In recent years, the fluctuating landscape of the generic drug industry has garnered considerable attention. The topic of "can a generic aspirin be produced for 3 cents" has sparked extensive online debate. This controversy stems from the results of the 10th National Drug Procurement, where the中标price of aspirin enteric-coated tablets was as low as 3.4 cents per tablet, raising public concerns about drug quality.
According to the First Financial Daily, the low price of aspirin active pharmaceutical ingredient is indeed achievable through large-scale production, and low price does not necessarily mean compromised quality. However, it is undeniable that the generic drug industry has entered an era of slim profits, with the net profit margins of the top ten generic drug companies globally ranging from 10% to 16% in 2022. In 2021, when the effects of the procurement policy began to show, domestic generic drugs were often criticized for being "upside down" compared to the global market, and how to address the issue of "high pricing of generic drugs" was a hot topic at the time.
Against this backdrop, as a major player in procurement, Hengrui Medicine seems to be experiencing a diminishing impact. According to its Q3 report, from the first three quarters of 2024, Hengrui Medicine achieved operating revenue of 201.89 billion yuan, a year-on-year increase of 18.67%; and net profit of 46.20 billion yuan, a year-on-year increase of 32.98%. Although Hengrui Medicine has maintained a relatively stable growth trend in recent years, 2021 marked a turning point with a year-on-year decrease in both operating revenue and net profit, which only recovered to growth in 2023 but still fell short of the level in 2020. In the annual report and semi-annual report, Hengrui Medicine pointed out that the decline in generic drug revenue and the pressure from procurement on sales were the main reasons.
In past procurement rounds, Hengrui Medicine has been selected for multiple varieties, with significant average price reductions. For example, in the 10th round of "National Procurement", Hengrui Medicine's gadoterate meglumine injection was priced at 26.88 yuan, with a reduction of about 85%. Facing the slim profit status of the generic drug market, Hengrui Medicine's future undoubtedly hinges on innovative drugs. As early as the early 2000s, company chairman Sun Piyang led Hengrui Medicine to explore the research and development of innovative drugs and proposed the concept of "second innovation". However, despite the rich pipeline of innovative drugs under development, Hengrui Medicine still falls short in global blockbuster drugs.
Hengrui Medicine's independently developed anti-cancer drug Camrelizumab was once seen as a blockbuster product, but its progress after obtaining FDA orphan drug certification was not smooth. In comparison, BeiGene's Tislelizumab and Junshi Biosciences' Tropimumab obtained FDA approval more smoothly, with Tislelizumab's sales ranking first in domestic PD-1 products. BeiGene's another independently developed Zanubrutinib was the first domestically developed anti-cancer new drug to launch in the United States, with global sales exceeding 1 billion US dollars, becoming a "blockbuster" innovative product. Thanks to the outstanding performance of these two products, BeiGene's revenue has grown rapidly, with the potential to catch up with Hengrui Medicine in the future.
In terms of international expansion, BeiGene has achieved significant gains through self-expansion. Hengrui Medicine, on the other hand, has chosen a more conservative strategy, from early licensing transactions to recent License-out and NewCo transactions, accelerating its pace of internationalization while focusing on stability. License-out refers to a company granting early R&D drug projects to other pharmaceutical companies for later R&D and commercialization, while NewCo is granting overseas rights of the pipeline to overseas newly established companies and introducing overseas funds and management teams. Although both forms can bring in gains, they also mean giving up the opportunity to become an international enterprise in the field.
To directly access overseas capital, Hengrui Medicine announced plans to issue H shares overseas and list on the Main Board of the Hong Kong Stock Exchange. This will provide Hengrui Medicine with more financing channels and help enhance its visibility in the international market. In terms of internationalization strategy, Sun Piyang said that Hengrui Medicine is currently mainly "sailing on a boat," collaborating with foreign companies and capital to avoid risks and improve efficiency. As for self-expansion, Sun Piyang believes that there are many challenges, including high clinical costs and future commercialization.
Looking back at Hengrui Medicine's development history, it is inseparable from Sun Piyang's vision and decisions. Starting from his 1982 employment at Lianyungang Pharmaceutical Factory, Sun Piyang has demonstrated extraordinary leadership and innovative spirit. In the face of the factory's business difficulties, he boldly initiated new projects, led the whole factory to develop new products, and turned the factory from losses to profits. Under Sun Piyang's promotion, Hengrui Medicine has gradually built an innovative drug research and development platform and promoted the development of the company's innovative drug business.
However, with the arrival of the slim profit era in the generic drug industry, Hengrui Medicine also faces new challenges. How to maintain stable generic drug operations while accelerating the research and development and market expansion of innovative drugs will be the key to Hengrui Medicine's future development. At the same time, how to better utilize overseas resources and enhance internationalization will also be an important issue for Hengrui Medicine to consider.
Despite the challenges, Hengrui Medicine, under Sun Piyang's leadership, has always maintained an innovative and enterprising spirit. From the early production of generic drugs to the current innovative drug research and development, Hengrui Medicine's development history is full of legend. In the future, whether Hengrui Medicine can achieve greater breakthroughs in the field of innovative drugs and achieve a higher level of internationalization remains to be seen.
With the continuous development of the pharmaceutical industry and the continuous improvement of policies, the generic drug industry will also face new opportunities and challenges. How to ensure drug quality while reducing production costs and improving market competitiveness will be a problem that all generic drug companies need to consider. Meanwhile, innovative drug companies need to pay more attention to R&D innovation and market expansion to achieve greater commercial and social value.
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