As of the date of publication, nearly 100 pharmaceutical and biotechnology companies in Hong Kong have issued the 2021 interim report.

On the whole, the overall growth of traditional pharmaceutical companies with product income slowed down significantly in the first half of the year, while the achievements of pharmaceutical enterprises that have just entered commercialization are relatively bright, but the problems of commercialization still remain to be solved. The slowdown in revenue has not affected drug companies' investment in research and development. Macromolecular drugs are still the focus of research and development of major pharmaceutical companies; innovation of small molecules is also a place where pharmaceutical companies are willing to make "efforts"; and cutting-edge technologies such as cell therapy, ADC, mRNA drugs, and PROTAC are no longer games for the minority, but an important way for major pharmaceutical companies to break through the bottleneck of innovation.

01 growing & falling

Market capitalization is a comprehensive indicator of performance and future pipeline valuation.From the perspective of the rise and fall of the 108 enterprises so far this year, the rise and fall forces are equal, with 51 biopharmaceutical companies rising, 3 tied and 54 falling. There are three main types of enterprises with large increases in market capitalization (stock prices):

One is to obviously benefit from the epidemic.For example, to develop the pharmaceutical industry-B (09939), the share price has risen as high as 588.34% so far this year, making it the fastest-growing enterprise. The growth of the development of the pharmaceutical industry mainly benefits from the excellent performance of COVID-19 's specific drug protamine, which was approved by regulatory agencies such as FDA and Brazil's National Health Supervision Agency in the first half of the year. It is conducting a global registered phase III clinical trial for COVID-19 patients, and has reached a commercial cooperation with Shanghai Fosun Pharmaceutical (02196) in India and 28 African countries, and with Etana in Indonesia.

One is to benefit from the rapid growth of new business.Kingsley, for example, has seen its share price rise 228.9% year-to-date, giving it a chance to hit the market capitalization of hundreds of billions of dollars. This growth is mainly due to the good development expectations of its biopharmaceutical CDMO, gene and cell therapy industry chain, including Hillhouse Capital's investment in its incubated booming organisms, and the continued progress made by its predecessor Kingsley Biopharmaceuticals Division, including cell therapy subsidiary Legend Biotech Corp.

The last one is a combination of many factors.Shanghai Fosun Pharmaceutical, for example, has seen its share price rise nearly 40% since the beginning of the year, making it a member of a club with a market capitalization of 100 billion yuan and the sixth largest biomedical company in Hong Kong by market capitalization. In the first half of the year, Shanghai Fosun Pharmaceutical achieved a revenue of 16.952 billion yuan, an increase of 20.85% over the same period last year, while the net profit of shareholders belonging to listed companies was 2.482 billion yuan, an increase of 44.77% over the same period last year.

One of the main factors is related to the mRNA COVID-19 vaccine, which was included in the government vaccination program in Hong Kong and Macao, with a revenue of more than 500 million yuan in the first half of the year, and it is also the only two mRNA vaccines in China that urgently need to be approved; in addition, Yikai of its joint venture company Fosun Kate reached the first CAR-T cell therapy approved to be listed in China in the first half of the year.

Companies with a large decline in market capitalization also have something in common, such as the digestion of high valuations, slow business progress and other factors. Among them, the market capitalization of three enterprises fell by more than 100 billion yuan: JD Health (06618), Alibaba Health Information Technology (00241) and Hansoh Pharmaceutical Group (03692), and the market capitalization of the three enterprises was almost halved.

JD Health exceeded HK $600 billion late last year and was entrusted to a health care enterprise with the largest market capitalization of Hong Kong stocks. On 26 August, HSBC lowered JD Health's target price and pointed out that the management believes that regulatory changes are conducive to the long-term and healthy growth of the industry and may bring uncertainty in the short term. Although the situation is unstable, I believe the Government is still willing to support the online pharmacy industry. Companies also have the ability to help the government achieve its goals of centralization and digitization.

02 billion market capitalization of pharmaceutical companies & the newly rich of commercialization

As of press date, there are 12 pharmaceutical and biotechnology companies with a market capitalization of 100 billion yuan in Hong Kong, including four "old generation pharmaceutical companies" Shanghai Fosun Pharmaceutical, Sino Biopharmaceutical (01177), CSPC Pharmaceutical (01093), Hansoh Pharmaceutical Group (03692), two biological upstarts BeiGene, Ltd. (06160) and Zai Lab Limited-SB (09688). And four CXO companies, Wuxi Biologics (02269), Wuxi Apptec (02359), Pharmaron Beijing Co., Ltd.* (03759) and (03347), and two Internet medical giants JD Health and Alibaba Health Information Technology.

Hovering around the market capitalization of 100 billion yuan is also INNOVENT BIO (01801), and several characteristic potential stocks such as Jinsi Rui (01548), CANSINOBIO-B (06185), HUTCHMED (China) Limited (00013) and Rongchang Biological-B (09995) have been sprinting to the market capitalization of 100 billion yuan.

From the ranking point of view, Pharmaceutical Department dominated the Hong Kong stock market value of the top two, whether it is biological drug CDMO Wuxi Biologics or CRO Wuxi Apptec, with a market capitalization of more than 400 billion yuan, far ahead of a number of pharmaceutical companies.

Although JD Health and Alibaba Health Information Technology "Gemini" have held their TOP5 seats, the share prices of the two companies have halved, falling by 53.33% and 50.74% respectively so far this year, making them the two worst declines in the market capitalization of 100 billion yuan.

On the whole, the absolute value of the market capitalization of pharmaceutical companies is lower than that of other medical and health industries. BeiGene, Ltd. is the only Biopharma in the top five with a market capitalization of about 210 billion yuan, up 10.83% so far this year. The bottom four of the 12 companies with a market capitalization of 100 billion yuan are all pharmaceutical companies.

Starting from 2020, many Biotech in Hong Kong stocks have entered the commercialization stage one after another. For them, what are the results of the commercialization examination?

Cinda is one of the earliest pharmaceutical companies to enter the commercialization stage. In the first half of this year, INNOVENT BIO achieved product income of 1.855 billion yuan, an increase of 101.4% over the same period last year, mainly due to the rapid year-on-year growth of blockbuster product PD-1 and the significant contribution of revenue from four new products. During this period, Dabotan, a FGFR2 inhibitor used by Cinda to treat cholangiocarcinoma, was first approved in the Taiwan market, and the number of commercial varieties increased to five. This means that Cinda needs stronger commercial capacity, and it has been reported that Cinda has set up a commercial team of more than 2000 people, covering more than 4700 hospitals in more than 300 cities across the country.

Baiji is also one of the few biological upstarts with a variety of commercial products. In the first half of the year, BeiGene, Ltd. achieved a total product revenue of 245 million US dollars (about 1.587 billion yuan, exchange rate 6.478), an increase of 107.95 percent over the same period last year, and a net loss of 414 million US dollars, a decrease of 40.99 percent over the same period last year.

BeiGene, Ltd. 's income mainly comes from five products: PD-1 "Baize", BTK inhibitor "Baiyueze", PARP inhibitor "Parkway", IgG2 monoclonal antibody "Anjiawei", and the products introduced from BMS "Ruifumei" and "Vidasa". Of this total, Baize'an 's sales revenue in China in the second quarter was 74.9 million US dollars (485 million yuan), up 154.76 percent from the same period last year; Baiyue Ze's sales revenue was 42.4 million US dollars (275 million yuan), up 505.71 percent from the same period last year. Parkway Ze has achieved sales revenue of 2.2 million US dollars (14.2516 million yuan) since it was listed in China in May 2020.

In the first half of the year, Baiji's sales, general and administrative expenses (hereinafter referred to as "sales expenses") were $414 million, up 79.29% from a year earlier. According to the latest prospectus, Baiji has a global commercialization team of more than 1800 people.

Unlike many commercial varieties but not profitable Biotech, CANSINOBIO is one of the few. In the first half of 2021, CANSINOBIO is expected to achieve an operating income of 2 billion yuan to 2.2 billion yuan, an increase of 49532.59% and 54495.85% over the same period last year. The net profit attributed to the owner of the parent company is expected to be 900 million yuan to 1.05 billion yuan, turning losses into profits compared with the same period last year. Commercially, CANSINOBIO gave Pfizer Inc the exclusive right to promote his MCV4 vaccine products in Chinese mainland. The company said in its annual report that it has set up a core marketing team, which can cover more than 10 core provincial markets across the country, including Jiangsu, Shandong, Henan, Sichuan, Guangdong and other populous provinces.

03 future focus: pipelines hit hard

Baiji has always been willing to invest in research and development. From US $920 million (about 5.97 billion yuan) in 2019 to 8.452 billion yuan in 2020, Baiji ranked first in R & D investment. The investment in R & D in the first half of this year has reached 6.77 US dollars (about 4.37 billion yuan). The money invested has also been translated into the growing number and progress of projects on the pipeline.

BeiGene, Ltd. announced his latest early R & D pipeline layout and development progress on the Global R & D Day investor conference call on August 25. According to BeiGene, Ltd., there are currently more than 50 preclinical projects, about half of which have Fist-in-class potential, and more than 10 projects will enter the clinical phase in the next 24 months.

In Baiji pipeline, the targets of BTK, PD-1 and PARP have been commercialized. The targets such as TIGIT, OX40 and TIM3 in the second echelon are not only more innovative, but also make rapid progress.

Its anti-TIGIT antibody ociperlimab (BGB-A1217) is one of the most advanced anti-TIGIT antibodies in the current development process. It has a synergistic effect with PD-1 and can enhance the anti-tumor activity of PD-1. At present, the AdvanTIG-302 phase III clinical trial of ociperlimab combined with BeiGene, Ltd. 's anti-PD-1 antibody Bai Ze'an ®is being carried out to treat first-line locally advanced, unresectable or metastatic non-small cell lung cancer (NSCLC) patients with high expression of PD-L1 and no sensitized EGFR mutation or ALK translocation.

In May this year, its clinical application for HPK1 inhibitor BGB-15025 capsule was formally accepted by NMPA for the treatment of solid tumors. BeiGene, Ltd. 's first self-developed candidate drug with First-in-Class potential has also entered the clinical stage.

In addition to the field of small molecules and antibodies, BeiGene, Ltd. has also expanded his layout in cutting-edge technologies, involving PROTAC (protein degradation), ADC (antibody coupling drugs), CAR-NK cell therapy, mRNA therapy, and so on. At present, the size of BeiGene, Ltd. 's preclinical team has exceeded 650, and it is expected to reach 800 by the end of this year.

Zaiding's investment in research and development is no less than that of biotech companies based on self-research. In 2020, Zaiding's R & D investment reached US $220 million (about 1.43 billion yuan), and in the first half of this year, R & D investment reached US $346 million (about 2.26 billion yuan), exceeding the investment for the whole of last year and an increase of 239% over the same period last year. As of June this year, Zaiding had 594 R & D personnel.

In its pipeline, Adagrasib, a highly selective and potent oral KRASG12C inhibitor introduced from Mirati, is expected to release the latest data in the second half of 2021 and submit a new drug marketing application in the United States in the fourth quarter of 2021 that may be used to treat patients with KRASG12C mutated non-small cell lung cancer who have received systemic treatment. Bemarituzumab, which was introduced from Amgen Inc, was awarded a breakthrough therapy recognition by FDA. Bemarituzumab is a potential antibody drug for First-in-class. As a tumor targeted therapy for overexpression of FGFR2b, it is being studied for the treatment of gastric cancer and gastroesophageal junction cancer with overexpression of FGFR2b.

In addition to authorized imported drugs, Zaiding also announced the new progress of its self-developed products. ZL-1102 is a new type of human nano-antibody against IL-17, which is expected to release preliminary data interpretation of the global phase I study; ZL-1201, a monoclonal antibody targeting CD47, is conducting a phase I clinical study; and ZL-2309, which has the potential to target CDC7, will start a phase II proof-of-concept study by the end of this year.

Innovation is not the right of newcomers, and traditional pharmaceutical companies are also using practical actions to prove their innovation ability. In 2020, CSPC Pharmaceutical invested 2.89 billion yuan in research and development, an increase of 44.45 percent over the same period last year. In the past three years, CSPC Pharmaceutical's R & D expenditure has grown at a compound rate of 46.7 per cent. In the first half of this year, investment in research and development of stone medicine reached 1.613 billion yuan, an increase of 11.0% over the same period last year.

At present, CSPC Pharmaceutical is studying about 300 projects, including more than 40 small molecular innovative drugs and 30 macromolecular innovative drugs. In addition, stone drugs are also rich in the layout of cutting-edge technologies, including PROTAC, double antibodies, triple antibodies, ADC, nano-drugs, mRNA vaccines, small nucleic acid drugs and so on. Among them, in the field of small molecular drugs, emphasis is placed on PROTAC, LYTAC and screening platforms based on AI technology; in terms of nano-drug delivery, stone drug systems are equipped with a number of technologies, such as nano-liposomes, albumin nanoparticles, and lipid nanoparticles for the delivery of nucleic acid drugs.

In addition to internal research and development, stone medicine has also strengthened the business layout of cooperation with the outside world. On August 23rd, Shiyao and Corning Jerry reached a partnership to obtain the development and commercial rights of KN026, an antibody drug targeting HER2, for the treatment of breast cancer and gastric cancer in mainland China (excluding Hong Kong, Macao or Taiwan).

From the pipeline layout of many companies, we can see that ADC, cell therapy, mRNA vaccine and other cutting-edge technologies are the key layout of the track. In the cutting-edge technology track, a number of companies also have a bright performance.

In the field of ADC, the listing of Rongchang biological vidixitumab brings the first ADC drug to the Chinese market. On August 9th, Rongchang Bio licensed the global development and commercial rights and interests of vidixitumab in Asia (excluding Japan and Singapore) to Seagen for a price of up to US $2.6 billion (about 16.83 billion yuan), and set a new record for single drug license in China. In the first half of this year, Rongchang invested 327 million yuan in biological research and development, an increase of 73.5 percent over the same period last year.

Shanghai Fosun Pharmaceutical is a big winner in both cell therapy and mRNA vaccines. With the approval of Fosun Kate's Aquilun injection (trade name: Yikaida), the domestic market also ushered in the first CAR-T cell therapy. With Fubitai ®(mRNA COVID-19 Vaccine, or BNT162b2) included in the government vaccination program in Hong Kong and Macao, Shanghai Fosun Pharmaceutical achieved an income of more than 500 million yuan in the first half of 2021.