Performance explosion, trade tightening, where do the bioreactors above the outlet go?

On the second day of the Year of the Tiger, domestic pharmaceutical investors were really frightened.

CdMO, a biologics with the highest production capacity in the country, is included in the U.S. Department of Commerce's "Unverified List" (UVL). Single-use bioreactors, which are the core consumables of production tools, have not been explicitly cut off, but import screening has become more complicated. All along, domestic manufacturers have been highly dependent on imports for the use of disposable bioreactors, and WuXi Biologics has also been hesitant in responding to the domestic substitution of regulated products, "If imported products can achieve 90 points, the domestic current level can only reach the level of 60 points." "In the context of the global shortage of new crown vaccines, this part of the production capacity has begun to tilt to foreign manufacturers, and the cycle of domestic manufacturers waiting for supplies has been lengthened, and under stricter import rules, the shortage of disposable bioreactors will obviously increase."

Of course, for secondary market investors, the bigger panic is that more key biopharmaceutical raw materials are stuck in the neck. Therefore, even if WuXi Biologics made a full response for the first time, it still could not stop WuXi App's individual stocks from opening low, involving WuXi AppTec being "lying gun", and after a sharp low opening, it fell to a stop quickly, while the Hong Kong stock WuXi Biologics fell by more than 30%, suspended trading at noon, evaporated the market value of more than 1,000 Hong Kong dollars throughout the day, and this negative market continued until the later trading days.

If you look at the other side of the coin, you will find that this situation provides an excellent opportunity for the domestic substitution of disposable bioreactors that has not been realized for a long time.

Just in the past few days, domestic biopharmaceutical consumables manufacturers have ushered in a continuous surge in stock prices. Dongfulong, whose products cover the core process links of various biopharmaceuticals from liquid nitrogen storage to cell storage, rose 8.03% on the day of UCL news, and rose 6.41% the next day. The stock price of Chutian Technology, a leading domestic pharmaceutical equipment company, also rose by 8.49% and 6.64% respectively.

In fact, these two companies are probably the biggest hidden winners during the COVID-19 epidemic, on the one hand, the stock price has frequently doubled from a few yuan to tens of yuan in market value, and on the other hand, the net profit has successively exceeded the mark of 100 million yuan, gradually moving closer to the leading enterprises in the upstream of biopharmaceuticals. Since the outbreak of the new crown, jinyi shengshi, Lechun biology, donning biology and other one-time bioreactor field star projects, but also continue to expand production capacity, increase research and development efforts, has become an important part of the industrial chain, and this shrinking import gate, undoubtedly for them to become bigger and stronger inject more powerful momentum.

Long sedimentation

In recent years, biopharmaceutical upstream tools have entered the vision of entrepreneurs and investors, and high-quality projects in petri dishes, chromatography devices and other subdivisions have successively stood on the cusp, making disposable bioreactors appear to be lagging behind. The reason is that the higher technical barriers of disposable bioreactors will block most domestic teams from independent research and development, and what they can do is to accumulate cognition with reverse research and development and explore the inflection point of innovative technology, which is precisely an important part of the growth of this cell culture technology.

What people usually call a single-use bioreactor is a cell culturer composed of plastic materials certified by regulatory agencies (such as polyethylene, vinyl acetate, polycarbonate, polystyrene, etc.), related controllers and regulatory software. It is characterized by out-of-the-box, non-reusable use, providing conditions suitable for cell growth and product formation. This cell culture tool, which first appeared in the laboratories of American biologists in the 1960s, did not enter large-scale applications until nearly 40 years later, wave Biotech introduced the wave hybrid disposable bioreactor 20 for commercial production.

At present, disposable bioreactors are widely used for seed expansion culture, including small to pilot-scale mammalian cells, plant cells and insect cell culture, which is the mainstream production process of monoclonal antibodies, vaccines, and recombinant proteins. For single-use bioreactors, the limitation of reactor size and the problems that may be caused by membrane dissolutions and precipitates have been a long-term problem in the industry.

Specifically, on the one hand, the previously mentioned single-use materials are difficult to withstand continuous high pressure, limiting further amplification of the scale of disposable bioreactors. On the other hand, single-use plastic bags for cell culture may release dissolutions when they come into contact with cultures, which, once in the medium, will hinder cell growth, and there is currently no standard test method suitable for detecting dissolutions from different membranes. The optimization of these underlying technologies is undoubtedly a process of long-term experience accumulation and repeated trial and error.

Internationally, the development of disposable bioreactors is a process of multiple iterations, and has produced mainstream types of wave hybrid, stirred, orbital vibration and shake type in different periods. These single-use bioreactors, developed based on different principles, correspond to different cell type culture priorities and maximum working volumes.

After the wave Bioreactor 20 was introduced, in the third year, the orbital vibratory disposable bioreactor was fully operated in the laboratory for the first time, and in 2004, Hyclone introduced the first stirred disposable bioreactor with a maximum working volume of 250L.

Among them, the wave disposable bioreactor is widely used in the culture of mammalian cells that are sensitive to shear force in seed cell expansion culture. The development speed of orbital vibratory disposable bioreactors is relatively slow, mainly in the culture of animal cells and plant cells with low oxygen requirements, mainly limited to laboratory-scale applications, mostly for animal cells, microalgae, insect cells, plant cells, microorganisms, etc.

Stirred disposable bioreactors appeared late, but developed extremely fast and have become the most widely used type. Thermo Fisher Scientific, GE, Sartorius, Merck, Pall, etc. have launched stirred disposable bioreactors with larger working volumes.

Among them, Thermo Fisher Scientific's Hyperforma, with a maximum working volume of 2000L, is mainly used for the culture of animal cells and insect cells, while GE, Sartorius's 2000L stirred disposable bioreactor XcellerexXDR and BIOSTATSTR are mainly used for the culture of CHO cells, mammalian cells and so on. The emergence of 2000L products is an important milestone in the development of stirred disposable bioreactors, and subsequently, 3000L-6000L stirred disposable bioreactors were quickly developed by industrial giants such as AVEC and Thermo Fisher Scientific.

In this process, the supply side of disposable bioreactors has experienced very active industrial mergers and acquisitions. For example, Fenwal, which developed plastic plasma bags, was acquired by Fresenius Scarbie, Nunc, who developed CellFactory, eventually belonged to ThermoFisher, the forerunner WAVE was acquired by GE, and then because GE sold its life sciences division to Danaher, it eventually belonged to Danaher, and Hyclone was first acquired by ThermoFisher and then transferred to GE, which currently belongs to Danaher.

At this stage, the global disposable bioreactor market is mainly occupied by overseas giants such as Cytiva, ABEC, Sartorius, etc., and Dongfulong, Chutian Technology, Doning Biology, Lechun Biology, Jinyi Shengshi, etc. have made a layout in advance, but the advantages are still limited to related peripheral consumables. For example, the disposable reaction/liquid storage/stirring bag provided by Lechun Bio has occupied 20-30% of the domestic market.

An investor who has long been concerned about the field of biopharmaceuticals told Arterial Network that at the underlying technical level, there is still a big gap between the domestic disposable bioreactor team and the overseas giants, "The core teams of many domestic manufacturers have professional experience in the research and development and management positions of relevant overseas giants, and they attach great importance to technology research and development, and the direction is relatively accurate." In a sense, the anxiety caused by WuXi Bio's entry into UTL will be a positive incentive for their technology development. ”

The hottest track above the vent

It is undeniable that disposable bioreactors will become one of the most active segments of investment and financing activities in 2021.

In July 2021, JinYiShengshi, a provider of biopharmaceutical disposable systems, completed two consecutive rounds of important financing within 6 months, each with a financing amount of hundreds of millions of yuan. Half a year later, Huatai International Private Equity Fund led the B+ round of financing of tens of millions of dollars in Jinyi Shengshi Biologics. Founded in 2014, the company was the first in China to realize the localization of disposable bioreactors and disposable consumables process technology in the biopharmaceutical process, and after introducing head institutions such as Matrix Partners China, Huarui Investment and Jiayuan Capital in the A round of financing, the B round of financing was supported by CMB International Capital, Sherpa, CITIC Medical Fund, C&D Emerging Investment and other institutions.

At the end of 2021, Lechun Bio and Doning Biotech have successively announced the completion of series C and B+ rounds of financing, involving an amount of more than 1 billion yuan.

Among them, Lechun Biologics, a provider of biopharmaceutical one-time process technology and overall solutions, also completed the B round of financing led by two funds led by Junlian and invested by Hillhouse Venture Capital's Shanghai Hillhouse Chenjun Equity Investment Partnership in the first half of the year, and then introduced a number of well-known institutions to complete hundreds of millions of dollars of B+ round financing. Focusing on the development of serum-free media, disposable products and bioreactors in the biomedical industry, Doning Biotech has received continuous additional investment from existing shareholders such as Sequoia China and Qingchi Capital in the C round of financing, and has introduced well-known professional investment institutions Telford Capital and Huitianfu.

In fact, the capital outlet brings abundant liquidity, allowing these domestic disposable bioreactor companies to free up their hands and feet to invest in more complex technology and product development. For example, the Lechun biological team has focused on the development of biopharmaceutical disposable consumables and equipment for more than 10 years, and recently began to set up a research and development center in the United States, integrating the upstream industrial chain, ensuring the supply chain, and expanding the R&D market operation team at home and abroad, officially entering the global competition sequence of key technologies.

For another example, Doning Biology started with CHO cell culture medium, and after acquiring 40% of the shares of Lechun Biologics in 2016, it has accelerated the pace of mergers and acquisitions in the past two years, and has expanded the income of Guangzhou Qizhi, Lianghei Technology, Jinke Filtration, Shanghai Ximai, ATS Antuosi and other companies from the original localization serum-free culture medium and new disposable consumables platform, and continuously added new business areas to extend the upstream and downstream supply fields of biopharmaceuticals.

Among them, Guangzhou Qizhi specializes in laboratory cell bioreactors, pilot and production cell bioreactors, laboratory microbial fermentation tanks, and pilot and production microbial fermentation tanks, the technical strength is comparable to imported similar products, while Bright Black Technology provides professional and personalized technical solutions for biopharmaceutical liquid transportation, instrument connection, fluid storage and system assembly, etc., providing GMP-grade pharmaceutical hoses, pipeline assembly, and supporting disposable joints for research and development, small test, pilot and scale production. Sensors and other products, after mergers and acquisitions, will help Doning Bio reduce the cost of disposable products and improve the quality of domestic disposable products.

Entering 2022, the investment and financing of disposable bioreactors is still continuing. Jinyi Shengshi's latest financing was released before the Spring Festival of the Year of the Tiger, and more investors started to visit the one-time bioreactor project. An investor admitted to arterial network that disposable bioreactors and even most biopharmaceutical upstream projects, just look at the market scale is not large, the industry ceiling is basically below 10 billion, but it is an indispensable part of the investment layout of biomedical professional institutions, "In fact, I don't want the heat of the track to be too high." "However, in the face of the continuous outbreak of demand, as a key link of biopharmaceutical disposable bioreactors, it is difficult not to be hot."

Demand continues to explode

If the reasons for the explosion of disposable bioreactors are further analyzed, in addition to the shortage of import supply caused by the new crown epidemic mentioned at the beginning of the article, it is undoubtedly the research and development and clinical landing demand brought about by the continuous prosperity of the innovative drug ecology.

This demand is epitomized by the growing number of clinical trials. In November 2021, the Drug Review Center of the State Food and Drug Administration released the Annual Report on the Status of Registered Clinical Trials of New Drugs in China (2020). The data shows that a total of 2602 clinical trials were registered in 2020, an overall increase of 9.1% over 2019 (2386 cases). Among them, the clinical trials completed in 2020 are mainly Phase I clinical trials, followed by Phase II clinical trials, and only 5 Phase III clinical trials.

Carrying out massive clinical trials for a large number of innovative drugs may be the most lively picture in the short-term domestic pharmaceutical ecology. Usually, the number of patients who need to be enrolled in drug clinical trials increases from phase I to phase III, and the corresponding demand for experimental drugs continues to increase, and as clinical trials push to the later stage, the production capacity of experimental drugs will obviously be under pressure.

Under pressure, innovative pharmaceutical companies have expanded their production capacity, creating a huge demand for bioreactors. In the first half of 2021, 4 domestic PD-1 drugs are in the critical period of listing after being included in the medical insurance catalog, and the construction of production capacity has expanded to varying degrees. Some antibody and ADC drugs that are in the clinical phase III and have submitted marketing applications have also begun to prepare for production capacity construction. The capacity expansion of wuxi biologics, a biopharmaceutical CDMO company, ranks among the top in the country.

According to the financial report of the first half of 2021, the production capacity construction of domestic pharmaceutical companies is mainly based on disposable reactors, most of which are 2,000 liters of production scale. BeiGene and Innovent Bio have begun to shift to the construction of stainless steel bioreactor production lines, which will further reduce the production cost of biological drugs and increase the competitive advantage of volume.

In addition, for those biotechnology companies that do not have the conditions for self-built capacity, the outsourcing demand for promoting clinical generation in research pipelines also puts forward higher requirements for cdMO's production capacity, and promotes the latter to continuously expand their plants. For example, according to the financial report, WuXi Biotech's production capacity construction will be further expanded in the first half of 2021, and it plans to expand its production capacity to 430,000L. In China, WuXi Biologics' production bases have covered Hangzhou, Chengdu, Shanghai and Wuxi, and have also expanded to the United States, Ireland and Germany.

A previous study showed that more than 50 monoclonal antibody varieties or projects worldwide have been carried out using disposable bioreactors, and nearly 77% of pharmaceutical companies and CDMO worldwide use disposable bioreactors for the development of related products.

For example, WuXi AppTec built a 2,000L disposable bioreactor capacity as early as 2013, and successfully copied the cell culture production process in the traditional stainless steel bioreactor, and cultured NSO mouse myeloma cell lines to complete the trial production of the first batch of AIDS treatment monoclonal antibody drugs ibalizumab. For another example, more than 20 domestic enterprises, including Henlius, use disposable bioreactors to produce monoclonal antibody products.

It is worth noting that because the disposable bioreactor has a stronger capacity configuration flexibility than the traditional stainless steel tank, the industrial synergy can be better compatible with the outsourcing performance of CDMO, and can avoid cross-contamination between different production tasks, and improve the efficiency of enterprise operations.

For example, WuXi Biologics' production lines mostly use disposable bioreactors, one of which has the first 4000L disposable bioreactor in China, and the other plant is the world's largest disposable bioreactor cGMP biopharmaceutical factory, with two complete production lines and a total production capacity of 60,000L.

As the international trade environment tends to be severe, the demand for the aforementioned disposable bioreactors has been transformed into opportunities for domestic manufacturers to a certain extent, coupled with the power formed by abundant liquidity, which will drag the industry into a new fast lane of development, and whether this process can give birth to world-class platform-based large enterprises, we are willing to wait and see.

*Cover image source: 123rf