Price strategy to be considered.
The potential commercial value of immunoglobulin A glomerular disease (hereinafter referred to as "IgA") is attracting market attention. A few days ago, the management of Genting Xinyao (1952.HK) announced that its drug Nefecon for the treatment of IgA (hereinafter referred to as "Naofukang") is expected to be approved by the China Food and Drug Administration in the fourth quarter of this year. It is understood that Naofukang is not only the world's first targeted drug specifically for the treatment of IgA, but also the first drug approved by the FDA in this field in the past 50 years, filling the gap of "no specialized medicine to treat" in clinical practice. The news stimulated Genting Xinyao's share price, which rose more than 30 per cent in intraday trading on June 20 and finally closed at 18.74 yuan per share, up 27.31 per cent, and its market capitalization rose 1.269 billion yuan from a year earlier. Before June 15, Yunding Xinyao closed up as much as 54.01, with its market value soaring by 1.913 billion yuan a day. Another source of enthusiasm for Genting Xinyao in the secondary market is that international pharmaceutical company Novartis (NV S.N) plans to acquire Chinook Therapeutic(KND Y.O), an American biotechnology company with a kidney disease pipeline, for 25.118 billion yuan. The latter's clinical drug Atrasentan can be used to treat IgA. This is seen by the market as the IgA field or has greater development potential, which in turn drove up the share price of Genting Xinyao. According to management's forecast, Neifukang's future sales peak is expected to reach 5 billion yuan, which is undoubtedly a major benefit for Yunding Xinyao, whose operating income is only 10 million in 2022. However, many practical problems still lie in front of Genting Xinyao. On the one hand, the current price of Genting Xinyao in Hainan is about 23600 yuan per bottle, and the cost of a course of treatment may exceed 200000 yuan, which is also a test for the ability of Chinese patients to pay; on the other hand, Genting Xinyao is expected to be included in the medical insurance catalogue in the first half of 2025, so "soul bargaining" will also become an inevitable difficulty. The price strategy may become a new challenge for Genting Xinyao. ## 5 billion prospect IgA is a common type of glomerular disease, accounting for about 45% of primary glomerular diseases. Public information shows that although the pathogenesis of IgA is more complex, intestinal mucosal immune abnormalities are regarded as a key cause in the industry. Generally speaking, the galactose-deficient Gd-laA1 molecules induced by intestinal mucosal infection mistakenly enter the systemic circulation and combine with the IgG or IgA autoantibodies produced by the human body to form pathogenic immune complexes containing GD-IgA1. A large number of these complexes are deposited in the mesangial area, which eventually leads to the deterioration of renal function. Without effective interference, the course of IgA may progress to uremia. As a result, patients need to receive dialysis or kidney transplants, which puts great economic pressure on families. Based on the gap in clinical treatment, Yunding Xinyao spent 0.108 billion yuan in 2019 to purchase the commercialization rights of Naofukang, the world's first candidate drug for IgA treatment, in China, Singapore and other Asian regions, from Swedish biopharmaceutical company Calliditas Therapeutics AB(CALT X.O, hereinafter referred to as "Calliditas"), and to continuously promote relevant clinical trials. It is understood that the basic principle of Naofukang is to act on the abnormal immune parts of intestinal mucosa, so as to reduce the level of circulating Gd-IgA1 and so on, so as to achieve the effect of treating IgA. Public data show that compared with placebo, IgA patients taking Naofukang for 9 months and 15 months after stopping the drug, the decline in renal function was reduced by 50%. In 2021 and 2022, the drug was approved in the United States and the European Union, and became the first drug approved by the FDA for the treatment of IgA in 50 years. However, due to the small number of IgA patients in Europe and the United States, the sales of the drug after listing are relatively limited. Calliditas 2022 financial report shows that the current sales of Nai Fu Kang is only 0.536 billion yuan. But IgA is a common disease in our country, and more often in young people. Public data show that at present, the number of IgA patients in China is between 4 million and 5 million, of which more than 80% are under the age of 45. Because of this, the sales potential of Nai Fu Kang in China has attracted the attention of the market. On June 19, the management of Genting Xinyao announced at the investor exchange meeting that it is expected to obtain listing approval from the China Food and Drug Administration in the fourth quarter of 2023. Not only that, Luo Yongqing, CEO of Genting Xinyao, also pointed out at the meeting that Nai Fukang's sales peak is expected to reach 5 billion yuan. This is undoubtedly a big plus for Genting Xinyao, which has an income of only 0.071 billion yuan in 2022. On June 20, Genting Xinyao rose more than 30 per cent at one point, closing at 18.74 yuan per share, up 27.31 per cent, and its market capitalization rose 1.269 billion yuan a day. It is worth mentioning that before this, Genting Xinyao has been sought after by the secondary market. June 15 closed up as much as 54.01, the market value of a day soared 1.913 billion yuan. Market enthusiasm was ignited with a piece of news. On June 15, Novartis announced the acquisition of Chinook Therapeutic, an American biotechnology company with a kidney disease pipeline, for 25.118 billion yuan. The latter's clinical drug Atrasentan can be used to treat IgA. Many people in the industry believe that it is the huge transaction that has triggered the market's attention to IgA, thus re-pricing Genting Xinyao. ## The annual treatment cost is more than 200000? Although Nelfukang has a significant effect, there are many practical difficulties in commercialization. On the one hand, the expected pricing of Nefokam is not low, which tests the ability of Chinese patients to pay. At present, the price of Naofukang in the United States is about 100000 yuan/bottle, and the treatment cost is 700000 yuan to 900000 yuan. Domestic prices are relatively low. In April this year, Hainan Drug Administration gave priority to the approval of Naofukang for clinical use in Hainan Hospital of Ruijin Hospital affiliated to Shanghai Jiaotong University School of Medicine. The price of Nifukang is 23600 yuan/bottle. According to the calculation of 9 bottles per course of treatment, the patient has to pay 212400 yuan. However, this price is still under pressure to pay for many patients. Yunding Xinyao responded to Xinfeng (ID:TradeWind01) in response to the price of sky-high drugs, pointing out that many patients have received registration applications under the price system of over 200,000 yuan per year for treatment. "The EAP project that Nefecon landed in Boao, Hainan has a monthly price of 23600 yuan and treatment for 9 months. Within a few weeks after the project was launched, we received hundreds of patient registrations." Genting Xinyao said to the trade wind (ID:TradeWind01). On the other hand, according to Luo Yongqing's plan, Nai Fukang is expected to be included in health insurance in the first half of 2025, and "soul bargaining" is also a challenge to the realization of sales thereafter. Xinfeng (ID:TradeWind01) noticed that the price of Noxinasan Sodium Injection, a well-known "sky-high drug" previously known as "700,001 needles" for the treatment of spinal muscular atrophy, dropped to 33000 yuan after entering the medical insurance. According to media statistics, the annual treatment cost of drugs in the current medical insurance catalogue does not exceed 300000 yuan. Zheng Jie, head of the expert group on the calculation of the National Medical Insurance Negotiation Drug Fund, once publicly stated that the prices of products included in the medical insurance catalog need to take into account factors such as per capita disposable income to maximize the benefits of residents. "The fund estimates the pursuit of not the lowest price, but a reasonable price. Combined with the per capita disposable income of urban and rural residents in China, etc., comprehensive consideration of the patient's personal affordability, through the measurement to find a most patients can be able to afford the price, the maximum range of benefits to the people, so that the negotiation is meaningful." Zheng Jie said. Sales of the million-dollar drug Akirensa Injection (Yikeda), which suffered the failure of health care negotiations, are not optimistic today. As China's first CAR-T product, Yikaida's market sales in 2022 are expected to be only about 0.3 billion yuan. Some market participants believe that this is a dilemma for Genting Xinyao. "This is a test of the price strategy of the pharmaceutical companies. If Nifu Kang does not enter into health insurance, according to the consumption level of Chinese residents is estimated not many people can afford to use, that scale can not be up to say; into health insurance, it must be the soul to bargain, it depends on how the pharmaceutical companies to balance." An innovative drug analyst in Beijing told Xinfeng (ID:TradeWind01). However, some market participants believe that the incidence of IgA groups have a strong ability to pay. "IgA is more common in young adults, and this group may be willing to pay, so the expected benefits are still there." An innovative drug researcher in Shanghai pointed out. In addition, Genting Xinyao also needs to pay additional related fees to the original research drug manufacturer Calliditas. The agreement between the two shows that Yunding Xinyao will pay Calliditas an additional 0.761 billion yuan when Naofukang achieves the milestones of scheduled development and commercialization. At the same time, Genting Xinyao is also required to pay a corresponding proportion of royalties in accordance with the approved countries of Nai Fu Kang, etc., until 12 years after commercial sales. However, Genting Xinyao may still provide a reference business model for China's innovative pharmaceutical companies, that is, focusing on areas with more patients in the market but less drug development on the market, so as to reduce competitive pressure. But this is still difficult to say simple for China's innovative pharmaceutical companies. After all, Yunding Xinyao mainly adopts the "clever" mode of introducing drugs. At present, more innovative pharmaceutical enterprises in China, which really rely on self-research ability in the market, are still stuck in the quagmire of "me too. Whether Genting Xinyao's business model is sustainable still needs time to be verified.