On December 27th, the multinational pharmaceutical company Sanofi's Resuvastatin Yizhemai Bu Pian (trade name: Zhilida) was approved by the National Medical Products Administration of China as a compound lipid-lowering drug. As a result, Sanofi China's cardiovascular product line has added another innovative drug.
However, since November, Sanofi has been reporting a series of layoffs, including in its cardiovascular product line. At the same time as layoffs, these products will be sold and promoted by local enterprises.
Until December 15th, Sanofi China and Shanghai Pharmaceutical Group announced the official signing of a strategic cooperation agreement. Among them, Shangyao Holdings is a wholly-owned subsidiary of Shanghai Pharmaceuticals. It is also one of the largest pharmaceutical sales enterprises in China, with a total revenue of 127.79 billion yuan in 2022.
According to the article on Sanofi China's official official account on December 15, the two enterprises will carry out omni channel and nationwide cooperation in the field of key diseases. Sanofi's many products, including but not limited to cardiovascular diseases, central nervous system diseases, tumors and other fields, will be promoted based on the marketing service system of Shanghai Pharmaceutical Holdings.
In short, some of Sanofi's products will be sold and promoted by Shanghai Pharmaceutical Group in the future. This also indicates that the previous industry rumors were indeed true. However, for any pharmaceutical company, the sales commission of many large products is not a small matter. The question arising from this is, what exactly happened to Sanofi?
The entrusted products are mostly centralized procurement products
There are mainly six products transferred by Sanofi, including Kesai and Novolab in the cardiovascular field, Debagin in the neurological field, Abajie in the rare disease field, and Lexadine and Tesodi in the oncology field.
With the transfer of drug sales work, the layoff and adjustment of sales personnel is inevitable. It is reported that employees of Sanofi can choose to resign with compensation, and going to drug interviews is another option; Moreover, due to the large number of products involved in this promotion, if Sanofi abandons its own promotion, it will affect about a thousand employees.
Among them, the entire production line of the neural line product Debakin has a staff size of about 500 people. After the team is laid off, the compensation plan is N+3; There are also hundreds of employees from Kesai, Novilex, and Abajie, and employees can choose to interview for medication. However, after a successful interview, a contract is signed with the three parties, and the compensation plan is also N+3; Le Sha Ding and Tai Suo Di can also choose to leave directly with compensation, and the plan is also N+3. However, when going to apply for medicine, N+1 will be provided. Due to the basic salary being given to the translator and the compensation of N+1, many people choose to apply for medicine in the district.
Regarding the rumors of product and employee layoffs and transfers mentioned above, Interface News reporters have verified with Sanofi and Shanghai Pharmaceuticals, and neither side has denied it.
On November 22nd, Sanofi told Interface News reporters that the innovative business model can refer to the content released by Sanofi China's official WeChat account on December 15th; As for the issue of employee retention, the company stated that as a responsible employer, the company will work with partners to provide the best solutions and future career development opportunities for relevant employees, and ensure product accessibility.
From a product perspective, most of the products entrusted by Sanofi to Shanghai Pharmaceutical Group are centralized procurement products. And almost all of these products are lost label products from Sanofi.
Specifically, enoxaparin sodium injection (trade name: Kesai, the same below) and sodium valproate injection concentrated solution (Debagin) are the eighth batch of centralized procurement products, while oxaliplatin injection (Lesatine) and docetaxel injection (Tesodi) are the fifth batch of centralized procurement products. In terms of time, the eighth batch of centralized procurement was carried out at the end of March this year, while the fifth batch of centralized procurement occurred in June 2021.
Among the aforementioned products, Sanofi only won the bid for oxaliplatin injection (losartan). Oxaliplatin injection is a third-generation platinum based anti-tumor drug and a first-line treatment for colon cancer. In 2020, the domestic market size of this product was 2.942 billion yuan. In the fifth round of drug procurement, Sanofi lowered its price from 1760 yuan per unit to 310.5 yuan per unit. Faced with a sizable market, this company's price reduction efforts are evident.
However, in addition to oxaliplatin injections, Sanofi's labeled enoxaparin sodium injection (Kesai), sodium valproate injection concentrated solution (Debagin), and docetaxel injection (Tesodi) are also products with a market size of billions of yuan. Before the centralized procurement, Sanofi, as an enterprise with original research advantages, performed well in the market of these products, with an overall sales scale of at least 2 billion yuan.
Specifically, according to data from Yaorong Cloud, enoxaparin sodium injection is a large variety with a scale of 2 billion yuan. Before centralized procurement, the domestic market presented a situation of "one super and multiple strong", with original research Sanofi occupying the largest market share. Specifically, in 2021, Sanofi's sales of enoxaparin sodium injection exceeded 1 billion yuan, accounting for about 50% of the market share.
As a broad-spectrum antiepileptic drug without nitrogen, sodium valproate is the largest variety of antiepileptic drugs. According to data from Mi Nei Net, in 2019, the terminal sales of sodium valproate in public medical institutions in China exceeded 2 billion yuan, and injections accounted for more than 60% of the market share, which is over 1.2 billion yuan. Similarly, before the centralized procurement, the original pharmaceutical company Sanofi also held a major market share.
Docetaxel injection is one of the commonly used drugs for treating tumors in China. According to data from Mi Nei Net, in 2019, the terminal sales of docetaxel injections in public medical institutions in China exceeded 4 billion yuan, with Hengrui Pharmaceutical having the largest market share, followed closely by Sanofi.
Moreover, in the fifth round of injection procurement, Sanofi's docetaxel injection left a classic scene - at the same time as its peers quoted less than 60 yuan and its competitor Hengrui Pharmaceuticals quoted 22.6 yuan, the company quoted a maximum price of 860 yuan and voluntarily eliminated it. If the centralized procurement is eliminated, it will naturally lose its original market position.
How to deal with the once large single product of Sanofi, which failed in centralized procurement, has become a problem. The simplest truth is that it is a pity to give up directly in the face of markets with foundations and scale. Therefore, how to obtain the maximum profit with the minimum cost has become a matter that Sanofi needs to consider.
For Sanofi, the company has been expanding from "4+7" due to the impact of centralized procurement, and the influence of Polivi (formerly developed clopidogrel) and Ambonol (formerly developed irbesartan hydrochlorothiazide) has continued to this day; In insulin procurement, another representative product, Glargin Insulin, is also affected.
If viewed from the perspective of product portfolio, while more high-value innovative drugs have not formed sufficient advantages, the product lines of foreign enterprises are actually in a stage of being in a state of decline. Therefore, how to find new living space and sales strategies for existing advantageous products in the new situation is also something that foreign enterprises need to try.
In addition to centralized procurement, in terms of carbonated Siweilam tablets, this variety has already met the conditions of having 5 or more companies that have passed the evaluation and are originally developed, indicating a higher risk of centralized procurement. This product is also a high phosphorus kidney disease treatment drug with a market size of about 700 million yuan. Another drug, Teraflutamide Tablets (Abajie), is mainly used to treat multiple sclerosis. It was approved in 2018 and once set a record of only 58 days from approval to market, making it the "fastest" innovative drug launch process for rare diseases in China. However, in early 2022, domestically produced trifluoramide was approved. In China, there are approximately 30000 patients with multiple sclerosis (MS).
Overall, the products currently entrusted by Sanofi to Shanghai Pharmaceutical Holdings for sales are products with lower cost-effectiveness for their own promotion. From the current pharmaceutical market environment observation, reducing costs and increasing efficiency, concentrating resources to maintain advantageous projects, are the common way for all pharmaceutical companies to survive in the cold winter.
Compared to multinational pharmaceutical companies, local enterprises have two advantages. On the one hand, the advantage of sinking markets, such as having more branches in non core markets, may enable them to have more breakthrough capabilities in markets outside of centralized procurement, which is also necessary for some products that have failed centralized procurement. Meanwhile, although tertiary hospitals generally have a larger presence in society, the scale of China's primary healthcare market is very large.
On the other hand, from the perspective of labor costs, compared to local enterprises, foreign enterprises have a higher base salary. Therefore, cooperation between foreign and local enterprises objectively saves a considerable amount of labor costs. Once foreign enterprises entrust the sales rights of products, it is equivalent to only considering sales targets and profit sharing issues. In addition, outsourcing the original research products and introducing and developing more high-value innovative drug products is more in line with the current strategy of foreign enterprises in the Chinese market.
Multinational pharmaceutical companies accelerating their transformation in China
In terms of performance, in the first half of this year, Sanofi China's revenue was 1.54 billion euros, a year-on-year decrease of 4.5%, mainly due to the impact of the epidemic and centralized procurement. On a quarterly basis, Sanofi's revenue in China decreased by 14% in the first quarter, but increased by 6.3% in the second quarter. In addition, in the third quarter of this year, Sanofi China's sales revenue was 728 million euros.
From the changes in executives at Sanofi China this year, starting from August 1, 2022, Shi Wang will replace He Enting as the President and Head of General Pharmaceuticals for Sanofi's Greater China region, becoming Sanofi's first local CEO in 40 years in China. On September 1st this year, Shi Wang was promoted to the position of President of Sanofi Greater China.
In addition, Sanofi's global business performance is currently under considerable pressure. On October 27th, this company plummeted by 19.13% and its market value evaporated overnight by $25.7 billion, marking the biggest tragedy for MNC (a multinational corporation) in nearly a decade. It is also the largest daily decline since Sanofi's US stock market went public in 2002.
The trigger for all of this was Sanofi's quarterly report released during the same period, as well as the company's updated "Play to Win" strategic plan. In terms of performance, Sanofi's net sales in the third quarter were 11.96 billion euros, a year-on-year decrease of 4.1%.
In the strategy plan of striving for victory, Sanofi mentioned increasing investment in research and innovation, splitting consumer healthcare business, and also proposed optimizing costs. Specifically, the company stated that it wants to save 2.7 billion euros on research and development investment to maintain the growth potential of pharmaceutical companies. However, due to increased investment in research and development, Sanofi expects that earnings per share will only achieve moderate single digit growth in the next two years. This has also sparked dissatisfaction among investors.
From all aspects of conditions, Sanofi China must further optimize its strategy at present. If we observe from the perspective of domestic industry status, cooperating with local leading enterprises has become another strategy for foreign companies to demonstrate localization.
Before Sanofi announced its cooperation with Shanghai Pharmaceutical Group, on December 1st, the official WeChat account of Shanghai Pharmaceutical Science Park Trade announced that Science Park Trade had reached a strategic cooperation with Pfizer China to expand the vaccine market, and the two sides would cooperate in the long term. In late November, Pfizer also reported layoffs for its celebrity pneumonia vaccine product.
Like Shanghai Pharmaceutical Holdings, Keyuan Trading is also a subsidiary of Shanghai Pharmaceuticals. Specifically, it is the core pharmaceutical service enterprise of Shanghai Pharmaceuticals North Platform Shangyao Keyuan, mainly engaged in import procurement, high-end vaccine import distribution, etc. The company's imported vaccine quantity accounts for more than half of the total imported vaccines in the country. In 2022, the revenue of Shanghai Pharmaceutical Science Park was 49 billion yuan.
In addition, in the field of vaccines, on October 9th, Zhifei Biotechnology announced that it had obtained the exclusive marketing and promotion rights of GlaxoSmithKline shingles vaccine in mainland China. Earlier, Merck's HPV vaccine was also handed over to the agent of Zhifei Biotechnology.