Kailaiying Pharmaceutical Group (Tianjin) Co., Ltd. (hereinafter referred to as 'Kailaiying') successfully listed on December 10, 2021, with a global issuance of 18,415,400 shares at a price of HK$388.00 each, raising approximately HK$7.15 billion.
During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, investment banks, and other intermediaries in completing relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication with the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the company in completing feedback on various industry-related issues from the Hong Kong Stock Exchange.
Overview of Pharmaceutical R&D Expenditure
Global pharmaceutical R&D expenditure
With the continuous expansion of the global pharmaceutical market, global pharmaceutical R&D expenditure steadily increased from $156.7 billion in 2016 to $204.8 billion in 2020, with a compound annual growth rate of 6.9%. It is expected that this growth will continue, and by 2025, total expenditure is projected to reach $295.4 billion, representing a compound annual growth rate of 7.6% starting from 2020. US pharmaceutical companies continue to invest heavily in pharmaceutical R&D, accounting for 43.8% of global pharmaceutical R&D expenditure in 2020. In the past five years, China has played an increasingly important role in the growth of global pharmaceutical R&D investment. The following chart shows the growth of global pharmaceutical R&D expenditure:
Global Pharmaceutical R&D Expenditure Comparison, 2016 - 2025E
Source: Frost & Sullivan report
China's pharmaceutical R&D expenditure
The high growth potential of the Chinese pharmaceutical market is supported by strong investment in pharmaceutical research and development. R&D expenditure in China's pharmaceutical industry increased from 788 billion yuan in 2016 to 1703 billion yuan in 2020, with a compound annual growth rate of 21.3%. It is expected to maintain a strong momentum and further grow to 3423 billion yuan in 2025, with a compound annual growth rate of about 15.0%, approximately twice the global growth rate of R&D expenditure. The following chart shows R&D expenditure in China's pharmaceutical industry by research and development stage:
China's pharmaceutical R&D expenditure by clinical stage, 2016-2025E
Source: Frost & Sullivan report
CMO/CDMO Market Overview
CMO/CDMO Services Overview
CMO and CDMO services generally refer to the pharmaceutical production services provided by CMO and CDMO companies to pharmaceutical companies. The following diagram illustrates the services provided by CMO/CDMO companies from preclinical to commercialization stages:
Source: Frost & Sullivan report
In the process of drug development, CMO companies mainly focus on production itself, essentially producing drugs according to the manufacturing processes provided by pharmaceutical companies without any process development or optimization work. In contrast, CDMO companies not only provide production services but also offer manufacturing process development and optimization services based on the chemical structures of the drugs provided by pharmaceutical companies, as well as various value-added services including but not limited to method development and validation, stability testing, and impurity research.
A key aspect of pharmaceutical production is the manufacturing of active pharmaceutical ingredients (APIs), which consist of three components: registered starting materials (RSMs), cGMP intermediates, and APIs. The large-scale production of cGMP intermediates and APIs requires advanced technology platforms, well-equipped factories, and comprehensive quality control systems. The large-scale production of APIs is an important part of the CDMO market, with high entry barriers and strict R&D investment requirements.
Global CDMO market
As the outsourcing trend in the pharmaceutical industry continues to intensify, CDMO has gradually become an indispensable part of the pharmaceutical company's value chain, and the market size of CDMO services is expanding faster than the entire pharmaceutical market.
The global CDMO market increased from $35.3 billion in 2016 to $55.4 billion in 2020, with a compound annual growth rate of 12.0%, exceeding the 3.0% growth rate of the global pharmaceutical market during the same period. It is expected that this growth will continue, with the global CDMO market expected to reach $106.6 billion by 2025, representing a compound annual growth rate of 14.0% from 2020 to 2025, while the compound annual growth rate of the global pharmaceutical market during the same period is expected to be 5.7%. The following chart shows the global CDMO market size divided by chemical/biological drugs:
Global CDMO market size by chemical/biological drugs, 2016-2025E
Source: Frost & Sullivan report
China's CDMO market
Driven by many positive factors such as the expansion of the pharmaceutical market and government preferential policies, China's CDMO market has seen a growth rate exceeding that of the global CDMO market over the past five years. From 2016 to 2020, China's CDMO market grew from RMB 105 billion to RMB 317 billion, with a compound annual growth rate of 32.0% over five years. It is expected that this growth will continue, with the market size reaching RMB 1235 billion by 2025, representing a compound annual growth rate of 31.3% from 2020 to 2025, which is much higher than the expected global compound annual growth rate of 14.0%. The following chart shows the CDMO market size in China divided by chemical/biological drugs:
The scale of the China CDMO market, by chemical/biological drugs, 2016-2025E
Source: Frost & Sullivan report
Analysis of the Competitive Landscape in the CDMO Industry
According to the 2020 revenue statistics, Cailaiying ranks second in China's chemical drug CDMO market, accounting for 13.9% of the overall market share.
Analysis of the Market Share of Major Competitors in China's Chemical Drug CDMO Industry, 2020
Source: Frost & Sullivan report
According to 2020 revenue statistics, Celgene ranks first in the commercialization stage of chemical drugs CDMO market in China, accounting for 22.0% of the overall market share.
Analysis of the Market Share of Major Competitors in China's Commercial-stage CDMO Market for Chemical Drugs, 2020
Source: Frost & Sullivan report
CDMO production services can be categorized into bulk drugs (including RSM, cGMP intermediates, and APIs) and pharmaceutical formulations (including preparations and packaging). The difficulty and complexity associated with the manufacture of these products gradually increase with the manufacturing process. Generally speaking, companies capable of large-scale API production exhibit higher cGMP capabilities, enabling them to further expand their business into pharmaceutical formulation production. The following table shows a comparison of major participants in the Chinese market by drug category:
Source: Frost & Sullivan report
In the CDMO industry, the key factors for success include one-stop service delivery capabilities, advanced technology, professional talent reserves, sufficient production capacity and strict quality control, as well as excellent customer service. Currently, the backdrop of healthcare reform, encouragement for innovative drug research and development, support from policies and regulations, and the construction of continuous innovation technology platforms will promote the vigorous development of the CDMO industry in the future.
Frost & Sullivan, integrating 60 years of global consulting experience, has dedicated 23 years to serving the booming Chinese market with a global perspective. We help clients accelerate their business growth and achieve benchmark positions in industry growth, innovation, and leadership. The healthcare industry is one of the core areas of focus for Frost & Sullivan. Over the past sixteen years, the Frost & Sullivan healthcare team has provided financing financial advisory, IPO industry advisory, strategic consulting, management consulting, and other services to hundreds of outstanding domestic and international biopharmaceuticals, medical devices, healthcare services, and internet healthcare companies. Successful listings include: Eagle Eye Technology (2251.HK), Clover Biotech (2197.HK), Minimally Invasive Robotics (2252.HK), Harmony Kai-Man (2256.HK), Kunbo Medical (2216.HK), Xianruida (6669.HK), Kangsheng Global (9960.HK), Yimaitong (2192.HK), Tengsheng Bo Yao (2137.HK), CanSinoBiosciences (2162.HK), Chaopu Ophthalmology (2219.HK), Guichuang Tongqiao (2190.HK), Hehuang Medicine (0013.HK), Kexier Pharmaceutical (2171.HK), Zhaoke Ophthalmology (6622.HK), Nature Medicine (UPC.NASDAQ), Sino Biologics (6600.HK), Zhaoyan New Drugs (6127.HK), Novogene Health (6606.HK), Tianyan Pharmaceutical (ADAG.NASDAQ), Beikang Medical (2170.HK), Jianbimiao Miao Miao (2161.HK), Minimally Invasive Heart Link (2160.HK), RuiLi Medical Beauty (2135.HK), Jiake Pharmaceutical (1167.HK), Hebo Medicine (2142.HK), JD Health (6618.HK), Deqi Pharmaceutical (6996.HK), Rongchang Biotech (9995.HK), WuXi AppTec (2126.HK), Simcere Pharmaceutical (2096.HK), Yunding New Energy (1952.HK), Jiahe Biotech (6998.HK), Zai Ding Pharmaceutical (9688.HK), Ocular Therapeutics (1477.HK), Yongtai Biotech (6978.HK), Hapre Pharmaceutical (9989.HK), Kexier Pharmaceutical (9939.HK), Peijia Medical (9996.HK), Kangfang Biotech (9926.HK), Nuo Cheng Jian Hua (9969.HK), Tian Jing Biotech (IMAB.NASDAQ), Kanglong Chemical (3759.HK), China Antibody (3681.HK), Dongyao Pharmaceutical (1875.HK), Yasheng Pharmaceutical (6855.HK), Fuhong Hanlin (2696.HK), Hansoh Pharmaceutical (3692.HK), Mabotech (2181.HK), Fangda Holdings (1521.HK), Via Biotech (1873.HK), CStone Pharmaceuticals (2616.HK), Junshi Biosciences (1877.HK), WuXi AppTec (2359.HK), Innovent Biologics (1801.HK), Hailun Medicine (2552.HK), BeiGene (6160.HK), Gilead Sciences (1672.HK), WuXi Biologics (2269.HK), China Resources Medicine (3320.HK), Jacobus Bussing Scientific Research Pharmaceutical (2633.HK), Hehuang China Medicine (HCM.NASDAQ), Biotechnology (1548.HK), BBI Life Sciences (1035.HK), etc. In terms of the number of filings, the Frost & Sullivan healthcare team maintains an absolute leading position in Hong Kong healthcare IPOs, continuously occupying over 90% of the market share from 2018 to 2020.
Since the first batch of companies on the Sci-tech Innovation Board (STAR Market) were listed in July 2019, Frost & Sullivan reports have also been widely cited in the prospectuses of leading STAR Market-listed companies in the industry. These include: Novogene (688105.SH), Chengda Biology (688739.SH), Geckov Microelectronics (688728.SH), Huaxi Biotechnology (688363.SH), Junshi Biosciences (688180.SH), Zhejiang Genomics & Biotechnology Co., Ltd. (688266.SH), BeiGene (688177.SH), Shenzhou Cells (688520.SH), and others. It is considered one of the most powerful, professional, and influential industry research institutions in the sector. We hope to work with enterprises to understand industry trends, seize development opportunities, jointly promote innovation and upgrading of China's healthcare industry, and build a healthy future.
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