Hand in hand with AstraZeneca. Can Junshi Biology complete the counterattack?

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The “medical brother” Hengrui once licensed Carrelizumab to Incyte in 2015, with a mileage of US$770 million (but the cooperation was terminated in 2018).
In April last year, it was authorized to South Korea's CG company, which will pay Hengrui a milestone payment of no more than US$84.
25 million based on actual annual net sales.

Junshi came from behind, and in February this year it went to sea twice: first, it authorized the development and commercialization of triprolizumab in the United States and Canada to Coherus (and received a total of up to 1.
11 billion US dollars in down payment, optional Project execution fee and milestone payment).
Then, it reached a strategic cooperation with AstraZeneca China.

The domestically produced PD-1 monoclonal antibody "goes to sea", and BeiGene is undoubtedly the best performer.

On January 2, 2021, BeiGene authorized Novartis for the development, production and commercialization of ralizumab in multiple countries.
The down payment was as high as 650 million U.
S.
dollars and the total transaction amount exceeded 2.
2 billion U.
S.
dollars.
The "double record" of the domestic drug authorization cooperation project with the highest authorized transaction amount and the highest down payment amount for a single domestic drug.

In summary, behind the domestically produced PD-1 monoclonal antibody's acceleration of "going to sea", there are the following underlying logics:

Bottom Logic 1: The "Red Sea" in the domestic monoclonal antibody market has appeared

According to the Southwest Securities Research Report, there are a total of 154 PD-1 monoclonal antibodies under research worldwide, of which 85 are R&D or co-developed by Chinese companies (accounting for 55%), and 8 have been listed globally (6 in China).
5 are in the application for listing stage and 7 are in the phase III clinical stage.
It is expected that more than 20 PD-1 products will be marketed globally in the next 2-3 years.

At present, a total of 6 PD-1 monoclonal antibodies have been approved for marketing in China, including two imported products: Bristol-Myers Squibb BMS's nivolizumab (drug O) and Merck’s pembrolizumab (drug K); 4.
Domestic products: Junshi’s Terelimumab (trade name: Tuoyi), Cinda’s Sintilizumab (trade name: Daboshu), Hengrui’s Karelizumab (trade name) : Erica) and Baekje's tislelizumab (trade name: Bezeran).

In addition, in the “soul bargaining” of the national medical insurance negotiations in 2020, the three domestic companies of Junshi, Hengrui, and Baiji entered the medical insurance with an average price reduction of 78%, and the profit margin of the company was greatly compressed.

For example, Junshi's Tuoyi (240 mg specification), the price before negotiation is 7,200 yuan / bottle, using 26 bottles a year, the annual treatment cost reached 187,200 yuan.
After being included in the medical insurance this time, the annual treatment cost is less than 55,000 yuan.
The price of Baiji An (100 mg specification) is as low as RMB 2,180 per tube, and the annual treatment cost is less than RMB 75,000.

Although it has a price advantage relative to foreign investment, it also reflects the increasingly fierce price war competition in the domestic PD-1 monoclonal antibody market.
As more and more PD-1/PD-L1 monoclonal antibodies and double antibodies are launched in the future, the antibody drug market will gradually change from the blue ocean market to the red ocean market.

Bottom logic 2: The necessity of opening up overseas markets

Dr.
Wang Xide, executive director of CSPC's US branch, once said, "The value of an innovative drug must be reflected on the international stage and recognized by the international market.
"

Since the ceiling effect of the domestic PD-1 monoclonal antibody market and the Red Sea market have gradually emerged, through the development of overseas rights authorization and the use of the mature overseas sales channels of multinational giants, there will be more opportunities to share the global monoclonal antibody market.
According to public data, the world's highest sales of PD-1 monoclonal antibodies in 2020 are Merck's K drug (14.
380 billion U.
S.
dollars) and BMS O drug (6.
992 billion U.
S.
dollars).

Obviously, if a company wants to gain more market share in the wave of competition, it must not only promote multi-indications and joint therapy research and development with other drugs, but also expand its academic promotion team, control costs, and expand production advantages.
This is the development trend of PD-1 monoclonal antibodies, which cannot be separated from the blessing of experienced multinational giants.

In addition, similar to the medical device industry, which is continuously accelerating the pace of internationalization and realizing localized substitution, domestic monoclonal antibody drugs with high specificity, high lethality, and low side effects also need to break the monopoly of imported monoclonal antibodies to benefit more Many patients.

In the domestic monoclonal antibody market, which one is stronger?

So, in the fierce competition in the monoclonal antibody market, who can be the big winner?

In the past ten years, the global monoclonal antibody market has maintained a steady growth trend.
In 2019, the global PD-1/PD-L1 monoclonal antibody drug market has exceeded US$20 billion.
According to the analysis of the Frost & Sullivan Report, it is expected that with the increasing availability of indications and patient education, China’s PD-1/PD-L1 monoclonal antibody market will usher in rapid growth, reaching 664 in 2023 Billion yuan, with a compound growth rate of 133% from 2018 to 2023.

As we all know, the level of sales of monoclonal antibody products depends on factors such as indications, capacity advantages, and sales team size.

If you want to seize a place in the PD-1 monoclonal antibody market, you must win major indications.
According to statistics, non-squamous non-small cell lung cancer, gastric cancer (Her2 negative), liver cancer, and squamous non-small cell lung cancer in major indications account for more than 70% of the total market.

Since these four domestic companies have different indications layout strategies, their monoclonal antibody products are also significantly different.

According to the Insight database, Hengrui’s Karelizumab has the most approved indications, including 4 indications for second-line Hodgkin’s lymphoma, second-line liver cancer, first-line non-squamous non-small cell lung cancer and second-line esophageal cancer.
Followed by Baekje (3), Junshi and Xinda each have two.

In this regard, although Junshi won the first domestically produced PD-1 monoclonal antibody to be listed, Daboshu, which was approved for listing only a few days later than Tuoyi, gained more due to its advantages of being included in the medical insurance of 2019 first.
Sales.
Moreover, Erica, which was only approved for listing in mid-2019, took advantage of Hengrui's mature sales channels to sell for 1 billion yuan in half a year, achieving a preemptive strike.
This is also closely related to its approval for more major indications.
.

According to public data, as of June 2020, Cinda's commercialization team has expanded to 1,100; during the same period, Hengrui Pharmaceuticals has more than 6,000 sales personnel on the oncology line, of which nearly 2,000 are full-time sales personnel for PD-1.
As of the end of October, Junshi has nearly 700 sales staff, and the advantage is relatively unobvious.

Therefore, the leading domestic PD-1 monoclonal antibody company is undoubtedly Hengrui, and the market expects its sales in 2020 to reach 5 billion.
Secondly, Cinda, Junshi, and Baekje are about 2.
2 billion, 1.
319 billion, and 1.
055 billion, respectively.

But here comes the problem.
Regardless of market growth potential or indications, Hengrui, Cinda, and Baekje are relatively good.
But why did AstraZeneca China choose to cooperate with Junshi Biologics?

Can Junshi and AstraZeneca turn the situation around?

There is a slogan called "Don't choose the most expensive one, only choose the most suitable one.
" This sentence is also very appropriate when used in the cooperation between Junshi and AstraZeneca China.

In contrast, unlike Hengrui’s and Cinda’s major indications, Junshi took the route of "small indications to open a fast channel to market and strive for major indications.
" The indications will follow suit, which means that the product will be extremely explosive in the future.

This "niche + differentiation" development model can be described as a late bloomer or a large accumulation.
It not only avoids competition with similar products, but also allows the company to always maintain the position of the first echelon with the widest layout and faster progress.
.

At present, Junshi has submitted the marketing application for the two major indications of second-line treatment of urothelial cancer and first-line treatment of combined chemotherapy for advanced/metastatic nasopharyngeal carcinoma, and it is expected to be approved for marketing as soon as 2021.
At the same time, adjuvant treatments for first-line non-small cell lung cancer and liver cancer are also expected to be approved for marketing in 2022 and 2023.
At the same time, the research indications of teriplizumab include tumors in 10 locations, including lung, liver, and kidney.
Among them, the only types of renal cancer are teriplizumab and nivolumab.

It is worth mentioning that Junshi's R&D strength has also been the first to be recognized by foreign markets.

Up to now, three indications of teriprizumab have been approved by the FDA as an orphan drug.
They are combined with axitinib for the treatment of mucosal melanoma, nasopharyngeal carcinoma and the treatment of soft tissue sarcoma.
Moreover, in September 2020, teriprizumab was used to treat nasopharyngeal cancer and obtained a breakthrough therapy by the US FDA.
This is not only the first PD-1 product approved for nasopharyngeal cancer indications in China, but also the first to obtain the FDA Domestic PD-1 monoclonal antibody recognized by breakthrough therapy.

Although Junshi's sales in the domestic market are temporarily failing, it still has the first-mover advantage and monoclonal antibody capacity advantage of "going overseas".
At present, Jun has achieved a monoclonal antibody production capacity of up to 33,000 liters (Wujiang + Lingang), which is the largest among the current four companies.
The company also plans to increase production capacity by 12,000L (Lingang).

On the weaker sales side, Junshi hopes to "make up for shortcomings" by collaborating with Coherus and AstraZeneca, and accelerate the pace of global commercialization.

In 2019, AstraZeneca's sales in China reached 4.
88 billion U.
S.
dollars (only 710 million U.
S.
dollars in 2009, nearly 7 times in 10 years), accounting for 21% of its global revenue, and revenue surpassed European revenue for the first time.
Moreover, from 2013 to 2018, AstraZeneca achieved a 12% growth rate in the sales of sample hospitals, while Eli Lilly and GSK experienced negative growth.
In 2019, AstraZeneca's sales at IQVIA China Hospital surpassed Pfizer for the first time, ranking first.
This is due to AstraZeneca's vigorous deployment of academic promotion of its business in China in recent years.

On the one hand, with the help of AstraZeneca's extensive channel network accumulated for many years in China, especially its promotion ability in the county market, the company's monoclonal antibody products can be branded at home and abroad and more users can be obtained.
On the other hand, through the in-depth cooperation with Junshi, AstraZeneca can also fully complement the indications of existing immuno-oncology products, allowing its PD-L1 inhibitor duvalizumab injection to be in the phase III non-small cell Based on the success of lung cancer, continue to actively explore tumor types including esophageal cancer, lung cancer and liver cancer.

Therefore, only by finding a suitable international partner to deal with issues such as regulations, culture, and familiarity with the market can we better achieve internationalization.
In this way, Junshi and AstraZeneca, who have rich experience, are undoubtedly the right choice to reach a cooperation.

Conclusion

Looking forward to the future, as the follow-up major indications enter the period of intensive approval for the market, and its own production capacity superior to its peers, coupled with the strong cooperation with Coherus and AstraZeneca to make up for the sales shortcomings, Junshi Bio is very likely A counterattack will be realized, and its investment value will also be revalued.
(Insight database)