing stages are expected to maintain an average annual compound growth rate of 32.0% and 32.5%, respectively.

In the past ten years, China's innovative drug research and development has formed a "VIC" industrial model, namely venture capital (Venture Capital), intellectual property (Intellectual Property) and contract research organization (Contract Research Organization) models, and countless hot money has been poured in. After entering the research and development of innovative drugs, a considerable part of them eventually flowed to CRO/CMO companies such as WuXi AppTec and Kailai Ying.

CROs and CMOs are also known as "water sellers" in the industry. As innovative drugs are favored in the capital market, the valuations of "water sellers" have also risen, and they are even more favored by the market due to their lower risk.

For example, industry leaders such as WuXi AppTec and Tigermed Pharmaceuticals have chosen to go to Hong Kong for a second listing at high valuations, and Kailaiying is no exception. When the market gives high valuations, it can do better at a lower cost. "Encourage money", why not do it?

Of course, since the research and development of innovative drugs is fierce, CXOs have also begun a new era of competition when they are facing a round of development opportunities. This competition includes production capacity, technical fields, etc., having more funds can obviously help CXOs to carry out better The next stage of competition.

Take Kailaiying as an example, its main small molecule business is actually not a popular direction in the research and development of innovative drugs, and because the technical threshold is lower than that of large molecule biological drugs, the competition is more intense. According to the investment data of Kangcheng, 8 of the top 10 innovative drugs in global sales in 2000 were small molecule drugs, and by 2019, only 4 of the Top 10 were small molecules. Small molecule drugs gradually lost the top spot in sales. The proportion of overall sales also shows a gradual downward trend. In contrast, macromolecular drugs have ushered in a period of fiery development and have become the core driving force leading the development of global drugs.

At the same time, because downstream demand is still strong, companies of the same type such as WuXi AppTec, Jiuzhou Pharmaceutical, and Proton have expanded their production capacity through plant construction and acquisitions. Therefore, the R&D and production of small molecule drugs may reach the ceiling at some point. Kailaiying's performance growth will also be blocked.

In this case, Kailaiying began to gradually deploy macromolecular biopharmaceuticals to expand more business possibilities. On July 2nd, an investor asked on the investor interactive platform about the future growth of Kailaiying and whether it has plans to enter cell and gene therapy. In response, Kailaiying replied that the company's business sector has expanded from the field of small molecule CDMO to new fields such as chemical synthesis of macromolecules, bioengineering, biological macromolecule CDMO, and clinical research. It will also cut into the ADC business area to drive the development of the antibody business; the clinical research business segment has been deployed early and has service projects in the clinical research fields of advanced therapies such as cell therapy and gene therapy.

However, compared to the leading domestic macromolecule CDMO WuXi Biologics, Kailaiying has only started now, obviously, it is a bit late. According to data from the Research Department of Zhongtai International Securities, WuXi Biologics, as the leading player in macromolecular biologics CDMO, has a market share of more than 75% in China. And WuXi Biologics CEO Dr. Zhisheng Chen has repeatedly stated to the media that CDMO, a biological drug, is "the strong and always strong", and he is not worried about competition from latecomers.

This statement may not be a boast. For example, Boton, which also focuses on small molecules, chose to skip large-molecule biological drugs and use gene therapy as a new business expansion.

In this case, can Calais break the ceiling of development?