The Most Promising Pipeline in 2022: Yuhan’s Lazertinib
The author is an analyst of NH Investment & Securities. He can be reached at pk.park@nhqv.co. -- Ed.
The primary beneficiary of the Covid-19 pandemic in the pharma/bio industry has been large-cap pharmas. The biotech industry has been performing sluggishly during the pandemic due to delayed clinical trials and M&S deals. That said, global healthcare funding reached a historic high in 2020, brightening the prospects for biotech firms upon a resumption of clinical trials and M&A deals.
Covid-19 vaccine development efforts have led to the growth of the CMO and GCT markets. Unlike existing vaccines, Covid-19 vaccines are mostly GTC vaccines such as viral vector and mRNA vaccines that do not require protein production, shortening the development period. Amid a push to develop GTC vaccines for Covid-19, CMOs are mass-producing GCTs after mainly producing small molecule and monoclonal antibody therapies.
In 2022, new drug companies should take a leap forward and the CMO segment should propel the growth of the pharma/bio sector. We advise paying attention to major domestic beneficiaries such as Samsung Biologics and Yuhan.
I. 2021 pharma/bio market review
In 2020 alone, about 2,000 clinical trials were suspended, which is exceptionally high given the average 46 suspensions per month in 2019. As a result, global R&D expense rose only 0.9% y-y in 2020. In addition, M&A deals in the global market have remained subdued due to the pandemic. As global clinical trials are getting back to normal amid a transition to a post-pandemic era, we expect M&A deals of bio companies in non-anti-infectives (such as oncology) to accelerate, thus fostering development of new drug-developing biotech firms.
II. 2022 outlook, assuming market normalization
In 2020 and 2021, global clinical trials have remained hampered due to the pandemic. But, despite the major disruption of global clinical trials, investment in the bio industry has soared significantly. In particular, the IPO market for bio firms jumped from US$8.3bn in 2019 to US$22.1bn in 2020. Overall bio industry funding, meanwhile, expanded from US$170bn in 2019 to US$250bn in 2020. Venture funding, which contracted y-y to US$24.5bn in 2019, resumed explosive growth, climbing to US$33.7bn in 2020. With the raised funds likely to be spent on new drug development from next year, we project strong growth for the pharma/bio industry.
III. In mid-2020s, CMO segment to grow, driven by monoclonal antibody therapies and GCTs
In the mid-2020s, the CMO segment should grow, driven by monoclonal antibody therapies and GCTs. The monoclonal antibody therapy market was valued at US$160bn in 2020, taking up more than half of the bio CMO market. The monoclonal antibody therapy market is estimated to grow at a CAGR of 10% to around US$390.5bn by 2030. The GCT CMO market should grow sharply on the development of GCT Covid-19 vaccines such as viral vector and mRNA vaccines.
IV. Top pick
We maintain our Positive stance on the pharma sector. While there are uncertainties surrounding Covid-19, the CMO segment (crucial for the domestic pharma/bio sector) should keep growing and clinical trials should normalize. In 2022, the most promising pipeline is Yuhan’s Lazertinib (NSCLC treatment). Janssen is expected to apply for breakthrough therapy approval from the FDA within the year or accelerated approval in 2022. We also hold upbeat prospects for the bio drug CMO industry. When Samsung Biologics’ plans for future investment (plants #5 & #6, investment in US and Europe) become tangible, the firm’s market cap should level up.