Hainan Unveils New 'Lecheng R&D + Haikou Manufacturing' Model, Enabling Medical Enterprises to Unlock Lucrative Opportunities

Recently, "Polyester Collagen Bone Repair Material" introduced by Hainan Susheng Biotech from Switzerland has been officially approved for Class III medical device registration.Becoming the first medical device in China to be approved for marketing under the "Lucheng Research and Application + Haikou Production" collaborative model.. For a time, the industry caused a heated response because another blockbuster single product is coming soon.

Figure 1. Revenue and Net Profit Performance of Simcere Pharmaceutical from 2020 to 2024 (Data Source: Annual Report)

In fact, this is not without reason. As the first innovative drug in China to achieve "R&D and application in Leting + production in Haikou," Cosela (Trilaciclib Hydrochloride for Injection) has already provided an answer with its real performance. Recently, Simcere Pharmaceutical released a positive profit forecast for 2024, expecting its adjusted profit attributable to the company's equity shareholders for the fiscal year 2024 to reach between 1.003 billion yuan and 1.033 billion yuan.Compared with 719 million yuan in the fiscal year 2023, the increase is approximately 39.5% to 43.7%.。

Cosella has obviously played a significant role in this growth. In April 2024, Cosella officially "launched" in Hainan.This means that the entire production process of "imported drug" Cosela, from raw material manufacturing to packaging and transportation, will be fully carried out according to local deployment.. Under this production model, Cosela has truly achieved cost reduction and efficiency improvement. Not only has its annual production capacity rapidly expanded to 2 million units, but costs have also been significantly reduced. It is reported that after Cosela transformed into a "locally produced drug," its production costs decreased by nearly 70% compared to before, which undoubtedly secured it a larger profit margin.

And as Kesera's "Lucheng R&D + Haikou production" first business model has been established, it has also attracted more medical companies to rush into the "gold rush," includingPharmark, Yaron Pharm, Bloomage Biotech, RuiTai BioMedical device products from multiple companies are currently queued up in Hainan to initiate domestic listing and localization in China, with the progress accelerating.

Thus, amidst a flurry of eager competition, a brand-new path to monetization has become increasingly clear at present.

Based on this question, we can still find answers from Cosella.

It is reported that Cosela, an innovative drug with comprehensive bone marrow protective effects co-developed by Simcere Pharmaceutical and G1 Therapeutics, was first approved by the U.S. FDA in February 2021, becoming the world’s first innovative drug with comprehensive bone marrow protection. Four months later, thanks to Hainan's "Pilot Program" (The Implementation Plan for Supporting the Construction of Boao Lecheng International Medical Tourism Pilot Zone, issued in September 2019, allows the use of urgently needed clinical drugs and medical devices that have been approved overseas but not yet registered in China within specific medical institutions in the pilot zone.) Policy advantages enabled Kesela to be used for the first time within China and included in the Real-World Data Research Pilot for medicines in Lecheng that August.

With this, in July 2022, Cosela was officially approved for marketing in China, with the indication of "reducing the risk of chemotherapy-induced myelosuppression in patients with extensive-stage small cell lung cancer (ES-SCLC)." Although the official sales figures have not been disclosed, the annual report for that year shows that Simcere Pharmaceutical's revenue in the second half of 2022 reached 3.619 billion yuan, a significant increase of 34% compared to the first half of the year, which is evidently related to the approval and increased availability of Cosela.

But this is not the most important,Most importantly, from FDA approval in the U.S. to market launch in China, Cosela took only 14 months., which is in stark contrast to the approval cycle of innovative drugs that typically takes 3 to 5 years. Of course, this is all thanks to Real World Study (RWS), also known as "Lecheng Research and Application" mentioned by official sources (Promote the Application of Real-World Data, Accelerate the Registration and Listing of International Innovative Drugs and Medical Devices in China）。

Figure 2. The Real-World Research Pathway for Supporting Drug Regulatory Decision-Making in Haikou (Source: Lecheng Pilot Zone Official Website)

It is reported that real-world studies refer to the systematic collection of data generated by patients in routine clinical care or health maintenance settings. Under a pre-established research protocol, these data are analyzed and processed using a series of research methods to ultimately compare the safety and effectiveness of treatment measures such as pharmaceuticals and medical devices.According to the involved company's estimates, relying on Real-World Studies (RWS), the commercialization process can be accelerated by at least 2 years, with costs being less than 1/4 of conventional trials.。

But this is still not the end. Although Cosela has been successfully approved for marketing, it remains an "imported drug." The domestic local production business still needs to be carried out by foreign enterprises, resulting in a lower gross profit margin. To address this, in April 2022, Haikou High-Tech Zone and Lecheng Pilot Zone jointly established Hainan Free Trade Port's first "inter-regional economic cooperation demonstration zone."The purpose is to transfer the already approved imported medical device products to enterprises in Haikou National High-Tech Industrial Development Zone for localized production, thereby creating greater benefits. This is what is known as "Haikou Production."。

On April 1, 2024, Cosela officially transitioned to local production in China, with the first batch producing approximately 20,000 units. From the outer packaging of the medicine, the locally produced Cosela differs from the previously imported product only in the approval number. The marketing authorization holder has changed from G1 Therapeutics in the U.S. to Hainan Simcere Pharmaceutical Co., Ltd., and the production address has moved from the U.S. to Haikou City, Hainan Province, China.

Don't underestimate this small change; it involves huge profits. According to reports,In the first half of 2024, Simcere Pharmaceutical's gross profit margin rapidly increased to 79.1%., which inevitably includes the contribution of Cosella's localized production. Not only that, but with the significant reduction in production costs, it has also become more competitive in market pricing. Therefore, in November 2024, Cosella was officially included in the new edition of the medical insurance catalog, and the market expansion is imminent.

Therefore, it is not difficult to find that the entire "Made in Hainan" process actually has a sequential order,It first allows imported medical device products to "pioneer and trial," then uses real-world research to promote their rapid approval, and finally relies on "localization" to truly achieve localized production.。After a complete set of processes, medical device products not only seize the market opportunities but also gain significant cost advantages, which will bring considerable economic benefits to enterprises.

Kesera is clearly the "first to eat crab," but definitely not the only one. It is reported that, apart from the recently approved polyester collagen bone repair material,Currently, 19 pharmaceutical and medical device products have also received marketing approval from the National Medical Products Administration (NMPA) with the assistance of real-world data for clinical evaluation, including six innovative drugs and 13 medical devices.。

Figure 3. 14 Medical Devices Approved for Marketing Through Real-World Studies

So, what are the common characteristics between them? In other words, what kind of medical device products can meet the conditions of "Research and Application in Lecheng + Production in Haikou"?

First, it has been approved by internationally advanced regulatory agencies and has a foundation of critical registration studies., which means that the approved products usually need to have sufficient overseas clinical research data, while real-world data is only used as supporting evidence. For example, before conducting real-world research in the Boao Lecheng Pilot Zone, Ocunvision Bio's OT-401 had already completed Phase III clinical trials overseas; the main data submitted for Pralsetinib's marketing application also came from overseas, and the real-world data research in Lecheng provided auxiliary support for evaluating the efficacy and safety of Pralsetinib in Chinese patients with advanced non-small cell lung cancer.

Figure 4. Seven innovative drugs approved for marketing through real-world studies

Secondly, it is essential to fully align with the unmet clinical needs in the Chinese market.For example, Inclisiran sodium injection, the first small interfering nucleic acid drug from Novartis, was first applied in China at Lecheng in July 2021 and has been used more than 7,000 times within just one year. The rapid market penetration is mainly due to its ability to fill a clinical gap. As the world's first and currently only small interfering RNA (siRNA) cholesterol-lowering drug for reducing low-density lipoprotein cholesterol (LDL-C), Inclisiran sodium injection is a "super vaccine" for patients with hyperlipidemia.

In fact, this is also the core significance of "pilot programs," which is to allow more patients in China to access cutting-edge international drugs and technologies without going abroad, while receiving better treatment and significantly reducing medical costs. It is reported that,Lecheng has currently introduced more than 460 international innovative pharmaceuticals and medical device products, primarily concentrated in the fields of ophthalmology, oncology, and rare diseases, all of which have significant clinical needs behind them.。

The last point is that it can be scaled up for production, significantly reducing the cost of production equipment and raw material imports.According to reports, Pralsetinib Capsules, which were approved for marketing in China in March 2021 based on real-world research evidence, have now become the main source of revenue for CStone Pharmaceuticals. According to the annual report, in the first full year after the launch of Pralsetinib, CStone Pharmaceuticals achieved a significant revenue increase of 97.51%, and has since maintained a high growth trend.

But even so, CStone Pharmaceuticals has yet to摆脱 its亏损 situation, with a net loss of 367 million yuan in 2023,主要 due to其高昂的运营成本. Therefore, there is a明确需求 for Pralsetinib to undergo "localization" because一旦实现本土化生产, it will open up更大的利润空间 for CStone Pharmaceuticals, making扭亏为盈 an achievable goal.

In this regard, a professional from Lecheng commented, "In recent years, we have been continuously enhancing our R&D and production capabilities. At the same time, we are carefully selecting projects, hoping to focus more energy and resources on a group of innovative pharmaceuticals and medical device products with significant clinical demand and higher production costs. This will help them achieve 'overtaking on a curve' and create greater profitability."

Since the beginning of this year, there has been no shortage of good news in Lecheng.

First in January,Three products have been successively approved for marketing through real-world data research.They are Sanofi's anti-CD38 monoclonal antibody Sarclisa (Isatuximab Injection), Roche Diagnostics' FOLR1-2.1 Antibody Test Reagent, and Carl Zeiss Femtosecond Laser Corneal Refractive Treatment Machine. Particularly, the Femtosecond Laser Corneal Refractive Treatment Machine, equipped with the latest SMILE pro surgical technology, can complete single-eye scanning within 10 seconds, making it a groundbreaking device product.

In addition, in the clinical aspect, several heavy-weight products have recently been used for the first time in China in Hainan, including the innovative Alzheimer's drug donanemab and the medical food Modulen IBD for treating Crohn’s disease, among others.

With the localization of polyester collagen bone repair materials and the further expansion of Cosella's gross profit margin, the current Lecity is showing a significant trend of accelerating cash conversion. In fact, over the past few years, the medical industry layout in Hainan Lecity has become increasingly complete, which undoubtedly provides a guarantee for current and future cash flow conversion.

Figure 5. The "Lercheng Innovative Medical Devices" window specially opened at Ruijin Hainan Hospital

For example, at the hospital end,As of June 2024, 29 medical institutions in Lecheng have opened and are in operation.There are 21 medical institutions with the qualification to use specially licensed pharmaceuticals and medical devices, and capable of generating real-world research data. These include Hainan Hospital of Ruijin Hospital, affiliated with Shanghai Jiao Tong University School of Medicine, and Hua Xi Le Cheng Hospital of Sichuan University, among other "national teams." Taking Ruijin Hainan Hospital as an example, it has completed the use of 111 specially licensed pharmaceuticals and medical devices, treating more than 8,000 patients.

In addition, on the enterprise side, an increasing number of global leading companies have also started to cluster and invest heavily. It is reported that at the beginning of 2023, as the domestic market gradually opened up, presidents of several international pharmaceutical and medical device companies, including Novartis, Boston Scientific, Merck, Sanofi, and Medtronic,密集 visited Lecheng for office inaugurations or signing strategic cooperation agreements. After this, Lecheng's industry "circle of friends" continued to expand.Currently covers nearly 300 pharmaceutical and device companies globally, with overall engagement increasing., such as Merck and Gilead, which have already established branches in Lecheng.

Finally, in the critical supply chain, a complete closed loop has been formed from approval for marketing to production and then to payment.Taking the "Front Zone, Back Factory" model that LECITY focuses on as an example: The "Front Zone" refers to promoting the domestic import registration and market entry of innovative pharmaceuticals and medical devices that have already been launched overseas by leveraging the real-world study policies in the LECITY Pilot Zone. The "Back Zone" involves transferring these marketed products to enterprises within the Haikou National High-Tech Industrial Development Zone for localized production.In addition, in terms of payment, Lecheng has specially launched the "Lecheng Global Special Drug Insurance," which currently covers nearly a hundred high-priced special drugs, with more than 2 million insured participants.。

In this regard, the founder of a company入驻乐城 remarked, "Actually, since the second half of last year, it has been clearly felt that Lecheng is accelerating the realization of some past achievements, which has also enabled many local medical enterprises to gain considerable income in 2024. Entering 2025, this momentum of cash flow conversion will intensify. On one hand, this is because there is already the precedent of 'Cosela,' which provides a concrete path reference for later entrants; on the other hand, a large number of innovative drugs and medical devices have accumulated in the early stage and are awaiting approval for market launch. Currently, more than 460 types of foreign innovative drugs and medical devices not yet marketed in China have been introduced, mainly covering major disease fields such as cancer, rare diseases, and chronic diseases."

Therefore, it is foreseeable that one performance "miracle" after another will soon be staged in Lecheng, Hainan. Those who enter the market early will naturally be more competitive and able to seize the first wave of market dividends.

1. "What Does the First Approved Domestic Drug and Device Mean for the 'Letcheng Research and Application + Haikou Production' Collaborative Model?" — Invest Haikou;

2. "Driven by Innovative Drugs, Simcere Pharmaceutical Profits 1 Billion Yuan!" - PharmaCube;

3. "How to Make Imported Drugs in Hainan?" — Hainan Daily.