In the past, influenced by expectations of the effects of
1. Firm in transition, the Company is using S&D model to drive its innovative development
Looking back at its history, the Company began introducing exclusive or original drugs from multinational pharmaceutical companies through rights control or exclusive sales agreement early in 2010, creating a unique "CMS Model". Under this model, the Company has accumulated a strong network of overseas upstream resources and good reputation, and formed a strong product evaluation system. However, considering the potential impacts of the Company's existing products, which are all original or exclusive drugs with expired patents or no patents, and
The true meaning of rebirth lies in the courage to kill your past self. As a CSO leader, CMS takes advantage of its competences in deployment of innovative drugs in its gradual transformation, and has formed a development path that is different from most other biotechs and innovative pharmaceutical companies.
First of all, the Company's original business has maintained a steady growth over the years and generated strong cash flow, which has given itself the confidence to further expand its business, while its long-term accumulated resources and networks overseas have also given it more opportunities to quickly deploy overseas innovative resources. For various reasons, CMS has transformed itself into a venture investor in overseas pharmaceutical companies and actively promoted its presence in the innovative drug field. Through equity investment in overseas biotech companies and strategic cooperation, the Company has rapidly formed a R&D pipeline covering a number of innovative products in just around three years.
The following are some highlights of the Company's deployment of innovative drugs:
a) Excellent BD capability and mature system help CMS enter into the innovative drug field quickly
Compared with the R&D (research & development) path, which is common in pharmaceutical companies, the Company adopts an S&D (search & development) model, i.e., gradually enriching its innovative pipeline through global search for quality innovative drug projects and early R&D participation. This model particularly tests the Company's ability to screen and evaluate products.
Looking back at the Company's history, as a leading CSO company, CMS' unique vision and product selection ability has been fully verified by the introduction of a series of blockbuster original products with clear efficacy, sufficient clinical evidence and competitive differentiation in the past. The Company has also achieved excellent performance with these quality products for a long time. And with the transition, this long-tested ability is continuing to help its selection of innovative products.
In fact, as the fastest way to deploy innovative drugs, the Company has also polished a complete and mature BD system. From top-level design, introduction strategy, clinical development in
In the past three years, CMS has quickly acquired more than 20 innovative products with unique competitive advantages, including Diazepam Nasal Spray, Tildrakizumab, Cyclosporine Eye Drops 0.09%, etc., and achieved great results, which fully validates its strong and sustainable BD capability and forms a competitive moat, providing CMS with opportunities to achieve a higher premium valuation.
b) Avoiding competition in overpopular products, CMS tries to find "diamond in the rough" with a differentiated product selection strategy
In fact, according to its footprint in innovative product deployment, due to its innate promotion-driven genes, the Company is more capable of exploring new products from the perspective of marketing and promotion. It does not blindly pile up popular products, but takes cost effectiveness, market potential and whether meeting unmet market needs as the benchmarks, and takes a long-term view of the commercial prospects and the localization value of the innovative pipeline.
In recent years, there have been pharmaceutical companies who spend a lot of money to buy some seemingly sexy, but very competitive drugs. Taking PD-1 for example, its R&D costs hundreds of millions of dollars, but the competition between pharmaceutical companies is fierce. With the price reduction caused by national centralized procurement, it is clear there has been serious involution in this field. This is the kind of fields that CMS has been intentionally avoiding in its selection process. The innovative drugs that the Company has acquired all have differentiated competitive edges and considerable market potential. Taking the products mentioned above as examples, Diazepam Nasal Spray is an innovative drug targeting acute repetitive seizures that is convenient to use outside the medical setting with a very rapid onset of action; Tildrakizumab is a novel monoclonal antibody targeting IL-23 with high cost-effectiveness for the treatment of psoriasis; Cyclosporine Eye Drops 0.09% is a novel, preservative-free, clear ophthalmic solution using a globally patented nanotechnology for the treatment of dry eye.
In addition, let's take the Methotrexate Pre-filled Syringe/Pen introduced by the Company last year as an example to see the characteristics of its deployment of innovative drugs. Methotrexate is an API with a long history, and is referred to in many articles as one of the ten landmark drugs in human history, while many biological agents under development now are also clinically compared with methotrexate injections for equivalence. But even so, as an inexpensive and efficacious old drug, there are severe gastrointestinal side effects in oral preparations resulting in decreased patient compliance, and there is currently neither pre-filled methotrexate injection products approved, nor methotrexate injectables for the treatment of RA on Chinese market. It is based on this typical unmet clinical need that the Company chose to introduce this drug to fill the market gap.
c) Rapid clinical advancement capability with significant organizational and institutional strengths
Although CMS does not have a CMO with a strong background for the time being, its medical team and clinical capabilities should not be underestimated. In terms of clinical works, CMS plays its resource advantages in clinical development by strictly controlling the core clinical processes such as clinical protocol formulation, patient enrollment and quality control, and cooperates with CROs to jointly promote clinical projects in
Most of CMS's innovative drugs are in late clinical stages or already marketed in the
d) Strong academic promotion capability helps commercialization of innovative drugs
With more than two decades of successful experience in academic promotion, the Company has accumulated extensive industrial and network resources to carry out the commercialization of innovative products in the future. Its well-established system has also been providing great support to the commercialization of innovative products whether in terms of compliance management, digitalization, or team management and training.
The Company has repeatedly mentioned in financial reports its efforts in refining management and compliant marketing, such as optimizing organizational structure, strengthening application of digital tools, enhancing compliance training, etc. Meanwhile, the Company has made continuous efforts on digital promotion for many years, thanks to which, its selling expense ratio has remained at around 22% for years, which is at a relatively low level in the industry. In addition, the Company has a professional team and organizational system. By the end of 2020, the Company's academic promotion system has covered about 57,000 hospitals and medical institutions nationwide, with 3,300 professional academic promotion staff. As a company noted for sales and promotion ability, its strong professional academic promotion capability and compliant and efficient system will bring broad market prospects for its innovative products once commercialized.
2. Great market potential for the innovative pipeline and great room for growth for the Company
According to the Company's financial report, by the end of 2020, the Company has more than 20 innovative products with relatively high innovation level, high market potential and competitive differentiation advantages, among which, 9 products have been approved for marketing in the
According to the R&D progress of its products, the Company is expected to have a number of blockbuster products marketed in succession, which may provide new growth points for the Company.
Next, let's take a look at some of the blockbuster products that are expected to be marketed soon as well as their market potential:
a) Diazepam Nasal Spray
The product is indicated for acute repetitive seizures in patients six years of age and older, and is expected to be marketed this year. It has received marketing approval from the
According to Chinese epidemiological data, it is estimated that there are approximately 6 million active epilepsy patients in
b) Cyclosporine Eye Drops 0.09%
Expected to be launched next year, Cyclosporine Eye Drops 0.09% is used to increase tear production in patients with dry eye, and has a global nanotechnology patent. The Company received the clinical trial notice of the product from NMPA of
Data shows that the incidence of dry eye in
c) Tildrakizumab
Tildrakizumab is used for the treatment of moderate-to-severe plaque psoriasis, and has already been approved for marketing in the
Chinese epidemiological data shows that the incidence of psoriasis in
d) Others
By 2023, the Company's products such as Plenity (an innovative weight loss product), Desidustat (indicated for CKD anemia), Methotrexate Pre-filled Syringe/Pen (pre-filled injectables indicated for RA) and Methylene Blue MMX (enhancing lesion detection during colonoscopy) are expected to be approved for marketing, all of which also have a market potential of at least
Taking Methotrexate Pre-filled Syringe/Pen as an example, it is easy to use, convenient for self-administration at home, and strikes a greater balance of efficacy and safety, excellent tolerability and compliance. With 5 million RA patients in
3. Conclusion
To conclude, CMS's advantages in deployment of innovative products come from two aspects. On the one hand, the Company's strong BD ability built up in its long-term development gives it the confidence and strength to quickly enter the innovative drug field, and at the same time, it does not blindly chase after popular products, but focuses on digging overseas quality innovative products with relatively high market potential and unmet market demand using its differentiated product selection strategy. On the other hand, the resource advantages based on the strong marketing and promotion system empower the Company with rapid clinical advancement ability and strong academic promotion ability, which strongly supports the clinical development and commercialization of innovative products. Based on all these, CMS has made remarkable achievements in its transformation, and it is believed that with the marketing of blockbuster innovative products, the Company's value will be re-recognized by the market and its valuation will usher in a new leap.
After CMS released its annual results, several institutions have published research reports that are optimistic about the Company's transformation focusing on innovative drugs and its long-term potential.
In addition, Citi reported that the Company's management is committed to acquiring licenses for five competitive innovative drugs each year, and the nasal spray for epilepsy is also planned to be launched in
In summary, it is not difficult to find that all these institutions have full recognition of CMS in its presence in the innovative drug field. They have all raised their target prices of the Company based upon the Company's performance and potential. Compared with ordinary investors, professional institutions tend to have a deeper understanding of the industry and the enterprise. These bullish reports have all shown that, despite the fact that the Company's share price has almost doubled in the year, they still have full confidence in the Company's future potential.
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