Under the influence of the normalization of the centralized procurement, focusing on innovative research and development has become the only path for pharmaceutical companies to break out of the circle. Hong Kong Hang Seng Index stock company Sino Biopharm (HK.01177) released its 2022 interim results report on August 23, showing that new products, innovative drugs and oncology drugs have become the company's second growth curve, effectively hedging the impact of the first three batches of centralized procurement. Among them, 84 new products were listed in the past 5 years, which accounted for 43.5% of revenue; the revenue of innovative drugs totaled 3.49 billion yuan, accounting for 22.9% of revenue. It is expected that the revenue share of innovative drugs will increase to 60% by 2030.

The recently announced seventh batch of national volume-based procurement included a total of 60 varieties, and the average price reduction of the drugs to be selected was 48%, lower than the previous five batches, reflecting the benign price competition in the centralized procurement. Sino Biopharm won 9 products among 11 bids, becoming one of the listed pharmaceutical companies with the largest number of selected bids.

According to the PDB sample hospital sales information, the revenue contribution of this collection of winning varieties to Sino Biopharm in 2021 is only about 5%, and the relatively large market share of zoledronic acid, tigecycline, edaravone and palonosetron were successfully won. Sino Biopharm said that although the seventh batch of collection involves a number of key products, the company continues to be in the first echelon in key areas such as anti-tumor, liver disease, respiratory and anti-infection, especially in the domestic pharmaceutical enterprises with obvious advantages. The share of sales after the centralized procurement will be rapidly released to make up for the adverse impact of price reduction on revenue, and sales are expected to eventually achieve faster growth.

Undoubtedly, the centralized procurement of innovative drugs will create much bigger payment space for medical insurance, spurring companies to focus on endogenous growth and pay more attention to innovative research and development. This is also evident in the year-on-year decline in sales and administration expenses of Sino Biopharm. Its half-yearly report shows that sales and administrative expenses fell by 1.6% year-on-year, indicating that the company is making a strong shift from focusing on sales to focusing on research and development.

From "New in China" to "New in the World"

In the long process of returning to rationality, where are the opportunities for investors in the biopharmaceutical industry? The industry generally believes that the internationalization of Chinese innovative drugs will be a fairly important theme in the next decade. This is not only limited to the transfer of interests out of China's innovative drugs, but really allowing China's innovative drugs to start selling in the international market, or even growing their position in the international arena through mergers and acquisitions.

On the way of innovation and transformation, Sino Biopharm is building its own "ecosystem". Miss Tse, Theresa Y Y, Chairwoman of the Board of Directors, pointed out that in order to move from "New in China" to "New in the World", truly breakthrough innovative drugs cannot be achieved without the support of international markets. technologies such as dual antibodies, triple antibodies platform, and mRNA/DNA. At the same time, we will accelerate international expansion by strengthening the innovative R&D capabilities of our headquarters and empowering the business pipelines of our subsidiaries to form a synergy to build an upgraded version of China's top pharmaceutical company.

On June 23, 2012, Sino Biopharm announced its proposed acquisition of NASDAQ-listed F-star, a Cambridge, UK-based company that not only has the world's most advanced tetravalent bivalent antibodies platform, but also has worked with a number of multinational pharmaceutical companies, including Merck and AstraZeneca, with potential milestone revenues of over $2.2 billion, for $161 million. If the deal is finalized, it will give Sino Biopharm a cutting-edge bivalent antibody platform technology and a strong international clinical development team.

Miss Tse, Theresa Y Y pointed out that it is the common ideal of all colleagues in Sino Biopharm to build a world-class Chinese innovative pharmaceutical company and to see Chinese innovative drugs benefit patients worldwide. While striving to be one of the top 30 global pharmaceutical companies, Sino Biopharm will always focus on solving unmet clinical needs and improving access to medicines to fulfill its mission of "for the country, for the people and for the company".

(Associate editor: FengHu)