China Securities Co., Ltd.: Segmented production of biological products continues to be promoted, benefiting capacity optimization and efficiency improvement.

China Securities Co., Ltd. released a research report stating that at the beginning of this month, the National Medical Products Administration General Office issued a notice regarding the implementation of segmented production for biological products. This notice provides a complete set of segmented production licensing and regulatory operation guidelines for provincial drug regulatory authorities. For blood product companies, the continuous advancement of segmented production helps open up regulatory barriers for companies by splitting the collection of raw blood plasma and subsequent plasma production into different production sites, thereby increasing plasma and production capacity utilization rates, and reducing cost inputs. In addition, segmented production is beneficial for vaccine companies to produce multi-component and multi-valent vaccines, and helps optimize production capacity construction and utilization efficiency for biological product companies. The main points of China Securities Co., Ltd. are as follows: Event: Notice regarding the implementation of segmented production for biological products issued On April 1, the National Medical Products Administration General Office issued a notice regarding the implementation of segmented production for biological products. This notice elaborates on regulatory requirements for segmented production of biological products, and constructs a complete set of operational guidelines for licensing and monitoring segmented production for provincial drug regulatory authorities. The notice consists of six points, providing a set of complete guidelines for segmented production licensing and regulatory operations for provincial drug regulatory authorities: 1) Production license: Provincial drug regulatory authorities get involved in advance, provide guidance, review and issue or modify the "Drug Production License" according to the requirements after review; the provincial drug regulatory authorities where the trustee is located are responsible for the trustee's production license work concurrently. 2) Establishment of a unified quality assurance system. Both parties must establish a unified quality system covering the entire production process and all sites, with at least one party having at least three years of commercial production experience with the same dosage form in principle. Under special circumstances, with written approval from the provincial drug regulatory authority, the experience requirement may be relaxed to three years of research or production experience with the same dosage form. 3) Technical evaluation: The drug review center uniformly reviews, focusing on the reasonableness of process connections and the controllability of the entire quality process, and standardizing the evaluation criteria, specifying different evaluation points for different varieties. 4) Cross-border segmented production: When applying for a drug production license for cross-border segmented production, materials issued by domestic and foreign drug regulatory authorities can be used to replace domestic application materials that are not applicable, reducing the cost of cross-border compliance. 5) Local supervision: Provincial drug regulatory authorities implement local supervision responsibilities, strengthen enterprise supervision and inspection, and ensure the safety, effectiveness, and controllability of drug quality. 6) This notice will come into effect from the date of issuance. Biological product companies face production capacity limitations, and the demand for segmented production continues to increase Segmented production of biological products refers to dividing the production process of biological products into multiple stages (such as raw liquid production and formulation filling), which is completed by different enterprises or sites through outsourcing or cooperation. Due to the complexity of biological product production technology and strict quality control requirements, there is no clear regulatory permission for segmented production of biological products at the regulatory level. Enterprises have long faced restrictions that the production sites for raw liquid and formulations must be at the same site, becoming a bottleneck for industry development. Segmented production helps companies save operating costs and optimize resource allocation. At the same time, with the comprehensive implementation of centralized drug procurement, the industry's demand for expanding production capacity and improving efficiency continues to increase, leading to a growing demand for segmented production. Continuous progress of regulations related to segmented production of biological products, pilot programs being carried out in various regions In terms of regulations, Article 12 of the "Announcement on the Supervision and Management Regulations of Drug Commissioned Production" issued by the former State Food and Drug Administration in 2014 clearly prohibits the commissioning of biological products, to some extent restricting the exploration of segmented production of biological products in China. In 2019, the "Drug Administration Law" fully implemented the MAH system, partially opening up commissioned production, but did not make clear regulations on segmented production of biological products. In 2022, the "Regulations on Vaccine Production and Circulation Management" first explicitly stated that with the approval of the National Medical Products Administration, multi-component and multi-valent vaccine raw liquids or formulations can be commissioned for segmented production. In October 2024, the National Medical Products Administration issued the "Pilot Work Plan for Segmented Production of Biological Products," covering innovative biological products, clinically urgent needed varieties, etc., with pilot areas required to meet criteria such as industry concentration and regulatory capabilities, marking the substantial promotion of segmented production of biological products in China. In addition, starting in 2021, local explorations have been carried out in places like Suzhou and Shanghai to promote pilot programs for segmented production of biological products. Legal basis obtained for segmented production of biological products, this notice conducts policy alignment In January 2026, the revised "Drug Administration Law Implementation Regulations" were officially issued, for the first time providing clear regulations on segmented production of drugs in the form of administrative regulations, providing a legal basis for segmented production of biological products. To align with the policy, the National Medical Products Administration General Office issued this notice, further detailing the requirements for production licenses, evaluation approvals, and monitoring, providing operational guidelines for work. Compared with the 2024 pilot program, this notice aligns with administrative regulations, providing higher authority, and no longer restricting specific pilot areas. In terms of production and operation requirements, this notice stipulates that under specific circumstances, the experience requirement can be extended to over three years of research or production experience, significantly lowering the threshold. It also makes relevant provisions for cross-border production, facilitating cross-border segmented production activities for multinational pharmaceutical companies and domestic enterprises. Blood product companies: Expected to open up segmented production barriers, increase plasma utilization rate and operational capabilities The newly promulgated "Drug Administration Law Implementation Regulations" in 2026 clearly state that blood product manufacturers are prohibited from commissioned production, but also stipulate that "except as otherwise provided by the State Council's drug regulatory department," providing policy space for blood product companies to implement segmented production. In the segmented production model, enterprises under the same marketing authorization holder can split the collection of raw blood plasma and subsequent plasma production into different production bases under a unified quality system, concentrating the collected plasma at advantageous bases for large-scale processing, significantly increasing the single factory's production capacity utilization and plasma utilization rates; it can also reduce redundant production line construction, lowering depreciation and operating costs per unit product. This notice requires that at least one party of the commissioning parties must have over three years of commercial experience with the same dosage form, and must establish a comprehensive quality system. This means that only leading enterprises with multiple GMP-certified bases, a complete quality control system, and mature commercial experience can quickly implement this model, and the scale advantage of leading enterprises in the industry is expected to be further enhanced. Other biological product companies: Benefit multiple-component and multi-valent vaccine production, optimize production capacity construction and utilization For vaccine companies, the new "Drug Administration Law Implementation Regulations" provide space for vaccine companies to produce multi-component and multi-valent vaccines as well as vaccines needed for disease control or reserve through segmented production. This notice further specifies regulatory requirements, benefiting vaccine companies producing multi-component and multi-valent vaccines to relieve production capacity restrictions. For other biological product companies, segmented production can reduce the production capacity construction threshold for small innovative drug companies, reduce additional investments, and accelerate the commercialization process; for companies with raw liquid production capabilities, they can expand their CDMO business line by undertaking commissioned formulation production, thereby increasing production capacity utilization and expanding revenue. Investment recommendations for the biological product industry Key points to focus on in the vaccine industry: 1) Progress of follow-up research and external licensing for innovative vaccine pipelines. It is recommended to focus on companies such as Chengdu Olymvax Biopharmaceuticals Inc. (golden chrysanthemum vaccine) and CanSino Biologics Inc. (PBPV, tumor mRNA therapeutic vaccines). 2) Improvement in product sales in 2026, combined with performance improvement expectations for new product launches. It is recommended to focus on companies like Shenzhen Kangtai Biological Products, CanSino Biologics Inc., and Chengdu Olymvax Biopharmaceuticals Inc. 3) Progress of equity changes, recommended focus on Chengdu Kanghua Biological Products. Key points to focus on in the blood product industry: 1) Progress in the price adjustment of products such as albumin and immunoglobulin. 2) Expansion of plasma stations in the industry and regional planning of plasma stations during the "Fifteenth Five-Year Plan" period. 3) Industry mergers and acquisitions expectations. It is recommended to focus on companies like Hualan Biological Engineering, Inc., China Resources Boya Bio-pharmaceutical Group, and Shenzhen Weiguang Biological Products.