Hengrui Pharmaceutical PK Beigene, whose R & D pipeline is more serious?

Recently, I saw the news of two innovative drug leaders, which formed a sharp contrast.

One is about Beigene (HK:06160), the company's marketed product Zbrutinib achieved superior head-to-head efficacy in a global Phase 3 clinical trial in relapsed/refractory (R/R) chronic lymphocytic leukemia (CLL)/small lymphocytic lymphoma (SLL) patients with ibrutinib (the first BTK inhibitor). Demonstrated superior cardiac function-related safety characteristics.

In short, Zbrutinib demonstrates the potential of a "best in class" treatment globally.

Another piece of news is about Hengrui Pharmaceutical (SH:600276), another senior executive announced his resignation, so far, Hengrui Pharmaceutical this year has four senior executives resigned, all are vice general manager, and this resignation of the senior executive in office less than a year.

In this regard, the industry said, Hengrui medicine in cancer research and development this has been very "volume". I can't help but wonder if Hengrui has hit a bottleneck in research and development? Comparing with Beigene, does Hengrui Pharmaceutical have the "best of its kind" pipeline in the world?

Today we will take a look at the internal development of the two R&D pipelines together.

Head-to-head research and development. How good is that?

As for head-to-head testing, Dr. Wang Lai, Beigene's senior vice president and head of global research and development, has said, "It takes not only courage to conduct head-to-head testing, but also good medicine."

In this regard, let's first take a look at whether Hengrui Pharmaceutical also has a head-to-head test pipeline.

It is known that the innovative drug pyrrotinib maleate has been tested in head-to-head clinical trials with Lapatinib and extended PFS for 11 months, achieving breakthrough clinical results. It is the only innovative drug marketed by Hengri Pharmaceutical that has been tested in head-to-head trials.

The drug was conditionally approved for marketing in 2018, fully approved in 2020 for the first and second line indications for recurrent or metastatic HER2-positive breast cancer, and enrolled in Medicare in November 2019.

It is reported that pyrrotinib maleate exceeded 500 million yuan in 2019 and 1 billion yuan in 2020. In addition, based on its good efficacy, no new indications will be launched in 2021, and its sales volume still maintains a rapid growth trend.

It has to be said that the superior efficacy/competitiveness presented by head-to-head trials is self-evident.

For Hengri's pyrrotinib maleate, global sales of its three targeted HER2 small-molecule inhibitors for breast cancer are just $687 million, giving it room to sell at least $1 billion more in China.

For Beigene's Zebutinib, which can be used to treat a variety of hematologic tumors, the sales volume of its standard product Ibutinib alone reached 9.777 billion dollars in 2021, which shows its potential market space in the global market.

Through the first three quarters of 2021, Zebutinib generated worldwide sales of $389 million, an increase of approximately 196% over the same period last year.

In comparison, to some extent, Hengrui Pharmaceutical's research and development strength may be weaker than Beigene.

So does this mean that Beigene's R&D returns are high? After all, Beigene's investment in research and development expenses, sales expenses and so on still make the enterprise in a state of huge loss.

I would have thought I would have answered no, but given the amount of money spent on these two drugs and their sales, Beigene is not doing badly.

Although Beigene invested a large amount of research and development investment in Zebutinib, which reached 5.077 billion yuan by the first half of 2022, the drug began to be marketed at home and abroad in November 2019.

Sales are expected to exceed $700 million by the end of this year, which translates into nearly 5 billion yuan.

The market performance of Zbrutinib will be interesting to watch.

On the other hand, for Hengrui Pharmaceutical, the current cumulative R&D investment of pyrrotinib maleate is about 1.148 billion yuan, and also recouped the R&D investment cost about two years after the launch of the drug.

But the problem is that this drug is currently less than 300 million yuan a year in research and development, in the company's total R&D pipeline seems to have become a thing of the past, then other drugs with more investment in research and development have good efficacy?

Next, we will take a look at the core competitiveness of Hengrui Pharmaceutical and Beigene by combing through their R&D pipelines.

Hengrui pharmaceutical research and development pipeline further analysis

Next, we will mainly analyze other drug pipelines of Hengrui Pharmaceutical.

First of all, the company did not disclose much information about pipeline R&D investment. In 2021, it disclosed 6 major R&D projects, which was only 2.4% of its total of more than 250 clinical projects.

Have to say, Hengrui pharmaceutical research and development investment is relatively scattered, perhaps this is the reason for the internal research and development volume.

However, as things have come to this point, we will mainly look at these major R&D projects mentioned by Hengrui Pharmaceutical in 2021. At present, they are basically in the third clinical phase and are expected to become the main force of innovative drugs to be launched in the next one or two years.

The first are two projects related to SHR0302, a JAK inhibitor, for which multiple indications are in Phase III and the atopic dermatitis indication is included in breakthrough therapy.

For Hengrui Pharmaceutical, in addition to the word innovation, the enterprise innovative drug products "breakthrough" can be seen everywhere.

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So for Hengrui Pharmaceutical, can "breakthrough" help enterprises stand out in the fierce competition?

In the JAK inhibitor circuit, there are a number of JAK inhibitor products in the world, and there are a number of domestic enterprises layout.

Obviously for Hengrui Pharmaceutical, the current enterprise can rely on more pipelines, faster speed and even higher cost performance to win, but the competitiveness of the same track products can not be found.

In the domestic market, the comprehensive strength of SHR0302 or Zejing biology is comparable, each has its own advantages and disadvantages; SHR0302 has also been carried out overseas clinical trials by Hengrui Pharmaceutical to further facilitate the later dosage.

JAK inhibitors are mainly in the domestic research phase II clinical and late pipeline

In addition, let's take a look at the two listed products of Hengrui Pharmaceutical, which are both under continuous development at present. They are Dalcilil tablets of hydroxyethesulfonate and Fluzopalil capsules, which are CDK4/6 inhibitors and PARP inhibitors respectively.

The former was approved for breast cancer in December 2021, while the latter was approved for ovarian cancer in December 2020, with an additional indication in June 2021.

Since these two products have been approved for market indications, we can know from relevant announcements that they were recently launched, respectively, the cumulative investment in research and development costs of 364 million yuan, 411 million yuan, are not much.

It has to be said that although the low investment in research and development means that these drug pipelines are not as heavy, Hengrui Pharmaceutical can "win by volume" because it has not just a few potential innovative drugs behind it, but possibly dozens or more.

It is known that the JAK inhibitor track where SHR0302 is located, the CDK4/6 inhibitor track where Dalcilil oxyethoxylate tablets are located, and the PARP inhibitor track where Fluzopalil capsules are located. Currently, the global market size of the listed products reaches nearly $9 billion, $7 billion and $2.5 billion respectively.

They are not in the same competitive position as pyrrotinib maleate (Hengri's only drug in head-to-head trials), but they all have more addressable markets than pyrrotinib maleate, meaning they all have potential for growth.

Finally, let's talk about a biological drug in the main R&D pipeline of Hengrui Pharmaceutical in 2021 -- SHR-1701 injection. Based on the more optimistic development potential of biological drugs in the future, it is self-evident that Hengrui Pharmaceutical develops in the field of biotechnology.

The only "first of its kind" and "best of its kind" pipeline mentioned in the company's annual report is in the field of dual/multispecific antibodies (biologic drugs).

Further understanding shows that SHR-1701 is a double target product of PD-L1 and TGF-β, but on this drug, the market controversy is not small, not only for Hengrui medicine, mainly for the two targets of double antibody drugs.

In this regard, some say that the success rate of research and development is not high, and some say that this kind of double antibody is not much different from PD-1 monotherapy.

At this point, we can only wait or hope that this drug can be successfully developed. The indications of this dual antibody drug and PD-1 layout are quite different, and we hope that it can also achieve some breakthrough results.

In addition, there is another major research and development project of Hengrui Pharmaceutical that we did not mention, namely SHR3680 tablets (Reverulumide tablets), an AR inhibitor, which was approved for the domestic market in June 2022 for the indication of metastatic hormone-sensitive prostate cancer with high tumor load. By the time of listing, it has invested about 382 million yuan in research and development.

Its marketed similar products are not few, but Hengrui Pharmaceutical is still the first domestic company, among which the total global sales of three similar products in 2021 is about $6.297 billion. Therefore, we should also recognize the market potential of reverumide tablets.

Further analysis of Beigene R&D pipeline

After analyzing the main R&D pipeline of Hengrui Pharmaceutical, let's take a look at other R&D pipelines of Beigene. Can Zebutinib alone safely own a market value of more than 170 billion yuan? (Although this is not impossible with the amount of Zeptinib, there are still variables before it actually happens.)

According to the annual report data, in addition to Zebutinib, Beigene has three other drugs worth mentioning in its R&D pipeline, which are pd-1 monoclonal antibody Tirellizumab, PARP inhibitor Pamipali Capsule, TIGIT monoclonal antibody oseperlizumab.

By the first half of 2022, the cumulative R&D investment of the three pipelines is 5.674 billion yuan, 1.133 billion yuan and 977 million yuan respectively. The R&D investment of other pipelines is relatively small, so we will not consider it here.

Among them, the cumulative research and development investment of Tirelizumab can not be underestimated.

Speaking of it and Hengrui Pharmaceutical carrilizumab can be said to be a direct competitor, from the point of view of product development, the comprehensive strength of the two seems to be not much difference, so far, there have been 9 indications of Tirelizumab in the domestic market, Carrilizumab is 8.

On the one hand, I think the main reason for the investment gap is that the Tirelizumab pipeline is relatively faster and more extensive, and it also has a number of global clinical trials (opening up foreign markets), while carrilizumab currently has only one foreign pipeline.

On the other hand, there is a big gap between the current sales volume of Tirelizumab and carrilizumab, so we can speculate that there is still room for the volume of Tirelizumab, and at the same time, the sales capacity of Hengrui Pharmaceutical is recognized.

By 2021, sales of Tirelizumab and Carrilizumab were about 1.6 billion yuan and 4 billion yuan. Meanwhile, global sales of PD-1 products exceeded 27 billion yuan.

In this context, in the first half of 2022, the sales volume of Tirelizumab (Bai Zeon) maintained a rapid growth trend, achieving an operating revenue of 1.251 billion yuan, up 56.38% year-on-year.

Second, let's take a look at Beigene's other two products, PARP inhibitor Pamipali capsules and TIGIT monoclonal antibody oseperimab.

The former was approved in May 2021 for the treatment of relapsing advanced ovarian cancer, tubal cancer, or primary peritoneal cancer in patients with germ line BRCA (gBRCA) mutations who have previously received second-line or above chemotherapy. The latter is not yet on the market, and both are in global clinical trials.

The first is about PARP inhibitors. As we mentioned earlier, Hengrui's related product (Fluzopalil capsules) has also been launched.

The track market is now in the billions of dollars. It has to be said that the two are also competitive, and the actual efficacy may be similar (each product has its advantages and disadvantages), but that does not affect their current growth.

From the semi-annual report data, Baihuize that is Pamipali capsule in the first half of this year to achieve operating income of 29.55 million yuan, although the scale is not large, but maintain rapid growth.

Data from Flush iFinD, Tianfeng Securities Research Institute

Finally, the unlisted TIGIT monoclonal antibody of Beigene is oseperimab. It is worth mentioning that there are no listed products in this field in the world at present. The pipeline of Beigene has been tested in phase 3 clinical trials, leading the research and development level (second only to Roche).

The combination of this drug and PD-L1 has shown good efficacy in some areas, so it has broad market space.

In this regard, we can look forward to the follow-up research and development results and launch of this product by Beigene.

summarize

So far, we have sorted out the main R&D pipelines of Hengrui Pharmaceutical and Beigene. The full text involves explanations of many drugs, including 1 head-to-head trial marketing drug of Hengrui Pharmaceutical +6 main drugs under research in 2021 annual report, and 1 head-to-head trial drug +3 main drugs under research of Beigene. I think their core competitiveness lies in this.

For Hengrui, although it has not been successful in the sea, and there is no heavy head-to-head testing, but from the perspective of Hengrui's R&D pipeline, we can not just use "volume" to summarize.

Because at the current stage (the market competition is increasingly fierce), only if Hengrui Pharmaceutical quickly moves ahead, can it afford to invest more and continuously develop or acquire better quality pipelines.

For Beigene, although the company is still in a state of loss due to the huge investment in R&D, it seems that the company is showing its strength to us that it can live on its own.

For them to be able to maintain their core competitiveness when pharmaceutical innovation is very difficult and the success rate is very low, I think it's very difficult.