Post-Insulin Tender Pressure: Novo Nordisk, Tonghua Dongbao, and Gan & Lee Navigate Through Profit Squeeze and Strategic Transformation

Recently, Novo Nordisk released its Q2 and semi-annual report. The report shows that the company's half-year sales increased by 25% to reach DKK 83.3 billion, with a growth rate of 16% at constant exchange rates. Operating profit rose by 26% to DKK 37.5 billion, driven by the rapid growth in the obesity care segment, where product sales doubled in the first half of this year.

 

 

Notably, the insulin business, once a stronghold for Novo Nordisk, is no longer as prosperous. In the first half of 2022, Novo Nordisk's insulin business declined by 3% year-on-year to DKK 27.3 billion. The decline was particularly pronounced in China, with a drop of 9%, or 17% at constant exchange rates. The company attributes this decline primarily to China’s bulk procurement policy.

 

 

As traditional diabetes drugs like insulin have been included in bulk procurement, this has alleviated some of the financial burden for diabetes patients but has also squeezed the profit margins of listed companies in the insulin industry. Facing changes on both the pricing and market fronts, local companies are no exception. Tonghua Dongbao and Gan&Lee Pharmaceuticals, known as the "insulin duo," are also encountering significant challenges amidst this structural adjustment in the insulin market.

 

Against this backdrop, how should pharmaceutical companies in the diabetes field reshape their revenue growth curve?

 

In recent years, the new hypoglycemic drug, glucagon-like peptide-1 (GLP-1) receptor agonist, has shown strong competitiveness, not only making significant progress in the field of diabetes treatment but also demonstrating market potential in metabolic diseases such as obesity.

 

Industry experts generally believe that, with the rapid growth of GLP-1 in overseas weight-loss markets, once imported products represented by Novo Nordisk and Eli Lilly begin to extend their "weight loss" indications to the Chinese market, combined with the efforts of Gan&Lee Pharmaceuticals, Tonghua Dongbao, Innovent, Hengrui Medicine, and Huadong,PharmaceuticalsLocalEnterpriseThe rapid layout of the weight loss field, which was previously overlooked due to its "narrow track," seems to have a real demand far greater than traditionally perceived. The future weight management market may soon witness fierce competition.

 

 

 

The "IDF Diabetes Atlas (10th Edition)" released by the International Diabetes Federation (IDF) in 2021 shows that the number of adults with diabetes worldwide reached 537 million (10.5%) in 2021. Over the past decade, the number of people with diabetes in China has increased from 90 million to 141 million.

 

On November 30, 2021, the National Organization for MedicinesProcurementOffice Releases "Notice on Publishing the Winning Results of the National Centralized Drug Procurement (Insulin Special Project)." Eight months after the results of the insulin special procurement were announced, the full implementation across all provinces and cities in China was finally achieved on July 4, 2022. It is reported that the first-year procurement demand from medical institutions nationwide is about 210 million units, involving a procurement amount of approximately 17 billion yuan at pre-procurement prices. The winning products have an average price reduction of 48%, and it is expected to save patients a total of 9 billion yuan annually.

 

Recently, Tonghua Dongbao and Ganlee Pharmaceutical, leading enterprises in the insulin market, disclosed their performance forecasts for the first half of 2022.

 

Tonghua Dongbao expects a net profit of 1.191 billion yuan for the first half of this year, representing a year-on-year increase of 76.74%. However, the non-recurring net profit is expected to decline by 31.36% year-on-year. The main reason for the significant growth in net profit is that Tonghua Dongbao sold part of its shares in Xiamen Amoytop Biotech Co., Ltd. The non-recurring net profit reflects the true situation of its main business.

 

 

Meanwhile, Gan&Lee Pharmaceuticals, another leading company in the industry, has directly fallen into a loss. Gan&Lee Pharmaceuticals estimates that it will incur a loss of 168 million to 200 million yuan in the first half of this year, turning from profit to loss year-on-year. This marks the first loss for Gan&Lee Pharmaceuticals since its initial public offering.

 

 

The main reason for the forecasted loss in performance is attributed by both companies to the implementation of the national special procurement program for insulin, which has led to a decrease in insulin product prices.

 

In order to accelerate the elimination of the impact brought by centralized procurement, both Tonghua Dongbao and Ganlee Pharmaceutical have expedited the progress of new drug development. GLP-1 receptor agonists are a hot research and development direction in the field of hypoglycemic drugs for many pharmaceutical companies both in China and internationally.

 

On June 9, Tonghua Dongbao announced that the company's marketing authorization application for Liraglutide Injection had been accepted by the National Medical Products Administration (NMPA). Liraglutide is a glucagon-like peptide-1 (GLP-1) analog developed by Novo Nordisk. It entered the Chinese market in 2011 and was approved for glycemic control in adult patients with type 2 diabetes. Additionally, Liraglutide has a significant weight-loss effect, and its product for obesity indication (Saxenda) was launched in the United States in December 2014.

 

On July 22, Gan & Lee Pharmaceuticals announced that its self-developed GZR18 is currently undergoing Phase II clinical trials in China and has recently successfully completed the first dosing of a subject. GZR18 is a once-weekly glucagon-like peptide-1 (GLP-1) receptor agonist independently developed by Gan & Lee Pharmaceuticals. It is currently in Phase Ib/IIa clinical trials for the indications of type 2 diabetes, obesity, and overweight weight management.

 

Since Novo Nordisk developed the first generation of GLP-1 analog liraglutide (Saxenda) for weight loss indications in 2014, it has become a representative of a new generation of weight loss drugs, and participants have also smelled the huge market prospects of GLP-1 agonists.

 

Currently, the main GLP-1 receptor agonist drugs available on the global market are as follows:

 

 

 

 

In fact, GLP-1 receptor agonists enhance insulin secretion and suppress glucagon secretion in a glucose concentration-dependent manner, thereby reducing blood glucose without significantly increasing the risk of hypoglycemia. Meanwhile, GLP-1 receptor agonists can reduce body weight by delaying gastric emptying and centrally inhibiting appetite. In addition, several large clinical studies, such as LEADER, SUSTAIN, and REWIND, have shown that GLP-1 receptor agonists like liraglutide, semaglutide, and dulaglutide significantly reduce the risk of major cardiovascular events.

 

As the pace and scope of centralized procurement under China's medical insurance system accelerates, it is only a matter of time before GLP-1 drugs face price cuts and are included in the medical insurance catalog. For pharmaceutical companies with diabetes pipelines, it is crucial to build sufficient resilience before this "sword of Damocles" falls. Developing new indications for GLP-1 drugs has become an important strategic focus they have collectively pursued.

 

Adding new indications is an important strategy in drug clinical development. With significant investment from numerous companies, an increasing number of GLP-1 drugs are being developed for indications related to metabolic syndrome beyond the treatment of type 2 diabetes, such as obesity.

 

The "Dietary Guidelines for Chinese Residents (2022)" shows that the overweight rate and obesity rate of residents aged 18 and above in China are 34.3% and 16.4%, respectively, and the problems of overweight, obesity, and chronic diseases are becoming increasingly serious.

 

Currently, the treatment for obesity mostly still focuses on exercise and dietary intervention. However, "watching your mouth and moving your legs" is always easier said than done. People are in urgent need of a drug that can easily reduce weight through oral medication or injections while also improving various health indicators.

 

There have been many weight-loss drugs on the market, but most of them have been banned due to damage to the central nervous system or cardiovascular and cerebrovascular systems. Currently, the only weight-loss drug approved for marketing in China is Orlistat, which works by reducing the absorption of fat in the gastrointestinal tract, but it is often accompanied by gastrointestinal symptoms such as diarrhea.

 

Although some diabetes medications can lead to weight loss (such as metformin, semaglutide, etc.), their current indications are still limited to the treatment of type 2 diabetes.

 

The increasingly large demand for weight loss, coupled with the current relative lack of weight-loss drugs, makes weight control medication in China still a blue ocean.

 

Novo Nordisk has gained significant market share and commercial success overseas with the development of liraglutide for weight loss indications. In June 2021, the next-generation GLP-1 star product "semaglutide," which succeeded liraglutide, was approved by the U.S. FDA for chronic weight management, further drawing market attention.

 

At the same time, as the core patent of liraglutide is about to expire, the demand for weight management is gradually opening up, attracting more and more pharmaceutical companies to get ready for action.

 

Currently, Eli Lilly's Tirzepatide is the GLP-1 dual-target drug with the fastest progress in clinical development and has entered Phase III trials. Overseas Phase III clinical data shows that in a "head-to-head" trial with semaglutide, over 72 weeks, participants using 5mg, 10mg, and 15mg of Tirzepatide lost an average of 16%, 21.4%, and 22.5% of their body weight, respectively, surpassing the weight loss effects of semaglutide and causing a stir in the industry.

 

The Chinese market is also ready to go. According to data from Wanlian Securities, the Chinese weight management product market is expected to reach 9.6 billion yuan by 2025, with a CAGR (compound annual growth rate) of 38.2% from 2020 to 2025; and reach 26 billion yuan by 2030, with a CAGR of 22.1% from 2025 to 2030.

 

Currently, there are no GLP-1 agonist weight-loss products available on the market in China. In order to gain a share of the weight-loss market and proactively transform through innovation, many pharmaceutical companies with diabetes pipelines have initiated research and development. Among them, Benevolent Bio and Huadong Medicine, which are at the forefront, already have products in the production application stage, and these could become the first innovative weight-loss drugs produced in China.

 

On March 11 this year, Renhui Bio announced that the Center for Drug Evaluation (CDE) of the National Medical Products Administration had accepted BEM-014 (the new indication of Benanlutide Injection in the weight loss field) for "production in China."Drug RegistrationApplication for "Marketing Authorization".

 

Following closely is Huadong Medicine. On the evening of July 13, Huadong Medicine announced that the marketing authorization application for the obesity or overweight indication of the liraglutide injection submitted by its wholly-owned subsidiary had been accepted.

 

In addition, many pharmaceutical companies, including Wanbang Biopharmaceuticals, Innovent Biologics, Dongyangang, and Hansoh, have laid out plans for developing GLP-1 agonist pipelines. Some are developing liraglutide generics, some are working on other GLP-1 agonists, and several pharmaceutical companies are taking the lead, entering the era of dual-target drugs.

 

 

"Currently, there are no GLP-1 products approved for weight loss indications in China. Moreover, from the perspective of clinical medication indications, the premise of using GLP-1 to treat obesity is that the patient is obese with diabetes, and there are also clear requirements for body mass index. The use of the drug should not be blind." Clinical experts stated that the misuse of GLP-1 drugs without meeting the medication indications is likely to lead to other medication risks, such as in Europe and America.MedicineRegulators have also issued warnings about this.

 

Nowadays, companies in the diabetes pipeline sector are facing immense competitive pressure. In the future, who will be the first to secure approval for GLP-1 weight loss indications in China? And who will capture the largest market share? Let's wait and see.