The Chinese pharma industry these days is besotted with sea turtles — albeit of a different kind. They are brought ashore, fed, and nurtured till they are ready for the long haul. But more on them in a bit.
Let’s get to the dragon-and-tiger subplot first, because what's a China story without that?
As Indian pharmaceutical majors come to terms with an unprecedented downturn in sales of generic drugs in the key US market, China has entered the brave world of innovative medicines. The rewards are pouring in: The heightened interest from top drug firms in partnering Chinese startups on highly sophisticated drugs shows how the country has captured a dominant position in drug innovation — a status that could well have been India's for the taking.
All of this happened in the span of just a decade, which should come as no surprise given China's penchant for rapid, jaw-dropping scale. But whereas in other sectors China's rise has been attributed to manufacturing muscle and the brute force of capital, pharma is different.
Here, the (unlikely) heroes are ’em sea turtles.
Epic homecoming
“If you haven’t visited China in the last year, your impression is almost surely out-of-date,” says Joshua Berlin, an avid watcher of the Chinese biopharma industry.
Berlin’s love affair with Chinese innovation started when scores of trained, highly educated, and skilled scientists of Chinese origin discarded prestigious jobs in US and European drug companies and walked back into their homeland with pride, repatriated with heavy incentives showered by the Chinese government through schemes such as the “Thousand Talents Plan”.
China fondly calls these returnees sea turtles.
True to the tenacity of that species, the researchers have plugged away at the job at hand: Set up their own units, cherry-pick research leads, raise funds from global investors, and bring on board top scientific brains.
Berlin now makes at least two trips from Washington to Shanghai, Beijing, and other research hubs on assignments for BioCentury, a widely read publication on the pharmaceutical and biotechnology industry. He has closely tracked how several single scientist-led local research units scaled and struck eye-catching deals with marquee western names. For instance, last year, Johnson and Johnson (J&J) came calling. In a remarkable (some commentators call it “risky” or even “unbelievable”) move, J&J stitched up a USD350 million agreement with Legend Biotech, a virtually unknown research firm in Nanjing, the capital city of Jiangsu province.
The deal would give J&J ex-China worldwide rights for an ongoing cutting-edge research programme in cell therapy developed to treat multiple myeloma, a form of blood cancer.
At the heavily attended annual gathering of the American Society of Clinical Oncology (ASCO) last year, senior Legend reps demonstrated significant progress in its CAR-T therapy — a treatment in which T-cells or immune cells are extracted, altered in the lab, and infused back into the patient’s body to attack cancer cells. China leads in the world in clinical trials for CAR-T therapy.
Legend said among the 35 relapsed, drug-resistant patients who tested its therapy, 33 had shown complete to partial remission. The study is continuously monitored as results are still pouring in.
Meanwhile in May, J&J secured approval from the US Food and Drug Administration (USFDA) to start clinical trials on US patients — making this the first Chinese-developed cell therapy up for testing in the US.
News reports have since captured how Legend’s scientific paper excited J&J researchers, who swiftly approached the company's co-founder Fangliang Zhang. Zhang, 53, had set up Genscript Biotech, the parent company of Legend Biotech in 2014, just three years before it produced a high-class research asset. After a long stint at Schering Plough (now part of Merck) in the US as a scientist, Zhang had gained deep knowledge in tumour biology and cardiovascular and neurological sciences.
In a similar deal last year in July, China’s BeiGene licensed out an immune-oncology treatment for solid tumours to US-based biotech drug maker Celgene. A press statement said it was well-tolerated and had anti-tumour activity across a range of tumours in 500 patients. The deal fetched BeiGene an upfront licence fee of USD263 million as well as USD150 million in equity investments.
Even India is reaching out.
Earlier this month, Glenmark Pharma announced a potential USD120 million pact with Harbour BioMed for greater China rights for a biotech-based drug (coded GBR1302) that the Mumbai-based company has developed to treat certain forms of breast cancer.
In a statement, Jingsong Wang, founder of Harbour BioMed, narrated what perhaps is emblematic of China’s success story. He said the collaboration with Glenmark is “aligned with our strategy to leverage our clinical development expertise by in-licensing highly innovative clinical-stage assets”.
An upbeat Glenn Saldanha, chairman and managing director, Glenmark Pharma, describes as “unbelievable” the progress in Chinese biopharmaceutical innovations.
In an interview with ET Prime after the deal, Saldanha said he continued to hold discussions with biotech startups in China, emphasising the Chinese government’s supporting role. “Those who worked in the western world are heading these startups,” Saldanha said.
Some half a dozen senior scientists at Harbour BioMed are US-returned, including founder Wang, who worked at Harvard Medical School and the French drug giant Sanofi. The head of business development at Harbour BioMed holds a doctorate from MIT, and another top hand has worked at German pharma major Boehringer Ingelheim.
“Harbour BioMed was set up in six quarters flat,” Saldanha said. “It licensed in a host of technologies, built its own labs, managed its infrastructure. All this [proves] the passion it has, and hence our decision to partner with it.”
Berlin of BioCentury says the Glenmark deal is part of a growing trend. “We have seen a significant jump in cross-border deals as well-financed China biotechs try to accelerate pipelines by in-licensing Greater China rights — and increasingly global rights to compounds discovered in the US and Europe.
“As these deals have increased, there has been a corresponding increase in price. A good example is China's CStone Pharmaceuticals, which raised a huge USD260 million Series B round in May 2018. A month later it paid USD40 million upfront to Blueprint Medicines, based in Cambridge, Massachusetts, for China rights to three clinical oncology compounds,” Berlin says.
Helen Chen, senior partner and head of China and Asia life sciences and healthcare industry at LEK Consulting, says Chinese startups have a “license-develop-commercialise” model, so they forego the “R” in “R&D.” She says such as Zai Labs, BeiGene, CANbridge, and Ascletis actively seek out products for China market licence.
The pace of these deals is working as catalysts to explore new agreements with western drug makers. Chen cites a recent LEK survey, co-authored by her and Joseph Damond of Biotechnology Innovation Organization, which found an overwhelming three-fourths of those participating keen for partnerships with Chinese researchers. The survey had 88 participants from biotech drug makers of all sizes based in the US, Europe, and Asia.
Even as licensed experiment-stage products are taken in for further development by Chinese upstarts, there is also a visible trend of out-licensing, though not at the scale of the J&J-Legend deal. “A recent example is of Shanghai's I-Mab Biopharma that granted global ex-China rights to a bispecific antibody to South Korea's ABL Bio,” Berlin says.
The state backing
Like most 'overnight’ success stories, China’s increasingly important position as a biotech innovator is the culmination of efforts that started over a decade and a half ago.
The government worked hard on building infrastructure in the Shanghai area, cut taxes, made tweaks to patent policies, and ensured steady and predictable drug pricing and procurement norms. Drug giants, including Pfizer, J&J, Sanofi, and Roche, built full-fledged research centres in China, helping them associate early with Chinese patients and understand the local disease patterns.
A recent friendly move came from Hong Kong. It allowed pre-revenue/pre-profit biotech companies to list if they met certain requirements on corporate compliance.
“We think this is a great development to help complete the ecosystem in China, where you have massive venture funding and many emerging biotechs. There must be a way for investors to exit, earn a profit, and hopefully reinvest funds into the next wave of biotechs. It makes a lot of sense,” Berlin adds, before quickly adding a disclaimer on the associated risks.
The best biotech companies are born with risky investments, as the science is tricky. “In the US, there are specialist biotech investors, who have invested for years and understand biotech risks. In Hong Kong, investors will have to learn about this risk. We think HKEX (Hong Kong Exchanges) has developed rules that make sense, including a biotech advisory panel, which hopefully will ensure that only the best companies are able to list.
“But once they do list, companies will need to execute on what they promised investors. The first few companies that get out will be watched closely, both by investors and by a slew of other Chinese biotechs hoping to list in Hong Kong,” Berlin says.
China’s policies are constantly aligned to suit the needs of the innovators. It has moved to a 60-day Investigational New Drug process and has agreed to accept foreign clinical data in its new drug filings, thereby reducing time lag for data reviews.
Recently, there have also been favourable changes to market-access policies, including a negotiated pathway for innovative products to receive government reimbursement in exchange for a price cut.
Of course, challenges remain. A few global biopharma companies continue to be concerned about local favouritism and intellectual property (IP) rights loopholes. There are also macro challenges to navigate given the US-China trade dispute. But overall, there is a recognition in the global biotech industry that China could be the new big hub for global innovation.
Accelerating review of applications and streamlining processes for transparency
Backlog shortened to less than 4,000 last year
Developing a Chinese version of the Orange Book of the US Food & Drug Administration — an exhaustive repository of approved products and related patent and exclusivity information
Patent linkage with regulatory-approval process; deepen data-protection laws
Encourage early-phase trials
Ramped-up manpower for site inspections
Translate the guidelines of The International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) at scale
The bottom line: our envy, neighbour's pride
Chen of LEK Consulting says as opposed to India, the size of the Chinese market is a big attraction for overseas investments. “The China market at USD123 billion versus India’s USD19 billion in 2017 means China is more relevant to the MNCs. There’s also probably (marginally) more IP protection, given China started on that road earlier than India, and the continued high value placed on the MNC product brand and quality.”
In the LEK report, Chen and Damond talk about a 2025 Made in China (MIC) mega policy plan. “The MIC 2025 policy cites both biopharma and medical technologies among 10 strategic industries that will be the focus of continuing government support,” the report says. These industries have been targeted specifically for domestic innovation, and local policies and initiatives can expect to receive high-level political backing.
Chen also cites a World Health Organization report, which projects the cancer market in Asia to reach USD150 billion by 2020, a 40% jump from USD107 billion in 2015. In terms of pharmaceutical spending, a 2017 report from global pharma data-analysis company Iqvia showed China moving up to USD160 billion in 2022 from USD123 billion, next only to the US.
On that list, India is ranked 11, with its spending expected to inch up to a relatively paltry USD28 billion in 2022 from USD19 billion at present.
(Graphics by Ankita Mehrotra)
Let’s get to the dragon-and-tiger subplot first, because what's a China story without that?
As Indian pharmaceutical majors come to terms with an unprecedented downturn in sales of generic drugs in the key US market, China has entered the brave world of innovative medicines. The rewards are pouring in: The heightened interest from top drug firms in partnering Chinese startups on highly sophisticated drugs shows how the country has captured a dominant position in drug innovation — a status that could well have been India's for the taking.
All of this happened in the span of just a decade, which should come as no surprise given China's penchant for rapid, jaw-dropping scale. But whereas in other sectors China's rise has been attributed to manufacturing muscle and the brute force of capital, pharma is different.
Here, the (unlikely) heroes are ’em sea turtles.
Epic homecoming
“If you haven’t visited China in the last year, your impression is almost surely out-of-date,” says Joshua Berlin, an avid watcher of the Chinese biopharma industry.
Berlin’s love affair with Chinese innovation started when scores of trained, highly educated, and skilled scientists of Chinese origin discarded prestigious jobs in US and European drug companies and walked back into their homeland with pride, repatriated with heavy incentives showered by the Chinese government through schemes such as the “Thousand Talents Plan”.
China fondly calls these returnees sea turtles.
True to the tenacity of that species, the researchers have plugged away at the job at hand: Set up their own units, cherry-pick research leads, raise funds from global investors, and bring on board top scientific brains.
Berlin now makes at least two trips from Washington to Shanghai, Beijing, and other research hubs on assignments for BioCentury, a widely read publication on the pharmaceutical and biotechnology industry. He has closely tracked how several single scientist-led local research units scaled and struck eye-catching deals with marquee western names. For instance, last year, Johnson and Johnson (J&J) came calling. In a remarkable (some commentators call it “risky” or even “unbelievable”) move, J&J stitched up a USD350 million agreement with Legend Biotech, a virtually unknown research firm in Nanjing, the capital city of Jiangsu province.
The deal would give J&J ex-China worldwide rights for an ongoing cutting-edge research programme in cell therapy developed to treat multiple myeloma, a form of blood cancer.
At the heavily attended annual gathering of the American Society of Clinical Oncology (ASCO) last year, senior Legend reps demonstrated significant progress in its CAR-T therapy — a treatment in which T-cells or immune cells are extracted, altered in the lab, and infused back into the patient’s body to attack cancer cells. China leads in the world in clinical trials for CAR-T therapy.
Legend said among the 35 relapsed, drug-resistant patients who tested its therapy, 33 had shown complete to partial remission. The study is continuously monitored as results are still pouring in.
Meanwhile in May, J&J secured approval from the US Food and Drug Administration (USFDA) to start clinical trials on US patients — making this the first Chinese-developed cell therapy up for testing in the US.
News reports have since captured how Legend’s scientific paper excited J&J researchers, who swiftly approached the company's co-founder Fangliang Zhang. Zhang, 53, had set up Genscript Biotech, the parent company of Legend Biotech in 2014, just three years before it produced a high-class research asset. After a long stint at Schering Plough (now part of Merck) in the US as a scientist, Zhang had gained deep knowledge in tumour biology and cardiovascular and neurological sciences.
In a similar deal last year in July, China’s BeiGene licensed out an immune-oncology treatment for solid tumours to US-based biotech drug maker Celgene. A press statement said it was well-tolerated and had anti-tumour activity across a range of tumours in 500 patients. The deal fetched BeiGene an upfront licence fee of USD263 million as well as USD150 million in equity investments.
Even India is reaching out.
Earlier this month, Glenmark Pharma announced a potential USD120 million pact with Harbour BioMed for greater China rights for a biotech-based drug (coded GBR1302) that the Mumbai-based company has developed to treat certain forms of breast cancer.
In a statement, Jingsong Wang, founder of Harbour BioMed, narrated what perhaps is emblematic of China’s success story. He said the collaboration with Glenmark is “aligned with our strategy to leverage our clinical development expertise by in-licensing highly innovative clinical-stage assets”.
An upbeat Glenn Saldanha, chairman and managing director, Glenmark Pharma, describes as “unbelievable” the progress in Chinese biopharmaceutical innovations.
In an interview with ET Prime after the deal, Saldanha said he continued to hold discussions with biotech startups in China, emphasising the Chinese government’s supporting role. “Those who worked in the western world are heading these startups,” Saldanha said.
Some half a dozen senior scientists at Harbour BioMed are US-returned, including founder Wang, who worked at Harvard Medical School and the French drug giant Sanofi. The head of business development at Harbour BioMed holds a doctorate from MIT, and another top hand has worked at German pharma major Boehringer Ingelheim.
“Harbour BioMed was set up in six quarters flat,” Saldanha said. “It licensed in a host of technologies, built its own labs, managed its infrastructure. All this [proves] the passion it has, and hence our decision to partner with it.”
Berlin of BioCentury says the Glenmark deal is part of a growing trend. “We have seen a significant jump in cross-border deals as well-financed China biotechs try to accelerate pipelines by in-licensing Greater China rights — and increasingly global rights to compounds discovered in the US and Europe.
“As these deals have increased, there has been a corresponding increase in price. A good example is China's CStone Pharmaceuticals, which raised a huge USD260 million Series B round in May 2018. A month later it paid USD40 million upfront to Blueprint Medicines, based in Cambridge, Massachusetts, for China rights to three clinical oncology compounds,” Berlin says.
Helen Chen, senior partner and head of China and Asia life sciences and healthcare industry at LEK Consulting, says Chinese startups have a “license-develop-commercialise” model, so they forego the “R” in “R&D.” She says such as Zai Labs, BeiGene, CANbridge, and Ascletis actively seek out products for China market licence.
The pace of these deals is working as catalysts to explore new agreements with western drug makers. Chen cites a recent LEK survey, co-authored by her and Joseph Damond of Biotechnology Innovation Organization, which found an overwhelming three-fourths of those participating keen for partnerships with Chinese researchers. The survey had 88 participants from biotech drug makers of all sizes based in the US, Europe, and Asia.
Even as licensed experiment-stage products are taken in for further development by Chinese upstarts, there is also a visible trend of out-licensing, though not at the scale of the J&J-Legend deal. “A recent example is of Shanghai's I-Mab Biopharma that granted global ex-China rights to a bispecific antibody to South Korea's ABL Bio,” Berlin says.
The state backing
Like most 'overnight’ success stories, China’s increasingly important position as a biotech innovator is the culmination of efforts that started over a decade and a half ago.
The government worked hard on building infrastructure in the Shanghai area, cut taxes, made tweaks to patent policies, and ensured steady and predictable drug pricing and procurement norms. Drug giants, including Pfizer, J&J, Sanofi, and Roche, built full-fledged research centres in China, helping them associate early with Chinese patients and understand the local disease patterns.
A recent friendly move came from Hong Kong. It allowed pre-revenue/pre-profit biotech companies to list if they met certain requirements on corporate compliance.
“We think this is a great development to help complete the ecosystem in China, where you have massive venture funding and many emerging biotechs. There must be a way for investors to exit, earn a profit, and hopefully reinvest funds into the next wave of biotechs. It makes a lot of sense,” Berlin adds, before quickly adding a disclaimer on the associated risks.
The best biotech companies are born with risky investments, as the science is tricky. “In the US, there are specialist biotech investors, who have invested for years and understand biotech risks. In Hong Kong, investors will have to learn about this risk. We think HKEX (Hong Kong Exchanges) has developed rules that make sense, including a biotech advisory panel, which hopefully will ensure that only the best companies are able to list.
“But once they do list, companies will need to execute on what they promised investors. The first few companies that get out will be watched closely, both by investors and by a slew of other Chinese biotechs hoping to list in Hong Kong,” Berlin says.
China’s policies are constantly aligned to suit the needs of the innovators. It has moved to a 60-day Investigational New Drug process and has agreed to accept foreign clinical data in its new drug filings, thereby reducing time lag for data reviews.
Recently, there have also been favourable changes to market-access policies, including a negotiated pathway for innovative products to receive government reimbursement in exchange for a price cut.
Of course, challenges remain. A few global biopharma companies continue to be concerned about local favouritism and intellectual property (IP) rights loopholes. There are also macro challenges to navigate given the US-China trade dispute. But overall, there is a recognition in the global biotech industry that China could be the new big hub for global innovation.
Accelerating review of applications and streamlining processes for transparency
Backlog shortened to less than 4,000 last year
Developing a Chinese version of the Orange Book of the US Food & Drug Administration — an exhaustive repository of approved products and related patent and exclusivity information
Patent linkage with regulatory-approval process; deepen data-protection laws
Encourage early-phase trials
Ramped-up manpower for site inspections
Translate the guidelines of The International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) at scale
The bottom line: our envy, neighbour's pride
Chen of LEK Consulting says as opposed to India, the size of the Chinese market is a big attraction for overseas investments. “The China market at USD123 billion versus India’s USD19 billion in 2017 means China is more relevant to the MNCs. There’s also probably (marginally) more IP protection, given China started on that road earlier than India, and the continued high value placed on the MNC product brand and quality.”
In the LEK report, Chen and Damond talk about a 2025 Made in China (MIC) mega policy plan. “The MIC 2025 policy cites both biopharma and medical technologies among 10 strategic industries that will be the focus of continuing government support,” the report says. These industries have been targeted specifically for domestic innovation, and local policies and initiatives can expect to receive high-level political backing.
Chen also cites a World Health Organization report, which projects the cancer market in Asia to reach USD150 billion by 2020, a 40% jump from USD107 billion in 2015. In terms of pharmaceutical spending, a 2017 report from global pharma data-analysis company Iqvia showed China moving up to USD160 billion in 2022 from USD123 billion, next only to the US.
On that list, India is ranked 11, with its spending expected to inch up to a relatively paltry USD28 billion in 2022 from USD19 billion at present.
(Graphics by Ankita Mehrotra)
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