Is the investment logic of domestic new drugs "caring" or "picky"?

1 Since 2011, the domestic pharmaceutical industry has gradually entered the era of innovation driven Behind this is the result of the interaction between supply and demand: medicine is highly sensitive to policy, and for policy makers, with the failure of the bonus momentum of health insurance expansion, it is necessary to continue to improve the public's sense of medical access by promoting innovation Correspondingly, since 2015, the drug administration has promoted the drug examination reform in the upstream access of innovative drugs, and since 2018, the health insurance administration has promoted the payment reform in the downstream payment of innovative drugs, which has provided incentives for new drug innovation At the same time, the drug administration has promoted the consistency evaluation of generic drugs, while the health insurance administration has promoted the centralized purchase and price reduction of generic drugs, which has further improved the innovation of pharmaceutical enterprises On this basis, the patient's demand for better treatment will be released continuously At the same time, with the continuous and rapid improvement of talent and technology accumulation and the increasingly strong financial and policy support, the supply capacity of domestic innovative drugs has also achieved considerable development under the background of substantial improvement of factors This change has a comprehensive and far-reaching impact on the pharmaceutical industry: on the one hand, the mainstream traditional pharmaceutical enterprises such as Tianqing and Kelun are all determined to innovate and transform; on the other hand, a large number of start-up pharmaceutical enterprises such as Baiji and Xinda are springing up And as time goes on and the trend becomes more and more obvious, "big pharmaceutical companies will have a way out only if they can innovate" has almost become the consensus of the market This consensus will affect the valuation system of individual stocks, such as "Hengrui pharmaceutical" and "Huadong pharmaceutical", both of which belong to the well-known pharmaceutical giant Baima Because of the competitive pressure of stock products and the layout difference of innovative new drugs, the performance of stock prices in the past half year has diverged significantly At the moment of "new drug trend has become a trend and innovative R & D has become a market consensus", if we only know that "innovation is the development trend of the pharmaceutical industry" and only know that "buy innovation and buy Hengrui medicine", it is likely to fall into new danger in future pharmaceutical investment In fact, the supply and demand factors of innovative drugs have changed profoundly in the past few years The huge change of the core environmental factors, logically, will bring the profound change of the dominant species spectrum sooner or later 2 The me too value peak transit, active or passive, domestic innovation needs to transfer the changes of ecological environment to the high place of value chain Logically, it will bring profound changes of dominant species Before discussing the changes of this species map, I will give two more recent examples In November, the 2019 innovative drug negotiation led by the health insurance bureau was launched 119 new negotiated drugs were negotiated 70 times, with an average price reduction of 60.7%, 31 renewed drugs 27 times, with an average price reduction of 26.4%; the overall decline was considerable, and the domestic class 1 new drugs were not even included in the negotiation list because of their low clinical value, which was particularly harsh compared with the negotiations on innovative drugs in the past three years; ii) Also in November, zebutinib, a Btk inhibitor from Baiji Shenzhou, was approved by the FDA to treat patients with cell lymphoma, becoming the first original innovative drug independently developed by Chinese enterprises and approved for marketing in the United States Zebutinib was awarded "breakthrough therapy certification" by the FDA in January this year, and in the past week, another Chinese company, Nanjing legendary target Cart therapy to BCMA has also been recognized by FDA as a breakthrough therapy FDA's breakthrough therapy has very strict requirements on the global competitiveness of product performance The dot like quality innovation progress of Baiji and legend suggests that China may be breeding a batch of world-class drugs These are two completely independent events in intuitive sense, but they are consistent in causal logic: with the increasing supply of domestic original research innovative drugs, the competition among innovative drugs is also increasing; under the influence of the trend of medical insurance negotiation promoting pharmacoeconomics, the clinical value of me too innovative drugs, which do not have enough clinical value, is rapidly diminishing; and At the same time, domestic best in class (BIC) and even first in class (FIC) new drug groups with global competitiveness are forming; whether active or passive, domestic innovative drugs have begun to migrate to the high-end value chain Another example: in 2011, the first generation of EGFR-TKI "ektinib" of Beida pharmaceutical was approved to be listed in China In terms of clinical value, ektinib is only the me too drug (generic drug) of gefitinib / erlotinib which was approved to be listed overseas 7-8 years ago, and its therapeutic value is significantly lower than that of the second generation and the third generation of EGFR-TKI with certain clinical data, but this is not the case It doesn't affect the industry landmark event that the listing of exetinib has become a sensation, and even was called "two bombs and one star" in the field of new drug creation by Chen Zhu, the former Minister of health In contrast, only eight years later, in 2019, the clinical data of the best third-generation EGFR-TKI "oshitini" published by efetinib of Ellis and bpi-7711 of bereda, which is just a "pretty good" industry news Behind this, the biggest difference is that more than 10 years ago, only Bada exinib was the only seedling of EGFR-TKI Now there are more than a dozen EGFR-TKI companies, whose supply and competition foundation are obviously different! 3 As the supply of innovative drugs is no longer scarce, "care" may gradually become "picky" We often hear a data: the success rate of global new drug research and development from the approved clinical to the final approved market is less than 10%, but the success rate of new drug research and development in China in the past 10 years is as high as 40% - 50%! Why is the global success rate of new drug R & D so low, while the success rate of new drug R & D in China is so high? In fact, most of America's "lost in the middle" innovative drugs are not the "clinical failure" as we all know, but the data fail to show better efficacy than the existing treatment methods and "give up voluntarily" When there is a "shortage" of domestic new drugs, the support attitude from upstream drug supervision to downstream medical insurance is "caring" Even domestic new drugs with no international competitiveness can be approved and listed in China and grow in large quantities However, as the supply of innovative drugs is no longer scarce, and even when there is excessive competition in new drug research and development in some fields, "caring" naturally becomes "selective" Tick " There is a problem of "rising water and rising ship": when a third-generation EGFR-TKI has more than a dozen enterprises competing to make a new class 1 drug, and a PD-1 / PDL-1 target has dozens of enterprises in the layout of a new class 1 drug, the era of "new class 1 drug" can attract countless attention and support will be gone forever It can be predicted that the drug regulatory bureau and the medical insurance bureau, including doctors and patients and other relevant participants, will have more and more strict requirements for new drugs; at the same time, a number of leading innovative enterprises will continue to promote the development of new drugs in China to the high end of the value chain 4 Innovation is a game against time variables, and game innovation of race is a game against time variables Only by recognizing the trend can we grasp the opportunity However, the current trend is that the value of domestic me too generic innovative drugs has already passed through the country In essence, me too is closer to the engineering behavior, and the leading pharmaceutical companies with the advantages of resources and platform system have greater advantages However, if they want to go to the best in class and first in class in the future, the risk-taking and creative requirements will be significantly improved In fact, most of the world's most valuable pharmaceutical innovations in the past decade were originally developed by small companies China also began to show signs of this "role switching": the first Baji and Chuanqi recognized by FDA breakthrough therapy are "new forces of drug creation", and if we go to sort out the representatives of "next generation" The domestic leading enterprises of car-t, RNAi, gene editing and other technologies of biotherapeutics (the next generation of biotherapy) are no surprise, including Hengrui, Tianqing, hausen, Qilu, Shiyao and other traditional large pharmaceutical enterprises, none of which are selected! After the hatch Waxman act of 1984, the pharmaceutical industry in the United States has entered the innovation driven stage If we look at the pharmaceutical stocks in the United States, we will find that the overall performance of the "leading pharmaceutical companies" in the United States during 1985-2000 is very excellent, but by 2000-2019, these leading pharmaceutical companies almost "annihilated" in the win-win index, at the same time, a large number of "new pharmaceutical companies" have performed very well This is a phenomenon worth pondering The iterative variable of innovation is giving birth to the continuous bright appearance of new forces, and also urges the gradual darkening of old forces The investment logic of new drugs has quietly changed "Will drug innovation continue to be the fast follow-up of me too", "is investment in innovative drugs the first pharmaceutical enterprise to invest in active transformation" At a time when valuations are at historically high levels, this is a particular issue to consider Note: all the individual stocks involved in this article are only for objective discussion, and do not constitute recommendation suggestion or trading reference I hope I can communicate with you on the point of view and improve each other Thoughtful differences of opinion are welcome.