The market of China's pharmaceutical and biotechnology industry maintains rapid development. Among them, the biopharmaceutical market has the fastest growth rate, with a year-on-year growth of 18.5%, and is expected to reach RMB 369.7 billion in 2020, and has a 5-year compound gr

In recent years, with the influence of various factors such as aging population, changing lifestyles, increasing work intensity, increasing allergens, and improper eye use, the prevalence rate of various eye diseases such as eye infection, keratinitis, dry eye disease, corneal injury, retinopathy, cataract , glaucoma and other eye diseases have increased year by year, and the ophthalmic market has grown rapidly. According to statistics, there are 75 million patients with dry eye disease in my country, 51 million patients with AMD and 6 million patients with glaucoma, with a huge patient base.

The layout of the ophthalmology field has been launched in the past one or two years. Anti-VEGF is currently the most basic ophthalmic drug research and development direction in China. Okonweishi, Qilu Pharmaceutical, Zhuhai Yisheng, etc. have all made arrangements. For the areas with the largest number of patients with myopia and presbyopia, Zhaoke Ophthalmology, a subsidiary of Li's Pharmaceutical Factory, announced that it had reached a product introduction agreement with Nevakar to obtain exclusive commercialization rights for low-concentration atropine; Jimu Bio also introduced MicroPine, which uses Optejet micro drug delivery platform from Eyenovia. In terms of dry eye disease, Hengrui Medicine has introduced two drugs from Novaliq and plans to guide the dry eye disease track with limited treatment plans.

The base of ophthalmology patients in my country is large, but their understanding of diseases is far lower than that in Europe and the United States. Research and development in the fields of uveitis and retinopathy are still mostly blank. In contrast, ophthalmology treatment in the United States has broken out of anti-VEGF therapy, and emerging treatment methods such as gene therapy, cell therapy, complement therapy, etc. have made gratifying clinical progress. As the next important track, ophthalmology still has many opportunities to be explored, whether in terms of depth or breadth.

2. The field of small molecule has regained popularity, and new targets and mechanisms have been verified. Compared with chemotherapy, small molecule targeted drugs have clear mechanisms of action and fewer side effects. Compared with large molecules, small molecule drugs can be taken orally, so patients have better adherence and lower production costs. With the gradual popularity of immunotherapy in the past few years, macromolecular drugs once occupied the main focus, but with the once invincible target KRAS, it is expected that small molecules will regain their research and development enthusiasm.

There are three major progress in the small molecule field in 2020.

First, Amgen has submitted Sotorasib's NDA on the KRAS target, and the drug has obtained FDA breakthrough therapy certification; Mirati's KRAS G12C inhibitor Adagrasib has a DCR of up to 96% for patients with specific mutations in NSCLC patients with specific mutations; target drugs such as SOS1 and SHP2 have entered the clinical trial one after another in the relevant pathways.

Secondly, small molecules entered the field of self-immunization that has been occupied by biological agents. Abbvie's Upadacitinib reached the clinical endpoint in the atopic dermatitis 3 clinical stage; SHR0302, a highly selective JAK1 inhibitor independently developed by Ruishi Biosciences, reached the clinical endpoint in the phase 2 clinical stage targeting atopic dermatitis.

Finally, PROTAC technology made a major breakthrough. Arvinas released the positive efficacy data of ARV-110 and ARV-471 for patients with prostate cancer and breast cancer respectively. The stock price rose 95% on the same day, with a market value of US$2.367 billion; Nurix Therapeutics completed several transactions successively, including a global strategic cooperation with Gilead with a total amount of US$2.345 billion, and a strategic cooperation with Sanofi with a total amount of US$2.5 billion.

3. Under the COVID-19 pandemic, the global competition for the development of COVID-19 vaccines

In 2020, the hottest investment theme in the medical investment field created by the COVID-19 pandemic is the COVID-19 vaccine.

is based on a variety of different vaccination methods, and more than 200 COVID-19 vaccine candidates are being developed worldwide.In this competition for the development of new crown vaccines, mRNA technology once again stood in front of the historical stage.

On December 2 last year, the mRNA new crown vaccine produced by BioNTech, one of the "three big mRNAs" in the world, and Pfizer, was awarded the "temporary authorization for emergency use" granted by the British MHRA, becoming the first new crown vaccine in the world to be approved for widespread use. In particular, this is a new crown vaccine approved based on the results of the Phase III clinical trial, which is of great significance. On December 18, the mRNA COVID-19 vaccine from Moderna also received Emergency Use Authorization (EUA) in the United States, and also authorized in the United Kingdom and Canada.

With the help of the popularity of the epidemic, mRNA technology has become a new darling in the field of biopharmaceuticals and an important track for major pharmaceutical companies to actively deploy.

4. AI+ drug research and development is expected to become the "infrastructure" for new drug research and development

In 2020, "Artificial Intelligence Discovery Molecules" were included in the "Top Ten Breakthrough Technologies in the World" list released by the "MIT Technology Review". It is conceivable that when two trillion-level industries, artificial intelligence and the drug industry, collide with each other, they will be expected to burst out with huge potential.

capital market also favors this. In 2020, 17 AI+ drug research and development related companies completed more than 20 rounds of financing with a financing amount of more than US$10 million, with a total financing amount of about US$3 billion.

As the first listed company in this field, Schrodinger landed on Nasdaq in February 2020 and currently has a market value of US$5.66 billion. Schrodinger's development history provides other companies in the industry with a development path that can be referenced. The company's core technology platform is a physical computing platform, providing integrated and differentiated solutions for predictive models, data analysis, cooperation, etc. in the development process of new drugs.

According to the company's latest annual report, in 2020, the top 20 pharmaceutical companies adopted Schrodinger's solutions and contributed about US$32 million in business revenue, accounting for 34% of the total software revenue. The number of customers with annual contract value (ACV) exceeding $100,000 has also been increasing, from 122 in 2018 to 153 last year. Meanwhile, the retention rate of customers with a company's ACV of more than $100,000 as of 2020 was 99%, a record high. All of these indicate that Schrodinger provides solutions are becoming increasingly recognized by customers.

In addition, the company has been deeply involved in the cooperative research and development of pharmaceutical companies. Last year, it cooperated with pharmaceutical companies to carry out the research and development of more than 25 new drug projects, which will bring Schrodinger including advance payments, research funding payments and milestone payments, and may incur additional milestone payments, option fees and royalties.

As in November 2020, the company signed an exclusive global cooperation and licensing agreement with Bristol-Myers Squibb (BMS) to discover, research and develop targeted drugs for the oncology, neurology and immunology therapeutic areas. Under the terms of the agreement, the company will receive a $55 million advance payment from BMS and will be eligible to receive a potential revenue of up to $2.7 billion in total from BMS. This cooperation in

can not only achieve a certain scale of revenue in advance, but also accumulate broader data and obtain the brand endorsement of TOP MNC, which is very conducive to the company's business development. In addition to sales and external cooperation, Schrodinger has started its own R&D projects with the goal of discovering FIC or BIC drugs since mid-2018. It is expected to submit three IND applications in 2022 and is expected to obtain clinical data for the first IND project in mid-2022.

Another company listed in 2020, Relay Therapeutics, is relatively focused on its business. Based on the Dynamo platform that integrates new experimental technologies (such as room temperature crystallography, cryo-electron microscopy) and computing technologies (such as molecular dynamics and machine learning), and using the customized supercomputer Anton 3, Relay is committed to developing targeted drugs with higher specificity and efficacy against proteins.

Dynamo's AI is able to search millions of potential compounds to find compounds that provide maximum efficacy, selectivity, and bioavailability, thereby maximizing the development of drugs at the clinical and potential commercialization stages.The company's current pipeline includes two clinical phase I products, RLY-1971 (SHP2 inhibitor) and RLY-4008 (FGFR2 inhibitor), and a Pre-IND product, RLY-PI3K1047 (PI3Kα inhibitor).

The development of AI companies that have been successfully listed overseas has provided a reference sample for the development of domestic companies. Although the domestic AI+ drug research and development sub-track has been a little calm in the past few years, this track has begun to accelerate significantly since Jingtai Technology and other companies completed financing last year. With the rapid advancement of the business of different categories of AI+ drug R&D companies and the growth of more AI+ drug R&D companies emerging with the help of capital, AI will unstoppably become a new driving force for new drug R&D and is expected to become a new generation infrastructure for new drug R&D.

Of course, there are still considerable challenges in this process, such as data docking, standardization and integration of the original R&D system, which also leaves opportunities for all industry players, including domestic AI+ drug R&D companies.

5. The popularity of gene therapy track continues

The 2020 Nobel Prize in Chemistry was awarded to French microbiologist Emmanuelle Charpentier, Ph.D., who made outstanding contributions to gene editing and Dr. Jennifer A. Doudna, a Fellow of the National Academy of Sciences, which greatly encouraged gene editing and even the entire field of gene therapy.

The first gene therapy product in Western countries was UniQure's gene therapy drug Glybera, approved by the European Medicines Agency (EMA) in 2012. Although the drug was not successful in its commercialization path after its official launch in 2014 and withdrew from the market in 2017, its launch completely opened the door to gene therapy.

In the following years, multiple gene therapy or related technology products poured into the market one after another: in 2016, GlaxoSmithKline's Strimvelis was approved for marketing in Europe; in 2017, Novartis and Gilead were approved for marketing in the United States, respectively, and Luxturna, a gene therapy drug based on AAV vectors by Spark Therapeutics, etc.

In the overseas capital market, the IPO of enterprises in the gene therapy field showed an explosive trend in 2020. A total of 7 companies were listed throughout the year, raising 1.2 billion US dollars. In my country, in addition to the first gene therapy product, Jinyusheng and the second Ankerui, which is on the market, there are more than 20 clinical trials on the field of gene therapy, targeting indications such as A/B hemophilia, β-thalassemia, metastatic non-small cell lung cancer, esophageal cancer, Leber hereditary optic neuropathy (LHON), autoimmune defective diseases and various solid tumors. The same as the clinical trial of gene therapy is that the domestic investment in the gene therapy field was also very popular in 2020. According to incomplete statistics, many related companies in the gene therapy field in China have completed financing last year, many of which have completed two or more rounds of financing.

6. CXO/pharmaceutical outsourcing organization creates advantages and develops on a large scale

Entering the third decade of the 21st century, CXO/pharmaceutical outsourcing organization has run through the entire process of the drug life cycle. As an important department of the pharmaceutical industry, the prosperity of the pharmaceutical outsourcing industry is closely related to the development of the pharmaceutical industry.

In the past decade, with the rapid development of the pharmaceutical industry, the domestic pharmaceutical outsourcing industry has also experienced rapid development and many platform-type leading companies such as WuXi AppTec and Kanglong Chemical have emerged. WuXi Biologics, Tiger Pharmaceuticals, and Kailaiying have deepened industrial development in the sub-field tracks and carried out horizontal business extensions. The market size of the

CXO industry is mainly affected by downstream R&D investment and penetration. Now the competition in the new drug R&D market is becoming increasingly fierce, and the investment in new drug R&D continues to grow. Pharmaceutical companies' requirements for the efficiency and quality of new drug R&D are also constantly improving. In addition, the favorable policies such as encouraging innovation and MAH systems, in the long run, the penetration rate of CXO will continue to increase in the future. The leading companies in various sub-tracks continue to accumulate and the advantages in scale and industrial chains are constantly strengthening, forming a long-term growth trend.

The domestic CXO field is also very hot in 2020, especially Tiger Pharmaceutical has launched a public raising of more than HK$10.7 billion in Hong Kong stocks, and its industry influence has further increased, and the CRO industry has entered the era of double giants.It can be seen that in the market environment with high enthusiasm for investment in the medical field, companies with obvious technological advantages or scale advantages in the segmented track are recognized and sought after by investors. The popularity of the

CXO industry is still continuing. Even though 2021 has just passed three months, as a well-known company in the CDMO field, ASK has completed a new round of nearly 500 million yuan in the early March of this year, under the premise of completing two consecutive rounds of financing last year, which shows that investors are still optimistic about the growth prospects of leading companies in the segmented track.

3. 2021 investment hotspot forecast

On March 30, 2020, the new version of the " Drug Registration Management Measures " was officially issued and officially implemented on July 1. In the new version of the "Drug Registration Management Measures", the modification of "establishing four accelerated channels for breakthrough therapeutic drugs, conditional approval, priority review and approval, and special approval" has opened up a new path for accelerated approval of innovative drugs. nowadays policy orientation has encouraged innovation from a general direction, gradually upgrading to refinement to clinical value and clinical needs. The evolution of

is also synchronized with international trends. The FDA has been using these tools to accelerate drug development and review for many years. From 2011 to 2018, 200 of the 367 novel drugs and biological products approved by the FDA used at least one review tool, of which 44 (12%) were accelerated approval. After the new version of

management measures was released, the first breakthrough therapy was announced in August 2020. Nanjing Legend Bio's LCAR-B38M CAR-T was the first, and the new drugs that were first included in the priority review include the TPO-R agonist of Hengrui Medicine , the KIT/PDGFRA mutant kinase inhibitor apotinib, the PD-1 antibody of Junshi Biologics PT-B38M CAR-T, BeiGene's PARP inhibitor pamiparib capsule, and the MET inhibitor of Hutchison Pharmaceutical.

The number of Class 1 new drugs INDs accepted by the CDE in 2020 has grown rapidly and hit a new high. More than 20 domestic innovative drugs have submitted applications for marketing, and the number of domestic new drugs approved exceeds double digits. With the explosive growth of the number of INDs in recent years and the upgrade of the review and approval channels, it is expected that the number of domestic new drugs approved each year will continue to grow in the future.

(2) Medical insurance negotiations have become normalized, categories continue to expand, and innovation remains the main theme

On February 9, 2015, the State Council issued the "Guiding Opinions on Improving the Centralized Procurement of Drugs in Public Hospitals ", which for the first time proposed new ideas for classified procurement at the top-level design level, requiring the establishment of an open and transparent drug price negotiation mechanism for some patented drugs and exclusively produced drugs. In October 2015, with the approval of the State Council, 16 ministries and commissions including the former National Health and Family Planning Commission established a departmental coordination mechanism and organized the first batch of national drug price negotiation pilot work.

Since the first round of access negotiations for medical insurance drugs in 2016, a total of five rounds of medical insurance negotiations have been completed. Among them, the negotiated varieties rose from the first three varieties of tenofovir ester, eketinib and gefitinib to 162 in the fifth round, with an average decline of between 40% and 60%. The disease fields cover many major diseases such as tumors, hepatitis, cardiovascular and cerebrovascular, diabetes , rheumatism and immunity.

In the latest round of medical insurance negotiations, 66 varieties were transferred into the medical insurance catalog after the negotiations, and 30 were produced by local enterprises. Among them, PD-(L)1 field Hengrui , Junshi, and Baekje were all shortlisted, while PD-(L)1 of multinational pharmaceutical companies such as Merck , BMS, AstraZeneca , and Roche were not included. More local pharmaceutical companies are expected to trade price for volume through negotiations and gain a larger market share.

In addition to medical insurance negotiations, volume-based procurement has also been carried out three times, and the fourth time will be launched soon. In November 2018, the National Health Insurance Administration officially released the "4+7 City Centralized Procurement Document" on Shanghai Sunshine Pharmaceutical Procurement Network. The first batch of catalogs has a total of 31 categories. The pilot scope is Beijing, Tianjin, Shanghai, Chongqing, Shenyang, Dalian, Xiamen , Guangzhou, Shenzhen, Chengdu and Xi'an, with a total of 25 varieties selected, of which only 3 original drugs account for 12%, and the domestic substitution effect is obvious.

After that, the volume-based procurement rules were further improved, allowing multiple companies to win bids, allowing different companies to choose prices for different companies of the same drug to be different, and gradually establish a long-term mechanism of normalization, standardization and national coverage. At present, volume-based procurement has expanded to the whole country, with varieties rising to 90, the market size continued to increase before procurement, and the dosage form range continued to expand.

In 2020, medical insurance funds have invested a lot in the epidemic. After the epidemic, the intensity of medical insurance cost control may be increased, which will put further pressure on the payment side. As medical insurance negotiations and centralized procurement policies gradually develop to normal, more pharmaceutical companies will force the transformation from imitation to innovation under the pressure of payment. From a long-term perspective, innovation will still be the unchanging main theme.

(3) DRGs first year combined with DIP, deeply optimize the payment method of medical insurance

In the past, my country's medical insurance mainly focused on payment by project (FFS) and total prepayment.

Pay by project means paying after payment based on the specific projects and quantity that occur during the diagnosis and treatment process. Doing more projects makes more money, which can easily lead to excessive diagnosis and treatment; total prepayment refers to the current medical insurance total prepayment system, which mainly allocates regional funds to each hospital, regardless of changes in the hospital's business volume, and adjusts according to the level of previous years, which to a certain extent leads to the phenomenon that hospitals do not accept critical cases and other difficult-to-treat cases.

Europe, the United States and Japan have begun to explore DRGs payment methods since the 1980s, that is, pay by group related to disease diagnosis. DRGs divide patients with similar clinical characteristics into a group based on the patient's age, gender, hospitalization days, main diagnosis, symptoms, surgical treatment, disease severity, comorbidities, complications and other factors, and determine the packaged medical insurance payment standards based on the group unit. Local medical insurance institutions use this standard to make advance payments to medical institutions. When the hospital accepts patients participating in medical insurance, the medical insurance institution pays the hospital according to the prepaid standards for the disease.

2019, the National Health Insurance Administration, the Ministry of Finance, the National Health Commission, and the State Administration of Traditional Chinese Medicine jointly issued the "Notice on the List of National Pilot Cities for Paying by Groups Related Groups by Disease Diagnosis", which determined 30 cities including Beijing, Tianjin, Hebei Handan and other countries as national pilot cities for DRGs paid. After three years of formal planning, the pilot cities will simulate operation in the second half of 2020, and actual payment will be launched in 2021, becoming the first year of DRGs in my country. Half a year after DRGs was piloted, my country also introduced the DIP score payment system , and 71 pilot cities were announced in November 2020. DIP no longer refines the total control indicators of medical institutions, but instead converts paid units such as projects, disease types, bed days into certain points. At the end of the year, based on the total number of services provided by each medical institution and the regional medical insurance fund expenditure budget indicators, the actual value of each point is obtained, and the actual points of the medical institution are paid according to the actual points. Under the DIP system, if medical institutions want to obtain more allocation quotas, they need higher points to promote hospitals to provide more efficient and economical medical services.

Whether it is DRGs group payment or DIP score payment, both are classified for inpatients, and their essence is to control the unreasonable growth of medical expenses. After the introduction of DRGs/DIP, the medical insurance department can better control the total amount of medical insurance payment, while the hospital needs to control the cost of a single hospitalization, forcing the hospital to improve efficiency and reduce service costs, curb overexamination and overtreatment, and at the same time improve the quality of diagnosis and treatment in order to obtain higher points.

Of course, the introduction of each new system is accompanied by potential problems, such as exaggerating the application of critical care costs for patients, reducing necessary diagnosis and treatment projects to save costs, and tilting resources towards third-level medical institutions. In the future, DRGs and DIPs will choose one or coexist, and the actual effect remains to be verified and improved. However, the general direction of diversified cost control in my country is very clear, and the pressure of price reduction and cost control in pharmaceutical companies and hospitals will exist for a long time.

(4) Commercial insurance is emerging, and personal payment ability continues to improve

If medical insurance is a fair distribution of basic medical resources, then commercial medical insurance is a differentiated individual purchase. At present, the development environment of commercial insurance is relatively sound. On the one hand, the government supports the opening and operation of private hospitals , and on the other hand, it introduces relevant personal income tax preferential policies to directly or indirectly stimulate and encourage the development of commercial medical insurance.

Compared with the mature commercial insurance system in the United States, my country's commercial health insurance is still in its initial development stage, and problems such as unbalanced regional development, limited product forms, and irregular protection clauses need to be solved urgently. However, with the increase in residents' health awareness and disposable income, it is becoming more and more common for individuals or enterprises to join commercial insurance. my country's health insurance has developed rapidly overall in recent years, and premium income has maintained a growth trend. According to the corresponding number of private hospitals, it is expected to become another major support besides medical insurance fund payment in the future.

4. Frontier technologies shine, and many technologies are worth paying attention to

(1) mRNA technology leads the research and development of the new crown vaccine, which will surely rewrite the overall pattern of the vaccine industry

Traditional vaccines usually take 8 years or more to be launched from the laboratory to the market. This process includes design, development, preclinical testing, clinical trials and regulatory review. Because mRNA vaccines have the technological advantages of fast design and fast production, they quickly became the most powerful competitors of the first batch of new crown vaccines to be launched from the beginning of the new crown vaccine research and development competition. The same is true for

. The world's first COVID-19 vaccine approved for widespread use is the mRNA COVID-19 vaccine produced by BioNTech in cooperation with Pfizer . It is not only safe, but its phase III clinical trial data shows that the protective effect is 90%, and the protective effect of another mRNA vaccine from Moderna also reaches 94%, with excellent performance.

According to statistics, mRNA vaccine is currently the largest number of COVID-19 vaccines in the world, and its protection effect and safety are currently supported by real-world data. These data indicate that mRNA technology has the potential to resist future infectious disease outbreaks. Using mRNA technology to develop vaccines is no longer a pure scientific challenge, but more like an engineering problem.

has reason to believe that the overall pattern of the entire vaccine industry will be rewritten with the application of mRNA technology. At the same time, based on the technical mechanism and pathway of mRNA vaccines, people are also full of expectations for using mRNA vaccines to conquer tumors.

(2) AI+ drug development has become a new path for new drug development

Generally speaking, the research and development and marketing process of innovative drugs takes decades, billions of dollars, and the failure rate is more than 90%.

In 2020, the FDA approved a total of 53 new drugs to be launched, of which 35 are small-molecule drugs, and most of these drugs are designed based on known molecular targets. It is extremely rare to find that new molecules that can act on new targets of a wide range of indications. With the rapid accumulation of drug research and development data and the accelerated development of artificial intelligence technology (AI), AI is increasingly used in new drug discovery.

Compared to traditional methods, AI can in principle be faster, lower cost and can make better decisions, especially if appropriate data or simulations allow. From drug target discovery, virtual screening, drug synthesis, ADME-T (absorption, distribution, metabolism, excretion and toxicity) properties prediction and physical and chemical properties (such as crystal form) prediction, drug relocation, to drug clinical trial management, patient recruitment, to pharmacovigilance application and real-world evidence generation, the integration of AI and drug development processes is moving forward in exploration.

5. New players are pouring in under the industrial transformation, but the pursuit of value based on innovation remains unchanged

(1) New players of different roles focus on Chinese innovation and reconstruct the pharmaceutical industry

Under the continuous development and changes of China's innovative drug industry, more and more new players are beginning to join this track.

On the one hand, traditional pharmaceutical companies have gradually attached importance to and expanded their innovative pharmaceutical business, and the continuous increase in industry popularity has also attracted many scientists to start businesses and join them. On the other hand, while domestic industrial giants are laying out pharmaceutical investments, overseas pharmaceutical companies have also set up investment bases in China. US dollar funds' investment in the Chinese market is becoming more and more active, and Chinese innovation has entered the vision of global players.

In addition to the successful examples of domestic traditional pharmaceutical companies transforming into innovative pharmaceutical companies such as Hengrui Medicine and China Biopharmaceutical , there are still thousands of traditional pharmaceutical companies in China. They are currently conducting self-innovation and business iteration, becoming new players in the innovative pharmaceutical industry. Especially among them, there are many listed companies, some of them are already seeking to separate their innovative drug business segments to accelerate the business progress of the innovative drug pipeline.

With the continuous development of the domestic innovative drug industry, more and more new players are also participating in the investment and financing market of biomedicine:

• The giant in the real estate field Country Garden established Country Garden Venture Capital in 2019, and has completed many investments such as Maibos Bio in the health field.

• The global healthcare industry fund jointly established by AstraZeneca and CICC Capital has completed a fundraising of US$1 billion.This fund is the first and largest medical and health industry fund raised by AstraZeneca in the world and the first practice of AstraZeneca's industrial and financial integration grafting in China.

• Several US dollar funds participated in the financing of Chinese biopharmaceutical companies in 2020. Among the investors of several companies such as Connecticut, Genting Xinyao, Rongchang Biologics, Yifang Biologics, and Beihai Kangcheng, there are institutions such as RA Capital, Janchor Partners, and Cormorant.

In the future, the investment and financing systems such as pipeline evaluation and valuation judgment will be continuously improved in the context of a prosperous enterprise and diversified player.

(2) The value of the post-epidemic era is back. Only by having the ability to innovate continuously can enterprises gain recognition for a long time

After entering 2021, in the context of popularization of vaccination and epidemic prevention becoming the norm, the impact of the epidemic will gradually fade, and the industry may focus more on the interpretation of medium- and long-term logic. The innovation of pipeline products, clinical data, team execution, and other dimensions that truly reflect product value will become the primary standards for market pricing, which also puts forward new requirements for industry players.

The supply of biomedical targets on the Science and Technology Innovation Board increased in 2020, and the review has been slightly tightened. Zesheng Technology and Yiteng Jingang were terminated. Two of the 7 fifth standard listed companies have broken the issue price, and the valuation has returned to a significant return. The implicit requirements and clear delisting rules in the recognition of scientific and technological innovation attributes also reflect the continuous tightening of reviews.

Among them, the scientific and technological innovation attribute requires more than 5 invention patents to form main business income. R&D investment accounts for more than 5% of the operating income in the past three years, or the cumulative amount of R&D investment in the past three years is more than 60 million yuan. Therefore, pure license-in model companies need to be cautious in the Science and Technology Innovation Board.

delisting rules state that if the fifth set of standard listed companies meet the negative net profit and the operating income is less than 100 million yuan in the fourth fiscal year, a delisting warning will be issued. Given that the third phase of innovative drugs generally takes 3 to 5 years to go on sale, the reverse suggests that the fifth set of standard listed companies need at least a pipeline to enter the third phase of clinical practice or register for clinical practice.

Hong Kong stocks were polarized in 2020, and solid fundamentals could support higher valuations. , Platinum Pharmaceutical, , Xiansheng Pharmaceutical , and WuXin Junuo broke the issue successively. On the 20th day after Yongtai Bio's IPO, 7 pharmaceutical companies listed in Hong Kong once broke the issue.

summary, companies with unsatisfactory stock prices are mainly concentrated in crowded tracks, and the clinical value of the products is questioned from the market space and subsequent R&D potential; while pharmaceutical and biotechnology companies with excellent performance have three successful elements: market prospects, innovative R&D, and pipeline layout.

In the future, whether the pipeline of

is rich, balanced and clear in layers, whether self-developed products have the potential of First-In-Class or Best-In-Class, whether License-in products have matching clinical promotion capabilities, whether the track focuses on large markets such as tumors and self-immunization or high-potential specialized fields, etc., will be the reasons for valuation differences.

In addition, in the environment of high enthusiasm in the capital market, the risks of drug research and development may be overshadowed by the short-term prosperity, but the announcements of several listed pharmaceutical companies' consecutive termination of clinical practices still sounded the alarm for investors. It is possible that in the near future, the stock price amplitude of innovative pharmaceutical companies will continue to fluctuate significantly. For example:

• Biote issued an announcement on February 8 that the company's independently developed HER2-ADC BAT8001 Phase III clinical trial did not reach the preset excellent endpoint compared to the control group (lapatinib combined with capecitabine ). The R&D expenses of 226 million yuan may be wasted, and the stock price fell by 18.73%, becoming the first variety to terminate clinical practice in the product line of the Science and Technology Innovation Board issuing companies. Immunovant, a partner of

• and Platinum Pharmaceuticals, terminated the overseas clinical trial of MVT-1401 due to safety issues. On the day of the release of the news, the share price of He Platinum Pharmaceutical fell 11.49%.

• , Kaituo Pharmaceutical's core product, prkulamide, failed to reach the first major end point of clinical phase 3. The stock price fell continuously and was nearly halved. Later, prkulamide achieved a major breakthrough in the treatment of new crown . The stock price recovered lost ground.

This wave of biopharmaceutical listing and bursting has emerged one after another. Rather than saying that the bubble in the biopharmaceutical industry appeared and burst, it is more of a portrayal of the reconstruction of the industrial chain and development logic under the continuous investment of more than ten years of funds and talents in China's biopharmaceutical industry. The biopharmaceutical industry has begun to move on track and gradually entered a breakthrough period of technological accumulation and R&D. The risks of drug development in

have always existed. In the future, independent research and development capabilities, BD, clinical execution capabilities, and local commercialization capabilities will become the center of value return, and investment in the capital market will also tend to be rational.

2. The most important investment theme and market prediction in 2021