Oriental Securities: Monkey Resources will become the leading domestic pre-clinical CRO core competitive advantage, CXO volume and price double rise reporting terminal or significant improvement

The Zhitong Finance App learned that Orient Securities released a research report saying that as the core raw material for the security assessment business, high monkey prices reflect the rise in domestic demand for security assessments. Currently, there is a huge gap between domestic supply and demand for crab-eating monkeys. Without large-scale imports, domestic monkey prices may reach new highs, and short-term monkey watching resources will become the core competitive advantage for domestic preclinical CRO. The bank believes that sufficient domestic CXO orders and a double increase in volume and price will lead to significant improvements on the reporting side as order execution and transformation are transformed.

Orient Securities's main views are as follows:

It concerns the safety of the innovative drug industry chain, and emphasizes the strategic resource attributes of experimental monkeys

In the context of innovation at the source of innovative drugs in China and the development of globalization “from 0 to 1”, experimental monkeys are no longer ordinary animal experimental consumables, but a pre-requisite for IND declaration, clinical verification, and overseas travel of innovative biological drugs. Experimental monkey resources have become a key “stuck neck” factor limiting the speed of domestic innovative drug research and development, the autonomy and control of the industrial chain, and the competitiveness of enterprises going overseas. Accordingly, experimental monkey reserves and stable supply have become the core competitiveness of pre-clinical CRO. It is worth noting that the rise in monkey prices is not only a short-term mismatch between supply and demand for monkeys, but also a true reflection of the boom in new domestic pre-clinical CRO orders and a reversal in industry demand. Monkey prices will become a key variable affecting the sector's performance and valuation.

Safety assessments for innovative biological drugs are rigidly supported, and demand for experimental monkeys continues to be high

The high demand for experimental monkeys in this round is not a short-term pulse, but a sustainable rigid demand. On the one hand, there were no one-time demand shocks such as COVID-19 vaccine and antibody development in the previous cycle; on the other hand, the new demand mainly came from pre-clinical safety evaluations, while a single IND reported repeated administration toxicity test required the use of about 40 experimental monkeys, and the demand was rigid. In addition, the quantity and quality of the research pipeline for this round of innovative drugs have been greatly improved, and more sustainable long-term commercial value has been realized by going overseas. Judging from the technology cycle, cutting-edge technologies such as double polyantibodies, ADC, and small nucleic acids continue to break through; judging from the forward-looking indicators of CXO prosperity, domestic financing and pipeline data continue to improve.

The supply mismatch gap is difficult to fix, and the price of experimental monkeys may reach a new high

The supply side faced multiple constraints in the short term: on the one hand, in the last round of high monkey price cycles, the industry overspent breeding monkeys, and the actual annual production capacity declined sharply, leading to a sharp decline in actual annual production capacity, while the production cycle of crab-eating monkeys was 6-7 years long and could not be rapidly expanded in the short term; on the other hand, the shortage of experimental monkeys also occurred in the US. Cambodia, the main import destination, also faced competition with US companies, and imports of compliant experimental monkeys were limited. Furthermore, alternative technologies such as NAMs are difficult to implement in the short term. The bank estimates that the supply and demand gap of up to 20,000 experimental monkeys this year is difficult to fill, and the price of monkeys may reach a new high.

Risk Alerts

1. Domestic policy risk; 2. Geopolitical risk; 3. Technology cycle risk; 4. Raw material shortage risk; 5. Risk of changes in assumptions affecting measurement results.