Regardless of whether it is a primary market investment or a secondary market investment, it is a basic requirement for investment managers to understand the basic framework of a large industry. Only when they have a basic grasp of the industry can they know the position and value of the company in the industrial chain. The following is an example of the various links in the industrial chain of the medical and health industry.
The author's team invested in the top three companies in the pharmaceutical industry, equipment manufacturers, distribution companies, third-party diagnostic companies and other industries in the above picture, and investigated other major industrial chain links. Based on the first-hand research information, we will briefly review the various aspects of the entire industry, mainly by self-organizing the investment logic of the big industry for memorization.
　 First, CRO
The basic logic of the industry:
CRO refers to the Contract Research Organization, which provides services ranging from drug discovery to clinical trials. Since the pharmaceutical industry is an administrative control industry, the listing of drugs requires the approval of national regulatory authorities (CFDA in China), and the registration certificate can only be listed for sale. At the same time, the development process of the drug itself is also complicated. Taking small molecule innovative drugs as an example, it is necessary to go through compound discovery, compound optimization, preclinical animal experiments, clinical phase I, phase II, phase III, and new drug declaration. The cost of a successfully marketed innovative drug has reached $1 billion, so there will be a variety of companies in the R&D segment.
Typical companies in the industry:
Typical businesses of such companies include compound screening, compound optimization, animal testing, and clinical research for pharmaceutical companies. With the representative of WuXi PharmaTech, the company started to provide compound screening services for pharmaceutical companies, charging according to the head, or charging according to the compound. The essence of this type of company's business model is R&D outsourcing. For example, pharmaceutical companies pay R&D expenses at a price of 10W per person per year. The company employs domestic R&D personnel at an annual price of 20W RMB, enjoying the domestic “engineer bonusâ€. With the intensification of competition among domestic companies, the profit margin of R&D outsourcing has also dropped rapidly, and the situation of oligopoly of several major companies headed by WuXi PharmaTech has been formed.
Development direction and investment opportunities:
The CRO link has been relatively mature, and the development direction includes the new R&D platform and the adaptation to the downstream R&D model. Most mature companies have already been listed, WuXi PharmaTech will also be privatized, and Kanglong Huacheng will also be listed. In the future, mergers and acquisitions in the industry will be the trend.
　 Second, CMO, API API
The basic logic of the industry:
With the advancement of research and development to the market for drugs, the requirements for the production of pharmaceutical compounds and raw materials are getting higher and higher, from a few grams in the early stages of compound discovery to several kilograms and tens of kilograms in animal experiments, clinical and mass-markets. , the production requirements of tons, so CMO (Contract Manufacture Organization, mainly by the pharmaceutical company commissioned to provide the process development, formula development, clinical trial drugs, chemical or biosynthetic raw materials required for product production Production, intermediate manufacturing, preparation, etc.) and API (Active Pharmaceutical Ingredient), which is intended to be used as a mixture of any substance or substance in the manufacture of pharmaceuticals, and as an active ingredient of pharmaceuticals when used in pharmaceuticals. ) It is born to be compliant. Its essence is the intermediates and raw materials of medicines.
Typical companies in the industry:
CMO's typical companies such as WuXi PharmaTech's subsidiary, Quanquan Pharmaceutical, and A-share listed company Boteng Pharmaceutical. As a subsidiary of WuXi PharmaTech's US listed company, the company's return to the New Third Board has also created a precedent for the return of the new third board of the US listed company to the first stock, and the listing of the company's listing financing, the amount is still very tight.
API companies such as Shijiazhuang Group are already very large. These companies are very mature in antibiotics and vitamins, and have been on the market for many years.
Development direction and investment opportunities:
The core competitiveness of pharmaceutical intermediate production is quality and production capacity. On the one hand, it requires excellent quality control and control capabilities. On the other hand, it needs sufficient capacity to meet downstream demand. High-quality companies in the industry need to bind downstream pharmaceutical companies and good varieties. This link is typical of capital-intensive and suitable for strategic investment. As the industry is more mature, mergers and acquisitions will become the main trend.
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