According to the latest report of the international market research institute IMARC, the global generic drug market reached 386 billion US dollars in 2020. Affected by the aging population, the high cost of new drugs, the pressure of medical insurance payment and other factors, generic drugs are gaining great popularity and penetration in the world.

In the United States, for example, FDA approved 948 generic drug applications for (ANDA) in 2020, including 72 first generic drugs. The proportion of generic drugs in prescription drugs has increased over the past decade, from less than 70% before 2010 to 89% in 2020, which means that generics are now used in almost 9 out of every 10 prescriptions in the United States.

On the other hand, the proportion of generics sales has been declining, only 11% in 2020. Generics have saved the health care system $2.2 trillion over the past decade, including $253 billion in 2016 alone, exceeding total generic sales that year, according to a report released by the FDA Drug Evaluation and Research Center.

This has also brought about changes in the pattern of generic drug manufacturers.

According to public information statistics in 2020, the top 10 generic drug revenues in the world are:

In 2010, fierce pharma, a well-known American media, also announced the ranking of the top ten generics companies of that year:

01 the evolution of global TOP10 generic pharmaceutical companies

Fierce mergers and acquisitions should be the most enthusiastic thing among the global generics giants in this decade, and almost every one is a regular customer of mergers and acquisitions.

The history of mergers and acquisitions of Teva, the world's largest generic drug company, can be traced back to the 1970s. In 1976, Teva first became Israel's largest pharmaceutical company through the merger of three pharmaceutical companies, and then opened the way to Buy Buy expansion. In the more than 40 years since then, Teva has initiated more than 30 mergers and acquisitions, and generic drug companies in Canada, Peru, Japan and other countries have been pocketed by them, and their tentacles are involved overseas.

In 2016, Teva completed the acquisition of Elgin's (Allergan) generic drug business for US $40.5 billion, making it the top generic drug in the world. Mergers and acquisitions are also closely linked behind the deal. Eljian's generic drug business acquired by Teva was renamed by Watson Pharmaceutical (Watson Pharmaceuticals), once the third-largest generics company in the United States.

If Teva has previously become the biggest rely on acquisitions, Huizhi (Viatris), which may challenge his position in the future, also relies on mergers and acquisitions.

When American generics giant Mylan (Mylan) and Pfizer (Upjohn) announced a merger in 2019, the new company was expected to generate $19 billion to $20 billion in revenue in 2020. However, according to the financial information released by Huizhi, the total revenue of Viatris and its subsidiaries in 2020 is mainly based on the historical performance of Mellan, which is about $11.95 billion. However, its performance guidance of $17.5 billion in 2021 will overtake Teva to become the number one generic drug company in the world.

Another change is that a total of five Indian companies have been squeezed into the 2020 list, and the name of India's generics power is becoming more and more "worthy of the name".

Sun Pharmaceuticals, at the top of the list, became the fourth largest generics company in the world in 2020, and its development also represents the expansion trajectory of the Indian generics giant. Sun Pharmaceuticals, which was founded in the late 1980s, entered the US market in 1996 and became the number one Indian pharmaceutical company in the US market after acquiring Ranbaxy from the first third Party for US $4 billion in 2014. The vast majority of Sun's revenue comes from overseas markets, with revenues of $4.6 billion in 2020, 70 per cent of which are from overseas, 33 per cent from the US market and 47 per cent from regulatory market operations in the US and Europe.

02 generics are really worthless?

"No innovation means death, and innovation means living. Cai Dongchen, chairman of Stone Pharmaceutical, has made it clear that at present, some imitation pharmaceutical companies with relatively good cash flow are transforming as soon as possible to move towards innovative drugs while there is cash flow.

Innovation has become the key word of pharmaceutical companies. "in order to innovate, even if they were not good at BD trading in the past, many pharmaceutical companies now have to buy products overseas, which has pushed up the authorized trading price on the one hand, and the homogenization of targets on the other hand is quite serious. An R & D executive at an innovative pharmaceutical company is talking about license in.

When all drug companies turn to innovation, are generic drugs really worthless?

In the United States, 9 out of 10 prescriptions filled out by doctors are generic drugs. The US generic drug market was worth $115.2 billion (750 billion yuan) in 2019, with a compound annual growth rate of 11.7 per cent between 2014 and 2019. According to the estimates of the IMARC Group, the US generic drug market will show strong growth in the next five years.

Back in China, it is reported that 2018 is the first year for the approval of generic drug consistency evaluation varieties in China, and it is also the starting point for China's rise from a big generic drug country to a powerful country. In the past, the generic drug market in China was upside down with the global market. on the one hand, generic drugs have been in a weak position in the competition with the original drugs for a long time, which is basically an open layout; on the other hand, based on the above-mentioned layout, the generic drug market is still nearly 500 billion yuan in 2018, coming from more than 4500 pharmaceutical companies.

The core reason for the upside down is the "high pricing of generics". In order to solve this problem, one is to increase the variety of overevaluation, and the other is to increase the purchase quantity, which requires the real linkage of the three doctors.

In March 2016, the former CFDA forwarded the "opinions on the consistency Evaluation of the quality and efficacy of generic drugs" issued by the General Office of the State Council, and the generic drug consistency evaluation was officially opened. In November 2018, the Medical Insurance Bureau formally launched the pilot project of "4-7" with volume procurement, which has been carried out in 4 batches and 5 rounds so far. According to official data, by 2020, the average reduction of the first three batches of selected products has reached 54%, and the overall cost savings have exceeded 100 billion yuan; the annual cost savings of provincial collection can reach 24 billion yuan; and the collection of high-value medical supplies coronary stents has saved 11.7 billion yuan.

Generic drugs as the basis of the process of transformation and innovation, in order to reduce drug prices and improve patient accessibility, China can not do without generic drugs.

03 where is the spring of generics? Why can't China produce the top 10 generic drug companies in the world?

With the advance of collection, generics companies gradually despair: where is the spring of generics?

However, it has to be said that the generics after collection is the norm and the new birth of generics. Compared with the data of the United States, the price of clopidogrel 75mg tablets in the United States is $0.30 / tablet, the price of Xinlitai in China is 3.18 yuan / tablet for the first time with the same specification, and the lowest price of stone drug in the second expansion is 2.44 yuan / tablet, which is the price truth of generics.

As for why generic drugs are so cheap in the United States, the key is full competition. One of the main camps of the global TOP10 drug companies, whether Indian or Israeli, is the US market, with a good space policy, including a six-month protection system for the first generic drugs, including encouraging hospital pharmacies and pharmacies to use generic drugs. "the United States is a free replacement system for generic drugs on the market, and the basic principle is consistency, which is recognized by both pharmacists and patients. So as soon as generics are on the market, pharmacies and hospital pharmacies automatically replace them, and about 80% of sales switch to generics. An investor familiar with generic drug sales in the US had previously told E Drug managers.

In the past, the main reason for the high price of generics in China lies in the channel. After collection, the channel factor no longer affects the price of generics, and economies of scale become the core factor of the price of generics. Why Qilu Pharmaceutical always quoted the lowest price every time, but posted the good news every time. "it's still profitable. You can visit his factory. "said one investor.

The lack of lower costs also makes it impossible for domestic drug companies to go out to sea on a large scale and compete with the top generic drug companies. According to past data, Teva had 330 product listing applications waiting for approval at FDA in 2016, of which 71 are expected to be approved in advance and 95 are the first. By comparison, the total number of ANDA approved by 22 domestic pharmaceutical companies in 2016 was 22, compared with 12 in previous years. If you do not go abroad, whether it is innovative drugs or generic drugs, it is tantamount to a broken leg.

However, it is worth paying attention to why the past generic drug market of 500 billion yuan (equivalent to 2Acer 3 in the United States) has failed to cultivate a global TOP10 generic drug company.

"the concentration is too low, there is no integrator," one analyst commented. Over the past many years, there have been no major mergers or acquisitions of Chinese pharmaceutical companies, and all the world's top generic drug companies have been built through acquisitions.

However, with the continuous reduction of drug prices, the polarization of enterprises in the industry will become more obvious, and there will be mergers in the future. This development can refer to the growth road of the top 10 generic pharmaceutical companies, as well as the development of domestic drugstores. Hillhouse Capital stirs up the whole industry like a catfish and greatly increases the concentration of the industry.

There are also views that excellent innovative pharmaceutical companies will break through the siege in the future, pharmaceutical giants with successful generic drug transformation should climb another tall building, emerging small enterprises can make a U-turn, and re-R & D and production can survive by relying on collective procurement and streamlining personnel as much as possible. On the other hand, the intermediate enterprises not only have a certain accumulation, but also have their own inherent problems, and the slow response may be the change of ownership.

On the other hand, the entry of Indian pharmaceutical companies into China will also make mergers and acquisitions necessary and accelerate their arrival. After the "China-India Drug Regulatory Exchange meeting" held in June 2019, the four Indian giants are figuring out how to open up the Chinese market. Sun Pharmaceutical signed a cooperation with Kangzhe and said it would expand its business in China; Sipla (Cipla) established a joint venture with Jiangsu Chuangnuo and set up a factory in China; Strides also established a joint venture with Sihuan Pharmaceutical; Natco Pharma to focus on the development of antineoplastic drugs in China through Durui Pharmaceuticals.

Reduce costs through mergers to achieve economies of scale or the future of generics, so who will be the integrator?

04 who might be the integrator?

If the integration between generics companies is bound to happen in the next five or 10 years, who will be the integrator?

The integrator either needs to have strong capital operation ability, or needs capital, or needs strong operation ability, or is limited by the scale that it is difficult for him to transform and innovate as a whole. According to these levels, we can find two dimensions of enterprises: one comes from the industrial direction, or CMO, or pharmaceutical companies, and the other comes from the direction of capital, which is the best at saving.

The scale of Yangzijiang Pharmaceutical Co., Ltd. can support the title of "integrator". The first is revenue. What is the revenue of Yangzijiang Pharmaceutical Co., Ltd.? It's a mysterious number in the industry. According to a list of local pharmaceutical companies with the top 200 sales in hospitals, the sales of Yangzijiang Pharmaceutical Company reached 9.297 billion yuan in the first half of 2020, or about 20 billion on an annual basis. Some data show that the income of Yangzijiang Pharmaceutical Industry has reached 80 billion yuan.

The second is personnel assets, according to its website, the company currently employs more than 16000 people, which is second only to Hengrui, China Biopharmaceutical and Stone Pharmaceuticals. Among them, the chemical generics team has nearly 1000 people, mainly engaged in high-end preparations, chemical generics, consistency evaluation and other drug research and development, or one of the largest branches except the sales team.

The third is the variety. By 2020, the group has 301 varieties and 314 specifications, covering anesthesia, analgesia, respiratory and anti-allergy, anti-infection, anti-tumor, cardiovascular, contrast agents and so on. Among them, 122 varieties of chemical drugs are on sale and more than 500 projects are under research. Up to now, 25 varieties have been passed or regarded as through consistency evaluation, of which 15 are the first over-evaluation in the country.

Last year, the Yangtze River began to disclose its innovative layout. In November 2020, Yangzijiang Pharmaceutical reached an exclusive strategic cooperation with Alvotech, a biopharmaceutical company, and Anwo Hi-Tech, a joint venture company of Changchun Hi-Tech. According to the agreement, Yangzijiang Pharmaceutical Co., Ltd. will acquire the commercial rights and interests of eight biosimilar drugs in China. At that time, Yangzijiang Pharmaceutical said that the commercial cooperation with Alvotech and Anwo Hi-Tech was an attempt of international cooperation in biomimetic drugs. Yangzijiang's vision is to develop, manufacture and introduce high-quality biomimetic drugs.

Also focus on another unlisted drug company, Qilu Pharmaceuticals, which could reach the world's leading generic level if it becomes an integrator. According to Shandong Business Daily, Qilu Pharmaceutical's business income in 2019 was 23.2 billion yuan, surpassing Stone Pharmaceutical Group in the same period and on a par with Hengrui Pharmaceutical.

In terms of assets, it has more than 15000 employees and 2000 full-time R & D personnel, and has ten major production bases at the same time. In terms of drug varieties, Qilu has launched more than 200 products in China. According to Minne.com, in 2020, Qilu Pharmaceutical ranked second in the number of imitation pharmaceutical varieties, and the application for listing of generic drugs ranked fourth, with a very strong first imitation ability. There are also products under development following the launch of the first bevacizumab bioanalogue. Qilu has a certain foundation in internationalization, and its APIs and preparations have covered more than 70 countries and regions, such as Europe, North America, Japan and so on.

Since last year, Qilu Pharmaceutical has acted frequently in innovation, successively, such as bladder cancer innovative drug Vicineum (an ADC targeting EpCAM), new hypertension drug firibastat and so on. At present, there are 15 category 1 new drugs under development. If it becomes an integrator, it will become a big pharmaceutical company with generics and innovative drugs at the same time.

The last one is a bold guess-Hillhouse Capital. Just like you in 2017, it's hard to imagine Hillhouse buying drugstores on a big scale. Since the establishment of Gaoji Medical, which runs drugstores in 2017, it has taken only two years to acquire tens of thousands of drugstores and is now the largest chain drugstore in China.

The entrance of Hillhouse brought "panic" to the drugstore, and the whole industry opened a huge wave of acquisitions, promoting the concentration of the whole pharmaceutical retail. The chain rate of drugstores in China rose from 49.44 percent in 2016 to 55.34 percent in 2019, according to data. TOP10's market share rose from 14.4% in 2014 to 21.6% in 2018. Then cross-border look at the case of Hillhouse Capital to save Belle, after Hillhouse integration seems to be able to coruscate vitality.

Since 2020, Hillhouse has subscribed heavily for stakes in pharmaceutical companies in the secondary market, with the intention of becoming the second or third largest shareholder through fixed growth. Successively participated in Kailaiying, Hualan Biology, Health Yuan and other fixed growth, and this year also participated in the IPO investment of Green Leaf Pharmaceutical and Nuocheng Jianhua, with an intention to increase by more than 10 billion yuan. In addition to becoming a major shareholder through a large investment in the secondary market, excluding the investment in the primary market, Hillhouse is also directly involved in making medicine through incubation and the establishment of Xilu Pharmaceutical Co., Ltd. Therefore, we can wait and see whether Hillhouse will roll up its sleeves and become an integrator again in the future, and whether it will become the spring of generics.