Just like that, when the tide is gone, you'll know who's swimming naked. At a time when the cold wave of capital still looms over the pharmaceutical sector, there are already excellent innovative pharmaceutical companies that have taken the lead and embarked on a new journey.

According to WIND data, after experiencing the first full profit in the 2023 financial report and an impressive report that continued to improve in the 2024 quarterly report, Fuhong Hanlin also ushered in a “Xiaoyangchun” in the capital market. By the close of trading on May 14, the biggest increase in the company's stock price range since October 2023 reached 91.04%. The trading volume was a record high in the company's 2 years, reaching 1,585,600 shares, and the total turnover reached HK$28.3034 million.

The capital market is optimistic about Fu Hong and Han Lin. What is the logic behind it?

Chart 1: Fuhong Hanlin stock price chart

Data source: WIND, Gelonghui compiled data as of the closing date of May 15, 2024

Targeting the 100 billion market

One of the reasons that can arouse excitement in the capital market comes from a recent report on Fuhong Hanlin H Pharmaceutical.

On May 15, 2024, Fu Hong Han Lin announced that the company's self-developed PD-1 inhibitor H drug Hans' (sululimab) combined with bevacizumab in combination with chemotherapy for first-line treatment of patients with metastatic colorectal cancer (mCRC) has completed the administration of the first phase III patient. H drug is expected to become the world's first anti-PD-1 monoclonal antibody for first-line treatment of mCRC. ASTRUM-015

Judging from the market size and prospects, the indications targeted by H Pharmaceuticals this time are broad and full of imagination.

Currently, colorectal cancer (CRC) has risen to become one of the most common malignant cancers worldwide. According to authoritative data from the World Health Organization (WHO), the number of new cases of CRC worldwide exceeded 1.9 million in 2020, and the number of deaths reached more than 930,000, particularly in Europe and Oceania. What is even more worrisome is that by 2040, the number of new cases of CRC worldwide is expected to surge by 63%, and the number of new cases per year will rise to 3.2 million, while more than 1.6 million patients will die every year as a result.

Focus on China. According to the latest cancer statistics report, CRC ranks second and fourth among all malignant tumors in China, respectively. It is particularly noteworthy that in 2022, the number of new CRC cases in China reached 517,000, while the number of deaths reached 240,000.

From the perspective of the pharmaceutical market, the CRC drug market is showing a strong growth momentum.According to Frost & Sullivan data, from 2018 to 2022, the global CRC drug market grew steadily from US$16.2 billion to US$20.6 billion, with a compound annual growth rate of 6.2%. It is expected to reach US$43.7 billion in 2030, and the compound annual growth rate will be 9.1% from 2026 to 2030. Meanwhile, in China, the CRC drug market grew even more rapidly, jumping from US$1.5 billion in 2018 to US$2.6 billion in 2022, with a compound annual growth rate of 14.6%. The forecast shows that by 2026 and 2030, China's CRC drug market will reach 5 billion US dollars and 7.8 billion US dollars, respectively, with growth rates of 17.1% and 11.8%, respectively.

Figure 2: Global CRC Drug Market Size

Data source: Frost&Sullivan, compiled by Gronghui

Judging from the current treatment plan, there are many limitations to existing drugs, and a large number of clinical needs need to be met urgently.

In fact, most CRC patients have metastasized at the time of diagnosis. mCRC tumors can be divided into dmmR/MSI-H and pmmR/MSS according to the molecular phenotype, with the latter accounting for about 95%. Currently, the standard first-line treatment plan for mCRC is mainly vascular endothelial growth factor (VEGF) inhibitors (such as bevacizumab) combined with chemotherapy, but ongoing efficacy and prognosis still need to be further improved.

Studies have shown that anti-PD-1 monoclonal antibodies can bring significant survival benefits to patients with advanced mCRC with mismatched repair defects or highly unstable microsatellites (dmmR/MSI-H). However, the higher proportion of mismatched normal/microsatellite-stabilized (PMMR/MSS) mCRC tumors had a very low response rate to single-agent immunotherapy, and are known as “cold tumors” for immunotherapy. For such patients, increasing the benefits of immunotherapy on top of standard first-line treatment is still unclear, and no corresponding drugs have been approved for marketing in the global market.H drug is expected to become the world's first anti-PD-1 monoclonal antibody for first-line treatment of mCRC, with an excellent differentiated competitive pattern.

Judging from the disclosed clinical data, the clinical effects of drug H have been positive in terms of CRC indications.

In January 2024, the Phase II/III clinical study (HLX10-015-CRC301) of H drug combined with hambetai (HLX04, bevacizumab) and chemotherapy for first-line treatment of metastatic colorectal cancer (mCRC) debuted at the 2024 American Society of Clinical Oncology Gastrointestinal Tumors Symposium (ASCO GI). The study results showed that in patients with metastatic colorectal cancer, compared with placebo plus bevacizumab and chemotherapy, H drug combined with bevacizumab and chemotherapy significantly improved the survival of untreated mCRC patients, and the safety was controllable. In the near future, the company will update the research data and present it in the 2024 American Society of Clinical Oncology (ASCO) poster.

Figure 3: HLX10-015-CRC301 research results

Data source: Company data, compiled by Gelonghui

Differentiate and innovate to create popular manufacturing machines

In fact, the progress of H medicine is only a microcosm of Fu Hong Han Lin's journey along the way.

In the context of the fiercely competitive PD- (L) 1 market, as the 13th PD- (L) 1 product to be marketed, H drug was not enthusiastically sought after by the market when it was first marketed. However, as Fuhong Hanlin's first innovative product, as the company announced the impressive sales performance of H Pharmaceuticals — with sales reaching 1.12 billion yuan in 2023 and 330 million yuan in the first quarter of 2024, people began to appreciate the market impact brought about by its unique “differentiation strategy”.

On the one hand, Fu Hong Han Lin “digs deep” into unmet clinical needs and competed out of place to create popular products.

Since it was approved for marketing in China in March 2022, H drug has obtained approval for 4 indications, including microsatellite-highly unstable (MSI-H) solid tumors, squamous non-small cell lung cancer (SqnsCLC), extensive small cell lung cancer (ES-SCLC), and esophageal squamous cell carcinoma (ESCC), benefiting more than 60,000 Chinese patients. The marketing registration application for the fifth indication for first-line treatment of non-squamous non-small cell lung cancer (NSNSCLC) has also been accepted by the National Drug Administration (NMPA).

In the competitive landscape, Fu Hong Han Lin has also always been on the path of differentiation. H drug is not only the world's first anti-PD-1 monoclonal antibody approved for first-line treatment of small cell lung cancer, but is also expected to become the world's first PD-1 monoclonal antibody to treat limited-stage small cell lung cancer, the only domestic perioperative immunotherapy for gastric cancer, and the world's first anti-PD-1 monoclonal antibody for first-line treatment of mCRC.

On the other hand, Fu Hong Hanlin “broadly lays out” the global market to accelerate market penetration.

As an innovative pharmaceutical company with a global layout, Fuhong Hanlin has always been actively promoting the pace of H drugs going overseas. Currently, H Drug's external licensing covers more than 70 countries and regions, including the United States, Europe, Southeast Asia, the Middle East and North Africa.

For the Southeast Asian market, H drug was approved for marketing in Indonesia in December 2023, becoming the first domestically produced anti-PD-1 monoclonal antibody to be successfully approved for marketing in Southeast Asian countries. In January of this year, the company efficiently completed the first batch of H drug overseas shipments, opening a new chapter for the benefit of patients around the world. In addition to Indonesia, Fu Hong Hanlin has also submitted marketing license applications for H drugs in Thailand, Singapore, Malaysia and other countries to further promote the marketing process of H drugs in Southeast Asia.

In the European and American biopharmaceutical market, the EU marketing license application (MAA) for H drug first-line treatment ES-SCLC has also been accepted by the European Medicines Agency (EMA) and is expected to be approved for marketing in 2024. Meanwhile, Fu Hong Hanlin is steadily advancing head-to-head US bridging trials of H drugs compared to the first-line standard treatment attirizumab for the treatment of ES-SCLC, and plans to submit a marketing license application (BLA) in the US in 2024. It is worth mentioning that in the first quarter of 2024, H drug officially entered the UK Innovation License and Access Channel (ILAP), which is expected to help implement the product in the UK in the future and bring more benefits to local SCLC patients.

In addition, Han Quyou, another core product of Fuhong Hanlin, is also speeding up its global deployment. Since 2023, it has been approved for listing in the US, Brazil, Thailand, and the Philippines. In April 2024, HERCESSI (Chinese product name: Han Quyou, European trade name: Zercepac), a trastuzumab biosimilar drug independently developed and produced by Fuhong Hanlin, was approved and marketed in the US to treat HER2-positive breast cancer and gastric cancer. Han Quyou is the first “Chinese” single antibiotic drug approved in China, the European Union, and the United States. It has now been successfully approved for marketing in more than 40 countries and regions, covering Asia, Europe, Latin America, North America and Oceania, and has entered the medical insurance catalogue of many countries such as China, the United Kingdom, France, and Germany, benefiting more than 190,000 patients.

Summarize

Back to the original question, why did Fuhong Hanlin's stock price and turnover both hit new highs.

After experiencing high and low points, investment in the innovative medicine sector is becoming more and more calm, and only enterprises with high-quality development characteristics will be valued, and this is the undertone of Fu Hong Hanlin. From the initial listing under the 18A clause, to successfully picking -B, to announcing profits, Fuhong Hanlin successfully transformed from biotech to biopharma, following the “internationalization+differentiation” route.

It's easy to say, but it's not easy to implement. Judging from the results, Fu Hong Han Lin did it. The company focuses on areas that need to be solved urgently but there are few players. Through a differentiated layout, the company “overtook a corner” and became a sample for the high-quality development of innovative local pharmaceutical companies. In the future, the company is expected to accelerate the innovation process and bring good news to more patients, which is worth looking forward to.