Wanchun Pharmaceutical’s rejection of new drug listing, will Hengrui be implicated in the development of new drugs, will it be a “point of no return”?

Can Hengrui break through the “nine deaths and a lifetime” of new drug research and development?

Wanchun Pharmaceutical’s core product Punablin was rejected from listing in the United States, plummeting 60%, and its market value fell to less than US$200 million

The research and development of new drugs is risky, full of uncertainties, and performance in a short period of time is under pressure.

Punabulin’s listing application was rejected.

The FDA pointed out in the review opinion that the data from only one registered clinical study (Prinabulin 106 Phase III clinical study) is not enough to fully confirm the clinical value of Prinabulin, and a second controlled registered clinical study is needed to provide sufficient information.

Pranabrin is a First-In-Class new drug developed by Wanchun Pharmaceutical.

In June 2020, Wanchun Medicine announced that the interim analysis of the PROTECTIVE-2 Phase III clinical trial of Pranabrin for severe neutropenia (CIN) caused by chemotherapy has reached the primary research endpoint

Public information shows that Wanchun Medicine was established in 2010, and all of the company's products have not yet been commercialized

Currently, Wanchun Pharmaceutical is preparing a response to the FDA's review comments, and plans to apply for a communication meeting with the FDA

According to the "Science Innovation Board Daily" report, it may be caused by the clinical impact of the epidemic in Eastern Europe.

The cooperation between Hengrui and Wan Chun is also Sun Piaoyang's first big move after his return, so it has attracted much attention

According to the agreement, Hengrui Pharmaceuticals will pay Wanchunbulin down payment plus milestone fees to a total of no more than 1.

It is understood that Hengrui has paid a down payment of 200 million yuan to Dalian Wanchun, and has not carried out any clinical research on pranabulin

Hengrui pointed out in today's announcement that the two parties will further negotiate in the near future regarding product follow-up research and development plans and cooperation matters

Buy, buy, buy, Hengrui will “spend the money” on R&D

Hengrui is not at peace this year, and its market value has evaporated by more than 300 billion yuan

The main reason for the sluggish performance was the decline in sales of Hengrui's generic drugs due to the impact of national and local volume purchases

In terms of innovative drugs, Hengrui’s main product PD-1 will begin to implement the negotiated price of medical insurance from March 1, 2021, with a reduction of 85%, causing revenue growth to be under pressure; in addition, other newly approved innovative drugs such as fluorine Zopali and Hytrobopar have just been listed and are in a ramp-up period, and their short-term contribution to revenue is limited
.

In the darkest moment, transformation is urgent.
Hengrui redefines innovation and internationalization in terms of R&D strategy
.
The first is to explore new targets, take on higher R&D risks, and solve unmet clinical needs; the second is to fully explore the potential of the targets under research in a variety of indications and explore new indications; the third is to deploy a variety of diseases in the field of treatment Products with different mechanisms of action form complements and gains; fourth, multiple platform technologies support in-depth research, and continue to produce global equity projects; fifth, strengthen cooperation with biomedical companies, improve pipelines, and accelerate internationalization; sixth, establish overseas clinical teams , Cultivate internal capabilities and accelerate overseas clinical development and product launches
.

Among them, Hengrui's more frequent action is to spend a lot of money to buy promising products from other pharmaceutical companies
.
Up to now, Hengrui has introduced 4 oncology drugs this year, mainly Yingli Pharmaceutical for the PI3kδ inhibitor YY-20394, Dalian Wanchun GEF-H1 activator punabulin, and Tianguangshi for the third-generation anti-CD20 Antibody MIL62, CStone's anti-CTLA-4 monoclonal antibody CS1002
.

In response to changes in the external environment, Hengrui has continued to increase its own pipeline R&D investment while also increasing its efforts in cooperation and introduction.
Hengrui is accelerating its progress on the road of innovation and transformation
.

The industry also understands that such as Hengrui’s authorized introduction and cooperation between domestic pharmaceutical companies, new drug R&D investment is large, the cycle is long, and the risk is high.
Products bought from other companies will soon be marketed.
Compared with independent research and development, the investment will undoubtedly get a faster return on investment.
One way
.
Coupled with the recent release of CDE's guidelines for clinical research and development of oncology drugs, it has also forced innovative pharmaceutical companies to develop their R&D capabilities and R&D results with high quality
.

The chief financial officer is replaced, and R&D investment is capitalized to avoid risk?

The urgency of transformation and the "three highs" of innovation itself have also brought many pharmaceutical companies into trouble.
As we all know, the high investment, high risk, and long cycle characteristics of pharmaceutical research and development make the road to market a new drug even more ups and downs
.
At the operating level, in order to make the financial report look better, some domestic pharmaceutical companies have adopted the method of capitalization of R&D expenditure
.

Regarding the treatment of R&D expenditures, Hengrui, which has always been conservative, is also beginning to change.
On November 19, 2021, Hengrui also issued an announcement stating that for drug R&D projects that require clinical trials, the development phase expenditure means that drug R&D enters III.
The R&D expenditures after the phase of clinical trials (or critical clinical trials) are included in the development expenditures when the expenditures in the development phase are assessed to meet the capitalization conditions
.

Coincidentally, recently, an article titled "Microchip Bio-Financial Radical Escort Refinancing" also pointedly pointed out that Microchip's R&D investment was over-capitalized and adopted a radical accounting treatment policy for R&D investment
.
In this regard, Microchip Technology issued a special clarification announcement stating that the company’s accounting policy for the capitalization of R&D expenditures does not differ significantly from that of companies in the same industry, and that the accounting policy remains consistent before and after the company’s listing
.

In the first half of 2021 and the first half of 2020, the capitalization ratio of Microchip's R&D investment was 43.
17% and 39.
85%, respectively.
Among the listed companies in the same industry, Betta Pharmaceuticals, Tebao Bio, Xinlitai, etc.
have capitalized R&D investment The proportions are not low
.

Regarding the capitalization of R&D investment, on the evening of November 29, Hengrui received a supervisory work letter from the Shanghai Stock Exchange to clarify supervisory requirements on related matters
.
According to industry insiders, this is nothing more than clarifying that the requirements for capitalization must be carefully assessed and the collection of R&D expenditures must be accurate and complete.
This is part of the exchange’s daily performance of duties and does not involve administrative penalties
.

The capitalization of R&D expenditures preferred by pharmaceutical companies, industry sources said, is simply understood as balancing current expenditures
.
This is because if R&D expenses are directly included in the statement at one time, it highlights that current expenditures are relatively large, and corporate profits are relatively small, which will also affect corporate valuation
.
Capitalization means to amortize R&D expenses in multiple periods, which can reduce current expenditures and make performance statements more balanced
.
However, not all expenses are suitable for capitalization
.

The relevant person in charge of Hengrui also revealed to the public that “In recent years, Hengrui has continued to increase investment in research and development, and at the same time implemented informatization and refined management of research and development projects.
With the accumulation of research and development strength and experience, the company has established an expert group Regularly evaluate R&D projects, and adjust R&D projects in a timely manner based on the evaluation results, business development needs and market conditions, reducing the uncertainty of R&D results and commercialization results
.
” And according to the announcement, compared with other companies, Heng In terms of capitalization of R&D expenditures, Rui's timing selection is still conservative
.

It is worth noting that with the adjustment in the general direction, the Chief Financial Officer of Hengrui has also adjusted
.
On November 12, Hengrui Chief Financial Officer Zhou Song applied to resign from the position of Chief Financial Officer of the company due to personal reasons, and Liu Jianjun took over.
The industry speculates that it may be related to the adjustment of the capitalization of R&D investment
.

Generic drugs have low profits and they spend great efforts on R&D.
R&D risks are difficult to evade.
However, this year’s performance growth rate is not as fast as expected, and the stock market’s response is also strong
.
Changing ideas on reports may also be an important part of Hengrui's many changes
.