Johnson & Johnson Retains Top Spot Among MNCs in H1; Roche Bets $2B on Alzheimer’s; BMS Exits TIGIT Target

A Total of 4 Briefs | Estimated Reading Time: 4 Minutes◆◆ ◆

01

Johnson & Johnson Retains Top Spot in H1MNC Performance

As major MNCs have successively disclosed their Q2 2024 financial reports, the H1 2024 performance of several pharmaceutical giants, including AstraZeneca, Roche, Sanofi, Johnson & Johnson, and Novartis, has been released. As of August 6, the global TOP10 ranking based on H1 revenue is as follows:

MNC 2024H1 and Q2 Revenue; Source: Public Data Compilation

After the gradual dissipation of the COVID-19 pandemic in 2023, the revenue situation of global pharmaceutical giants entered a new round of reshuffling. By 2024, the impact of the pandemic on business had largely faded, and pharmaceutical companies returned to their normal pace of development. In terms of performance, in the first half of 2024, except for Pfizer, the overall revenue of the remaining nine companies showed a growth trend.

Johnson & Johnson

Holding the top position, the oncology sector sees strong revenue growth

Since Johnson & Johnson reclaimed the top spot in global MNC revenue with $85.16 billion (pharmaceuticals and medical devices businesses) in 2023, its financial report for the first half of 2024 shows that the total revenue reached $43.83 billion, a year-on-year increase of 3.3%.

From the perspective of therapeutic areas, the oncology segment showed strong growth, surpassing immunology to become Johnson & Johnson's highest revenue-generating field, with Q2 revenue reaching $5.09 billion, a year-over-year increase of 15.7%. In contrast, the immunology sector reported Q2 revenue of $4.722 billion, marking only a 5% year-over-year growth.

In the first half of 2024, Darzalex (daratumumab, with sales of $5.57 billion) in the oncology field surpassed Stelara (ustekinumab, with sales of $5.536 billion) in the immunology field to become the top-selling product. Additionally, two new oncology drugs showed the highest sales growth: Carvykti, a BCMA CAR-T therapy, achieved sales of $343 million in the first half, representing an 81.5% year-over-year increase; Tecvayli, a bispecific antibody product, reported sales of $268 million, marking a 70.2% year-over-year increase.

In the first half of 2024, Johnson & Johnson continued to strengthen its presence in oncology and immunology within its innovative drug sector. In January, Johnson & Johnson acquired Ambrx Biopharma for $2 billion, gaining access to multiple ADC pipelines. In May, the company further solidified its position in autoimmune diseases by acquiring Proteologix for $850 million and Numab Therapeutics' subsidiary for $1.25 billion, enhancing its bispecific antibody portfolio.

Roche

Oncology Sector Takes the Lead, Ophthalmology Expands Strongly

In the first half of 2024, Roche's total revenue was 29.848 billion Swiss francs (+5%, approximately 33.719 billion US dollars), a year-on-year increase of 5%; among which, pharmaceutical business revenue was 22.637 billion Swiss francs (+5%, 25.573 billion US dollars), and revenue in China achieved double-digit growth to 1.609 billion Swiss francs (+14%, 1.818 billion US dollars).

In terms of pharmaceuticals, the oncology sector contributed CHF 9.619 billion (approximately USD 10.867 billion) to Roche's revenue in the first half of the year, accounting for 42.5% of total revenue, but the year-on-year growth rate slowed to only 4%. The business with the highest growth rate was ophthalmology, with revenue of CHF 1.891 billion, a year-on-year increase of 54%, but it currently accounts for only 8.4% of total revenue.

In terms of specific products, the ophthalmology bispecific antibody Vabysmo (Faricimab) generated sales revenue of 1.794 billion Swiss francs (approximately 2.027 billion US dollars) in the first half of this year, representing a year-on-year increase of 93%, nearly doubling, and entering the top 5 best-selling drugs of Roche.

Moreover, Ocrevus (ocrelizumab), Hemlibra (emicizumab), Evrysdi (risdiplam), Phesgo (pertuzumab + trastuzumab), Polivy (polatuzumab vedotin), Xolair (omalizumab), and Alecensa (alectinib) all maintained strong growth.

Merck & Co.

K Drug Reaches New High, Annual Sales Expected to Break $30 Billion

Merck's Total Revenue in H1 2024 Reached $31.887 Billion, Up 8% Year-on-Year; Pharmaceutical Business Revenue Hit $28.415 Billion, Up 9% Year-on-Year. Q2 Revenue Was $16.1 Billion, Increasing 7% Year-on-Year. The Growth in Merck’s Performance Was Mainly Attributed to the Outstanding Performance of Keytruda and the HPV Vaccine.

For Keytruda (Pembrolizumab, K drug), which just seized the top-selling drug position from Humira last year, this year's sales performance has been highly anticipated. In the first half of this year, Keytruda achieved sales of $14.217 billion, reflecting a robust double-digit growth rate of 18%, with the potential to surpass the $30 billion mark for the full year. Meanwhile, HPV vaccines have maintained stable performance, with Gardasil/Gardasil 9 generating sales of $4.727 billion, representing a 7% year-on-year increase.

Moreover, the sales of Welireg (HIF-2α inhibitor, $211 million, +128%), Reblozyl (luspatercept, $161 million, +80%) in the oncology field, Prevymis (letermovir, $362 million, +33%) for the prevention of cytomegalovirus infection, and the 15-valent pneumococcal vaccine Vaxneuvance ($408 million, +49%) all showed double-digit growth or higher.

However, Merck's main revenue currently still comes from Keytruda and the HPV vaccine, with Keytruda sales accounting for nearly half of Merck's revenue. Although Keytruda is still in a period of rapid growth, its patent will expire in 2028, at which point it will inevitably face a decline in sales. Additionally, while Merck currently holds a relatively stable leadership position in the global HPV vaccine market, the competition for HPV vaccine iterations is particularly fierce, and Merck's HPV vaccine sector income is not invincible.

Therefore, Merck urgently needs to seek a second growth curve. Since this year, Merck has also acquired new potential products and pipelines through acquisitions and other methods. Currently, Merck's subsequent potential blockbuster products include the pneumococcal conjugate vaccine, a new drug for pulmonary arterial hypertension called Sotatercept, a next-generation RSV neutralizing antibody, a TL1A antibody, and a neoantigen mRNA vaccine, among others.

Pfizer

Largest Revenue Decline, but Signs of Improvement in Q2 2024 Performance

Among the global TOP10 MNCs, Pfizer was the most affected by the COVID-19 pandemic. In 2023, due to a significant decline in sales of the COVID-19 vaccine Comirnaty and the antiviral drug Paxlovid, Pfizer failed to replicate its record-breaking revenue of over 100 billion US dollars achieved in 2022. Not only did it lose the top position to Johnson & Johnson, but it also dropped out of the top three. Entering 2024, with an 11% drop in revenue in the first half of the year, Pfizer has not yet fully emerged from the negative impact caused by the disappearance of the "COVID-19 dividend." However, based on the Q2 performance of 2024, revenue has shown some improvement.

Financial reports show that the total revenue for the first half of 2024 was $28.162 billion, a year-on-year decrease of 11%. The revenue for Q2 2024 was $13.2 billion, a year-on-year increase of 2%, surpassing market analysts' expectations of $12.96 billion. Excluding the contributions from the COVID-19 vaccine (Comirnaty) and the oral COVID-19 medication (Paxlovid), Q2 revenue increased by 14% year-on-year. This marks the first quarter of positive growth since the global impact of COVID-19 began to wane in Q4 2022, indicating that Pfizer has adjusted its position and is embarking on a new starting point.

By business segment, in the first half of 2024, the revenue from the COVID-19 product Paxlovid was $2.286 billion, a year-on-year decrease of 46%; the revenue from Comirnaty was $548 million, a year-on-year decrease of 88%. Although the performance of COVID-19 products continued to decline rapidly, Pfizer's oncology business grew significantly in the first half of 2024. According to the financial report, the oncology business revenue reached $7.505 billion, a year-on-year increase of 23%.

Among them, the sales of the blockbuster breast cancer drug CDK4/6 inhibitor Ibrance (palbociclib) declined (-8%), but it still ranked first in the oncology drug sales chart with an income of $2.184 billion. The androgen receptor signaling inhibitor Xtandi (enzalutamide) earned $913 million (+20%), ranking second, while the third-generation ALK inhibitor Lorbrena (lorlatinib) also showed growth ($332 million, +46%).

Additionally, ADC products acquired from Seagen, such as Vyndaqel (tafamidis), Eliquis (apixaban), and Nurtec ODT/Vydura, have also started contributing to revenue.

AbbVie

Humira Loses Ground, Autoimmune Duo Steps Up

AbbVie's total revenue in the first half of 2024 was $26.772 billion, a year-on-year increase of 3.7%. Among this, classified by therapeutic areas, immunology, neuroscience, and oncology were the three largest fields, with revenues of $12.342 billion (+0.6%), $4.127 billion (+15.6%), and $3.177 billion (+11%), respectively.

In the autoimmune field, in the first half of 2024, Humira (adalimumab) failed to reverse its declining performance, dropping by approximately 32% to $5.084 billion, with an expected annual revenue falling below $10 billion. However, AbbVie’s two star products in the autoimmune sector, Skyrizi (risankizumab) and Rinvoq (upadacitinib), maintained strong growth rates, generating revenues of $4.735 billion (+46.6%) and $2.523 billion (+60.4%), respectively. Among them, Skyrizi is expected to surpass $10 billion in revenue by the end of the year.

In the oncology field, Imbruvica (Ibrutinib) continues to lose market share, with H1 revenue reaching $1.671 billion (-6.4%); Venclexta (Venetoclax) shows steady growth, achieving H1 sales of $1.251 billion (+16%); Epkinly, a new CD3/CD20 bispecific antibody for hematological tumors, was approved by the FDA in May last year and generated $31 million in just half a year in 2023, doubling to $63 million in H1 this year. Additionally, Elahere (Mirvetuximab Soravtansine), an FRα ADC drug acquired through AbbVie’s purchase of ImmunoGen at the end of last year, contributed $192 million in revenue within six months.

In the field of neuroscience, except for the Parkinson's disease drug Duodopa, which showed negative growth, all other products are steadily increasing. Among them, although Qulipta has a relatively small sales volume, contributing only $281 million in revenue in the first half of the year, it is the fastest-growing product in the field (+73.2%). Other products such as Ubrelvy, Botox Therapeutics, and Vraylar achieved $434 million (+24.6%), $1.562 billion (+7.2%), and $1.468 billion (+20.4%) respectively. Meanwhile, based on AbbVie’s current layout in the neuroscience sector, with multiple pipelines for treating schizophrenia, Parkinson’s disease, and mood disorders advancing, AbbVie is expected to further expand its leading position in this area.

Novartis

Continuously Deepening Investment in Nuclear Medicine, Small Nucleic Acids, and Gene Therapy

Novartis 2024 H1 Revenue $24.3 Billion, Up 11% YoY; China Sales $2.1 Billion, Up 29% YoY

In terms of therapeutic areas: Oncology revenue was $6.984 billion, a year-over-year increase of +14%; Cardiovascular/Renal Metabolism revenue was $4.111 billion, a year-over-year increase of 37%; Immunology revenue was $4.403 billion, a year-over-year increase of 21%; Neuroscience revenue was $2.234 billion, a year-over-year increase of 39%.

In these areas, several blockbuster products of Novartis achieved steady growth, such as Entresto (Sacubitril/Valsartan, $3.777 billion, +30%), Kesimpta (Ofatumumab, $1.436 billion, +64%), Cosentyx (Secukinumab, $2.852 billion, +21%), and Kisqali (Ribociclib, $1.344 billion, +48%).

Moreover, Novartis’ strategically focused radiopharmaceuticals sector demonstrated steady revenue growth. In the first half of the year, Pluvicto and Lutathera, two key radiopharmaceutical products, generated revenues of $655 million (+45%) and $344 million (+16%), respectively, with combined revenues nearing $1 billion. The long-acting PCSK9 siRNA lipid-lowering drug Leqvio achieved sales of $333 million during the same period, representing a 135% year-over-year increase, making it the fastest-growing product among all marketed new drugs. Gene therapy products performed as expected, with Zolgensma, used for treating spinal muscular atrophy (SMA), generating $644 million in revenue in the first half, reflecting a 6% year-over-year increase.

Currently, unlike other MNCs, Novartis’ product portfolio and R&D pipeline hardly feature drugs from popular sectors such as ADC, PD-1, and GLP-1. In recent years, Novartis has been actively pursuing mergers and acquisitions but has largely avoided these extremely popular fields like ADC, GLP-1, and PD-1. At the same time, the company has, to a certain extent, moved away from a diversification strategy (such as in ophthalmology) and instead focused on the development of cutting-edge technologies and innovative therapies (such as radiopharmaceuticals, small nucleic acids, and CGT).

Although the combined revenue of nuclear medicine, small nucleic acids, and CGT in the first half of 2024 was only around $20 billion, accounting for less than 10% of the total revenue, Novartis' future income will become even more substantial as these emerging fields gradually gain momentum.

In addition, AstraZeneca, Sanofi, GlaxoSmithKline, and Bristol-Myers Squibb, the four MNCs ranked in the TOP10, also achieved positive revenue growth in the first half of 2024.

2024 is already halfway through, and all the MNCs are still striving hard. Some are seizing the hot topics of the times to expand their domain advantages; some are choosing to avoid homogeneous competition; others are cutting pipelines to focus on core assets... All in the hope of reaching new heights. We look forward to the outstanding performance of MNCs in the second half of the year.

(Source: Shell Society)

02

Roche Invests $2 Billion in Alzheimer's Disease

Today, Sangamo Therapeutics announced that it has reached a licensing agreement with Genentech, a subsidiary of Roche, to develop intravenously administered gene therapies for neurodegenerative diseases, including Alzheimer's disease. Genentech has obtained the development rights to epigenetic inhibitors based on zinc finger proteins, targeting the MAPT gene that encodes the Tau protein. The Tau protein plays a crucial role in Alzheimer’s disease and other tauopathies. Additionally, Genentech has secured the rights to use Sangamo’s proprietary adeno-associated virus (AAV) capsid, STAC-BBB. This AAV capsid has demonstrated robust blood-brain barrier (BBB) crossing ability in non-human primate models.

New Drug Development for Alzheimer's Disease Welcomes Breakthroughs in Recent Years. Leqembi (lecanemab), jointly developed by Eisai and Biogen, and Kisunla (donanemab), developed by Eli Lilly, have both received full FDA approval for the treatment of patients with early-stage Alzheimer’s disease. Additionally, cell and gene therapies have shown promising preliminary efficacy in treating Alzheimer’s disease. However, using gene therapy to treat Alzheimer’s requires crossing the blood-brain barrier that protects the brain to deliver therapeutic genes into the brain. Sangamo’s STAC-BBB vector has achieved a breakthrough in delivering transgenes for expression within brain tissue.

STAC-BBB is an AAV capsid discovered by the company through in vivo screening in cynomolgus monkey models. Compared to the AAV9 capsid used for delivering transgenes into the central nervous system (CNS), STAC-BBB demonstrates a 700-fold increase in its ability to drive transgene expression in CNS neurons. Moreover, STAC-BBB is capable of driving high levels of transgene expression across a wide range of different CNS tissues.

Typically, the majority of AAV vectors are absorbed by the liver, and potential liver toxicity is one of the reasons that limit the dosage of gene therapy. Additionally, experiments on non-human primates have shown that gene therapies targeting the CNS may be absorbed by the dorsal root ganglia (DRGs) and cause toxicity. Research from Sangamo indicates that, compared to the AAV9 capsid, STAC-BBB demonstrated a 100-fold reduction in liver enrichment and also showed significantly decreased levels in DRGs. Therefore, this capsid represents an ideal choice for delivering CNS gene therapies.

Tau Protein is a Key Protein in Various Tauopathies, Including Alzheimer's Disease. Based on its Proprietary Zinc Finger Protein Platform, Sangamo Has Developed an Investigational Therapy Capable of Specifically Inhibiting the Expression of the MAPT Gene Encoding Tau Protein Through Epigenetic Regulation. Delivered via STAC-BBB, This Epigenetic Inhibitor Can Specifically Suppress Tau Protein Expression in Key Regions of the Animal Brain and Within CNS Neurons.

Under the agreement, Sangamo will be responsible for technology transfer and certain preclinical research activities, while Genentech will handle all clinical development, regulatory, manufacturing, and commercialization activities. Sangamo will receive an upfront payment of $50 million and is eligible for up to $1.9 billion in development and commercialization milestone payments. Roche also obtained the development rights to Sangamo's zinc finger protein inhibitor targeting another CNS target.

Cell and Gene Therapies Show Potential for Treating Alzheimer’s Disease with Long-Term Benefits from a Single Treatment

NKGen Biotech Recently Announced Clinical Trial Data of Its Investigational Natural Killer (NK) Cell Therapy SNK01 for Treating Alzheimer’s Disease Patients. SNK01 is an autologous, non-genetically modified NK cell product. The latest disclosed data showed that among 10 evaluable AD patients, 90% experienced improvement or stabilization in the Alzheimer's Disease Composite Score (ADCOMS, a scoring system reflecting cognitive function) compared to baseline.

LEXEO Therapeutics' gene therapy LX1001 is an AAV-based gene therapy designed to deliver a transgene expressing protective apolipoprotein E2 (APOE2) to the central nervous system (CNS) of Alzheimer's patients carrying two APOE4 alleles, aiming to halt or slow disease progression. It is currently being tested in a Phase 1/2 clinical trial. Previously released preliminary data showed that in three patients followed for over 12 months, levels of Tau and phosphorylated Tau in cerebrospinal fluid decreased in all patients, and Aβ42 levels dropped in two patients.

(Source: WuXi AppTec)

03

BMS Heavyweight Target Fails

On August 5, foreign media reported that Agenus recently received a return notice from Bristol-Myers Squibb, which will take effect on January 26, 2025.

The returned product is Agenus' TIGIT/CD96 bispecific antibody AGEN1777. This drug was signed by Bristol Myers Squibb for a deal totaling over $1.5 billion in 2021 before it even entered clinical trials, with nearly $250 million already paid in upfront and milestone payments.

Bristol-Myers Squibb originally planned to conduct a Phase 2 clinical trial for the gastric cancer indication, but suddenly made a "strategic adjustment" and decided to return the drug, which was startling. It is speculated by outsiders that AGEN1777 likely did not achieve the desired results.

This is yet another piece of bad news for the star target TIGIT. In July this year, Genentech, a subsidiary of Roche, disclosed that a TIGIT monoclonal antibody had failed in a Phase II/III study for metastatic non-squamous non-small cell lung cancer; at last year's R&D Day event, Bristol-Myers Squibb announced it was abandoning its self-developed TIGIT monoclonal antibody BMS-986207.

At present, Bristol-Myers Squibb has completely withdrawn from the competition for the TIGIT target, and Roche has almost given up hope as well. Once hailed as "the next PD-1," the future of the TIGIT target has become bleak.

Suffering consecutive failures

In 2020, Roche presented excellent data on the combination of its TIGIT product Tiragolumab and PD-L1 product Tecentriq (T药) for the treatment of non-small cell lung cancer at the ASCO Annual Meeting, sparking a wave of industry interest in this target.

At that time, any large foreign enterprise with a PD-1/PD-L1 product was looking to acquire TIGIT-targeted drugs: GlaxoSmithKline paid $625 million upfront to introduce EOS-448 developed by iTeos; Novartis signed a nearly $3 billion agreement with BeiGene to obtain the overseas rights to Ociperlimab.

Bristol-Myers Squibb introduced Agenus's TIGIT drug in 2021, securing its TIGIT bispecific antibody AGEN1777 for a total price of $1.56 billion, and took a seat at the table.

It may be due to bad luck. After Bristol-Myers Squibb introduced this drug, multiple TIGIT pipeline drugs around the world began to fail one after another.

In March 2022, Roche announced the failure of the Phase III clinical trial of Tiragolumab combined with Tecentriq and chemotherapy for the treatment of small cell lung cancer. This marked the world's first failed Phase III clinical trial for a TIGIT inhibitor.

Immediately following, in May 2022, Roche announced the failure of the Phase III study of Tiragolumab combined with Tecentriq as a first-line treatment for locally advanced or metastatic non-small cell lung cancer with high PD-L1 expression.

Within two months, Roche's TIGIT-targeted drug combined with PD-1 failed twice in Phase III clinical trials, casting uncertainty over the future of TIGIT.

In July 2023, Novartis terminated its option agreement with BeiGene regarding the TIGIT inhibitor, but the $300 million upfront payment was still made. After evaluating clinical data, market competition, risk-benefit ratio, and future investment plans, Novartis decided it would rather forfeit the upfront payment than proceed with this drug; In January this year, Junshi Biosciences' TIGIT monoclonal antibody was also returned; In May this year, Merck also announced the termination of the Phase 3 clinical trial of its anti-TIGIT drug.

Roche, Gilead, and GSK Remain at the Table

Roche hasn't completely given up on TIGIT, but Bristol-Myers Squibb, which seemed to have smooth clinical progress, has already exited the TIGIT arena.

Actually, the TIGIT bispecific antibody introduced by Bristol-Myers Squibb is quite promising. In March this year, Agenus Inc. released preclinical data for AGEN1777: whether used alone or in combination with PD-(L)1, AGEN1777 demonstrated excellent immune activation effects. Agenus believes that this TIGIT/CD96 bispecific antibody has the potential to outperform TIGIT monoclonal antibodies.

But Bristol-Myers Squibb itself has experienced some turbulence in its operations. In April this year, Bristol-Myers Squibb announced a restructuring plan to cut 6% of its workforce and halt the development of unnecessary pipelines in order to save 1.5 billion US dollars by the end of next year. During last month's conference call, its Chief Financial Officer stated that the company intends to invest the saved funds into high-growth sectors with more certainty.

Agenus stated that after Bristol-Myers Squibb's withdrawal, it could independently proceed with development. However, with only 53 million US dollars left in the company's account, how long can it sustain?

TIGIT Target: From Being the Center of Attention to Now Fading Away, Once Again Proving That Drug Development Is Never Smooth Sailing. Roche is Still Evaluating the Effectiveness of Tiragolumab in Hepatocellular Carcinoma. In Addition, Gilead and GlaxoSmithKline Continue to Push Forward with Their Research.

In January this year, Gilead announced a $320 million equity investment in Arcus Biosciences, increasing its stake to 33% to further advance the co-development of the TIGIT monoclonal antibody domvanalimab. These studies all adopt a combination therapy regimen of PD-1 + TIGIT + chemotherapy, for the first-line treatment of non-small cell lung cancer and upper gastrointestinal tumors respectively, with all participants expected to be enrolled by 2024.

In July this year, belrestotug, an anti-TIGIT monoclonal antibody drug co-developed by GSK and iTeos Therapeutics, completed the first patient dosing in a Phase 3 clinical study, and the subsequent results are also worth attention.

(Source: Jian Shi Ju)

04

Northeast Pharmaceutical一字涨停

Northeast Pharmaceutical, which aspires to rival Hengrui, has never been short of money but always lacks genuine pressure and motivation for innovation. In the capital market, those who understand innovation seem to avoid looking at it, while those who look at it appear not to understand innovation.

Nearly a decade after Sun Piaoyang led his team into the TCR-T track, his对标者 (benchmark rival), Northeast Pharmaceutical—one of the "four major families" in the API industry—has finally made a high-profile entry.

Today, Northeast Pharmaceutical announced that it plans to acquire 70% of the equity in a 10-year-old Biotech company, Dingcheng Peptide Source, which focuses on CGT in solid tumors. The biggest highlight of Dingcheng Peptide Source is its TCR-T cell drug targeting KRAS G12D, which has the potential to become the world's second and China's first to enter clinical research.

The timing of the announcement was quite ingenious. A few days ago, the FDA approved the world's first TCR-T cell therapy. Priced at $727,000 per injection, significantly higher than the current CAR-T products on the market, this has excited the capital markets. Almost simultaneously, the first TCR-T cell therapy in China to receive an IND approval and enter clinical trials was announced, with the stock price of Xiangxue Pharmaceutical, the company behind it, rising over 110% cumulatively in five days.

In this atmosphere, Northeast Pharmaceutical opened with a "one-word" limit-up today, with an increase of 9.95%.

But as of today's closing, the total market value of Northeast Pharmaceutical is 6.317 billion yuan, with a dynamic price-to-earnings ratio of 27.4 times. In comparison, Hengrui's total market value exceeds 270 billion yuan, more than 40 times that of the former.

In 2018, after the Fangda Group took over Northeast Pharmaceutical, it boldly proclaimed its intention to compete with Hengrui Medicine. Six years have passed, and whether in terms of revenue scale, market value, or innovative transformation achievements, this long-established traditional pharmaceutical company seems to be far from being on the same level as the "top pharmaceutical company." Especially in terms of innovation, Northeast Pharmaceutical's progress is simply perplexing.

"Is it too late to take a shortcut to innovation?"

Northeast Pharmaceutical rarely experiences such a "one" character limit-up moment. The last time was related to a fever reducer under its brand that went viral on hot search during the pandemic for not raising its price in 20 years. Aside from that, the stock price of this long-standing Northeast pharmaceutical company has been largely "unremarkable" over the years.

The reason for this stock price increase is very understandable: Northeast Pharmaceutical finally made a new move in its innovative transformation layout, and this time it took a "shortcut" by acquiring an emerging seed player that has established a complete technical platform and product transformation system for TCR-T and CAR-T cell therapy products.

With the acquisition of Dingcheng Peptide Source, Northeast Pharmaceutical will gain core technology in the field of specific cellular immunotherapy and a relatively mature R&D team. This also means that TCR-T, an emerging track held in high hopes, has attracted another large traditional pharmaceutical company.

TCR-T Technology Track: With the Approval and Pricing of the First Product, It Initially Demonstrates Greater Commercial Value Than CAR-T. Previously, many respondents also told E Pharma Manager that, unlike CAR molecules which can only recognize membrane proteins, TCR molecules can identify intracellular proteins presented by tumor cells. This feature gives TCR-T technology greater advantages and potential in the treatment of solid tumors.

As a result, Xiangxue Pharmaceutical and Northeast Pharmaceutical, two traditional pharmaceutical companies, successively saw their stock prices rise due to their respective strategic layouts.

However, unlike Xiangxue Pharmaceutical, which has seen several days of consecutive gains due to breakthrough progress, the "pulse-like" sudden rise of Northeast Pharmaceutical is likely difficult to sustain.

The first reason is that Dingcheng Peptide currently has about 10 CGT R&D pipelines, with the fastest progress still in the IND application stage, and the subsequent highly uncertain R&D progress remains to be seen.

As for Northeast Pharmaceutical itself, its journey in TCR-T has actually just begun, starting from scratch.

But Northeast Pharmaceutical, which aims to emulate Hengrui, began its TCR-T layout as early as 2015 when Hengrui partnered with Yuanzheng Cell to establish Hengrui Yuanzheng. This means that Hengrui has accumulated approximately 10 years of technical expertise in developing TCR-T cell therapies targeting solid tumors.

Correspondingly, the layout of Northeast Pharmaceutical appears to be somewhat late.

Besides, not only TCR-T, but also the transformation and innovation of Northeast Pharmaceutical has yielded few results since it introduced Liaoning Fangda Group through a mixed reform in 2018.

Previously, the most notable innovative move was in 2022, when an agreement was announced with U.S.-based MedAbome for the transfer of the latter's original antibody MAb11-22.1. Both parties will also develop ADC and CAR-T cell therapy products based on this antibody.

According to the agreement, MedAbome will also assist and guide Northeast Pharmaceutical in designing and building ADC drug platforms and CAR-T cell therapy technology platforms, including R&D, pilot-scale production, manufacturing, and quality control platforms.

To better advance the research and development layout of ADC and CAR-T, Northeast Pharmaceutical immediately invested 500 million yuan of its own funds to establish a wholly-owned subsidiary — Northeast Pharmaceutical (Shanghai) Biotechnology Co., Ltd. — as a key strategic development initiative for internationalization and scientific innovation transformation. This also serves as an important vehicle to accelerate the implementation of the cooperation projects on ADC drugs and CAR-T cell therapy technology introduced through an agreement with U.S.-based MedAbome.

But until today, how is the progress of the MAb11-22.1 project? It is difficult to obtain major updates from public sources.

In terms of timing, Northeast Pharmaceutical's entry into the development of ADC and CAR-T products in 2022, when research had already reached its peak, did not offer a time-based competitive edge.

ADC and CAR-T are the most popular areas for Chinese pharmaceutical companies to focus on transformative innovation. However, if you lack experience, a mature team, or a solid foundation, or if you're not pursuing a Faster-follow strategy or relying on quantity for success, as one interviewee previously expressed to E Pharma Manager, "Traditional pharmaceutical companies trying to transform should avoid making leaps of progress, which is akin to 'seeking death,' leaving them with little chance for even a 'breakthrough in narrow margins.'"

With a 2% R&D investment ratio, can it catch up with Hengrui?

Tracing back history, Northeast Pharmaceutical reflects the "frog-in-warm-water-style" decline of Northeast China's pharmaceutical old industrial base that has lasted for a decade or even longer. As one of the few "long-standing" chemical pharmaceutical enterprises, Northeast Pharmaceutical, established in 1946, rose from primary raw material drugs to the glorious era of antibiotics. However, after entering the market economy and amidst the overall decline of Northeast China, it fell into difficulties due to challenges in transformation.

In 2018, Northeast Pharmaceutical introduced Liaoning Fangda Group through mixed reform. At that time, Northeast Pharmaceutical, as the only pilot enterprise for mixed ownership reform in Shenyang City, fully advanced the pilot tasks of mixed reform according to the requirements of the Shenyang Municipal Committee and the Shenyang Municipal Government. In the same year, Liaoning Fangda Group participated in Northeast Pharmaceutical's private placement project, and subsequently increased its stock holdings in the secondary market. Its shareholding in Northeast Pharmaceutical reached 26.02%, legally becoming the controlling shareholder of Northeast Pharmaceutical, while state-owned capital retreated to become the second largest shareholder. Since then, the Fangda Group has continued to increase its holdings.

In 2018, the first year of mixed-ownership reform, Northeast Pharmaceutical achieved brief growth. The company also announced a strategic initiative for innovative transformation, stating that it would "focus on innovative drugs and biologics while introducing generic drugs that align with the company’s strategic layout, steadily increasing the revenue share of new products, and further enhancing sustainable development capabilities."

But now, six years later, there are no visible significant innovative achievements, no clear positioning for innovation layout, and no substantial R&D efforts seen. This is the biggest doubt the current market has about Northeast Pharmaceutical.

From the perspective of R&D investment, in the past five years, Northeast Pharmaceutical Group's annual R&D investment accounted for no more than 2% of its total revenue, which is hardly sufficient to support the internal funding needs of a pharmaceutical company aspiring to innovate and transform. Financial reports show that in 2023, Northeast Pharmaceutical Group's R&D investment was only 138 million yuan, a year-on-year decrease of 11%. Moreover, the main R&D projects were still generic drug innovations. This level of R&D investment is not only lower than that of several large pharmaceutical companies of the same period but also below the average level of the chemical pharmaceuticals sector.

In terms of R&D personnel compensation, in 2023, the R&D expenses applied to the "employee compensation" item significantly decreased from the previous period (from 49.23 million yuan to approximately 35.27 million yuan). It is well-known that effective compensation management is essential to motivate employees to actively engage in R&D and innovation work.

In sharp contrast, Fangda Group has always had a "tradition" of being generous, enjoying the reputation of Liaoning's "Fat Donglai," and previously gave cash red envelopes to Northeast Pharmaceutical employees and retired employees quite generously.

But in this critical period of urgently seeking new growth points, how to allocate effective funds to solid new drug research and development is a strategic focus that Northeast Pharmaceutical needs to consider.

Most importantly, in terms of R&D and innovation outcomes, the achievements after six years of innovative transformation have indeed been lackluster.

The industry undoubtedly expects that this once glorious old pharmaceutical company in Northeast China can find a second growth curve through innovation. For Northeast Pharmaceutical itself, faced with the decline in revenue growth in the past two years, persistently high asset-liability ratio, and the风波caused by receiving hefty fines for price monopoly, it also needs to accelerate the introduction of new businesses and new profit growth points. This may be the reason why this old pharmaceutical company, which previously had little BD experience and no relatively mature CGT field layout, has suddenly introduced the TCR-T business layout.

It is worth affirming that, as an innovative pharmaceutical company with 10 years of experience in the CGT field, Dingsheng Peptide Source's willingness to choose Northeast Pharmaceutical reflects, in a sense, trust in the latter's ability to accelerate the advancement of research on antigen-specific cellular immunotherapy technology and product development.

However, the actual controller of Fangda Group once said at the beginning of the innovative transformation: "Northeast Pharmaceutical对标Hengrui Medicine, it's not something that can be achieved in just one or two years. But after a period of hard work, we will definitely achieve the goal of catching up. The group will fully support in terms of policy, funding, and other aspects." But now, it seems that there is still a long way to go to truly 对标 Hengrui.

But the industry still expects that this once glorious old pharmaceutical company in Northeast China could cultivate new profit growth points and interpret innovation in a unique way. Because, this is not necessarily paving the way for traditional pharmaceutical companies with weak innovative genes.

(Source: E Pharm Exec)