For a long time, China’s pharmaceutical industry is mainly engaged in generic drugs, innovative drugs are basically monopolized by foreign enterprises, and innovative drugs developed by local pharmaceutical enterprises are extremely rare. In recent years, this phenomenon has been gradually broken, and a number of local innovative pharmaceutical companies are emerging.
With the beginning of drug policy reform in 2015, drug procurement in 2018, the Hong Kong Stock Exchange allowed unprofitable biotechnology enterprises to go public, and the science and technology board also focused on supporting the implementation of policies such as biomedicine, local innovation pharmaceutical enterprises are facing more and more opportunities for development.
Over the past few years, China’s innovative pharmaceutical enterprises have moved towards the capital market, stepped onto the international stage, gradually harvested listed products and began to commercialize.
Covid-19 pneumonia, which began in 2020, disrupted the order of world operation and highlighted the significance and value of the biomedical industry. New drug research and development, clinical trials, accessibility, and payment, these medical terms are becoming more and more popular, and the valuation of local innovative pharmaceutical companies in the capital market has been refreshed again and again.
As a witness and recorder, the economic observer will continue to pay attention to the development and reform of China’s biomedical industry, and talk with witnesses who have experienced the change.
This article is the fifth in a series of reports on the reform of Sinopharm. It talks with Zhang Lianshan, deputy general manager of Jiangsu Hengrui Medicine Co.Ltd(600276) . Jiangsu Hengrui Medicine Co.Ltd(600276) known as China’s “first brother of pharmacy”, Zhang Lianshan has been managing the R & D business of innovative drugs since returning to Hengrui in 2010, leading the global R & D team to establish multiple technical platforms.
Since the establishment of a R & D center in Shanghai with an investment of nearly 300 million yuan in 2000, Hengrui’s R & D direction has also changed from imitation to innovation.
Zhang Lianshan and sun piaoyang were classmates in the University. After they graduated from China Pharmaceutical University in the 1980s, sun piaoyang entered the Jiangsu Lianyungang Port Co.Ltd(601008) pharmaceutical factory, and then developed the company into the current Jiangsu Hengrui Medicine Co.Ltd(600276) . Zhang Lianshan studied abroad and worked in major pharmaceutical and biotechnology companies in the United States after his doctor’s graduation, responsible for product research and development.
In Zhang Lianshan’s words, he and sun piaoyang both study medicine and want to make innovative medicine. The two old classmates hit it off immediately. Zhang Lianshan returned home to join Hengrui in 2010.
In 2011, the first innovative drug of Hengrui, irecoxib, was listed. Since then, innovative drugs have been harvested continuously. So far, 10 innovative drugs have been listed in China, more than 50 innovative drugs are under clinical development, and more than 240 clinical trials have been carried out outside China.
As an old pharmaceutical enterprise in the transition period, Jiangsu Hengrui Medicine Co.Ltd(600276) has always been known for its high R & D efficiency, and the proportion of R & D investment in sales revenue has remained around 20% in recent two years, which can be comparable to many large international pharmaceutical companies. However, in 2021, the Chinese newspaper handed over by Hengrui attracted unprecedented attention because its performance was lower than expected.
The pressure is transmitted to the research and development end, Zhang Lianshan said, What Hengrui needs to do now is to move the target forward: “R & D is a process of burning money. At the same time, we should take into account the healthy development of listed companies. Therefore, in the selection of targets, we spent a lot of time considering how to combine them. We don’t do high-risk, medium-risk and low-risk at all. High-risk and medium-risk Enterprises like us should do more.”
innovation has taken shape
Economic Observer: what was Hengrui like when you first joined?
Zhang Lianshan: since its listing, Hengrui has focused on the R & D of innovative drugs. The company has raised money from the capital market. The first step is to build a R & D center in Minhang, Shanghai in 2000 and slowly build its own team. Shanghai is a place where talents gather. If we want to develop into a global innovative pharmaceutical enterprise, it is a very important measure to build an R & D center in Shanghai. Over the years, it has been further confirmed that a large number of biomedical companies have gathered in Jiangsu, Zhejiang and Shanghai, especially in Shanghai. This measure is very important for the company today.
When I came in 2010, the whole new drug innovation had taken shape. In the past, almost no Chinese company has ever made innovative drugs, so even if Hengrui had accumulated for 7 or 8 years, innovative drugs became more and more complex, and more people who have research and development experience in foreign enterprises or who know more about making drugs outside joined. For me, it is very shocking that Chinese companies are willing to spend so much money on innovative drugs in 2010.
Economic Observer: what are some impressive jobs in the first year of Hengrui?
Zhang Lianshan: because I was in charge of R & D, it was natural for me to be in Shanghai on my first day. At that time, I made one-on-one communication with the R & D team. I can see the R & D pipeline clearly on one or two pieces of paper, but the whole R & D team needs to communicate what is missing, what needs to be supplemented.
Before 2010, most of Hengrui’s sales came from anti-tumor drugs. Hengrui was the first to introduce cytotoxic drugs not available in China into the Chinese market, breaking the monopoly of some foreign pharmaceutical enterprises in the Chinese tumor market in a sense. Whether docetaxel or oxaliplatin, Hengrui is the first company to introduce into the Chinese market.
However, if a company just sleeps on its past achievements, it will not develop. Chairman Sun thought about how to make the company have a relatively stable development, so he wanted to make innovative drugs in 2000. In addition to extensive layout in the field of cancer, I was thinking with the chairman at that time that Hengrui should also make layout in other fields of chronic diseases, such as metabolic diseases, cardiovascular diseases, autoimmune diseases and so on, Chronic diseases involve more and more people.
At the end of last year, a project of diabetes approved by Heng Ge Li Jing was started in this period. This is a SGLT-2 inhibitor that will serve the vast majority of diabetics this year. Such problems will be encountered when making medicine. The project we set up ten years ago will not be listed until ten years later.
Economic Observer: what are the gaps in the biomedical industry between China and foreign countries in 2010?
Zhang Lianshan: ten years ago, the strength of all (pharmaceutical) innovative enterprises in China was relatively weak. Almost after 2010, China’s new drug innovation began to develop. Today’s innovation situation is completely different from that ten or twenty years ago. In each historical stage, the definition of innovation is also different.
Ten years ago, if you didn’t recognize the gap between China and foreign countries, you would be ignoring the facts. It was recognizing this difference that we began to further increase our efforts to invest in innovation and introduce high-end talents.
Economic Observer: is this gap in all aspects?
Zhang Lianshan: mainly the difference of research level. New drug innovation is different from innovation in other fields. The industrial chain should move forward, including cro companies. One or two people alone can’t do this, but one team.
From biology, chemistry, all aspects, and of course management, the whole management level did not reach the level we expected at that time
transition pains
Economic Observer: last year’s interim report may be the most concerned one of Hengrui in recent years. The market feels that it has not met expectations. As the head of R & D, will the pressure be transmitted to you?
Zhang Lianshan: how to choose the target and how to layout it gives me a lot of pressure. With the increase of competition, the advancement of targets is more important in the project establishment today, but the newer the project establishment of targets, the greater the risk.
As a listed enterprise, we should not only make drugs with clinical needs, but also take into account the market demand. However, R & D is a process of burning money. At the same time, we should take into account the healthy development of listed companies. Therefore, in the selection of targets, we spend a lot of time considering how to combine them. High risk, medium risk and low risk may not be done at all. High risk and medium risk enterprises like us should do more.
Economic Observer: has the attitude of the board of directors towards R & D changed before and after the announcement of the mid-term report last year?
Zhang Lianshan: from the chairman to all the board members, we all agree that only innovation can make Hengrui truly transform and upgrade, and the board of directors has never wavered. Hengrui’s gene is innovation. We have never doubted the value that innovation brings to enterprises.
Economic Observer: the whole biomedical sector has been relatively depressed in the past two years. It seems that it is even more depressed every time medical insurance negotiation and centralized purchase, including Hengrui’s performance in the secondary market. What do you think of the impact of the policy?
Zhang Lianshan: I think the relevant national policies are to find a balance between meeting the needs of patients for rational drug use and promoting the innovative development of the pharmaceutical industry, and also promote enterprises to enhance their core competitiveness.
Hengrui is mainly affected by the fifth batch of centralized purchase. The market must respond, but it has no impact on our innovation. As an investor, he should look at the development trend of the company in the next five or ten years. Enterprises need to survive and transform. Without continuous innovation, no Chinese pharmaceutical enterprise will do better.
In fact, the change of regulatory policy has accelerated the process of new drug innovation in a sense. Because all Chinese enterprises, like Hengrui, are in the process of transformation and upgrading. If they want to be reborn, there will be pain in this process. No one knows how long the pain will last. Which enterprise can spend the pain period in the shortest time, the enterprise will develop better in the future.
7.22 (Note: on July 22, 2015, CFDA of the former State Food and Drug Administration issued the announcement on carrying out self inspection and verification of drug clinical trial data, which is known as the strictest data verification requirement in History). After the previous ind (application for new drug clinical trial) was sent, it took more than a year to get the approval. Now it is shortened to 60 days, which is a very good thing, Especially for all innovative drug enterprises.
From the government to the capital market, China pays more attention to new drug innovation. In a sense, we now have too many companies doing the same thing, that is, we now discuss more “internal volume”, such as PD-1 This is a waste of resources. After this period of time, both the capital market and people who make innovative drugs will gradually return to rationality.
In terms of my ability, even if Hengrui has so much R & D funds and I take 20% of the sales revenue for R & D, we still have to live within our means. We must do as much as we have money, and we can’t do things beyond my ability
bringing in / going out
Economic Observer: Hengrui used to give the impression that it was buried in medicine. In the past two years, there have been more and more licenses in / out. What’s the reason?
Zhang Lianshan: BD (Business Development), licensein and licenseout are very important to the development of pharmaceutical companies. The world’s largest pharmaceutical company has many actions in this regard every year, and they also have mergers and acquisitions.
The reason why Hengrui does this is mainly to introduce the best foreign drugs into China and serve Chinese patients. Generally, small companies will not introduce several products we introduced in the past. We can also complement our existing products to form a series of products.
Other products, such as PI3K made by Yingli δ， For a very small group of patients, according to the data of China lymphoma treatment guidelines (2021 Edition), there are about 2000 ~ 6000 new cases of follicular lymphoma in China in 2020. Why should it be introduced? Because we want to develop hematoma. To put it simply, it is for strategic consideration. As for licenseout, because Hengrui also has many products, it is also necessary.
Economic Observer: how do you consider the U.S. market when license out?
Zhang Lianshan: of course we want to do it ourselves, but it’s not so easy to do it ourselves.
For example, in two overseas markets, we have two products. One Btk inhibitor is sold to tgtherapeutics, a company in New York that specializes in hematoma. Another Jak1 inhibitor is shr0302, which I licensed to a California company arcutis biothera peutics, Inc., which specializes in skin diseases, such as atopic dermatitis, which are also many in China, especially teenagers, which are autoimmune diseases.
License out is mainly licensed to the United States, Europe and Japan, and we do it ourselves in the Chinese market. For other products, you need to generate enough data overseas to arouse the interest of overseas companies and generate more clinical data, such as some data on Westerners, so as to license the drug and get better returns.
We have clinical development teams overseas. On the one hand, we can make use of our own resources and develop what we can develop by ourselves. At the same time, we also actively cooperate with other enterprises around the world to form a win-win relationship. You can also learn from the process. After all, how many Chinese companies have made medicine overseas?
Economic Observer: the review of PD-1 products of Chinese peers in the United States a few days ago has aroused a lot of discussion. What do you think?
Zhang Lianshan: the materials of the meeting were disclosed a few days before the meeting. I read them all. My first reaction was that the meeting must be a difficult battle.
I appreciate that a Chinese enterprise dares to declare to the FDA. Because no matter what (the result), it is a learning process for all Chinese enterprises, and I don’t think it is a setback for Chinese enterprises who want to enter the overseas market
me too is just an expression
Economic Observer: what targets does Hengrui focus on now?
Zhang Lianshan: we have all done important targets and cutting-edge targets, but it doesn’t mean that all targets should be done. We don’t have so many resources, so we leave a lot of room to talk about license with others in the future If I don’t do this thing and others do it in front of me, I can cooperate with him.
Innovation is not that I want to do everything alone, but to help others do it with an open and cooperative attitude. Because the company is relatively large and the whole team is relatively complete from beginning to end, many small companies in China can only do one part, with this part and no that part. Therefore, we look forward to cooperating with other biotechnology institutions to raise China’s pharmaceutical innovation to a higher level.
With Hengrui’s own research and development, the tumor field covers kinase inhibitors, antibody drug conjugates (ADC), tumor immunity, hormone receptor regulation, DNA repair and epigenetics, supportive treatment, as well as autoimmune diseases, pain management, cardiovascular diseases, metabolic diseases, infectious diseases, etc.
Economic Observer: since the second half of last year, many people have talked about me too drugs (the same target as the original drug, changing the chemical structure and having intellectual property rights) and even sneered, but your views are different?
Zhang Lianshan: not all targets can do me too. I often take statins as examples. We give three successful statins, including MSD, Pfizer and AstraZeneca. They are the same target, but each statin has a market of billions of dollars.
What is the premise? Each statin performs better in clinical practice than the previous one, which tells us that even if me too is a target, it should do better than the previous one. What is better? If there is clinical data differentiation, it should be transferred to clinical data differentiation first; If there is no special clinical differentiation, stop it.
People who talk about me too color change may not have a special understanding of making medicine. The so-called new first in class targets are too few! Let’s be modest. Sit down and do something seriously to demonstrate your ability to this target. The clinical effect of some targets is saturated. In this place, you can’t make a better drug. Some targets you can do, and you should know that even the same target will form drug resistance. How to use the same target to solve the problem of drug resistance is scientific progress.
So I take a dim view of me too. Don’t tangle in the form of expression. Finally, I want to make a more effective and safer medicine.
Economic Observer: will there be such crowded competition abroad like China?
Zhang Lianshan: foreign markets are more rational. For example, there won’t be so many companies to do the same target. There are three or four, up to four or five, and then no one will do it. But what we should think of is that these foreign companies have accumulated for hundreds of years, and the mistakes they should have made in the past have been made. Don’t look at the current situation in China, it will gradually become more rational.
Economic Observer: after last year’s China Daily, Chairman Sun said that Hengrui would recover over a period of time. Do you think the market will perform better in 2022?
Zhang Lianshan: Hengrui’s expectation in 2022 is to “seek development and change in stability”. First adjust the structure so that our product pipeline and internal management can better adapt to the changes of market demand, and then seek development on this basis. In my opinion, how to make progress and change in stability is not only the subject faced by Hengrui, but also the subject that all participants in our pharmaceutical industry need to face together in the future.
As for R & D, there are more and more projects. In the future, R & D will still live within its means and improve resource utilization efficiency.
