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Surprisingly, in the entire downward cycle of the pharmaceutical industry, CDMO (pharmaceutical customized R&D and production), which is the slowest to feel the cold, has begun to walk out of the real
estate industry.
The boom in civil engineering, horse racing, large-scale financing, such as a rotten routine used by the declining real estate industry, companies in the CDMO industry began to "play"
.
Jiuzhou Pharmaceutical announced on August 4 that it expects to raise no more than 2.
5 billion yuan.
Among them, 1.
2 billion yuan will be used for the construction of Ribo (Taizhou) innovative drug CDMO production base; 560 million yuan for the construction of
Ribo (Suzhou) API CDMO.
On September 27, it spent another 185 million yuan to acquire Zhongshan Preparation Factory, intending to transform and expand
CDMO preparations.
Another leading enterprise, Kelleying, announced on the same day that it intends to invest 4 billion ~ 5 billion yuan in Taixing to invest in the biomedical R&D and production integration base project for the research and development and production
of small molecule CDMO chemical raw materials and APIs.
As early as March this year, Kelleying signed an investment agreement and invested 3 billion yuan to build a biopharmaceutical CDMO R&D and commercial production base
in Fengxian, Shanghai.
According to incomplete statistics of Times Finance, many companies have planned to invest more than 16 billion yuan
in CDMO business expansion.
in CDMO business expansion.
None of the CDMO companies on the cusp of the storm look like they're
wintering.
Some are impacting and listing, some are acquiring and acquiring factories, some are recruiting soldiers, and some are raising large amounts of money
.
In the past month, Mayberry submitted an IPO application and has been accepted by the Shenzhen Stock Exchange; Huashen Technology increased its capital by 200 million yuan to consolidate the foundation of the CDMO industry; Haixiang Pharmaceutical spent 300 million yuan to invest in Taizhou to build a headquarters research institute; Merck, a multinational pharmaceutical company, joined hands with Bio Intelligence Valley to land a composite macromolecular CDMO project in Chengdu.
.
.
No one wants to lose the wind
in this bubble-blowing arms race for capacity.
The "players" who accompany them to the end, as well as local governments that urgently need to drive local GDP growth: giving land, building factories on behalf of others.
.
.
This familiar scene appeared in
the expansion of the real estate and photovoltaic industries a few years ago.
the expansion of the real estate and photovoltaic industries a few years ago.
The huge expansion trend and the vanity of great success are often easy to cover up rationality and market laws, and the capacity planning of enterprises is always unrealistically breaking the ceiling
of imagination again and again.
The successive good news of industry expansion did not overwhelm the mind of a CDMO company founder, who wrote his hidden worries on social platforms: a CDMO company in Anhui planned a production capacity of 450,000 liters, while a CDMO company in Shaoxing announced that the production capacity should be 500,000 liters
.
Compared with the production capacity planning of the five global CDMO giants in 2023, Samsung Biologics is 620,000 liters, WuXi Biologics and Lunza are only 320,000 liters, Celltrion plans 310,000 liters, and Boehringer Ingelheim is 240,000 liters
.
Every latecomer planning enterprise must always aim to exceed the capacity scale of the previous enterprise, and a capacity revolution full of digital bubbles is about to emerge
.
Not to mention the ambitious Paradise Technology, a CDMO company that started with real estate, once made the slogan
of "making medicine for the people" and "the lowest cost can be $40 per gram of protein".
In its plan, the plant will have a capacity of 425,000 liters in the first phase of 2023 and 1.
3 million liters in 2025, making it the largest
in Asia.
3 million liters in 2025, making it the largest
in Asia.
This goes back to the old topic that has been thrown by the industry since 2020 - what if the plate is spread too large and there is overcapacity? Although the government and the park investment attraction have given CDMO the greatest support
.
But in the back, who will take over the failure of the investment project?
Soon, the cold of the pharmaceutical sector began to reach the CDMO
.
"Overcapacity, just roll, reduce prices
.
" The above-mentioned person said that affected by the cold capital winter in the first half of the year, the new innovative drug project was cut very fiercely
.
His company has taken at least 60
percent fewer orders than last year.
On the other hand, the smoke of the price war has been four times since the first half of this year, "the price of an IND was originally more than 20 million, and now it has been rolled up to more than 10 million
.
" Going from 25 million to 18 million is a matter of
months.
”
When the story of the industry cannot be realized, some enterprises have begun to tell the capital story in another way - financing a large amount of money, recruiting the best talents, making bigger pots, seizing the opportunity of "large-scale production" to squeeze out
profits.
But when the capital story lacks a receiver, the story of the industry begins to come to a tragic end - more companies that cannot raise money are now facing the reality
that construction has stopped.
"It turns out that many CDMO companies go beyond their own construction plans to do expansions because they are too optimistic
about the market.
However, now that many factors such as medical insurance negotiations and capital winter are superimposed, the expectations of pharmaceutical companies have declined, projects have been cut, and some CDMO companies have to make adjustments
.
Another industry source revealed
.
-01-
-01-Take a piece of land and tell a story
Take a piece of land and tell a story In 2015, the State Council first proposed the pilot
of the MAH (Drug Marketing Authorization Holder) system.
This management model, which separates drug marketing authorization from production authorization, gives CDMO companies the opportunity to stand on the
cusp of the times.
It can justifiably "OEM"
for pharmaceutical companies.
Then the highlight of CDMO has been repeated many times
.
Under the support of top-level regulations, capital support, and the return of talents at that time, domestic innovative drugs exploded, which gave birth to a huge demand for
pharmaceutical outsourcing services.
With the cost advantage, the global production capacity is transferred
to China.
The outbreak of the new crown epidemic once made domestic CDMO soft
on receiving orders.
Even their complaints smack
of Versailles.
CDMOs operating at full capacity were worried about insufficient capacity
.
WuXi Biologics CEO Chen Zhisheng publicly stated in 2021 that the shortage of production capacity was alleviated
after buying several factories, especially those of Hangzhou Pfizer and Suqiao Biologics.
Almost all leading enterprises have opened the mode of buying, buying and buying, and frequent large-scale actions have brought about the popularity of the entire industry
.
Starting in 2021, CDMO will compete for financing, listing, and expansion
.
Having production capacity means that there is a stronger ability to undertake orders, in order to reduce costs and enhance competitiveness
through scale.
.
Even if this year encounters a cold capital winter, this expansion trend shows no signs
of stopping.
Although the boom in innovative drug research and development has cooled rapidly within a year, capacity building and commercial production is a long process, and the large amount of demand accumulated before will not disappear
in a short time.
Especially in the commercialization stage, Biotech companies still have large-scale production needs
.
On the issue of whether to expand production, CDMO companies certainly have their own "small calculations"
.
He Jiang (pseudonym), founder of a CDMO in the second echelon of China, said frankly that last year there were many orders and good markets, and companies expanded production
.
"This year, because of the inertia of decision-making, companies have no time to turn around
.
"
.
"
Some companies choose to expand not because there is demand
in the market.
They did not choose to live within their means at the beginning of the expansion, but adopted a more aggressive blind expansion offensive
.
According to a park leader familiar with CDMO companies, it is not because they lack awareness of industry trends, but because they are involved in too many complex calculations
.
When they catch up with the good time to earn back real money, but do not know where to invest, shareholders immersed in the joy of profit will think that it is better to use this part of the money to build factories, at least a solid heavy asset investment
.
"Take a piece of land and tell a story
.
Even if the story is no longer told, this heavy asset is still a fortune, and there are always unlimited business possibilities
.
”
.
Even if the story is no longer told, this heavy asset is still a fortune, and there are always unlimited business possibilities
.
”
After all, production is a long-cycle, continuous behavior, and it is this lag that brings a drawback, that is, the accumulation of a large amount of production capacity, which was previously thought to be released
through the path of "going to sea".
Pessimistic entrepreneurs will hear a "three-year winter" argument
from industry analysts and investors.
In the current complex international environment, they will question
the way to release production capacity by going to sea.
In their opinion, too optimistic, enterprises are easy to die; In a pessimistic scenario, companies may only lose a little chance to grow, but they are still relatively safe
.
Optimistic entrepreneurs will think that this year's list is only temporarily limited, and the future list will definitely be large
.
They like to think about the strong demand
for biopharmaceuticals in the long term.
Early expansion of production capacity reduces production costs on the one hand, and solves the ability to
refinance on the other hand.
To attack the city in the cold winter and tell a different story to the capital market, we must advance the layout and occupy the largest market share
.
-02-
-02-One factory for one city
One factory for one city Another driver behind the capacity expansion is local governments
.
This is a win-win situation - CDMO enterprises choose the model of government agency construction, the government builds factories, enterprises enter, and perfectly avoids the pressure
brought by expansion.
Parks around the country have spared no effort to introduce CDMO enterprises, and the two KPIs
of "taxation" and "employment" are the most concerned.
of "taxation" and "employment" are the most concerned.
Every year, local park investment personnel will come to Shanghai Zhangjiang to "learn from experience" and "ask for projects"
.
A person familiar with Zhangjiang Park mentioned that many local parks feel that Zhangjiang has many new drug projects, and in 2021, Zhangjiang has more than 600 drug varieties under research
.
Even if CDMO undertakes one-tenth, it can revitalize the local park
.
"They even pointed out whether they could jointly attract investment and whether they could move the production link to their local area
.
"
.
"
A local park leader has made no secret of his preference
for CDMO companies.
In his view, CDMO is equivalent to a platform, connecting R&D at one end and production at the other
.
It will not be limited by the individual products and individual pipelines of
the startup.
In his understanding, the formation of the park industry is not supported by a few R&D enterprises, but by institutions that provide support and services for R&D
.
It is precisely because of the existence of platforms such as CDMO that the park can absorb more R&D institutions to come in
.
.
"Investment in the park is equivalent to ecological construction, with good sunshine, soil and air, more seedlings
will grow.
" Instead of saying, take some seeds and scatter them on
our land.
That kind of son will say, I can scatter anywhere, why should I be here with you? "And CDMO companies are sunshine, air and soil
.
In addition to the platform attributes, the park is more interested in the foundry capabilities
of CDMO companies.
"It can generate more output value, even if the company is only under the banner of CDMO, but as long as it does the work of foundry, solves the employment of local workers, and attracts outsiders, the local economy will be revitalized
.
"
.
"
Lan Xiaohuan, associate professor of the School of Economics of Fudan University, pointed out in the book "Inside the Matter" that local governments especially favor asset-heavy manufacturing, firstly, because of the large scale of investment, the pulling effect on GDP is obvious; Second, because the value-added tax is levied in the production process, it is directly linked to the scale of production; Third, because the manufacturing industry can not only absorb low-skilled labor transferred from the agricultural sector, but also promote the development of the tertiary industry and increase relevant taxes
.
In just two or three decades, China has become the world's largest manufacturing power
.
In the process of attracting investment, local governments still maintain inherent habitual thinking
.
For the sake of political performance, they will also pay more attention to production and construction projects
that are "visible and tangible" and tax revenue falls on the local area.
The person in charge of the above-mentioned park said frankly, "New drug research and development projects, if you can't see clearly, can't grasp it, but also have a certain scale and atmosphere, you can do it
.
" CDMO is different, the model looks safer
.
”
Many local parks cannot be like Zhangjiang, scientists only take a PPT and his scientific research results, can attract investment, come to the park to start a business, and be valued
by the government.
An industry source analyzed that Zhangjiang biomedical industry has a complete industrial ecosystem after 30 years of precipitation
.
The park can understand how the clinical trial data in the entire project is, and there are investors to endorse it, which is a condition
that many local parks do not have.
It is difficult for local government parks to endorse a project that has not been clinical, and they will think that it is safer to introduce CDMO companies
.
.
At this juncture, this urgency is even stronger
.
"Getting the KPIs up, what the future will look like, and whether the project is developing as expected, are all afterthoughts
.
" Now everyone is in a state
of anxious to find a livelihood and find work.
Other options are limited, seeing a visible and tangible CDMO project, if the government needs to build it, means that there is a lot to do
.
”
.
-03-
-03-The price war hit, but it intensified the expansion
The price war hit, but it intensified the expansion In He Jiang's impression, 4 years ago, even if a newly established CDMO company went to "make a list" (jargon, take the order), the market price was quite good, and the profit margin was considerable - as long as 10 IND projects were done a year, there would be more than 100 million in income, and basically the income and expenditure could be equal
.
.
And this year it is especially "rolled"
.
As mentioned at the beginning, an IND declaration project, from the original 25 million yuan, has been rolled to 18 million yuan
.
"The price war has been fighting, and it has been falling
little by little since the first half of this year.
" He revealed that there are some small and medium-sized CDMO enterprises in the IND stage that are in a state of
no orders.
Everyone's mentality has also undergone subtle changes, "anyway, the company can't raise capital, instead of waiting to be eliminated, it is better to simply reduce the price and give it a go
.
" ”
An old customer of He Jiang once predicted that after the new drug is developed and listed, a patient will spend about 200,000 yuan, and CDMO companies can easily get at least 40,000 yuan
.
But the policy of medical insurance negotiations and centralized procurement of drugs has made the founders of Biotech realize that new drugs are bound to reduce prices
in the future.
"If the drug price drops to 50,000, the asking price of CDMO is still 40,000, and the pharmaceutical company will have no profit
.
" In order to let pharmaceutical customers survive, we also have to optimize the cost and take the initiative to reduce
it.
”
.
" In order to let pharmaceutical customers survive, we also have to optimize the cost and take the initiative to reduce
it.
”
For CDMO companies, cost control must be optimized
by expanding scale, supply chain and operation system.
The expansion of production capacity has become a passive helplessness
.
Large enterprises have the strength and financial resources to sit back and relax
.
Small and medium-sized enterprises are worried about the rampant expansion
of large enterprises.
"In case any capital rushes in, the same as the Internet play, I am 'not bad for money', increase full horsepower, expand production capacity, even if it is a loss, I must occupy the CDMO market first, and then consider making money
.
" So how do we live? Another CDMO founder believes that "small and medium-sized enterprises cannot cope with such a play"
.
.
" So how do we live? ”
But such "volumes" are not for nothing
.
It has brought changes
to the CDMO industry, which originally had an immature supply chain, opaque prices, and uneven service quality.
He Jiang recalled that previously, Biotech went to CDMO companies to cooperate with extremely high prices, and the cost of IND for three ADC pipelines was enough to build its own workshop
.
Due to information asymmetry, Biotech companies often struggle to find cost-effective CDMO companies
.
What is even more difficult for him to understand is that Biotech needs to arrange orders to find CDMO, and even needs to book production capacity
two years in advance.
Nowadays, capital, talents, and policies have ripens the CDMO industry, although in He Jiang's eyes the industry is now a "pathological maturity", "but at least, now Biotech can book the desired capacity and services
as long as one month in advance.
" ”
History is always strikingly similar
.
From the late 90s to the beginning of this century, there was a round of car building boom in China, and more than 100 brands once had automobile production licenses
.
Home appliance giants have crossed over the border, including the now nationally renowned Midea air conditioner, Oaks, and the now disappeared "King of China's air conditioning" - Chunlan
.
Some of the companies that did not come to life slowly died, and their license plates were transferred to the next "gold digger"
.
Every emerging industry has such entrants and exiters, and the CDMO industry is no exception
.
Although some analysts have reassured the market, "in the next 2~3 years, there will be no overcapacity, and the capacity is far from saturated"
.
But the discussion around overcapacity has not stopped
for nearly three years.
There is also a voice that comes out - don't worry about what to do with excess capacity, there will always be someone to keep trying, there will always be more smart people coming out, and someone will always take over
.
"Some businesses die before they grow up than die suddenly when they're a Big Mac
.
"
.
"
