A domestically produced small molecule targeted drug achieved sales of 1.5 billion in the domestic market within six months, demonstrating that innovative drugs can successfully penetrate the market relying solely on domestic sales. Moreover, medical insurance negotiations are reshaping the value assessment of innovative drugs, allowing for more flexible pricing…
According to data from Menet, as of 2022, 62 domestic Category 1 new drugs have been approved for market release, with companies like Hengrui, Wuxi Biologics, and Chia Tai Tianqing Pharmaceutical leading in numbers. The top 25 best-selling drugs have collectively generated over 55 billion RMB in sales, with 11 of them surpassing 2 billion RMB, 5 exceeding 3 billion RMB, and 2 breaking the 4 billion RMB mark. Among the seven drugs with annual sales exceeding 3 billion RMB, five are biopharmaceuticals, and only two are chemical drugs.
Domestic Category 1 new drugs with sales exceeding RMB 1 billion in 2023
By this standard, if a chemical drug can achieve annual revenue of over 3 billion RMB in the domestic market, it can be considered a legend in the industry. This year, there is a high chance that "Furmonertinib," an innovative drug by the Sci-Tech Innovation Board-listed company Athenex, will break through the 3 billion RMB sales threshold.
According to Athenex's semi-annual report disclosed on August 21, in the first half of 2024, the company achieved a total revenue of 1.576 billion RMB, a year-on-year increase of 110.57%. The net profit attributable to the parent company was 656 million RMB, up 214.82% year-on-year. Most of Athenex's half-year revenue of over 1.5 billion RMB was driven by the sales of the small molecule targeted drug Furmonertinib.
Furmonertinib was approved by the National Medical Products Administration in March 2021 for treating patients with T790M mutation-positive NSCLC who developed resistance after treatment with first- or second-generation EGFR-TKIs. According to the FURLONG study results, Furmonertinib has a longer median progression-free survival (PFS) of 20.8 months compared to Gefitinib; particularly, it performs exceptionally well in patients with EGFR-sensitive mutations (L858R) and those with brain metastases.
In June 2022, Furmonertinib was further approved for first-line treatment of patients with EGFR-sensitive mutation-positive advanced NSCLC and was included in several authoritative treatment guidelines. These guidelines recommend Furmonertinib monotherapy as the preferred option for patients with EGFR mutation-positive advanced NSCLC. Since then, Furmonertinib's sales have surged.
Image source: Insight Database
In 2023, Furmonertinib's annual sales exceeded 2 billion RMB, nearly tripling compared to 2022. On top of this high base in 2023, Furmonertinib's sales in the first half of 2024 further skyrocketed, surpassing 1.5 billion RMB, indicating a strong likelihood of exceeding 3 billion RMB for the full year. This performance has already surpassed that of most anti-PD-1 monoclonal antibodies in the domestic market.
Industry analysts attribute Furmonertinib's explosive growth to two main factors: first, its outstanding product quality, with significant therapeutic efficacy; and second, its well-chosen niche market. Its indication, non-small cell lung cancer (NSCLC), is the most common type of lung cancer in China, accounting for approximately 80%-85% of all lung cancer cases. In 2022, the market size for targeted therapies for NSCLC in China was 54.2 billion RMB, with biological drugs accounting for 18.48 billion RMB and small molecule targeted drugs for 35.72 billion RMB.
As a third-generation product, Furmonertinib has the potential to compete with AstraZeneca's Osimertinib, which has annual sales of 5 billion RMB. Currently, Furmonertinib has officially launched a "head-to-head" challenge against Osimertinib—China's Clinical Trial Registry and Information Publicity Platform shows that Athenex has registered a Phase III clinical trial to evaluate the efficacy and safety of Furmonertinib combined with platinum-based chemotherapy compared to Osimertinib for treating patients with EGFR-sensitive mutation-positive non-squamous NSCLC with brain metastases.
According to the analysis by Jian Shi Bureau, the profitability of a drug depends on three key factors: the patient base, market penetration rate and speed (with domestic medical insurance negotiations being critical as they determine penetration rate and speed), and finally, pricing.
For EGFR drugs targeting the lung cancer market, the potential is immense, with around 450,000 new EGFR-positive patients annually in China. This large patient base allows the market to accommodate not only established players like AstraZeneca's Osimertinib, Athenex's Furmonertinib, Hansoh Pharma's Ameletinib, and Betta Pharma's Befotertinib, but also leaves room for one or two new entrants. Even with the recent approval of Dizal Pharma's Reziletinib, bringing the number of third-generation EGFR-TKIs in China to six, there's still significant potential to tap into this multi-billion RMB market through insurance inclusion and price-volume trade-offs.
Unlike other sectors where companies compete primarily by slashing prices, the EGFR sector is driven by product quality, with companies vying for the top spot in future sales. Therefore, for a new drug to succeed in the domestic market, it must align with the market's capacity, the current level of competition, and the product's strength. If a market is still in its early stages, and the clinical value of a company's product is high, there is an opportunity to enter the market early, even if it means facing tough "soul bargaining" during insurance negotiations.
For example, the insurance prices for the four already-listed third-generation EGFR-TKIs, Ameletinib and Furmonertinib, are 2,016 RMB and 2,494 RMB per box, respectively, with a monthly treatment cost of around 5,000 RMB (two boxes per month). Due to intense competition, Osimertinib's monthly treatment cost had to be reduced to 4,966 RMB. The more recently launched Befotertinib also saw its price drop from 6,000 RMB to 2,800 RMB per box, with a monthly cost of 8,400 RMB (three boxes per month). These are the current insurance prices, with patients paying approximately 30% out-of-pocket.
Relying on a single blockbuster drug to sustain revenue can lead to challenges once the drug passes its commercial peak. To address this, innovative pharmaceutical companies often expand indications, iterate products, and develop a product matrix to manage pricing pressure from insurance.
Another example of a company successfully entering the domestic market through insurance negotiations is Innovent Biologics. Founded in 2011, Innovent focuses on developing, producing, and marketing innovative drugs for major diseases such as cancer, metabolic and cardiovascular diseases, autoimmune disorders, and ophthalmology. Its portfolio of anti-tumor drugs primarily targets the domestic market, and through rapid expansion facilitated by insurance negotiations, the company's revenue reached 4-4.5 billion RMB in 2021 and 2022. In 2023, it achieved a significant breakthrough with revenue hitting 6.2 billion RMB. The first half of 2024 also showed impressive growth, with revenue reaching 3.7 billion RMB, a 60% year-on-year increase.
Innovent Biologics has 10 products approved for marketing
After overcoming a plateau in 2022, Innovent's strong growth in the past two years has significantly narrowed its losses. In 2023, the company's net loss decreased from over 2 billion RMB to 1 billion RMB, with the possibility of achieving annual break-even within the next two years.
Over the past seven years, the adjustment of the National Reimbursement Drug List (NRDL) in China has become a routine process. This year, the number of drugs included in the list reached a record high of 196, with most innovative drugs being covered. Participation in NRDL negotiations has become inevitable for new drugs. Previously, aggressive price cuts during negotiations were seen as a major hurdle for new drug development in China. However, the approach to pricing in these negotiations is becoming increasingly flexible, which is favorable for the growth of innovative drugs.
Simplified Renewal Process: In 2022, the National Healthcare Security Administration (NHSA) introduced a simplified renewal process, where price reductions are based on an incremental decrease of 5%-25%. This policy has been gradually refined over the past few years and is seen as a significant benefit for innovative drugs. The NHSA disclosed that in the 2023 NRDL adjustments, 70% of the drugs were renewed at their original price.
Comprehensive Evaluation for Price Adjustments: The NHSA now conducts a thorough evaluation of new drugs before adjusting their prices. Factors such as clinical value, social impact, market conditions, whether the drug fills a treatment gap, and whether it is a First-in-Class (FIC) or Best-in-Class (BIC) are all considered during price negotiations. In the first year, a price that the healthcare fund can bear and the company can accept is agreed upon. As long as the price stays within the company’s budget for fund expenditure or remains within a reasonable range, a minimal price reduction can be negotiated.
Introduction of Drug Classification: Starting last year, the NHSA introduced a new drug classification method during evaluations, categorizing drugs into four types: breakthrough therapies, improved new drugs, drugs with equivalent efficacy, and inferior drugs. This method underscores the increasing recognition of the value of innovation in new drugs.
The analysis by Jian Shi Bureau highlights that under the current healthcare system, the domestic market is striving to achieve a balance between patient benefits and encouraging innovation. Additionally, it has been revealed that new drugs with plans to enter international markets receive extra attention during the review process. For such drugs, pricing confidentiality is maintained, and efforts are made to consider their global market prospects when calculating technical pricing standards.
Overall, these policy shifts are paving the way for more flexible pricing mechanisms in NRDL negotiations, making it easier for innovative drugs to succeed in the domestic market.
