Revenue ranking in the CDMO field in 2020, the market share of WuXi Biologics will fall within five years

May 06, 2021

Nowadays, foreign multinational pharmaceutical companies have divested their production functions and advocated asset-light operations, which has brought about an increase in the overall outsourcing ratio; the trend of domestic innovative medicines + MAH system resonance, the domestic CDMO industry ushered in explosive growth, and then "endogenous + exogenous growth" "It has brought unprecedented opportunities to the CDMO industry to a large extent. At the same time, as the most populous country, China undoubtedly has the largest number of chemical and pharmaceutical-related professionals in the world. Younger age, high education, low employment costs, and easy squeezing of working hours are the four main characteristics of current domestic CDMO talents, resulting in high-cost areas. A large number of orders flowed into the country, which directly led to the rapid development of my country's CDMO industry. In the early years, due to the lack of capabilities of Chinese API suppliers in all aspects, international pharmaceutical companies generally did not hand over the core production links to the country, or after completing the clinical trial phase of drug development and production, the commercialization phase was transferred. As a result, the domestic commercial production of innovative drugs lags behind. However, after five years of development, local CDMO companies have successfully entered the production of cGMP intermediates. While the added value of technology and profit levels have continued to increase, the excellent completion indicators have also promoted the intensification of cooperation between the two parties and increased customer stickiness.

The income of Chinese enterprises is small, the future growth space is large, and the gap between domestic and foreign companies is large.

As the overall development time of my country's CDMO industry is relatively short, there is a huge gap in terms of income volume, profit volume, enterprise scale, talent ratio, or per capita revenue compared with international leading CDMO companies such as Lonza Pharmaceuticals. But at the same time, the growth rate and growth space of my country's CDMO industry is unmatched by other countries, and it has also become the biggest feature of the domestic CDMO industry.

In terms of revenue volume, WuXi Biologics, Hequan Pharmaceuticals, and Kailai Ying are in the first echelon of revenue. In 2020, the CDMO segment will generate 5.61 billion, 5.28 billion, and 2.838 billion revenues respectively; while the number of companies in the second echelon is obvious Higher than the former, the number of companies with revenues exceeding the 1 billion mark has reached 5, among which well-known companies such as Boten, Jiuzhou Pharmaceutical, Kanglong Chemical and Prologue Pharmaceuticals are among them; and the third echelon no matter it is The revenue volume of the CDMO sector and the quality of the year-on-year growth rate are uneven, but these companies are also important representatives of the industry's transformation and upgrading. If you look at the total revenue alone, many of them even exceed the second-tier companies. But at the same time, compared with the overseas CDMO leader Lonza Pharmaceuticals, there is undoubtedly a significant gap between the domestic revenue volume and the sales performance of 4.5 billion Swiss francs in 2020. CDMO does not list it separately. According to last year's sales pie chart, its CDMO performance is inferred. It should be around US$4 billion. Looking at the overall situation, there is undoubtedly a significant gap in the profit level of CDMO companies at home and abroad.

Business "vertical + horizontal" development is the main trend of the domestic CDMO industry

It is also because of the specific CDMO development environment in China. Although most CDMO companies are in the accumulation stage of customer resources, project management and financial strength, the added output value of the business scope is low. However, in recent years, leading companies such as WuXi AppTec, Proton, Kailai Ying, WuXi Biologics have adopted various methods to enhance their competitive advantages and profit margins. At present, they are mainly expanding their business vertically (pre-clinical to late-stage and commercial The main focus is on chemical expansion, as well as the expansion of intermediates to API and preparation CDMO) and horizontal layout of new business (biological medicine CDMO)

The integration of CRO+CDMO is an important development trend of Chinese enterprises

Judging by the current development direction of our country, the integration of CRO+CDMO is undoubtedly the most important trend. CDMO companies such as Gloria, Proton, and Jiuzhou Pharmaceuticals have all begun to deploy CRO business, and WuXi AppTec has already realized it in the early years. The integrated development of CRO+CDMO. At the same time, as the R&D needs of small and medium-sized innovative drug companies, scientific research units, and universities increase in the future, it is an inevitable trend for CDMO companies to develop into the CRO field. On the one hand, extending to the front of the industrial chain can better establish an industrial ecology and more firmly bind. Resource customers are equivalent to draining traffic for the back-end CDMO service.

The integrated development of API-preparation is the inevitable direction of the development of my country's CDMO enterprises

In the CDMO industry chain, cooperation with pharmaceutical companies often starts with intermediates and other links. The two parties will gradually develop in the direction of APIs and preparations after years of cooperation.

However, due to the relatively short development time of China’s CDMO industry, most companies, even if they cooperate with multinational pharmaceutical companies, are limited to the production of starting materials, non-GMP intermediates, GMP intermediates and APIs, even in the field of small molecules. Leading companies, Hequan Pharmaceutical (Wuxi AppTec) and Kailai Ying, are only just involved in the field of preparation production. With the enhancement of the R&D capabilities of CDMO companies and the deepening of customer binding, from intermediates to APIs and then to The gradual upgrade of preparations will be the only way for the development of China's CDMO enterprises.

The coordinated development of large + small molecules is the ideal state of my country's CDMO enterprises

The total sales revenue of the top ten drugs worldwide in 2020 will reach 103.11 billion U.S. dollars, of which 6 are small molecule drugs, accounting for 51.7% of sales revenue, and 4 are monoclonal antibody/recombinant protein macromolecular drugs, accounting for 48.3% of sales revenue. %. Compared with the top ten drugs sold many years ago, both the quantity and the amount have been greatly improved. At the same time, it also reflects that macromolecular biopharmaceuticals have now become the core driving force for global drug development. Considering that macromolecular drugs are particularly It is the characteristics of the research and development and use of cell and gene therapy drugs. It is more dependent on the CDMO industry and is expected to become a new growth point for the CDMO industry in the future.

In terms of business types, in addition to the "polypeptide and oligonucleotide CDMO" concentrated by most companies, antibody macromolecule CDMO and cell and gene therapy CDMO are also involved in many domestic companies. Among them, WuXi AppTec and Kailai Ying , Proton shares is one of the representative enterprises. Generally speaking, as more and more cell and gene therapy projects are advanced to the late clinical stage, as well as the expansion of local CDMO companies' production capacity, the ceiling of production capacity and revenue still has a lot of room for improvement in the future.

The low concentration of the industry is good for the injection of fresh blood

According to relevant data, there are currently more than 600 CDMO companies worldwide. Among them, the leading company Lonza Pharmaceuticals has a market share of 6.6% in 2019. Thermo Fisher, Catalent, Jiyoulian and Boehringer Ingelheim have a market share Lower. This is very different from other sub-sectors in medicine. This is due to the characteristics of CDMO. In the research and development stage, in order to better protect IP, pharmaceutical companies will hand over different links to different CDMO companies for completion, which can effectively avoid the complete process flow from being mastered by the same CDMO company; in the production phase, large pharmaceutical companies want to ensure Supply stability and relatively low supply prices, the same innovative drug intermediates/APIs will be outsourced to 3-4 CDMO companies for supply; the CDMO industry has strong technological attributes, and many technology-led small and medium-sized CDMO companies are in Certain sub-fields have very strong competitiveness, and new drug research and development are becoming more difficult, and process development is becoming more and more complicated. Therefore, CDMO companies with skills can occupy a place; but unlike the world, some of the CDMO industries in China are currently It is still in the preliminary stage. The concentration of CDMO of macromolecules is much higher than the concentration of CDMO of small molecules. In 2019, the market share of the leading macromolecular CDMO of WuXi Biologics exceeded 80%, which is the absolute leader in the industry. In contrast, small molecule CDMOs Leading Hequan Pharmaceutical has a market share of less than 10%. With the maturity of the technical strength, R&D capabilities, project management level, and capacity management of large-molecule CDMO companies in the future, it is an inevitable trend that WuXi Biologics' market share will drop significantly. This is an inevitable trend for the large-molecule field of CDMO. "Latecomer" is definitely a once-in-a-lifetime opportunity.

Capital replenishing CDMO, what about the latecomers of the production bubble?

In 2020, a total of 2,199 financing events occurred in the global healthcare industry, and the total financing amount reached a record high of 74.9 billion U.S. dollars (approximately 516.93 billion yuan), an increase of approximately 41% year-on-year. From the perspective of investment, biomedicine has received the most attention, and the average single financing amount is relatively large. In the first quarter of 2021, a total of 73 financing events (from seed round to pre-IPO) occurred in the domestic biopharmaceutical industry, with a total financing amount of over 18 billion, including Beinno Bio, Dingkang Bio, Zhenge Bio and Aosi The four CDMO companies in Kangxi have a total financing amount of over 2.4 billion, covering all financing stages, and Dingkang Bio is also the company with the highest amount of financing in the entire A round of financing.

In response, after the accelerated influx of capital into the CDMO field, can it pose an essential threat to the status of leading companies? Does the logic of the strong Hengqiang mean that it is too late to choose to enter the CDMO industry? Will the situation of getting together and entering the game lead to the production of a capacity bubble? But it has become a problem that most industry personnel worry about. WuXi Biologics Chen Zhisheng stated that the biggest advantages of leading domestic biopharmaceutical CDMO companies are production capacity, talents, and supply chain. The number of projects and customers needs to be accumulated before they can be converted to scale. At the same time, the development of the double-antibody, ADC and vaccine business also requires a certain degree of foresight. It is common to deploy race tracks and technical platforms a few years in advance. Regarding whether the entry time is too late, Xu Yi, the general manager of CICC Qichen, said at the CHC conference that in today's innovative drug market, those who dig gold may not be able to dig gold, but selling shovels can sell money. The CDMO industry is relative to the field of innovative drugs. The risk is greatly reduced. Perhaps this is one of the reasons why most people choose the curve to save the country and choose the CDMO industry. Regarding the production bubble, Zhang Suyang, the founder of Volcanic Rock Capital, also said at the 2021CHC CITIC Securities Medical and Health Conference that the market bubble is not terrible. The key is to find out what is air and what is water when the bubble is bursting. There is always a bubble, because there is no new thing without a bubble. The early stage of mobilizing resources must be a bubble. The bubble itself represents a direction. Chen Zhu, chief analyst in the pharmaceutical industry of CITIC Securities, emphasized that from 2020 to 2023, a wave of rapid commercialization may be ushered in. WuXi AppTec, Jiuzhou Pharmaceutical, and WuXi Biologics production scale, fixed asset investment and production capacity are all increasing. With rapid expansion, in the next three years, the most certain track of certainty and growth in the entire CRO industry is the CDMO field, and the future is boundless.