Original title: Starting at 1.2 million, the cost of advanced anti-cancer drugs: is it possible to drop to 200,000 in the future?

CAR-T cell immunotherapy is considered the most advanced treatment in the field of cancer treatment so far, and is known as the “last hope” for cancer patients with no cure. Since its inception, it has been receiving widespread attention.

In China in September 2021, this interest peaked — the CAR-T introduced by Fosun Kate, which was approved in June, treated a patient with lymphoma that had not been cured for a long time: after preparing CAR-T cells by taking single cells at the end of June and returning to the end of August, cancer cells disappeared from the patient's body after being examined at the end of August.

However, what has become the focus of controversy this time is the treatment price of CAR-T, which is as high as 1.2 million in China.

“Million-grade medicine has no social value in China!”A hematologist with extensive experience said that in his experience, leukemia patients are mostly ill in poor environments, and most families are not well-off.

For most lymphoma patients in China, the price of 1.2 million (out-of-pocket) is clearly out of reach, and for companies, developing a drug that cannot be sold is certainly not the ultimate goal.

In terms of improving the accessibility of CAR-T, patients and pharmaceutical companies have the same goals, but the high price of 1.2 million has become a mountain that both pharmaceutical companies and patients need to climb --It is unlikely that national health insurance will pay for 1.2 million drugs, and commercial insurance has limited interest; the only payer may be patients.

Today, when CAR-T introduced by two of the top domestic pharmaceutical companies, Fosun and Pharmaceutical Ming, was used clinically, CAR-T was once thought to be a magic drug for a few people. However, the ultimate mission of a drug can only be completed if it is used by most patients. Therefore, finding ways to reduce costs and prices will become drugs that will be marketed later - most of them are the only possible competitiveness of domestic CAR-T.

On September 18, 2021, at the annual meeting of the Chinese Pharmaceutical Society,Chen Shifei, deputy director of the State Drug Administration, said, “Currently, CAR-T is too expensive for patients to use, and drug reform needs to be further deepened.”Domestic CAR-T companies are very encouraged; this has been interpreted as an official attitude.

Recently, however, there is a rumor circulating in the industry that the price of domestic CAR-T may “fall short” after being marketed in the future, and there is a possibility that it will even drop to 200,000.

Is that really true?

01. Starting from the cost of CAR-T: Where is it really expensive?

As for the reason why CAR-T is expensive, the prevailing explanation in the industry is due to the special nature of CAR-T itself: it is both a drug and a therapy. It runs counter to the logic of large-scale, batch, and standardized production of all drugs currently on the market. It has strong specificity. It has strong specificity. It is privately ordered, thousands of drugs, checked in batches. The high cost comes from every step of its birth.

As a result, the prices of CAR-Ts listed overseas are 2 million yuan higher, which is more than half higher than the CAR-T currently listed domestically.

Currently, one of the two CAR-Ts listed domestically belongs to Fosun Kate, and the other belongs to Pharmaceutical Mingjunuo. Both companies are joint ventures. Through technology transfer from foreign companies and the import of raw materials and accessories, they have been quickly approved. Therefore, the industry also calls them “imported CAR-T”. The opposite concept is domestic CAR-T. The domestic “CAR-T” refers to Chinese companies that explore everything themselves from R&D to production.

Whether it's an “imported CAR-T” or a domestic CAR-T, they have to go through a very different preparation process than chemical drugs.

In terms of preparation alone, the CAR-T preparation process is very complicated. From single collection at the hospital to final transfer, including the production of each batch, from raw materials and accessories to the final product, a total of more than 600 steps are required. The quality inspection procedure alone requires more than 100 steps.

However, in these preparation processes, now and for some time to come, all key raw materials and accessories for CAR-T are imported from abroad, even for domestic CAR-T.

There is an opinion in the industry that in the current R&D and preparation process, at present and for some time to come, all key raw materials and accessories for CAR-T will be imported from abroad, even for domestic CAR-T.

There is also another opinion thatIn fact, this is because the products of many domestic companies can fully meet the production needs of CAR-T, but in order to make it easier to pass CDE and speed up drug approval, everyone will use formulations already in use abroad, and are unwilling to do certification work related to domestic formulations.

CAR-T preparation includes two parts: production and quality inspection. Only after quality inspection is passed can it be released in the entire production and preparation process. About 70%-80% must be imported. “The cell preparation system, all the media added during the production process, and the final frozen liquid, and even the bottles, cans such as cell bags, basically have to be imported. “A manager of a domestic CAR-T R&D company confirmed this. Take (cell freezing bags) as an example. CAR-T products cannot be placed in ordinary plastic bags; they must be guaranteed not to freeze or freeze in a liquid nitrogen environment below zero (196 ℃).

A common sense is that in China, anything imported is unlikely to be cheap. “A small single harvester (blood cell separator) alone would cost 2 million or even tens of millions.” An “imported CAR-T” company source revealed.

“(CAR-T) is expensive, which is also the reason for industrial technology,” said Yu Xuejun, chairman of Huadao Biotech. Currently, cell preparation in the industry mostly uses GE and Mitteni systems. “It's almost all around 3 million,” and the cell culture cycle of one device is 10 to 14 days. “This means that this set of equipment with 3 million devices can only be done for two patients a month.”

02. If everything is “localized”, how much will it cost?

“Domestic and imported CAR-Ts are on the same path in terms of preparation costs. Since they all need to be imported, the cost is about the same.” Song Zhenyuan (pseudonym), a senior practitioner, believes that if domestic CAR-T is put together with imported CAR-T, imported CAR-T is expensive in “patent fees”, CMO costs, and testing of raw materials for the virus.

However, these three parts of the cost will be a gap that domestic CAR-Ts can break through in the short term. This is not a small gap. According to the figures given by Song Zhenyuan, after removing the technology transfer dividends to be paid by “imported CAR-T”, foreign CMO, and virus raw material testing costs, the cost of domestic CAR-T can be reduced towithin 300,000.

This figure can also be reduced. Yu Xuejun, chairman of Huadao Biotech, believes that from the perspective of production costs alone, the future production cost of CAR-T can be within the 100,000 order of magnitude. Currently, the production cost of pure imported CAR-Ts is over 300,000 yuan.

The key here is the independent intellectual property transfer of technology in the cell preparation industry. “We have our own production equipment. We have developed fully automatic and fully enclosed cell production equipment, disposable consumables, key reagents, and personalized cold chain equipment. We have been developing since 2015.”

Song Zhenyuan's company has not carried out domestic substitution for the entire industry chain, but in some steps, there are also attempts at localization substitution. “For every accessory, we will do a comparative study of 5-10 types of localization,” Song Zhenyuan said. Currently, domestic CAR-T companies are already exploring comparative research on domestic substitution of accessories.

In contrast, companies that import CAR-T are subject to technology transfer clauses, and exploration in this area may come a little later.

However, there are also places where the cost of imported CAR-T is lower than domestic CAR-T, just in clinical trials. Since it is a technology transfer, Fosun Kate only needs to do a bridge test with 24 cases. If it were to start again, the clinical cost of one case would be in the millions.

However, domestic CAR-T companies need to do the first phase of the second phase of the trial one by one. “It's equivalent to imported technology and knowing that this is salt; domestic production must start from scratch; the verification is that salt is sugar.” Song Zhenyuan said.

03. Virus vectors and processes, roadblocks to the localization of CAR-T

No matter how low domestic companies can keep costs down, the most important thing is to successfully get approval for listing first. The relationship between being approved for listing and controlling costs is like the relationship between countless zeros and the one at the top --Without passing the CDE and the Central Inspection Institute's regulatory framework, all means of controlling costs are meaningless.

According to Wang Liqun, the former CEO of Fosun Kate, domestic substitution of other technologies is fine. Had it not been for the purpose of catching up with the market, domestic preparation systems could also be made slowly. However, when it comes to virus vector systems and processes, it is still very difficult for domestic CAR-Ts to get past them. Song Zhenyuan also agreed with this.

There is no standard procedure for the production process of CAR-T itself. However, according to the prospectus for cell therapy of CDMO and metabiotics, the production of CAR-T using a viral vector as the genetic material delivery system should have three parts.Plasmid process, virus process, cell therapy process.

Generally speaking, CAR-T technology uses leukocyte separation to collect T cells from patients and then activate T cells in vitro; when it was discovered that the target of T cells to attack malignant tumor cells was not clear enough, targeted killing by specific navigators was added, such as cruise missiles, which equipped T cells with eyes that could recognize cancer cells, and transfer the CAR gene into T cells to produce CAR-T cells. CAR-T cells are amplified and purified and then fed back into the patient's body for treatment.

The virus vector is the key link in the birth of CAR-T, so whether they are imported CAR-T company personnel or domestic CAR-T company personnel, they all think that the virus vector is the most important part of it, and it is also the part where the technology gap between domestic and imported CAR-T is the biggest.“If the virus were a little worse, the clinical results might still be a bit different from those abroad.”A staff member from an imported CAR-T company said.

The barrier is that domestic companies have not caught the virus before, and their processes are immature.

The manufacturing process of viral vectors is complicated and expensive. Building a production line requires hundreds of millions of dollars of investment. It is difficult for most startups to meet all GMP requirements in the early stages of clinical trials. In terms of product analysis, there is also a lack of standardized analytical methods for evaluating vector efficacy and safety. Viral vectors require cold chain logistics, which also makes research and development more difficult.

The method that can be learned from abroad is that startups focus their energy on scientific research and leave the production of virus vectors to the CMO to solve. The viral vectors of Fosun Kate and Yao Mingjunuo are all produced by imported CMO.

“The US industry chain is very mature. We need to be able to find CMO for virus production quickly, and domestic research is still ongoing,” Song Zhenyuan said.Domestic virus industrialization has a long way to go. If any CDMO company can produce pharmaceutical-grade virus vectors and get approval from the State Drug Administration, it can occupy a high position in the industry.

As marketed products, the viral vectors of Fosun Kate and Yao Ming Junuo have naturally passed the regulatory checks of the State Drug Administration and the Central Inspection Institute. Fosun Kate uses a retrovirus, while Yao Ming Junuo uses a lentivirus, according toDongwu SecuritiesResearch reports that with the exception of Hengrun Dasheng, domestic CAR-T companies mostly use lentiviruses.

“The lentivirus process is actually easy to master,” Song Zhenyuan said. The lentivirus is a product that can be standardized. The production process is complex and the technical requirements are high. In the future, it can be mass-produced, and production costs are more manageable.

Furthermore, differences in processes can also make differences in the efficacy of CAR-T.

Wang Liqun explained to Deep Blue that without strict or stable processes, the product failure rate may be high, or the product's clinical data cannot truly reflect the true level of the product among the test subjects.

CAR-T products are “living pharmaceuticals”. The starting raw materials are very different. The production process must be able to control and reduce the differences between batches caused by the variability of the starting raw materials, and use mature processes to produce CAR-T products with a high qualification rate. This is an important indicator of process maturity. If the large-scale production process of individualized cell therapy in the pharmaceutical industry does not meet GMP standards for large-scale production, pharmaceutical companies will not be able to pass the NDA.

Industry insiders said earlier that Fosun Kate was approved quickly because the “process” was ahead. After receiving CAR-T technology from the US National Cancer Institute in 2012, Gilead Kate spent two more years perfecting Yescarta's preparation process. Conversely, many domestic companies were stuck in clinical trials and marketing approvals because process control could not pass the CDE hurdle.

04. Limited Patients: Enterprise Commercialization Problems and Payment Difficulties

The R&D of CAR-T companies has now entered a stage of intense competition.

Currently, there are more than 30 domestic CAR-T pharmaceutical companies in the clinical phase, including Science and Technology Biology, Nanjing Legend, Reindeer Medical, and Heyuan Biology. They are mainly focused on the development of CD19 and BCMA-related drugs, and clinical trials of most drugs are still in the preliminary stages. Phase I and phase I/II drugs account for the vast majority.

Many entrants are facing a market that now seems difficult to expand.

“Pricing is a big issue, and it's hard to expand the CAR-T market.” Song Zhenyuan said that judging from the targets that have been verified so far, the indications for CAR-T focus on the three diseases of leukemia, lymphoma, and multiple myeloma.“In total, the market is only 11 billion dollars a year. If we really want to reach 50 billion dollars, we will have to expand to first-line second-line treatment.”

This embarrassment can be seen from CAR-T's sales in overseas markets.

The difference in annual sales between Kymriah and Yescarta in 2020 was not usually around 4-5 billion US dollars. Kymriah's growth rate was faster than Yescarta's. Yescarta's sales rate after 500 million yuan was significantly lower. The year-on-year increase in the fourth quarter of 2020 was only 5% year-on-year, and the first quarter of 2021 increased 14% year-on-year. Kymriah's growth rate was faster than Yescarta, but it remains to be verified over time whether it will maintain a growth rate of 50% or more after sales exceed 500 million.

The final conclusion of Dongwu Securities is that the price factor may have limited the release of these two products — this is still the case in the US, the most developed country in the world, not to mention China, which is more sensitive to CAR-T prices.

CAR-T companies are well aware of this, and they are also looking for solutions.

Since the approval for the listing of CAR-T products, Fosun Kate has actively promoted and included commercial insurance and urban customized insurance. On July 31, 2021, in the “2021 National Health Insurance Drug Catalogue Adjustment and Declared Drug List” published on the official website of the National Health Insurance Administration, 271 drugs passed the initial review. Among them, achilenxal injections were clearly listed. If the first trial is approved, CAR-T therapy can enter the follow-up phase of the 2021 health insurance negotiations. In the future, price reduction through health insurance negotiations is not ruled out.

However, according to another industry insider, Liu Hui (pseudonym), none of these can solve the CAR-T accessibility problem.

“Health insurance will not be taken into account in the short term. Commercial insurance, welfare insurance, and innovative payments are all working on these, but to put it bluntly, they are all just sales strategies,” Liu Hui said. “These experiments funded by pharmaceutical companies are a model for a transition period, an exploration in the middle stage.” It doesn't actually solve your ability to pay; it may increase performance a bit in order to expand the size of the market, but not for long. ”

Wang Liqun and Liu Hui invariably believe that these experiments made by pharmaceutical companies are not as good as directly discounting drug prices and making direct concessions to patients. “It's always better to let the middle link take away profits; the pharmaceutical company and the last two patients don't take advantage. “Liu Hui said.

The two currently listed CAR-T companies, Fosun Kate and Pharmaceutical Mingjunuo, have established commercialization teams. Wang Liqun once advocated not setting up a sales team and using curative effects to impress doctors. In the end, this idea did not come true. Currently, Fosun Kate and Yao Ming Junuo have also set up sales teams of hundreds of people.

In terms of entry, judging from the fact that pharmaceutical companies are now actively connecting with the top three hospitals, the influence weight of hospitals and doctors is still very high.

Fosun Kate announced to the outside world that it is currently selecting the top three hospitals in all provinces and cities across the country to participate in the CAR-T treatment list. Currently, 50 hospitals have been assigned, and the plan is to expand to 70 by the end of this year.

“But in fact, the most important thing is not how many hospitals to set up, but to find the most influential hospitals and doctors,” Song Zhenyuan said.CAR-T was not covered by medical insurance. Initially, the main sales channel was based on doctor recommendations. The imported CAR-T was first marketed to win a time dividend, but in the later stages, the CAR-T ratio was the efficacy and price.

What Liu Hui saw in this regard was slightly the same: “The window period for imported CAR-T is about one and a half to two years. Once domestic CAR-T is launched, the pattern will change drastically.”

Domestic companies, in the face of a small market where they have lost their own opportunities, can only compete for patients in terms of differentiation of indications.

Judging from the layout indications, domestic research and development focuses on research on hematoma and solid tumors, but due to the drawing on foreign drugs and research on new targets such as CLDN18.2 and CLL1, which needs to be explored, “domestic companies all have their own style of play. For example, Hengrun Dasheng wants to do all in blood diseases, Keji Biotech is conquering solid tumors”. Song Zhenyuan said that domestic layout in the field of solid tumors is relatively slow, and speeding up the layout of solid tumors will also be an important strategy for major pharmaceutical companies for some time to come.

And companies with a sense of adventure began writing articles on indications.

A CAR-T manufacturer whose products have not yet been approved has built 6 industrial bases in Shaanxi, Chongqing, Changchun, Zhengzhou, Guangzhou, and Shanghai. This means that once approved, companies can immediately release volume.

The company gave another opinion: “Leukemia is a minor disease. There aren't many patients a year. For us, with 200,000 pricing, a year that can be treated is 100,000 patients, which is a 20 billion market year.”

His focus is not limited to blood diseases. In his plan, CAR-T is mainly used to solve cancer patients' post-operative problems and control cancer cell metastasis and recurrence. “Cellular drugs can control the metastasis and recurrence of solid tumors after surgery. This is a market for 70 million people.” He hopes that in the future, CAR-T will enter the health insurance system due to the expansion of the number of people who are eligible for it.

Although some of the current production, preparation, and quality inspection technology still depends on foreign countries, the good point is that now a lot of capital has been poured into the CAR-T field. If this treatment solves the virus vector and process problems under the capital bubble and also opens a gap in other indications, then the entire circuit (short term) will also open up a market ceiling. Maybe at that time, we'll actually be able to see 200,000 times or even cheaper CAR-T therapy.