Release of the '2019 China Top 100 Pharmaceutical R&D Comprehensive Strength Ranking'

As a strategic emerging industry of national importance, the pharmaceutical sector constitutes a vital component of China’s national economy. According to the National Bureau of Statistics, China’s GDP exceeded RMB 90 trillion in 2018, with an annual growth rate of 6.6%. In the same year, pharmaceutical manufacturing enterprises above the designated size reported main business revenue of RMB 2.4 trillion, representing a year-on-year increase of 12.6%, which was 0.1 percentage points higher than the previous year. The total profit amounted to RMB 0.31 trillion, a year-on-year increase of 9.5%, marking a decline of 8.3 percentage points compared to the same period of the previous year.

Since the pharmaceutical review reforms in 2015, the pharmaceutical industry has reshaped new industry rules from the perspectives of healthcare services, health insurance, and pharmaceuticals, with the core commonality being alignment with international standards. During the period of deepening reforms, the industry has also faced unprecedented pressure. Increased R&D costs for enterprises and a decline in production momentum have led to a slowdown in the growth rate of total industry profits. In particular, 2018 marked the year when the comprehensive healthcare system reform was fully implemented. At the top-level design, significant changes occurred within the "three medical" sectors, with the establishment of the National Health Commission, the National Healthcare Security Administration, and the National Medical Products Administration. The National Healthcare Security Administration coordinated and advanced the implementation of various measures, including centralized procurement and health insurance negotiations. Continuous efforts were made in policy strategy, with the intensive release of pharmaceutical-related policies, forming a combination of measures to deepen healthcare reform. These policies covered various aspects such as drug production, distribution, and usage. The implementation of priority review for drug registration policies continued, along with the consistent evaluation policy for generic drugs. Supporting policies, such as volume-based procurement and local online listing policies, were successively introduced. The "two-invoice system" was comprehensively promoted nationwide, while zero tariffs on anti-cancer drugs and the new edition of the National Essential Medicines List further propelled the pharmaceutical industry toward a new path.

Amid the concurrent advancement of drug quality improvement and cost containment, the pharmaceutical ecosystem is undergoing rapid restructuring, with resources increasingly converging on leading enterprises. In particular, innovative companies within this group have become a resilient driving force for the industry’s steady progress. On June 21, the “2019 China Pharmaceutical and Health Industry Development Conference & The 4th China Pharmaceutical R&D and Innovation Summit” (PDI Conference) grandly opened at the Chongqing International Convention and Exhibition Center (Nanping). The conference prominently unveiled the “2019 China Drug R&D Strength Rankings” series. Among these, the most anticipated “2019 China Comprehensive Drug R&D Strength Top 100” (hereinafter referred to as the “Overall Ranking”; see the full list at the end of the article) featured representatives from one hundred innovative enterprises in the industry. These companies constitute the backbone of the sector, having achieved substantial gains in 2018, with their product portfolios serving as a key barometer for industry development.

Top 100 Companies Lead, Controlling Half the Market; Innovative Drugs Steadily Rise

According to Yaozhi Data, the number of new drug acceptance numbers reached 680 in 2018 (including two pharmaceutical excipients and one in vitro diagnostic reagent), representing a year-on-year increase of 9.9%. Among these, the top 100 companies on the overall list submitted 326 applications, accounting for 47.9% of the total, thereby dominating nearly half of the market. Of the 323 Class 1 chemical drugs, the top 100 companies submitted 172 applications, accounting for 53.3%; of the 122 Class 1 biological products, the top 100 companies submitted 50 applications, accounting for 41.0%; and of the two traditional Chinese medicine (TCM) products, both were submitted by Beijing Huasu Pharmaceutical Co., Ltd., which is included in the ranking. The top 100 innovative enterprises represent the highest level of R&D in the industry for new drug development. They also demonstrated outstanding performance in the current large generic drug market: for Class 3 generic drugs, there were 269 acceptance numbers, with the top 100 companies submitting 167 applications, accounting for 62.1%; for Class 4 generic drugs, there were 638 acceptance numbers, with the top 100 companies submitting 341 applications, accounting for 53.4%. In terms of consistency evaluation, the number of acceptance numbers reached 604 in 2018, with the top 100 companies submitting 376 applications, accounting for 62.3%.

Furthermore, an analysis of R&D applications over the past five years reveals that since the reform of the drug review and approval system, the proportion of Class 1 new drug applications has risen steadily, accounting for 65.7% of all new drug applications by 2018. Currently, new drug development is gradually entering a harvest period, with an further increase in the rate of marketing authorization applications. In 2018, the marketing authorization application rate for new drugs reached 14.9%, and eight Class 1 new drugs were approved. These included Albuvirtide for Injection from Frontier Biotechnologies (Nanjing) Co., Ltd.; Recombinant High-Efficiency Anti-Tumor and Antiviral Protein Injection from Jiehong Biotechnology (Qingdao) Co., Ltd.; Danoprevir Sodium Tablets from Ascletis Pharma (Zhejiang) Co., Ltd.; Anlotinib Hydrochloride Capsules from Chia Tai Tianqing Pharmaceutical Group Co., Ltd.; Fruquintinib Capsules from Hutchison Medicine Medical Technology (Suzhou) Co., Ltd.; Pyrotinib Maleate Tablets from Jiangsu Hengrui Pharmaceuticals Co., Ltd.; Roxadustat Capsules from FibroGen (China) Medical Technology Development Co., Ltd.; and Toripalimab Injection from Suzhou Zhonghe Biopharmaceutical Technology Co., Ltd. This represents a significant leap compared to the two Class 1 new drugs approved in 2017. As reforms deepen, innovation capabilities will become more prominent, and the drive for innovation will intensify.

Market Leaders Leverage Scale and Resources to Gain a Head Start, While Latecomers Chase Against the Wind

The Top 10 Enterprises on the 2019 Overall Ranking represent a microcosm of the industry’s forefront, gaining a competitive edge in their development through advantages such as exclusive product portfolios, R&D resources, and economies of scale. An analysis of the four published rankings reveals that the top 10 positions have remained consistently occupied by the same leading players. Notably, five enterprises—Jiangsu Hengrui Pharmaceuticals Co., Ltd., Chia Tai Tianqing Pharmaceutical Group Co., Ltd., Qilu Pharmaceutical Co., Ltd., Shanghai Fosun Pharmaceutical (Group) Co., Ltd., and Sichuan Kelun Pharmaceutical Co., Ltd.—ranked within the top 10 in all four years. Meanwhile, Humanwell Healthcare Group Co. Ltd., BeOne Medicines, and Innovent Biologics (Suzhou) Co., Ltd. achieved significant improvements in their rankings by accurately anticipating the latest policy trends and promptly adjusting their industrial layouts, thereby demonstrating rapid progress. In addition to the Top 10, another 25 enterprises appeared in the Top 100 of the Overall Ranking across all four editions. In total, 28 enterprises secured positions within the 2019 Top 50, indicating that the R&D capabilities of half of the Top 50 enterprises have stabilized.

Compared with the overall rankings released in 2018, 45 companies newly entered the 2019 list, rising to prominence. Among them, Jiangsu Enhua Pharmaceutical Co., Ltd. achieved the highest rank at number 20. Its focused research and development and production of central nervous system (CNS) drugs have gradually established its leading position in this niche sector. In 2018, the company obtained one manufacturing approval, two clinical trial approvals for Class 1 new drugs, and one clinical trial approval for Class 2 new drugs. Regarding the consistency evaluation program, applications for four key varieties have been accepted, and more than 20 varieties are at various stages of research.

26 companies experienced a decline in rankings, while 26 companies saw their rankings rise; among the latter, 13 companies advanced by more than 20 positions. Notably, 3SBio Inc. (Shanghai) achieved a remarkable turnaround, climbing 52 spots, driven by two biosimilar products. Its key products include: a trastuzumab biosimilar (recombinant humanized anti-HER2 monoclonal antibody for injection), for which it was the first in China to file for production approval; and a bevacizumab biosimilar (recombinant humanized anti-VEGF monoclonal antibody injection), which received three additional clinical trial approvals for the treatment of serious ophthalmic conditions, including macular edema secondary to retinal vein occlusion (RVO), myopic choroidal neovascularization (mCNV), and diabetic macular edema (DME).

High-Production Capacity Zones Highlight Regional Advantages, with East China Dominating the Landscape

As a technology- and capital-intensive industry, the pharmaceutical sector is characterized by "high investment, high risk, and high returns," with significant operational and technical barriers. Innovative products can generate substantial monopoly profits during certain stages. Furthermore, driven by rigid demand, an aging population, and the emergence of new diseases, the pharmaceutical market continues to expand, making the industry a key strategic focus for regional economic development.East China, leveraging its resource advantages, has become the primary hub for R&D enterprises. A total of 43 companies from six provinces/municipalities in this region made the list, and in 2018, these six regions accounted for 368 new drug application acceptances, representing 55.17% of the national total. Shandong, Jiangsu, Zhejiang, and Shanghai are particularly concentrated with innovative enterprises, with 12, 11, 9, and 8 companies listed, respectively. These regions are home to many renowned enterprises, including Qilu Pharmaceutical, Jiangsu Hengrui Pharmaceuticals, Jiangsu Hansoh Pharmaceutical Group, Chia Tai Tianqing Pharmaceutical Group, Betta Pharmaceuticals, Zhejiang Hisun Pharmaceutical, Zhejiang Huahai Pharmaceutical, Shanghai Fosun Pharmaceutical, and Shanghai Pharmaceuticals.Additionally, 11 companies from Guangdong Province in South China were listed. As a developed coastal province, Guangdong boasts superior conditions for hard-core innovation. After years of development, it has established a complete industrial chain system. In particular, the rapid growth of pharmaceutical distribution in Guangdong in recent years has attracted numerous innovative enterprises to establish their presence there, such as Livzon Pharmaceutical Group, China Resources Sanjiu (Shenzhen) Pharmaceutical Co., Ltd., and Shenzhen Salubris Pharmaceuticals.

Unstoppable Innovation Trends Drive Growth in R&D Investment Ratios

Six companies from the China Super 6 list have gone public, with a combined R&D investment reaching RMB 34.8 billion, marking a significant leap forward in R&D spending by domestic enterprises. Furthermore, an analysis of the distribution of R&D expenditure as a percentage of revenue indicates a positive trend among the top 100 companies on the overall list: 90% of these enterprises allocate more than 3% of their revenue to R&D, and 60% allocate more than 5%. Thirteen companies dedicate over 10% of their revenue to R&D, with six exceeding 20%. Notably, Walvax Biotechnology and Beta Pharma reported exceptionally high R&D intensity, at 43.3% and 48.2%, respectively. In addition, despite reporting operating losses, BeOne Medicines and Innovent Bio have maintained substantial R&D investments. BeOne Medicines, with an R&D expenditure of USD 679 million (approximately RMB 4.577 billion), ranked as the highest spender in R&D, representing a 152% year-on-year increase from USD 269 million in 2017.

The Tone of Innovation-Driven Development Takes Shape as Enterprises Forge Ahead to Triumphant Returns

By examining the triumphs of top-ranked enterprises, we can gain insight into the development trajectory of innovative drugs across the entire industry, gradually dispelling the fog that has long obscured its view. Driven by shifts in the broader industry ecosystem, it is evident that the direction of China’s pharmaceutical sector has decisively transitioned from “sales-driven” to “R&D-driven.” A major reshuffling of the generic drug market has been propelled by the Consistency Evaluation and supporting policies such as the “4+7” centralized procurement program, while a series of measures—including priority review and approval, and accelerated importation of clinically urgent drugs—have fast-tracked the market launch of innovative therapies. Pharmaceutical companies that have kept pace with this era have established their own innovation-oriented development strategies, thereby achieving significant leaps forward in their growth.

1. Enhancing Internal Absorption to Accelerate Industrial Upgrading

Amidst the trials of a complex industry environment, proactively undertaking internal strategic upgrades is the optimal choice. Companies such as Qilu Pharmaceutical and Huahai Pharmaceutical seized policy opportunities, dedicating themselves to investments in consistency evaluation while refining their product line portfolios. In 2018, Qilu Pharmaceutical had a cumulative total of 49 acceptance numbers for consistency evaluation applications, covering 25 varieties, 17 of which were injections, ranking first in the number of applications. By the end of 2018, Huahai Pharmaceutical had 11 varieties that passed or were deemed to have passed the consistency evaluation, leading all enterprises at that time. Meanwhile, Sichuan Kelun Pharmaceutical, facing restrictions on large-volume infusions and antibiotics, turned inward during difficult times to achieve comprehensive industrial upgrading. It continuously adjusted its infusion product structure, strengthened cost control, and saw its innovative products successively approved. In 2017 and 2018, seven parenteral nutrition infusion products were approved for market launch, six of which were first-to-market generics. In 2018, it became the first domestic infusion enterprise to pass certification by Japan’s PMDA, enabling exports to regulated markets. In 2018, its infusion products generated operating revenue of RMB 9.88 billion, accounting for 60.4% of total revenue, a year-on-year increase of 30.37%, with a gross profit margin of 71.18%, representing a year-on-year increase of 7.48%.

2. Financing, Integration, and M&A for Synergistic Growth

Beyond internal restructuring, the injection of external capital and the integration and merger of resources across industries are also important ways for enterprises to revitalize. Among the companies on the main list, several representative firms secured financing in 2018, further enhancing their competitiveness. In April 2018, Innovent Biologics announced the completion of a USD 150 million Series E financing round, led by Capital Group Private Markets (CGPM), one of the world’s largest investment organizations, with a USD 90 million investment. In May, CStone Pharmaceuticals (Suzhou) Co., Ltd. announced the completion of a USD 260 million (approximately RMB 1.65 billion) Series B financing round, marking the largest single Series B funding in China’s biopharmaceutical sector at that time. In July, Henlius Biologics completed a USD 157 million Series B financing round, and Ascentage Pharma successfully closed a RMB 1 billion (approximately USD 150 million) Series C financing round.

In terms of mergers and acquisitions, notable examples include Luye Pharma’s announcement on May 7 that it would acquire the licensed assets for Seroquel and Seroquel XR in designated regions from AstraZeneca for nearly $546 million (approximately RMB 3.477 billion). The designated regions cover 51 countries and territories, including China, the United Kingdom, Brazil, and Australia. On May 21, Shanghai Pharmaceuticals announced the signing of a share purchase agreement with Takeda Pharma AG (Takeda Switzerland) to acquire 100% equity interest in Takeda Switzerland’s wholly-owned subsidiary for $144 million in cash (approximately RMB 915 million), thereby indirectly acquiring a 26.34% stake in Guangdong Tianpu Bio-Pharmaceutical Co., Ltd. On November 8, Huadong Medicine announced a cash tender offer to acquire Sinclair Pharma plc, a UK-based aesthetic medicine company. Sinclair is a specialized global aesthetic medicine company with leading technologies and worldwide operations, covering the entire industry chain from research and development to production and sales. The total transaction amount was RMB 1.52 billion. In early November, Yunnan Baiyao proposed a massive transaction worth RMB 50.813 billion to absorb and merge with its controlling shareholder, Yunnan Baiyao Holdings Co., Ltd. Upon completion of the transaction, Baiyao Holdings and the listed company Yunnan Baiyao will formally merge into a single entity. Baiyao Holdings also stated that its post-merger task would be to enhance and optimize its existing four business segments.

3. Keeping Pace with the Times, Strategically Positioning in Frontier Fields

In recent years, the market potential of biopharmaceuticals has gradually emerged, establishing them as an internationally recognized sunrise industry. According to the annual report of Hengrui Pharma, the global biopharmaceutical market has exceeded $200 billion and continues to maintain rapid growth. Biopharmaceuticals are often first-line treatments, primarily focusing on oncology, autoimmune diseases, and metabolic disorders. Among these, global sales of antibody-based drugs increased from less than $50 billion in 2011 to $106 billion in 2017, representing a compound annual growth rate (CAGR) of 11.50% over seven years. International giants are competing to establish their presence, while domestic companies are closely following suit with remarkable achievements.In the realm of innovative biologics, PD-1 monoclonal antibodies have attracted significant attention. In 2018, Junshi Biosciences, Innovent Bio, Hengrui Pharma, and BeOne Medicines sequentially submitted marketing applications for their PD-1 monoclonal antibodies. The approval of Junshi Biosciences’ PD-1 monoclonal antibody at the end of the year marked a milestone development. Subsequently, first-tier players Innovent Bio and Hengrui Pharma received approval in 2019, with BeOne Medicines also making rapid progress.Additionally, biosimilars have become another competitive focal point for domestic enterprises. In 2018, Innovent Bio, Zhejiang Hisun Pharmaceutical, and Bio-Thera Solutions competed to file for marketing approval of adalimumab biosimilars. Other notable developments include Qilu Pharmaceutical’s recombinant humanized anti-VEGF monoclonal antibody injection and 3SBio’s recombinant humanized anti-HER2 monoclonal antibody for injection, both of which have drawn considerable attention.

4. Catching Up on the Path to Internationalization, Expanding Overseas Business

In 2018, Chinese pharmaceutical companies accelerated their international expansion, securing 100 Abbreviated New Drug Application (ANDA) approval numbers from the U.S. Food and Drug Administration (FDA), a year-on-year increase of 122.22%. These approvals covered 78 active ingredients from 24 Chinese pharmaceutical companies. In total, the FDA approved 817 generic drugs (ANDAs) and granted 184 tentative approvals in 2018. Chinese companies received 80 final approvals and 20 tentative approvals, accounting for approximately 10% of the total. Guangdong Dongyangguang Pharmaceutical led the rankings with a total of 15 approvals (including 3 tentative approvals). Humanwell Healthcare Group secured 13 approval numbers through its U.S. subsidiary and its domestic entity, Yichang Humanwell Pharmaceutical. Despite receiving an FDA warning letter in 2018, Huahai Pharmaceutical continued to forge ahead into new markets, obtaining 11 approval numbers. Other companies, including Qilu Pharmaceutical, Fosun Pharmaceutical, CSPC Pharmaceutical, Hisun Pharmaceutical, Yiling Pharmaceutical, and Hengrui Pharma, also achieved notable successes.

Unstoppable Momentum Under High Pressure: Challenges and Opportunities Coexist

Since the beginning of 2019, the pharmaceutical industry has appeared to be under extreme pressure. Not only has the “4+7” volume-based procurement program been officially piloted, with local procurement initiatives rapidly following suit, but the national list of adjuvant drugs and the new National Reimbursement Drug List are also imminent. The consistency evaluation for injections is poised for implementation, while the Drug Administration Law and the Vaccine Administration Law are expected to take effect. Additionally, DRG payment pilots have been launched in 30 cities. The series of repercussions from the Kangmei Pharmaceutical and Buchang Pharmaceutical incidents, followed by the joint enforcement actions of the Ministry of Finance and the National Healthcare Security Administration involving inspections of 77 enterprises, have once again thrown companies into a state of panic.

Meanwhile, numerous innovations and market opportunities await exploration by enterprises. The revision of the Drug Administration Law and the comprehensive rollout of the Marketing Authorization Holder (MAH) pilot program further benefit pharmaceutical innovation. On May 28, the National Health Commission issued the Notice on Promoting the Construction of Close-knit County-level Medical Consortia, explicitly accelerating the implementation of tiered diagnosis and treatment and advancing the development of close-knit county-level medical consortia. The large population of patients with common and chronic diseases will gradually shift to primary healthcare institutions, making the primary-level pharmaceutical market a potential strategic focus for pharmaceutical companies. On May 29, the Center for Drug Evaluation (CDE) released the Basic Considerations for Real-World Evidence Supporting Drug Development (Draft for Comment), which clarified several scenarios in which Real-World Evidence (RWE) supports drug development and regulatory decision-making, including post-marketing re-evaluation of drugs, treatments for rare diseases, revisions to indications or scopes of combination therapy, and clinical development of hospital preparations of Traditional Chinese Medicine (TCM). TCM, particularly TCM injections, has long faced considerable criticism; RWE may offer a glimmer of hope. By leveraging real-world data for more comprehensive drug assessments, obtaining robust clinical evidence, or improving data for re-evaluation, TCM can extend its viability and maintain a foothold in fierce market competition. In early June, the General Office of the State Council issued the Key Tasks for Deepening the Reform of the Medical and Healthcare System in 2019, which mentioned the formulation of policy documents on pricing and medical insurance reimbursement for internet-based diagnosis and treatment. As medical insurance coverage expands into the out-of-hospital market and the trend of prescription outflow emerges, preparing to capture this flow presents a significant opportunity. Additionally, the document indicated that a catalog of drugs encouraged for generic production would be released, further providing reference for pharmaceutical companies to invest in the generic production of high-quality drugs.

Amidst intense, high-pressure challenges, opportunities and risks coexist; enterprises must marshal their strength and strive for rapid advancement. It is evident that innovative drugs have become the core competitive advantage. In the coming years, biologics are poised to become the primary driver of market competition, while the market dominated by chemical drugs and generics will continue to intensify its "survival of the fittest" dynamic, with scale-driven and R&D-focused enterprises controlling the landscape. Meanwhile, the traditional Chinese medicine (TCM) sector urgently needs to break through existing constraints, deepen its presence in other pharmaceutical markets, and forge new paths in this new era.

Appendix: "Top 100 Rankings of Comprehensive R&D Strength of Chinese Pharmaceuticals in 2019"

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