Rapid development of cro and CMO: repetition of the story of mining gold and selling water

Brother Wen Niu The story of selling water and digging gold is repeating in the field of innovative medicine in China! In recent years, due to its great role in R & D, clinical, production and other links, along with the start of China's innovative pharmaceutical industry, the pharmaceutical outsourcing industry has ushered in a huge development opportunity, and the growth rate of the industry market scale in recent five years has exceeded 20% Figure 1 the effect of outsourcing on clinical research and production of Medicine Data source: Zhongkang Industrial Research Center Pharmaceutical contract outsourcing means that pharmaceutical enterprises purchase third-party services, and the contractor is responsible for the R & D, production or sales business within the scope of the contract, and bears the corresponding business investment risks At present, pharmaceutical contract outsourcing runs through the whole pharmaceutical life cycle, which can be divided into cro, CMO and CSO Figure 2 according to the pharmaceutical cycle, pharmaceutical outsourcing includes cro, CMO and CSO Data source: Zhongkang Industrial Research Center CrO (contract research organization) is a professional organization that provides clinical or preclinical research services of new drugs to pharmaceutical enterprises in the form of contract It undertakes the tasks of some new drug development tests and application registration, mainly serving the new drug market and the previous stage CMO (contract manufacturing organization) refers to the organization entrusted by pharmaceutical companies to provide services such as process development, formula design, clinical trial medication, APIs, intermediates, preparation production, packaging, etc for pharmaceutical production, mainly serving the new drug production stage CSO (contract sales organization) is a specialized organization entrusted by pharmaceutical companies to undertake drug sales and promotion, mainly serving the stage of new drug marketing and sales In general, Chinese pharmaceutical outsourcing enterprises are mainly concentrated in cro industry, among which there are large cro & CMO companies such as Wuxi Pharmaceutical Co., Ltd., kailaiying Pharmaceutical Co., Ltd and Jiuzhou Pharmaceutical Co., Ltd they not only have a long and mature development in cro business, but also further develop CMO business In China, there are not many companies doing CMO or CSO business alone, and they are still in the development stage, especially the CSO industry is still in the early stage of development, and there are few listed specialized enterprises Figure 3 pharmaceutical outsourcing companies in China (unit: 100 million yuan) Data source: Ifind, Zhongkang Industrial Research Center Founded in 2000, Wuxi Pharmaceutical Co., Ltd ranks first in the pharmaceutical outsourcing industry in China with a total market value of 151.157 billion yuan, mainly focusing on small molecule compound business In recent three years, the compound growth rate of net profit has reached an amazing 50.56% It not only has an industry leading position in cro field, but also actively carries out business in CMO industry With the advantages of domestic costs and human resources, the company has undertaken a large number of innovative R & D outsourcing needs of foreign pharmaceutical companies, and gradually emerged in the global competition, becoming the second largest pre clinical cro company in the world Yaoming biology, which is "homologous" with Yaoming Kant, takes bio medicine cro as its main business Its total market value at the closing price on January 1 also reached RMB 114.396 billion In 2018, the company's net profit reached RMB 253 million, a year-on-year increase of 79.43% Kailaiying is a cro & CMO enterprise, which mainly provides drug R & D services for large and medium-sized pharmaceutical enterprises and biotechnology enterprises at home and abroad By the end of 2018, the company's market value is nearly 30 billion yuan, and its net profit has increased year by year in the past three years, with a compound growth rate of 33.79% In recent years, Tege's business has also developed rapidly By 2018, its net profit increased to RMB 507 million, a year-on-year increase of 52.71%, and the compound growth rate of net profit in three years reached 42.84% In the golden age of rapid development of pharmaceutical outsourcing industry, in addition to the above several large companies with comprehensive business development, there are also a number of enterprises with professional characteristics At the end of 2019, Jiuzhou pharmaceutical acquired 100% equity of Novartis group, a multinational enterprise in the global pharmaceutical and health industry, representing new forces in cro and CMO industries Zhaoyan new drug Co., Ltd was founded in 1995 and has been focusing on drug safety evaluation business In recent three years, the company's net profit has grown continuously, with a compound growth rate of 30.06% in three years Yaoshi technology is a company that mainly makes molecular blocks in cro industry segmentation In 2018, the net profit of Yaoshi technology was 135 million yuan, a year-on-year increase of 98.9%, and the compound growth rate of the company's three-year net profit reached 89.2% As the domestic drug sales system is in the process of standardization, CSO market is in the introduction period There are few listed companies in a share market, but with the promotion of "two vote system" and other medical reform policies, CSO companies are expected to get better market development From the above analysis, in recent ten years, the overall development speed of China's pharmaceutical outsourcing industry is relatively fast, mainly for the following reasons In recent decades, with the increase of basic test costs and increasingly strict regulatory requirements, the cost of new drug development has increased rapidly, which brings great pressure to the research and development of pharmaceutical enterprises Those pharmaceutical companies can improve their operating efficiency, reduce operating costs and disperse R & D risks by outsourcing some aspects of drug R & D and production to other outsourcing companies with specialized technology Figure 4 average R & D cost of new drugs in recent years (unit: million US dollars) Data source: tufts Center for the study of drug development, Zhongkang Industrial Research Center It generally takes 10 to 15 years to develop a new drug from the drug exploration stage to its launch At present, the patent protection period of new drugs in major countries is 20 years, so the actual effective patent protection period after the new drug is launched is only 6 to 10 years And these cro enterprises can help pharmaceutical enterprises to accelerate the progress in the limited patent period, shorten the R & D cycle, and make new drugs to market as soon as possible to achieve returns.