Yuheng Pharmaceutical's Recent Strategic Moves: Asset Divestitures, Partnerships, and Innovation Pipeline

Recently, Yuheng Pharmaceutical (002437.SZ) announced its plan to sell 100% equity interests in its wholly-owned subsidiaries—Shanghai Huatuo Pharmaceutical Technology Development Co., Ltd. and Tibet Yuheng Sunshine Pharmaceutical Co., Ltd.—as well as 100% equity interest in its wholly-owned subsidiary Shanxi Pude Pharmaceutical Co., Ltd., to Shanghai Liding Investment Management Co., Ltd. or funds managed by it.

Previously, Yuheng Pharmaceutical undertook several initiatives from late 2017 to early 2018. These included signing a cooperation agreement with WuXi Biologics to develop an innovative fully human anti-LAG3 antibody drug; proposing to acquire a third-party payment acquiring outsourcing service provider for RMB 1.6 billion; and partnering with Nanjing Jinruisi, which would develop tumor-targeted therapeutic drugs for the company.

Amid its recent flurry of activities, we cannot help but ask: What is the rationale behind Yuheng Pharmaceutical’s moves? What is its strategic main thread? And how will it develop in the future? With these questions in mind, VCBeat (WeChat ID: vcbeat) has provided a brief overview of Yuheng Pharmaceutical’s development history and recent strategic deployments, aiming to analyze the company’s potential for sustained growth.

Yuheng Pharmaceutical, formerly known as Harbin Yuheng Pharmaceutical Co., Ltd., was established in 2000. After a decade of development, it was listed on the SME Board of the Shenzhen Stock Exchange in 2010. Prior to its IPO, Yuheng Pharmaceutical’s primary strategy focused on blockbuster products. At that time, its main products included Deer Antler and Cucurbita Polypeptide Injection and Gemcitabine Hydrochloride for Injection, primarily targeting the orthopedics and oncology sectors.

Deer Bone Extract and Cucurbita Polypeptide Injection once accounted for over 50% of Yuheng Pharmaceutical’s sales revenue, contributing 70% of its gross profit. In 2008, the market size for Deer Bone Extract and Cucurbita Polypeptide Injection in China was approximately RMB 600 million, with Yuheng Pharmaceutical alone generating more than RMB 100 million in sales, capturing one-fifth of the market. Gemcitabine Hydrochloride for Injection also achieved notable success, with annual sales revenue exceeding RMB 20 million.

Since its listing, Yuheng Pharmaceutical has progressively enriched its product pipeline. Currently, the company owns more than 20 product series, comprising over 150 products that cover therapeutic areas including cardiovascular and cerebrovascular diseases, vitamins and minerals, endocrinology, anti-infectives, oncology, urology, gastroenterology, and respiratory diseases.

Yuheng Pharmaceutical's Main Product Portfolio

*Data sourced from Yuheng Pharmaceutical's 2017 interim report

The cardiovascular and cerebrovascular product portfolio is a key strategic focus for Yuheng Pharmaceutical, comprising more than ten products that include both oral and injectable formulations, as well as traditional Chinese medicines (TCM) and chemical drugs. Its flagship product, Sodium Creatine Phosphate for Injection, holds a market share exceeding 50%. Annao Pills (Tablets), an exclusive product listed in the National Essential Medicines List, ranks seventh in annual sales volume among TCM products in the neurology sector. The distributed Clopidogrel Bisulfate Tablets have achieved a growth rate of over 50% for three consecutive years, with annual net sales surpassing 12 million boxes. Furthermore, through collaboration with Japan’s Daiichi Sankyo, Yuheng Pharmaceutical has introduced Olmesartan Medoxomil Tablets (Olmetec) and Pravastatin Sodium Tablets (Mevalotin), thereby strengthening its presence in the chronic disease market and further solidifying its competitive advantage in the cardiovascular field.

In addition to cardiovascular and cerebrovascular medications, Yuheng Pharmaceutical’s vitamin and mineral product, Xin Gai Te (Zinc Calcium Special), has also delivered outstanding performance. It has maintained leading sales in its category for many years, with a market share exceeding 60%, making it the No. 1 brand in China for children’s health care.

While boasting major products such as Creatine Phosphate Sodium for Injection and Calcium Zinc Gluconate, Yuheng Pharmaceutical is also making forward-looking strategic layouts to pave the way for future development, with biopharmaceuticals, chronic disease management, and smart healthcare identified as key focus areas.

In the field of biopharmaceuticals, Yuheng primarily collaborates with WuXi Biologics. Leveraging WuXi Biologics’ significant advantage in providing one-stop global solutions for biologics research and development, the company selects promising candidates and utilizes WuXi Biologics’ internationally benchmarked technology and capabilities to enter the innovative biologics sector, thereby enhancing its R&D strength in this area. Furthermore, through an innovative service model featuring minor risk-sharing, WuXi Biologics supports the company in developing biologics that meet international standards.

Currently, the clinical trial application for GLS-010 injection, a PD-1 monoclonal antibody product developed by Yuheng Pharmaceutical in collaboration with WuXi AppTec, has been accepted by the Center for Drug Evaluation (CDE) of the China Food and Drug Administration (CFDA), positioning Yuheng as an early mover among domestic pharmaceutical companies. Reviewing the overall landscape of PD-1/L1 drug development in China, no PD-1/L1 monoclonal antibody drugs have been approved for marketing to date. However, 16 products have received clinical trial approvals and are undergoing clinical trials for various tumor types, with companies such as Hengrui Medicine, Innovent Biologics, Yuheng Pharmaceutical, and Alphamab Oncology actively advancing their pipelines. Industry experts optimistically predict that, with accelerated review and approval processes, domestic PD-1/L1 products are expected to launch in the first half of 2018. If progressed effectively, PD-1/L1 drugs are poised to bring significant opportunities for Yuheng Pharmaceutical’s future development.

Meanwhile, the rights to GLS-010 in North America, Europe, and other regions have been licensed to Arcus Biosciences of the United States for $816 million, and the two parties will jointly advance the clinical registration of multiple products in the field of tumor immunology both domestically and internationally.

On November 22, 2017, Yuheng Pharmaceutical signed another cooperation agreement with WuXi Biologics to jointly develop a novel immune checkpoint antibody drug targeting LAG-3. LAG-3 is a second-generation target with relatively abundant clinical data and a well-established druggability profile; antibody drugs targeting this site are highly likely to become significant anti-tumor therapeutics in the future. On December 29, 2017, Yuheng Pharmaceutical entered into a technical development contract with Nanjing GenScript, under which the company intends to acquire the rights to an Ipilimumab biosimilar developed by Nanjing GenScript and commission Nanjing GenScript to conduct phased, ongoing research and development of the product.

Chronic Disease and General Health Sector. Yuheng’s current chronic disease product portfolio primarily includes its proprietary products, Annao Wan (pills/tablets), and the electrolyte balance medication Potassium Chloride Sustained-Release Tablets (Budaxiu). It also features collaborative products: Clopidogrel Bisulfate (Shuaixin) with Lepu Medical; Olmesartan Medoxomil Tablets (Aotan) and Pravastatin Sodium Tablets (Meibai Lezhen) with Daiichi Sankyo; human insulin Chonghelin with Poland’s Biton; Calcium Acetate Tablets (Aoqining) for chronic kidney disease with Guizhou Weikang Pharmaceutical; and Desloratadine Citrate Disodium Capsules (“Ruipukang”) with Hefei Enrite. These products have formed a product cluster in Yuheng’s chronic disease sector, gradually demonstrating strong market performance. Additionally, Yuheng has partnered with JD Bangneng to establish Yuheng JD Health Investment Management Co., Ltd. The Yudong health management team has been fully assembled, and the company has secured rights to multiple chronic disease products through agency agreements and other models.

Smart Healthcare Sector. In 2016, Yuheng subscribed to the preferred shares issued by the U.S.-based company Proteus. Proteus is primarily engaged in the research, development, and manufacturing of digital pills, with plans to build a comprehensive disease management platform. Its pioneering “smart drug chip” concept aims to improve disease management by enhancing medication adherence, enabling real-time monitoring of vital signs, and designing and optimizing rational medication regimens, which aligns with the characteristics of the chronic disease management field.

The development trajectory of Yuheng Pharmaceutical mirrors a path commonly taken by many pharmaceutical companies. By establishing a solid performance foundation with blockbuster products, these firms gain entry to the capital markets and secure convenient channels for capital aggregation. They then expand their product portfolios and therapeutic areas through in-licensing, investment, and mergers and acquisitions. As long as management maintains keen insight into future trends, such companies are, in a sense, poised for sustained success.

Yuheng Pharmaceutical’s multi-dimensional layout and strategic expansion are closely linked to the inherent changes in the healthcare industry. Driven by policy, market, technology, and capital, the pharmaceutical industry is undergoing a cyclical adjustment. Yuheng Pharmaceutical’s transformation logic serves not only as a response to industry shifts but also as a deep restructuring of its own business operations.

The experience offered by Yuheng Pharmaceutical lies in initiating internal reflections on future development directions and driving the integration of high-quality resources from the top down, rather than passively waiting for external environmental forces to prompt action. With strong execution capabilities, it took the lead in laying out strategies in areas such as biologics, chronic disease management, and smart healthcare, thereby reserving competitive tracks for sustained growth.

In short, through a series of strategic layouts in recent years in areas such as innovative drugs and chronic disease management, Yuheng Pharmaceutical has gradually built its core competitiveness:

1) A robust pipeline of combination immunotherapy drugs, featuring fully human PD-1, LAG-3, and CTLA-4 inhibitors, holds potential for application in the treatment of various common oncology indications;

2) A rich portfolio of Yuheng’s proprietary chemotherapy oncology products, represented by gemcitabine, can provide more robust combination options for the design and clinical implementation of future immuno-oncology novel drug regimens in combination with chemotherapy;

3) The existing sales team and commercial channels, along with a strong brand image cultivated over many years, will lay a solid foundation for the rapid promotion and market adoption of new immuno-oncology drugs post-launch;

4) Diversified partnerships will significantly broaden its business scope. For instance, the collaboration with WuXi AppTec provides a solid foundation for the large-scale manufacturing of post-launch products and the continuous development of new products. Meanwhile, the partnership with Arcus Biosciences not only aligns with Yuheng’s current primary objective of focusing on domestic development, but also preserves opportunities and relationships for overseas expansion, thereby facilitating more efficient and rapid capture of international market share for Yuheng’s products abroad.

Recent collaborations in innovative drugs, the advancement of chronic disease health services, and the revitalization of traditional business assets demonstrate Yuheng Pharmaceutical’s clear strategic focus on deep transformation. The company is concentrating on frontier areas of the pharmaceutical industry with significant growth potential, gradually establishing a closed-loop business model and building an innovation platform through cooperation, joint development, and asset securitization.

As the pharmaceutical industry continues to undergo deep adjustments, a value-based healthcare system that is product-oriented and patient-centric will be gradually established. Yuheng Pharmaceutical’s strategic layout in biopharmaceuticals, chronic disease management, and smart healthcare aligns with policy directives and market trends, positioning the company to progressively realize its performance potential. We are optimistic about Yuheng Pharmaceutical’s sustained growth prospects.