With the introduction of policies and measures and continuous optimization of resource allocation, the domestic biomedical industry is entering a critical stage of comprehensive development. Recently, a policy document on “full chain support for innovative drugs” came out of the market, lighting a beacon of guidance for innovative pharmaceutical companies at the crossroads of development.
This is certainly a huge benefit for Fu Hong Hanlin (02696), who achieved full year profits for the first time and successfully completed the transformation to an international Biopharma.
According to the latest 2023 annual report, under the guidance of the “internal and external” strategy, Fuhong Hanlin was able to continue to push the core varieties of Han Quyou and H Pharmaceutical Hans to the international market, and while achieving continuous profits and continuously replenish cash reserves, push innovative research and development to a new level, further consolidating the “positive cycle” of its own Biopharma development.
Further explore the commercialization potential of core varieties
In the global biomedical industry financing environment, commercialization capacity has undoubtedly become one of the important indicators for measuring the ability of innovative domestic pharmaceutical companies to differentiate and innovate. For Fu Hong Hanlin, behind large-scale profits, the company's strong innovative R&D strength and differentiated advantages of innovative products have been recognized by both the industry and the market.
The Zhitong Finance App learned that on March 21, Fuhong Hanlin announced its 2023 annual results.
Financial reports show that at present, Fuhong Hanlin has launched 5 self-developed products in China and 2 self-developed products on the global market. A total of 19 indications have been approved, and the expansion of the global commercial landscape continues to accelerate. The company achieved a total revenue of about 5.395 billion yuan in the current period, an increase of 67.8% over the previous year; of these, the company's 5 products achieved a total sales revenue of about 4.554 billion yuan, an increase of 70.2% over the previous year; large-scale revenue growth led the company's steady investment in R&D to reach 1,434 billion yuan, ensuring the steady progress of innovative research and development.
The reason why Fuhong Hanlin was able to achieve its first full-year profit in 2023 was due to the commercialization performance and layout of the two core products Han Quyou and H Pharmaceutical Hans, and this is clearly an important highlight in this financial report.
In 2023, Fuhong Hanlin received 2,737 billion yuan in domestic sales revenue from Han Quyou, an increase of 58.1% over the previous year; the overseas market achieved sales and licensing revenue of about 93 million yuan, a sharp increase of 162.3% over the previous year.
In fact, Han Quyou's upgrade from a popular model to today's cash cow product is inseparable from Fuhong Hanlin's mature production and commercialization system. According to the Zhitong Finance App, Han Quyou achieved rapid global commercialization and implementation within 3 years, making it the largest number of domestically produced biosimilar drugs in the countries and regions approved for listing. In terms of the domestic market, Han Quyou's 150mg/60mg dual-specification products have now completed medical insurance approval in all provinces in China. Up to now, it has benefited more than 180,000 Chinese patients; in the global market, Han Quyou has been approved for listing in more than 40 countries and regions, and has entered medical insurance in many countries such as China, the United Kingdom, France, and Germany.
In the first half of 2023, Han Quyou's US marketing license application was accepted by the US FDA; last year, the company also accepted the FDA's pre-marketing license inspection (PLI inspection) for Han Quyou. Han Quyou is expected to be the first “Chinese” biosimilar approved in China, the European Union, and the US. The US market, which continues to be developed in the future, is also expected to become a new performance growth point for Fuhong Hanlin.
Another major pillar of Fuhong Hanlin's crossing the “annual profit” threshold is its first innovative product, Hans Pharmaceutical. In 2023, H Pharmaceutical achieved further sales volume and received sales revenue of 1,120 billion yuan, which became a key part of fuhong Hanlin's rapid growth and large-scale profit.
Since the launch of H medicine, it can currently be used to treat microsatellite-highly unstable (MSI-H) solid tumors, squamous non-small cell lung cancer (SqnsCLC), extensive small cell lung cancer (ES-SCLC), and esophageal squamous cell carcinoma (ESCC). It is also the world's first and currently the only anti-PD-1 monoclonal antibody approved for first-line treatment of SCLC.
In terms of domestic commercial operations, by the end of last year, the Hans-like sales team had expanded to nearly 600 people, entering more than 50 of 365 key hospitals; in addition, H Pharmaceutical had completed tenders in 30 domestic provinces and successfully entered urban welfare insurance in 75 provinces and cities, benefiting more than 60,000 Chinese patients.
In the global market, the company established a complete international commercialization system, paving the way for Hans to go global.
The Zhitong Finance App learned that the EU marketing license application (MAA) for the first-line treatment of ES-SCLC with H drugs has been accepted by the European Medicines Agency (EMA); in March of this year, the Hans form for ES-SCLC indications was approved by the UK Innovation Pass, marking that H drugs have officially entered the UK Innovation License and Access Channel (ILAP) to help land in the UK; and Hans forms for ES-SCLC indications are also expected to be submitted in the US this year.
At present, Fuhong Hanlin's accumulation in the development and commercialization of two core products, Han Quyou and Hans, has been efficiently transformed into momentum for domestic market expansion and international commercial development. As subsequent explosions continue to advance in the domestic and international commercialization process, the release of market value will eventually continue to be verified in the company's future financial reports.
“Refined management+abundant cash flow” elevates the margin of safety
An important sign of an innovative pharmaceutical company's evolution to Biopharma is switching the company's cash cycle pillar from financing cash flow to operating net cash flow. This not only requires pharmaceutical companies to have cash cow products, but also daily fine management and sufficient cash flow.
Take Fuhong Hanlin as an example. Its net cash flow from operating activities was corrected for the first time in 2021. Since then, as the company's various products were approved and commercialized, the company's net operating cash flow reached 1.05 billion yuan in 2023, achieving net profit of 546 million yuan, and has steadily entered a positive cycle of pharmaceutical value.
Behind this, fine management of all aspects, from sales to R&D, is indispensable.
An important manifestation of Fuhong Hanlin's refined management is that its sales expenses ratio is relatively low in the industry. Since 2020, Fuhong Hanlin has achieved a steady decline in sales expenses under fine management. Financial reports show that in 2023, the company's sales expense ratio was 32.52%, which is a low level compared with the sales expense ratio of innovative pharmaceutical companies listed on AH, which is generally above 40%.
On the R&D side, in 2023, the company's overall R&D expenditure was 2.11 billion yuan, of which 1.12 billion yuan was spent on expenses, 310 million yuan on capitalized expenses, and 680 million yuan on external authorized products, accounting for 53.1%, 14.7%, and 32.2%, respectively. The continuous increase in cost expenditure reflects that Fuhong Hanlin's clinical research and development is gradually becoming a fruitful commercial achievement. The development stage of some major products under development has also reached the middle to late stages of maturity and strong certainty, indicating that Fuhong Hanlin has become a pharmaceutical company with strong innovation capabilities and clinical transformation capabilities.
Furthermore, under fine management, the company's pipeline development can carry out differentiated indication selection, and while achieving the widest coverage of indications that do not meet the needs of patients, it also ensures that the product has broad commercial expectations in the future. For example, the company uses H medicine as the foundation to thoroughly explore joint research between H medicine and its own products such as Hanbetai, HLX07, HLX26, HLX208, and HLX60 to further amplify the synergetic effects of anti-tumor drugs.
In terms of cash flow, Fuhong Hanlin's cash reserves also reached 988 million yuan, an increase of 45.14% over the previous year. In other words, while continuously improving its “hematopoietic capacity,” the company also has sufficient reserves of “food and grass.” This is particularly important at a time when the global biomedical financing environment is still unclear.
Improve the integration of R&D, production and marketing to consolidate Biopharma's development base
After completing the transformation to Biopharma, Fuhong Hanlin did not stop, but instead further improved the closed loop of integrated R&D, production and marketing innovation, and continuously consolidated its Biopharma development base.
On the R&D side, in addition to building a complete and unique set of monoclonal antibody similar drug products, Fuhong Hanlin has also forwardly laid out a diversified, high-quality innovation pipeline, covering more than 50 molecules, comprehensively laying out various high-potential cutting-edge innovative targets such as HER2, VEGF, EGFR, PD-1/L1, BRAF, LAG-3, TIGIT, etc., and effectively promoted tumor immunotherapy combinations based on H drugs, and simultaneously carried out more than 10 clinical trials of immunotherapy combinations worldwide.
It is worth mentioning that in August of last year, the clinical trial applications for Fuhong Hanlin's HLX42 and HLX43 were approved by the Chinese NMPA on the same day. They are all potential first-in-class/best-in-class ADC products, marking the company's official entry into the ADC circuit.
Take HLX42 as an example. As a novel EGFR-ADC, HLX42 has a strong bystander killing effect, has a larger treatment window than similar ADC products, and can enhance the therapeutic effect of ADC in solid tumors. In vivo pharmacodynamics studies, HLX42 showed strong tumor inhibitory activity in various CDX/PDX models resistant to cetuximab or EGFR TKI.
On November 23 of last year, HLX42's IND application was approved in the US for the treatment of advanced/metastatic solid tumors. A month later, on December 27, HLX42 obtained US FDA Fast Track Qualification (FTD) for the treatment of advanced/metastatic non-small cell lung cancer (NSCLC) with EGFR mutations that progressed after treatment with third-generation EGFR tyrosine kinase inhibitors. The ADC HLX43 targeting PD-L1 is also the first domestic same-target product to enter the clinical stage. Phase I clinical research is currently being carried out. This also shows that the company's differentiated R&D strength and forward-looking insight on popular ADC tracks should not be underestimated, showing the company's efficient and rapid clinical development capabilities.
In terms of international quality management systems and production capacity construction, the company's major products Han Quyou and Hanley Kang obtained GMP certification from Brazil, a member of the Drug Inspection Cooperation Program (PIC/S) in October last year, laying the foundation for the company to further expand the South American market; later, in December, the company's core product, Hans, obtained a GMP certificate issued by the Dutch Health Supervisory Authority. According to the GMP mutual recognition system among EU member states, passing the Dutch GMP certification indicates that the above production line has met EU GMP standards, laying a solid foundation for Fuhong Hanlin to further expand Hans-like overseas markets in the future.
Meanwhile, in the field of international commercialization, Fuhong Hanlin is currently working with international partners such as Organon, Abbott, Getz Pharma, and EuroFarma to accelerate the overseas process of various pipeline products, including HLx11, HLX14, Hanquyou, Hanlikon, Handayuan, and Hanbetai.
Taking Hans as an example, Fu Hong Hanlin is collaborating with KGBio on the development and commercialization of H drugs in 22 countries. In December of last year, drug H was officially approved for the treatment of ES-SCLC in Indonesia. This is the first time that H drug has been successfully approved for marketing in overseas markets, and it is also the first domestically produced anti-PD-1 monoclonal antibody to be successfully approved for marketing in Southeast Asian countries. Up to now, H Drug's external licensing has covered more than 70 countries and regions, including the United States, Europe, Southeast Asia, the Middle East and North Africa, and India.
According to data disclosed by the company, in 2023, Hans-like first-tier productivity per capita exceeded 2 million yuan, leading the industry. Combined with the high current increase in net operating cash flow mentioned above, it confirms the company's strong ability to convert sales into net cash flow.
Currently, financing expectations for the global biomedical industry are falling rapidly as the Federal Reserve's interest rate cut expectations “drastically shrink,” and it is unknown when the general financing environment will improve in the cold winter. However, even so, Fuhong Hanlin was able to achieve rapid and smooth progress simultaneously with key pipeline research and global commercialization processes. In the future, supported by abundant cash flow, Fuhong Hanlin is expected to accelerate its transition to the international leader Biopharma in systematic competition in various fields such as global R&D, overseas registration, and commercialization through continuous improvement of the closed loop of R&D, production and marketing innovation.