In mid-June, Eli Lilly, with a market capitalization nearing USD 850 billion, announced that its GLP-1 triple hormone receptor agonist, retatrutide, showed Phase 2 clinical results in treating metabolic dysfunction-associated steatotic liver disease (MASLD), reducing liver fat content by up to 86%. Retatrutide’s potential to become the next market sensation has once again excited participants in the GLP-1 peptide industry.

In recent years, developing small molecule drugs has become increasingly challenging, while the homogeneity among large molecule drugs has intensified. Despite these trends, peptide drugs have maintained impressive global market performance. Notably, the GLP-1 segment, dominated by semaglutide and tirzepatide, has opened a new frontier, elevating the market to a new level.

Over the past two to three years, the popularity of drugs for diabetes and weight loss has driven many upstream raw material providers and contract development and manufacturing organizations (CDMOs) to seize this significant opportunity. Data indicates that the share of Chinese peptide CDMOs in the global market is expected to rise from 5% in 2020 to 9% in 2025. In terms of raw materials, Chinese companies have filed more DMFs for peptide-related active pharmaceutical ingredients (APIs) with the US Food and Drug Administration (FDA) than their US and European counterparts.

Capacity expansion, process technology upgrades, and IPO fundraising—each company’s strategy varies, but the goal is the same: to secure orders.

In 2024, a crucial point is the expiration of patents for major overseas products like liraglutide, making the volume growth of generic drugs inevitable. Many Chinese products are about to complete development and enter the market, such as Innovent Biologic’s GLP-1 dual-target product mazdutide, which has already applied for listing.

Generic products spur further market growth

In recent years, the GLP-1 target has ignited enthusiasm for peptide drug R&D, with market-leading products continuously driving development opportunities in the related API and CDMO industry chains.

However, current progress shows that the two blockbuster products, semaglutide and tirzepatide, have relatively late data disclosure for significant indications like Alzheimer’s disease (AD) and non-alcoholic steatohepatitis (NASH). For example, the Phase 3 clinical trial for NASH treatment is expected to be completed by 2029, with a certain window period before market launch. In the short term, the most direct market catalyst may come from the proliferation of generic peptide drugs, including those developed domestically in China.

In previous years, the expiration of patents for products such as Novartis’s octreotide for acromegaly and AstraZeneca’s exenatide for diabetes drove an increase in volume of a batch of products, providing a significant opportunity for Chinese peptide API companies and CDMOs to undertake overseas transfer demands. Now, the GLP-1 target products, gradually approaching the patent cliff, will undoubtedly push this momentum to the next level.

For example, the patent for liraglutide under Novo Nordisk will expire this year. According to the US Securities and Exchange Commission (SEC) documents, generic drug giants such as Teva, Mylan, and Sandoz have been approved to launch liraglutide generic drugs this year. Although relevant companies have not directly disclosed upstream suppliers, 36Kr reported that Chinese companies have evidently participated in the competition.

In its 2023 annual report, A-share peptide CDMO Shengnuo Biotechnology disclosed that the company’s APIs for drugs like liraglutide have been exported to international markets like Europe, the Americas, and South Korea. Additionally, Hybio Pharmaceutical has announced multiple times since last September that it received orders for GLP-1 APIs from overseas, with disclosed amounts reaching between RMB 556–568 million (USD 76.5–78.1 million).

Meanwhile, the number of upstream peptide API suppliers and CDMOs aiming to participate in this battle is still increasing. According to official data, as of the end of 2023, there were more than 20 FDA DMF filings for liraglutide, including Chinese companies like Hangzhou Jiuyuan. In China, Hybio Pharmaceutical and Sinopep have also registered APIs with the Center for Drug Evaluation (CDE).

Besides generic drugs, Chinese companies investing in GLP-1 pipeline R&D also bring incremental markets. For example, Huadong Medicine’s GLP-1 product liraglutide covered over 1,000 large hospitals and more than 30,000 pharmacies by the end of the first quarter of 2024. Additionally, in the highly anticipated GLP-1 dual- and triple-target market, fast-moving companies like Innovent’s mazdutide planned to submit a listing application for weight loss indications early this year. Hengrui Medicine and BrightGene Bio-Medical Technology are also in the late stages of clinical trials.

As these products gradually enter the market, betting on mature Chinese products has also become a source of orders for upstream companies. For instance, Innovent’s chosen CDMO partner for mazdutide is domestic CXO leader Asymchem. Recently, Sinopep announced that it had reached a CDMO cooperation agreement for GLP-1 with a well-known Chinese biopharmaceutical company, agreeing to a tiered supply price for APIs after the client’s terminal formulation is approved in China.

According to a report by Frost & Sullivan, globally, the volume brought by GLP-1 drugs led the non-insulin peptide drug market to surpass the insulin peptide drug market for the first time in 2017. By 2030, the global non-insulin peptide drug market is expected to exceed USD 100 billion in value.

This means that opportunities still exist for latecomers in the face of enormous downstream market demand. “Peptide synthesis is a current R&D hotspot,” a person from a leading Chinese CXO company told 36Kr. “Traditional methods can generally meet capacity needs, but they are insufficient for disruptive products like semaglutide. Although top companies are constantly building GLP-1 peptide capacities, CDMOs are still needed.”

Securing that order: Expanding capacity, improving technology, and IPOs

Currently, in the rapidly growing upstream peptide market, no clear leader has emerged yet.

Taking the performance of CDMOs as an example, in 2023, overseas companies Bachem and PolyPeptide Labs’ peptide businesses contributed USD 431 million and USD 313 million in revenue, respectively. WuXi AppTec’s TIDES segment, focused on oligonucleotides and peptides, also showed significant growth, reaching RMB 3.41 billion (USD 469.3 million).

In other words, the market share gap between leading Chinese and international companies is not significant. Chinese companies, with their engineering and cost advantages, have the potential to overtake them.

Expanding capacity is the most direct method. Traditional peptide production mainly uses solid-phase peptide synthesis (SPPS), which is automated with high product yield and purity. However, it has clear disadvantages, such as purification difficulties and long cycles. For example, the solid-phase synthesis of the long peptide semaglutide, which has more than 30 residues, takes more than two weeks. Since there is limited room for process improvement, capacity is mainly expanded by building plants. On the other hand, peptide CDMOs have economies of scale, and suitable synthesis methods can potentially reduce costs.

Companies already benefiting from GLP-1 products, such as WuXi AppTec and Asymchem, are naturally among the most active participants. WuXi AppTec’s new capacity expansion projects at its Changzhou and Taixing bases went into operation in January this year, increasing the volume of solid-phase peptide synthesis reactors to 32,000 liters. Asymchem’s total solid-phase synthesis capacity was 10,250 liters at the end of last year and expected to increase to 14,250 liters in June. Additionally, Hybio Pharmaceutical and Tide Pharmaceutical have also disclosed new capacity expansion plans.

Developing new processes has also become a breakthrough direction for some companies. For example, Asymchem recently told investors that it is actively promoting peptide CDMO business development and strengthening the capacity reserves of new technologies such as liquid-phase synthesis. This method is closer to small-molecule synthesis, not constrained by solid-phase capacity and synthesis efficiency, and helps control impurities and reduce costs. The company added that this could be “the future trend for large-scale peptide synthesis.”

Furthermore, seeking listing and fundraising through the GLP-1 wave to gain more certain opportunities is not uncommon. For example, Tide Pharmaceutical, a peptide CRDMO company that filed for an IPO in Hong Kong at the end of May, already has nine R&D orders from seven customers developing oral or injectable GLP-1 products and still aims to construct infrastructure, expand capacity, and develop customers.

Overall, unlike small molecule drugs and other drug forms, peptide companies are more dependent on suppliers. Apart from external factors such as investment scale and certification time, technical barriers also prevent companies from entering this field easily. For example, due to the complexity and interconnectivity of production and synthesis steps, peptide drugs require higher integration, usually needing a single company to complete the production process end-to-end, making it difficult to delegate the process.

For example, according to Tide Pharmaceutical’s prospectus, the average cooperation time with its major customers is 14 years. From 2018 to 2023, its customer retention rate exceeded 97%, with no terminations due to cooperation with other CRDMO manufacturers.

In other words, no matter what actions are taken, peptide CDMOs that are already in the market will hold a competitive edge.

KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Hu Xiangyun for 36Kr.