The different paths of Chinese and foreign diabetes giants: double males and double bears

January 2023, 1 is undoubtedly a memorable day for Novo Nordisk. That night, Novo Nordisk's share price hit a new high, with a market value of nearly $24 billion.

However, the rise in stock prices may not be surprising to Novo Nordisk. In the past 5 years, Novo Nordisk's stock price has climbed from $40 to $144 today, playing out the myth of 5 times in 4 years. This is not easy for a supergiant.

Of course, it is not surprising that Novo Nordisk, which is deeply engaged in the field of diabetes, can become a big bull stock, after all, this is a super blue ocean market. In this area, Eli Lilly is also a super bull stock.

In contrast, the domestic market is a completely different style. Gan&Lee Pharmaceutical, which was listed in 2020, has gone all the way down after touching a market value of 218 billion, and the latest market value is only <>.<> billion.

Tonghua Dongbao, another giant of "the same door", is not much better, and since 2018, the company's stock price has been cut.

Why can the diabetes market give birth to two males overseas, but only two bears in China? The answer to this question may also be the answer to the questions that China's pharmaceutical industry has faced in the past few years.

 01 

Innovation drives the growth of both heroes

The reason why the overseas diabetes treatment field can give birth to Novo Nordisk and Eli Lilly is related to three factors: the large scale of the patient group, the long medication cycle, and the innovation drive.

Diabetes is a geriatric disease that is also chronic and requires long-term medication. With the aggravation of the aging trend and the increase in the penetration rate of diabetes diagnosis and treatment, the size of the drug user group continues to grow, and the ceiling of this market is becoming higher and higher.

At the same time, leading pharmaceutical companies such as Novo Nordisk and Eli Lilly have made new mechanism varieties and me better therapies with the same mechanism emerge endlessly through continuous innovation, thereby widening the gap with latecomers and creating their own "dynasty".

This can be peeked through Novo Nordisk's path to king.

Since the invention of the first generation of animal insulin in 1925, Novo Nordisk's development iteration has not stopped. From improving safety and efficacy to extending safety time, insulin has been upgraded from the second generation to the fourth generation, and Novo Nordisk has been a leader.

The ultimate pursuit of technology has created the supremacy of Novo Nordisk. In the first half of 2022, Novo Nordisk's insulin accounted for 47.1% of the global market share.

In order to strengthen its position, Novo Nordisk did not put all the "eggs" in the insulin basket. In 2009, Novo Nordisk launched the world's first GLP-1 analogue, liraglutide, opening a new era of glucose reduction; In 2017, Novo Nordisk launched a long-acting hypoglycemic drug semeglutide.

In the GLP-1 analogue, Novo Nordisk once again explains what the word "extreme" is. Around semeglutide, Novo Nordisk has exerted its "refined and specialized" expertise, and strives to tap the full potential of semeglutide by expanding indications, increasing doses, and combining with other drugs.

Currently, semeglutide has become the ruler in the GLP-1 field. At the end of 2021, Novo Nordisk occupied 31% of the global market share of hypoglycemic drugs.

Hypoglycemic drugs also brought an unexpected gain to Novo Nordisk - a huge weight loss market.

In June 2021, the FDA approved the approval of semeglutide for weight loss. According to Morgan Stanley, Novo Nordisk's obesity revenue will reach $6.2030 billion in 117, and a new growth engine has begun.

This is not only Novo Nordisk's growth trajectory, but also the path to Lilly's rise in the field of diabetes.

 02 

A double bear created by collection

China's diabetes treatment market also has the soil for giant growth.

The number of diabetic patients in China has exceeded 1 million, making it the world's largest diabetic country, and the diagnosis and treatment plan of patients requires long-term medication like that of overseas markets.

The large scale of the patient group and the long medication cycle are also the characteristics of the domestic diabetes treatment market, which is no different from overseas.

So, in this context, why has the domestic diabetes field not run out of super companies? The core problem lies in the product force level.

For a long time, domestic insulin and other products have been in a state of following.

For example, the third-generation products of Gan & Lee Pharmaceutical, insulin aspart and insulin aspart 30, were approved for marketing in 2020, firing the first shot of domestic replacement of insulin aspart.

But at this time, Novo Nordisk's similar products have been on the market in China for 15 years. For 15 years, Novo Nordisk has been a monopoly on the market.

More intuitive data is reflected in the volume of centralized procurement.

In 2021, the national procurement demand for insulin in the first year totaled 2 million, of which 14 million second-generation insulins and 0 million third-generation insulins, accounting for about 90% of China's total insulin market.

Through the above procurement data, we can see that the demand for third-generation insulin is significantly higher than that of second-generation islets, but it is foreign-funded companies such as Novo Nordisk that occupy the main market.

Once upon a time, the insulin track was also a sweet potato in the eyes of investors. After all, the huge market share gap means that there are huge opportunities for domestic substitution. In other words, the growth dividend of domestic insulin is visible to the naked eye.

It is precisely because of this that the market value of Gan&Lee Pharmaceutical once stood at the 2020 billion mark after its IPO in <>. However, unfortunately, domestic substitution has not yet been completed, and centralized procurement has taken precedence, which has led to the collapse of market expectations.

Due to the relative backwardness of products, the products of Gan & Lee Pharmaceutical, Tonghua Dongbao and other companies have entered the centralized procurement, and the decline is large, resulting in a decline in performance.

In 2022, Tonghua Dongbao's revenue will be 27.75 billion yuan, a year-on-year decrease of 15.09%; Non-net profit was 8 million yuan, down 46.21% from the same period last year. Gan&Lee Pharmaceutical expects a net loss of 47 million to 2022 million yuan in 3. This is also the first time that Gan&Lee Pharmaceutical has suffered a loss since its listing in June 9.

Along with the decline in performance, the company's stock price also declined, in the past year, Tonghua Dongbao and Gan&Lee Pharmaceutical fell by 11.29% and 53.38% respectively. Domestic insulin diandrogynous became a double bear.

 03 

Achieve self-redemption with innovation

Of course, the overseas duoxiong has not escaped the heavy punch of centralized procurement.

Looking at their financial reports, the business in China has been affected by centralized procurement. In 2022, Eli Lilly's revenue in China was US$14.53 billion, down 13% year-on-year; Novo Nordisk's diabetes market revenue in China decreased by 9% year-on-year to DKK 152.<> billion.

However, Novo Nordisk's total revenue in China was not affected. In 2022, Novo Nordisk's revenue in China was DKK 162.09 billion, up 1% year-on-year.

The core reason is that Novo Nordisk's GLP-1 products have served as a buffer, not only in the field of diabetes revenue has grown significantly, but also the weight loss market has grown by leaps and bounds.

Novo Nordisk's performance undoubtedly proves that centralized procurement is the factor that causes a company's revenue and stock price to fall, but it is not all.

Looking back, the pot of the "double bear" cannot be completely attributed to collective procurement.

Although domestic enterprises such as Gan & Lee Pharmaceutical and Tonghua Tongbao are the leading enterprises in the field of diabetes, they do not catch up with the giants through product innovation, but choose to follow and break through the products that have lagged behind for more than ten years in order to get a piece of the pie.

From a normal business point of view, products with low technology content are usually difficult to have high profits. Perhaps, in the past, the market expected too much for domestic insulin and other products, and this in itself was a false expectation.

And for truly innovative products, profit margins are never too low. For domestic pharmaceutical companies, there are still opportunities in the future.

For example, Gan&Lee Pharmaceutical has laid out around two aspects: one is to consolidate its own circle of competence, and on the basis of listing a variety of third-generation insulins, it has also begun to lay out fourth-generation insulin; The second is the expansion of the product, DPP-4 inhibitors have been approved for marketing, and GLP-1 receptor agonists have entered the clinical stage.

The biggest controversy faced by centralized procurement has always been that it has greatly compressed the profits of drugs, causing innovative drug companies to lose the motivation for new drug research and development. But from another point of view, this is also a kind of backwards, forcing China's innovative drug industry to stand at a new starting point.

Who can save the face of China's diabetes pharmaceutical companies through innovation, let's wait and see.