In or Out?

License is a product introduction method that has emerged in the medical field in recent years
.

Depending on the direction of introduction, licenses can be divided into two types: License-in and License-out.

US$1.
5 billion License-out cooperation sets a new record

US$1.
5 billion License-out cooperation sets a new record

In mid-December, Shanghai Qilu Regal Pharmaceutical Research and Development Co.
, Ltd.
(hereinafter referred to as: Regal Pharmaceuticals) and the multinational pharmaceutical company Eli Lilly reached a cooperation agreement.
The two parties will closely develop preclinical drug development, clinical research and commercialization in the next few years.
Cooperation to jointly develop innovative therapies for metabolic diseases
.

According to the agreement, Rieger Pharmaceuticals will grant Eli Lilly the United States a license for the intellectual property rights of Rieger Pharmaceuticals, and Eli Lilly can choose to extend the license
.

Eli Lilly will be responsible for clinical development, production and commercialization outside of Greater China (including Mainland China, Hong Kong, Macau and Taiwan); Ruige Pharmaceuticals will retain the aforementioned rights and interests in Greater China

Regal Pharmaceuticals will receive a total of 50 million US dollars in advance, including part of the equity investment
.

In addition, Rige Pharmaceuticals will also receive up to US$1.

Established in 2018, Rege Pharmaceuticals is a high-tech biomedical company in the clinical stage.
It needs to use its own AI-assisted new drug development CARD (Computer Accelerated Rational Discovery) platform to target the "long-term" targets in the pharmaceutical industry and develop clinical Innovative drugs with differentiated advantages, and focus on the three therapeutic areas of tumor, immunity and metabolism
.

At present, Regal Pharmaceuticals has established a rich layout of self-research pipelines in the above three therapeutic areas, and this time the company cooperated with Eli Lilly on a pre-clinical early patent in its metabolic pipeline

In terms of innovative drugs, License-in has its own significant advantages, enabling biotech companies to quickly transform into biopharmaceutical companies; and with the help of License-out, companies can obtain sufficient cash flow support in a short period of time for further research and development.
Work
.

However, in the process of rapid development, disputes have gradually emerged.

License-in: To make up for the shortcomings of the enterprise and realize "overtaking in corners"

License-in: To make up for the shortcomings of the enterprise and realize "overtaking in corners"

Domestic pharmaceutical companies have introduced early projects from overseas companies to increase the probability of innovative drug research and development, and quickly enrich the company's product pipeline.
The license-in model can make up for the shortcomings of their own products and create differentiated advantages to achieve "curve overtaking"
.

At present, more than half of the introduced project areas are anti-tumor drugs, and the project phase is mainly clinical phase II/III

License-in statistics of domestic pharmaceutical companies in the past ten years (Source: Western Securities R&D Center)

Top Ten License-in Transaction Cases of my country's Innovative Drugs in 2021 (Source: Yaozhi.
com)

License out: Promote the international layout

License out: Promote the international layout

Relatively speaking, license-out is more difficult than license-in, and the scientific research strength of pharmaceutical companies needs to be recognized by giant companies
.

With the gradual construction and maturity of the domestic innovative medicine ecological environment and the continuous emergence of innovative achievements, the number of license-out agreements reached by domestic pharmaceutical companies and international pharmaceutical companies has also begun to increase, and the transaction volume has soared

TOP 10 License-out Transaction History (Source: Wind Ping An Securities Research Institute)

Innovation going overseas can be divided into 4 stages: product internationalization, directly authorizing products to multinational pharmaceutical companies for global development; clinical internationalization, establishing overseas operation teams, and conducting multi-center clinical research; R&D internationalization, directly establishing early R&D teams overseas ; Business internationalization, overseas self-built commercialization team, complete global sales
.

At present, Chinese companies have completed product and clinical internationalization, and some companies have also begun to set up R&D departments abroad, which is expected to further improve China's innovative drug research and development capabilities and product export capabilities

Summary of overseas license-out projects of domestic pharmaceutical companies (Source: Guosheng Securities Research Institute)

With the deepening of national policies, drug innovation usher in new opportunities for development

With the deepening of national policies, drug innovation usher in new opportunities for development

On June 19, 2017, the State Food and Drug Administration announced that China has joined the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH)
.
The field of drug registration is in line with international standards.
Drug regulatory authorities, the pharmaceutical industry and R&D institutions have gradually adopted and implemented high standards in the international drug field, and introduced global drug R&D and registration technical requirements.
On the one hand, it has enhanced the innovation and competitiveness of the domestic pharmaceutical industry.
On the other hand, it is also conducive to the integration of Chinese pharmaceuticals into the international pharmaceutical industry chain
.

ICH Guiding Principles (Source: Official Website of ICH Work Office)

From 2015 to 2021, the State Council, the National People's Congress and other departments have successively issued more than 30 documents to remove obstacles to drug innovation and development and provide convenient services
.
In July 2020, the newly revised "Administrative Measures for Drug Registration" was formally implemented, with a special addition of a chapter on accelerated drug registration procedures and the establishment of four channels for breakthrough therapeutic drugs, conditional approval, priority review and approval, and special approval to support the Clinical value-oriented drug innovation
.

"Administrative Measures for Drug Registration" (Source: Drug Evaluation Center of the State Drug Administration)

The National Health Commission and the National Medical Insurance Bureau jointly issued the "Long-term Prescription Management Standards (Trial)", which stipulates long-term prescription organization and management, issuance and termination, dispensing, medication management, and medical insurance payment
.
The adjustment cycle of the medical insurance drug catalogue has gradually stabilized from once every 4 years to once every 1 year.
The proportion of innovative new drugs has increased significantly, and the time from listing to inclusion in medical insurance has also been greatly shortened
.
From 2017 to 2020, most innovative drugs can be successfully admitted that year, and the shortest period in 2020 is only 5 months
.
According to data from the National Medical Insurance Administration, 66 of the 67 drugs out of the catalog in 2021 were listed within five years, accounting for 99%, of which 27 innovative drugs entered the medical insurance the year they were launched
.
The speed at which innovative drugs enter medical insurance has increased significantly, which can help innovative pharmaceutical companies to accelerate the withdrawal of funds, and is a powerful push for pharmaceutical innovation
.

Part of the medical reform policy (Source: Western Securities)

Investment institutions: R&D potential and clinical value are favored

Investment institutions: R&D potential and clinical value are favored

From the perspective of the capital market, after the start of the medical reform, pharmaceutical innovative companies have grown rapidly, and the investment boom in innovative drugs has risen, and the amount and volume of investment have increased sharply
.
However, with the successful listing of leading high-quality companies and the continuous increase in the threshold for innovation, the investment boom has begun to cool down
.
The rapid increase in the number of listed innovative companies has caused the capital market to re-set investment standards
.

In recent years, the capital market has favored innovation targets that have not yet been verified
.
Unverified targets are expected to innovate treatment methods, have high clinical value, have great market potential, and have not yet formed a clear competitive landscape
.
In addition, investors are more willing to deploy innovative elements or cutting-edge technology companies
.
Molecular innovation is mainly a technological platform breakthrough, which contains more opportunities than target innovation
.
Many securities reports indicate that attention should be paid to independent innovative companies with sustainable development potential in the future, as well as innovative drug products with high clinical value and barriers, such as Hengrui Pharmaceuticals, BeiGene, Cinda Bio, Corning Jerry, Micro Core biology and so on
.

License-out main licensor company (Source: Guosheng Securities Research Institute)

License-out main transferee company (Source: Guosheng Securities Research Institute)

Enterprise: I like it but I am afraid of being hurt

Enterprise: I like it but I am afraid of being hurt

The wave of early license-in development has passed, and most of the current trading projects are mid-to-late stage projects, but the low-risk mid-to-late stage projects are accompanied by high transaction costs
.
The license-in transaction model is mainly composed of down payment, milestone payment, and future sales commissions.
The drawbacks are obvious.
If the drug is successfully listed in the future, the importer will have to surrender its own sales profits
.
To make matters worse, domestic pharmaceutical companies are merely agents in China for basically all imported projects
.
Moreover, products that take shortcuts will eventually return to a similar price competition situation as generic drugs, mainly for price PK
.

It is worth noting that although the number of domestic new drug pipelines has increased significantly, from the perspective of target distribution, there are a large number of cases where the same target is piled up.
As a result, new drugs will face a fierce competition in the market
.
The overseas release of License-out products brings opportunities to break the game, and domestic pharmaceutical companies should pay attention to the value space of local pharmaceutical companies going overseas
.
BeiGene has set a demonstration for the industry, and the R&D capabilities of local pharmaceutical companies can directly compete with overseas leading pharmaceutical companies
.
With hard product technology and high R&D efficiency, in the future, local pharmaceutical companies will brave the wind and waves for innovative drugs going overseas
.

A panoramic view of domestic small molecule tumor drug targets (Source: Yaodu, Ping An Securities Research Institute)

From the perspective of the development process, the license-in is more worrying than joy.
The importing party needs to be extra cautious and not blindly import for the sake of introduction.
The Red Sea area is already overcrowded, and the development direction should be changed to the blue ocean field
.
Also, whether technology is valuable and whether technology becomes the only bargaining chip for listing are two different things.
License-in technology itself should not be the focus of questioning
.
The way companies use it is the root of the problem .
As the saying goes, iron strikes still need to be hard.
Whether it is License-in or License-out, independent R&D and innovation are the core of enterprise development
.
Taking doctrine may be a transitional strategy, but self-reliance is the foundation of survival
.

Reference source:

Reference source:

[1] "Investment Strategies for the Pharmaceutical Industry in 2022-The Era of Changes, Taking Over the Stars in the Grand Pattern"

[1] "Investment Strategies for the Pharmaceutical Industry in 2022-The Era of Changes, Taking Over the Stars in the Grand Pattern"

[2] "Pharmaceutical and Biological Industry 2022 Annual Strategy Report Accelerating the Evolution of Industry Ecosystem, Seeking Higher Quality Development"

[2] "Pharmaceutical and Biological Industry 2022 Annual Strategy Report Accelerating the Evolution of Industry Ecosystem, Seeking Higher Quality Development"

[3] "Fourteenth Five-Year" National Medical Insurance Plan One Question and One Answer

[3] "Fourteenth Five-Year" National Medical Insurance Plan One Question and One Answer

[4] China Food and Drug Network

[4] China Food and Drug Network

[5] Official website of ICH Office of Work

[5] Official website of ICH Office of Work