The Biologics market continues to rise as innovative R&D such as YB1 becomes a long-term driver of growth in the anti-tumour industry.

Human life has evolved, evolved, and developed over hundreds of millions of years to the point where modern civilization has finally been able to take more precise control of its health and future destiny thanks to the rapid development of life sciences and medical technology.

From natural medicines (typically represented in China by traditional Chinese medicine) to chemical drugs and then to biological drugs, there has been a dramatic change in the type of mainstream medicine that we are used to. Among these, biologics represent the cutting edge of research and development, offering the most effective way to treat a wide range of medical conditions and diseases that are currently under-treated, and therefore promise to have great clinical and market potential as a new form of medicine.

What is a biological drug? Generally speaking, a biological drug is a pharmaceutical product produced using biological methods and sources designed to modulate the activity of natural substances such as enzymes, antibodies, or hormones. The main applications for biologics include antibodies, peptide vaccines, gene therapy, cell therapy, etc. Biologics with a wide range of applications are at the forefront of drug research and development, particularly oncology.

Huge growth potential for China's biologics market

Biological drugs are currently the world's best-selling pharmaceutical products. Globally, the pharmaceutical market can now be divided into two main categories: biological drugs and chemical drugs. Biological drugs are medicines isolated from various natural sources - human, animal, or microbial - produced by biotechnology methods and other advanced technologies.

According to the professional research report, the global biologics market will grow at a CAGR of 7.8% from US$220.2 billion in 2016 to US$297.9 billion in 2020 and then grow at a CAGR of 12.2 percent. And 8.7 percent from 2020 to 2025 and 2025 to 2030, respectively, to US$530.1 billion and US$804.9 billion in 2025 and 2030. The CAGRs are 12.2% and 8.7% from 2020 to 2025 and 2025 to 2030, respectively.

Compared to the global biologics market, China's biologics market is growing at a faster rate, from US$2.82 billion in 2016 to US$53.2 billion in 2020, at a CAGR of 17.1%. Moreover, it is expected to further reach US$124.9 billion and US$1991.0 billion in 2025 and 2030. With a CAGR of 18.6% and 9.8% from 2020 to 2025 and 2025 to 2030, respectively. CAGRs of 18.6% and 9.8% from 2020 to 2025 and 2025 to 2030, respectively.

The information shows that in 2016, the market penetration of biologics in China was 13.8%. In 2019, while seven of the top 10 best-selling drugs globally are biologics, only three of the top 10 drugs sold in China are biologics. However, the penetration rate of biologics in China rises to 23.9% in 2020 and is expected to reach 43.3% in 2030.

It means that the growth potential of the Chinese biologics market is enormous.

What are the favorable policies for domestic biologics development?

Biological drugs are now widely used in the treatment of oncology and autoimmune diseases. Research has demonstrated that most 'advanced' biologics (e.g., recombinant proteins, monoclonal antibodies, etc.) and next-generation cell therapy technologies are more effective when applied to conditions such as cancer and autoimmune diseases for which no effective treatment was previously available.

Experimental results have shown that biologics are more effective and have fewer side effects in treating these diseases. The growing acceptance of these therapies by patients and physicians alike due to the superior efficacy of biologics is further stimulating demand and market growth. The demand for effective biologics in these therapeutic areas is increasing in China against a backdrop of limited or delayed access to innovative drugs from overseas.

In our country, favorable policies for the development of biologics include several aspects.

Firstly,the ever-simplifying drug approval system. The General Office of the CPC Central Committee and the General Office of the State Council issued the Opinions on Deepening the Reform of the Review and Approval System to Encourage Innovation in Pharmaceuticals and Medical Devices (the "Reform Opinions") in October 2017. Which introduced fast-track and priority review channels for drugs addressing unmet medical needs (e.g., cancer) and the possibility of conditional approval for oncology therapies to enter the market. The approval process for clinical trial applications has been shortened from the previous 12-18 months to 60 days, and clinical trial data generated outside of China can be accepted in the review process if certain requirements are met.

Secondly, the progressively shorter oncology drug development cycle. Before 2010, it took an average of 2,794 days to obtain NDA approval for an oncology drug after obtaining IND approval. However, after 2010, this time has been reduced to 1494 days. The overall approval period is expected to be further reduced, resulting in significant savings in time to market for new oncology drugs.

Thirdly, the State is vigorously promoting the inclusion of biologics into the medical insurance catalog. As of 31 December 2020, a total of 119 innovative patented drugs have been included in Category B of the National Health Insurance List, including 37 new drugs in the category of "antineoplastic drugs and immunosuppressants," as well as all four domestic PD-1 drugs. As a result of the National Health Insurance List, the prices of drugs in the National Health Insurance List have been significantly reduced by introducing competition between different drugs for the same indication and strictly limiting drug prices, increasing affordability and sales of biologics. The dynamic adjustment of the National Health Insurance List has also shown a shortening trend in the entry of innovative oncology drugs into the National Health Insurance List.

Fourthly, all parties are committed to improving the affordability of innovative medicines. The Chengdu model implemented in 2016 is a reform of the Chinese government's current pharmaceutical reimbursement system. Some innovative medicines, usually oncology and orphan drugs reimbursable under the government's health insurance scheme, are reimbursed at the same rate for in-hospital and out-of-hospital pharmacy purchases. In addition, DTP (direct-to-patient) pharmacies that have achieved 'dual channel' status are additionally designated as suppliers of drugs covered by the government health insurance. The successful implementation of the Chengdu model and 'dual channel' payment has increased the affordability and accessibility of innovative medicines.

Finally, the State is implementing favorable policies for oncology drugs and rare disease drugs. According to the Announcement on the Publication of the Second Batch of the List of Anti-Cancer Drugs and Rare Disease Drugs Subject to VAT Policy (VAT Announcement) issued in September 2020, manufacturers, distributors, and retailers of the six active APIs and 14 rare disease drugs listed in the VAT Announcement are eligible for a 3% VAT reduction with effect from 1 October 2020. In addition, the Reform Opinion provides that orphan drugs and medical devices for rare diseases that have been approved for marketing outside China may be approved for marketing in China with conditions. In addition, applicants for registration of drugs and medical devices to treat rare diseases may apply for clinical trial exemptions if they meet certain requirements.

Market size overview for biologics used in oncology treatment

The global market for oncology drugs is growing rapidly.

Industry report data shows that the global oncology drugs market reaches US$150.3 billion in 2020, growing at a compound annual growth rate of 12.5% from 2016 to 2020, and is expected to reach US$304.8 billion by 2025 and US$482.5 billion by 2030, growing at a compound annual growth rate of 15.2% from 2020 to 2025, and at a compound annual growth rate of 9.6% from 2025 to 2030. CAGR of 9.6% from 2025 to 2030.

The share of biologics in the global oncology drugs market continues to rise from 39.6% in 2016 to 49.3% in 2020. Furthermore, it is expected to reach 63.4% in 2025 and 66.2% in 2030.

The oncology drugs market in China is growing rapidly. The market will reach RMB197.5 billion in 2020, growing at a CAGR of 12.1% from 2016 to 2020. It is expected to reach RMB 416.2 billion in 2025 and $ 683.1 billion in 2030. Growing at a compound annual growth rate of 16.1% from 2020 to 2025 and 10.4% from 2025 to 2030.

Publicly available information shows that the share of biologics in China's oncology drug market climbed from 4.7% in 2016 to 17.1% in 2020 and is expected to reach 44.4% in 2025 and 56.8% in 2030.

Innovative therapies create a broader market, and new drug creation provides long-term momentum for the anti-tumour industry.

The dominant paradigm in cancer treatment has evolved over the years, and the development of tumour immunotherapy, after surgery, radiotherapy, and chemotherapy has been particularly influential at present. Providing a valuable treatment option for many cancer patients by improving the outcome of various cancer types and immunotherapy is now the next dominant paradigm in cancer treatment after surgery, radiotherapy, and chemotherapy.

The field of immunotherapy, which is the new pillar of anti-tumour therapy, has seen the emergence of many cutting-edge therapies in recent years, including PD1, PDL1, CTLA4, and other antibody therapies, CAR-T cell therapy, immune vaccines, oncolytic viruses, and oncolytic bacteria, among which oncolytic bacterial therapy is cutting-edge technology.

HKND is the first biotechnology company to successfully modify and invent a lysozyme product through synthetic biology technology that precisely targets the tumor's hypoxic region. Through independent research, we have successfully invented a lysozyme cancer immunotherapy method with high safety and efficacy, achieving a breakthrough in the field of bacterial vector technology.

Throughout the entire oncolytic bacterium track market, there are no mature products available in China yet. As the first major competitor to layout this track, HKND invented the world's first oncolytic bacterium vector YB1.

As the company's core technology product, the tumour oncolytic bacterial vector YB1 adopts a unique tumour hypoxia-specific targeting technology, which can spontaneously lyse and die at high oxygen levels (>0.5%) without harming normal organs. In comparison, at low oxygen levels (oxygen concentration below 0.5%), it will rapidly proliferate itself and release the slug-like drugs it carries to attack the tumour with a tumour lysis effect.

YB1 has already been used in the clinical treatment of primary cancers in pets, including malignant sarcoma, melanoma, breast cancer, prostate cancer, and lymphoma, and is effective in treating cancer in pets. We look forward to furthering developments in applying YB1 technology and exploring oncolytic bacteria in cancer immunotherapy, which will provide new impetus for the long-term development of the global anti-tumour market.