3rd Annual Bio Cross-border Investment & Partnership Summit: Summary and Outlook
On December16th, 3rd Annual Bio Cross-border Investment & Partnership Summit: Summary and Outlook was successfully held virtually by MSQ Ventures and The BayHelix Group. This summit consisted of 2 panel discussions, 1 expert speech, and 12 company presentations. The two panel discussions were “How does China joining the ICH Impact the Dynamics of Global Clinical Trial Design? ”, and “A Leap from Regional to Global Deals: China Biopharma’s Licensing Strategy Revolution”. The one expert speech was about “Biotech Hong Kong IPO: Common Legal Issues”.
MSQ Ventures received highly positive feedback from the audience and will continue to boost cross-border collaboration and communication in the biopharmaceutical industry.
PANEL DISCUSSION I: “How does China joining the ICH Impact the Dynamics of Global Clinical Trial Design?”
The panel discussion was hosted by: Alvin Luk, Neurophth, CEO
Distinguished Panelists:
· Roger Luo, Overland Pharmaceuticals, CDO
· Whitney Page, G1 Therapeutics, Head of Alliance Management
· Xin-Yuan Fu, GenEros Biopharma, Chairman & Founder
· Oliver Kong, Qilu Pharmaceutical, CMO
Alvin Luk: In the 20th century, the model of drug innovation came from the US in terms of innovation, public sector funding, availability of capital, and FDA standard. The high drug price in the US also intensifies companies and investors to focus on US-centered development. China joined ICH in June 2017. It must be interesting to discuss how China joining ICH impacts the global clinical trial design dynamics.
Here’s a brief summary of the content covered during the panel discussion:
1. What are the major changes in regulation after China joined the ICH?
· Xin-Yuan Fu: Like joining WTO many years ago, joining ICH changed standards and practices. If Chinese pharmaceuticals and biotech companies want to make a difference in the world, we have to understand ICH rules and follow the rules. It's an opportunity for us to push ourselves to go to the world.
· Roger Luo: Based on my previous 10-year observation on the clinical trials in China and in Asia, I noticed two changes.
One is speed. Back to 5-10 years ago, China IND approval took 6-8 months. It's so hard for China to join the global program, especially for cancer. When drugs got approval in western countries, it took another 5 or 6 years to get approval in China. We can't get parallel approval. After joining ICH, there's a huge change. Now we only need 60 working days. With my experience, if you prepare the package quite well, you get approval in about two months. It's a huge improvement.
Another one is about data. Data quality is essential. If we want to join global trials, we have to follow certain rules. By following the rules, we can start important dialogue such as a partnership.
· Oliver Kong: One key change after ICH is the mutual recognition of data. Now FDA has begun to recognize data generated in China. Chinese CDE also recognizes data from the US or Europe. It really speeds up the process. Recently, CDE approved some drugs based purely on foreign data. That really opened the door for indications with many unmet needs.
The challenge also exists. FDA will not change their standard, regardless of where the data are generated. Also, there's the ethnic difference in terms of PK/PD. The solution is to have a global trial. In the global trial, you'll see the ethnic difference. ICH really builds the foundation for companies in China and other countries to work together.
· Whitney Page: China is a major market. Joining ICH decreased the timeline and changed the data quality. The changes expedited China's approval and made it a major player, and affected how we considered global trials moving forward.
2. What are the considerations when we are developing a drug, either domestic or international companies?
· Roger Luo: In the next 5-10 years, the major trend for many Chinese biotech companies is global development. In order to go overseas, they must have the same principle and the same clinical development foundation. That's what ICH is trying to do. It really paves the way for Chinese companies who want to go overseas.
· Whitney Page: I think the main considerations are, how do you access major patient populations? How do you accelerate the timeline? The global development model maximizes speed, reduces costs while still getting to the patient population. But what underlying the whole thing is how are you able to deliver data across different regulatory agencies? That's what we're still working towards figuring out.
· Xin-yuan Fu: When we're doing clinical trials, my fellows usually ask whether we should record the trial in English or in Chinese. That's one thing I would like to discuss. Another thing is that if the data can be recognized by FDA, why do we still conduct multiple site trials. Doing clinical trials in the US is expensive. If it can be done in China, that would be much easier.
· Oliver Kong: When we conduct a clinical trial, we definitely need more than one center for regulatory approval. Because the regulatory wants to see that you demonstrate the efficacy and safety in more than one center. There will be bias if we only have one center. Another consideration is about cost. In general, doing clinical trials in China is cheaper than doing in the US. But according to our experience, the gap between China and US is shrinking. It's no longer that cheap. Another thing to consider is the market environment. When you develop a drug globally, you really need to think about where's the market.
· Roger Luo: If you think from the regulatory agencies' perspective, you can understand why we need multi-site trials. The mission of the health authority is to approve a drug globally based on a few hundred of patients' data. You have to make sure that the data package can reasonably represent the larger population.
In terms of the cost, I agree that China is not that cheap anymore. You have to think about your development strategy. To consider how many patients you need to prove the efficacy.
· Alvin Luk: In terms of the first question by Xin-Yuan, you do have to have the electronic case report in English. But it can be in the background. You can link that later in the Chinese database. You will need a local language.
For the second question, I agree that China is not cheap anymore. If you only conduct trials in one country, you need to consider the ethnic differences. You need to prove it to FDA. We also need to consider the commercialization plan. You need to let the KOLs in the countries get familiar with the product ahead of time.
3. With the new clinical development landscape, what do you see as the future in China? What are the challenges?
· Roger Luo: The main challenge is to get yourself prepared. You need to do your homework to understand the landscape. You need to have a clear strategy and plan.
· Oliver Kong: The key is the opportunity. Joining ICH opens the door for collaborations. The standard of research in China has been elevated. But there're still gaps. We need further improvement in terms of the clinical plan and commercial plan. Now we tend to license in programs. But any deal without a solid clinical and commercial plan is just a piece of paper.
· Xin-yuan Fu: There's still a huge gap between current practice and western standards. This is a big challenge. I hope you guys could set up some kind of courses and find some good examples to help Chinese organizations improve.
· Whitney Page: Right now, the US clinical development space is rapidly evolving. We see an extremely crowded clinical trial space. Most US companies are looking for a more innovative global solution. China has emerged in that solution. China can deliver a large patient population and accelerat approval timeline. That also converted to increased cost and competition. Just as more and more companies are now evolving, more US or EMA focused companies would also include China in their plan.
4. What are the impacts for venture capital?
· Whitney Page: There's usual capital. But now, US biotechs are affected, looking for partners that rely heavily on richer capital.
· Oliver Kong: Venture capital firms need to do the homework. If they want to help biotech companies, they need to have the capacity. Another thing is that venture capital can help facilitate the partnership between Chinese companies and global partners.
· Roger Luo: From the perspective of investors, when I want to invest money, I would definitely look at their pipeline carefully. I would like to know whether the products are competitive and suitable for global clinical development. I would also be careful with their development strategy.
· Xin-Yuan Fu: We just signed an agreement for five million dollars invested in my company. The reason they invested in us is that they see our potential. We're going to use the money for clinical trials in the US. If you want investors to invest in you, you need to be very strong in science. Some companies might think the Chinese market is large enough. But I would like to say that "集采" (volume-based procumbent) will cut the price very low. It would be hard to make a profit at that time. The international market is definitely the future. At the very beginning, you should start with something really innovative.
PANEL DISCUSSION II: “A Leap from Regional to Global Deals: China Biopharma’s Licensing Strategy Revolution”
The panel discussion was hosted by: Dr. Ginger Ding, MSQ Ventures, Managing Director
Distinguished Panelists:
· Dr. Eddy Wu, Arctic Vision, CEO
· James Xue, CANbridge Pharmaceuticals, Founder & CEO
· Bing Yuan, Oncusp Therapeutics, Co-Founder & CEO
Dr. Ginger Ding: In 2021, it is exciting to see several companies are transitioning from “licensing for China” to a “licensing for global” one, which is a good reflection that the emergence of China biopharma is no longer just a China story, it is a global one, and will pose profound implication for years to come.
Here’s a brief summary of the content covered during the panel discussion:
· James Xue: Biotech and biopharma companies should always have an aspiration to be global players at some point, no matter where they started. Every single biopharma company, with a focus on rare diseases, must be global to capture all the patients as the patient population is already very small. On the other hand, clinical design, clinical trials, and approval are very much globalized. To be more specific, they need to recruit patients from different parts of the world and gain the full commercialization value realized for the product. Therefore, when they develop a product in the rare disease space, it is most likely to become a global development plan versus just regional.
As for CANbridge, China is our most important market, however, we must look at both the expectation and reality. The reimbursement issue for the rare disease has been a particular hindrance for any company to realize its potential in China market. Therefore, it forces all these players, including CANbridge, to look beyond China before China steps into a real mature market. Another factor is that global market value makes better and more justifiable rewards compared to just China market value. When we develop a product, the significant investment including the upfront cost for preclinical CMC, valuable data generated from the proof-of-concept study, has to be better measured in terms of output by its full potential. Thus, based on these two factors, more and more companies are going to think beyond China, particularly for rare disease players.
· Bing Yuan: Firstly, technology and ecosystem readiness are the drivers that led to an emerging appetite for global rights. In the past six years, many talented and highly experienced scientists went back to China and built either the CRO system or their own biotech companies, booming the biotech industry in China. The emerging global competitive advantages, including the global first-in-class and best-in-class assets, lead to ambitious global deals.
Second, the pressure of reimbursement, the increasing cost for R&Dand even licensing- in deals, making the China-only strategy quite challenging. Instead, making the global deal is more attractive.
Thirdly, the global market is much bigger than China. China only accounts for 10-15% of the market. The future market is out there as far as the company has global competitive assets. What’s more, since last year, there are so many successful licensing deals by Chinese companies. People not only see global deals as a potentially huge market to tap into but also know they can get profit from. These are the three underlying reasons for such a forward drive.
· Dr. Eddy Wu: Licensing-in/out has already been part of the biotech industry for a long time. However, only recently it has become an ongoing heated discussion about what are the major drivers for the Chinese company to gain global rights. To answer this question, we must bear in mind what is the purpose of the company, why the company exists, and what is the long-term goal? For example, if you believe that licensing in something for the companies can build up the pipeline in a healthy way, then you should do it regardless of where the product is from. To conclude, do not follow the market trend to do global right, instead, companies should focus on their long-term goals and future development when making deals.
· Ye Hua: We're working on cutting-edge technology medicine that is truly innovative. If the product is truly meaningful, it's definitely of global value.We happen to be a group of scientists who had overseas training, and willing to help the local Chinese biopharma industry to grow because it's relatively a new industry. And that's why we have a licensing-in and later licensing-out deals. So essentially, it is to utilize the best potential of each company to get to the best benefit of the product. With the help of big giants, large pharmaceuticals in the world are well positioned for late-stage development and commercialization, and the small biotech companies can bring their innovative products to a higher level.
Secondly, financial reason is one of the most important drivers for global licensing- in/out deals. Many VC-backed start-up companies utilize licensing approach to acquire assets for the China right. However, for most of these deals, it's just a way of creative financing operation. To avoid such criticism, we cannot forget the true purpose and we need to do our best for the product.
· Dr. Ginger Ding: Without the domestic pricing pressure, we may become complacent, and simply embrace whatever market we can have in China. And then lose the motivation to try harder, and have a global vision
1. How to convince partners to cooperate with Chinese companies instead of multinational companies?
· Bing Yuan: Oncusp Therapeutics is a global company that has offices in both New York and Shanghai. The R&D team, especially the core competency for pre-clinical, translational, and early clinical development team are based in the US. The BD teams, in both US and China, are looking for opportunities to build a global development capability, and eventually a large connection and network in the entire industry, especially in oncology. Therefore, Oncusp Therapeutics can convince partners to give global rights. Although some of the investors and some of the key members are originally from China, this company should be considered a global company.
· James Xue: The cooperation is based on the business model. Many small and medium-sized companies want to capitalize on China market, but they do not know how to run China market, therefore, they must partner with a China-specialized company. For companies that want to develop good products and gain the global right, the late-stage products are very expensive, therefore the earlier stage would be a fair entry point.
What’s more, if a company would like to build products but also to build some internal capabilities including platforms, they need to focus on technologies that would allow companies to build or integrate capabilities that will generate their drug candidates. The trend from late-stages to early-stages and platforms enables the next generation of biopharma companies to become the ones that could produce and generate their global proprietary products.
· Dr. Eddy Wu: Arctic Vision is a company with a key focus on ophthalmology, making the partners in this field willing to provide the related technologies to them instead of other companies. What’s more, they would explain their strategy for future development in details to their partners and allow the partners to understand they are a trustworthy companion. Importantly, as Arctic Vision is small and emerging biotech, they can promise their licensing-in assets will be the core business and be made full use of, bringing the confidence to the partners that their technologies can have a better development. I believe all those elements are very important to convince the partners that we have advantages over multinational companies.
2. What are the plans for manufacturing and commercialization in Ex-China regions? Do you prefer organic expansion or partnership, and why?
· James Xue: CANbridge has ten rare disease products, either commercial or in the development stage, and we own seven out of the ten for global rights. For the majority of the seven products, we plan to develop fully into global value.
In terms of commercialization, focusing on rare disease is quite a unique business model. Companies can launch a billion-dollar product just with a few hundred people on a commercial team size versus thousands, compared to other indications, for example oncology. The reimbursement system globally is well established, and the pricing is favorable to margins.
In terms of the product supply and manufacturing, there's no fixed formula. CANbridge had plans for a gene therapy program, for example, we currently have disclosed two pre-clinical candidates, which position as either first-in-class or best-in-class globally. For a portion of that, we would not start in China in terms of the first-in-human study but would probably start outside China as the regulatory framework is more mature. The availability and quality of the manufacturing source are better than inside China at this stage. In addition, we also had a reserve or flexibility to use CMO like Wuxi biologics, which they have been working with for over five years. Furthermore, at some point, we would plan for our own facilities because, in some areas like gene therapy, it might be even more costly to use the CMO than just doing it on our own.
· Dr. Eddy Wu: The manufacturing and commercialization are the daily discussions within the Arctic Vision. The question cannot be very clear-cut for every single quarter, especially for a company at our stage. Regarding manufacturing, we would have different strategies depending on different types of products. As for cell therapy, Arctic Vision has committed to developing its self-processing centers in China to make sure they can continue providing therapy to their patients in the future. For small molecules, we think we do not need to build the facilities or site ourselves because we can rely on CMO sites. On top of that, we have a series of smart devices, including the drug dispenser from micro-dosing. We have the device to stimulate the patients to produce natural tears by themselves. As for some types of heavy technologies, we must think about it carefully and produce it internally as well because we don't want to the information leakage to the industry. And at the same time, it is not easy to manufacture outside as well. We must have the onset of the strategy and at the same time, and we must consider at this moment if there are supply chain issues as well. For some of the material may be located outside of China, how to make sure that the supply chain would not be the issue is also something we need to take into our considerations.
For the commercial issues, we may not need to have a huge size of sales team, but we would like to have a good team of the medical college to do the medical education for the cell therapy, gene therapy, and another consumer-based market. We may utilize more E-commerce channels instead of the big sales team.
EXPERT SPEECH: “Biotech Hong Kong IPO: Common Legal Issues”
Yiming Liu
Yiming represents biotech companies and investment funds on strategic transactions in the life sciences and technology industries. He regularly advises clients on the structuring, negotiation and of a wide range of cross border transactions, including mergers and acquisitions, private equity financings, joint ventures, research collaborations and licensing agreements. Yiming is also widely recognized for his work on life sciences IPOs in Hong Kong and the US. In particular, he is adept in leading the preparation of prospectuses and the discussions and communications with issuers, sponsors, investors and the Hong Kong Exchange as the issuer’s counsel during the listing process.
Why Listing in Hong Kong?
Especially in today’s sensitive political environment, HK has emerged as a safe and preferred listing venue for companies with significant presence in China. Of those companies that are already listed in the US, some are also seeking secondary listing in Hong Kong to hedge against any potential exposure or risks that arise from geopolitical tensions in the near term.
What does Hong Kong Listing mean?
Interestingly, for a Hong Kong IPO, the primary offering of the securities will be outside of Hong Kong. Most of the time, investors buying into the IPO will be based in the US. Therefore, a dual listing in Hong Kong offers a global offering of the primary issuance plus a listing of the company’s stock in Hong Kong.
Timeline
Typically, a conventional HK IPO process requires 6-8 months to complete. The timing can vary based on several factors, i.e., the size of the IPO and the capacity that the stock exchange allocates to the IPO application. The HKEX has become quite efficient in responding to applicants despite high application volumes in 2020. On the applicant’s side, an efficient working group is also the key to expediting the application process.
Key stakeholders and their responsibilities
The issuer is supported by various parties to enable a smooth and successful HK IPO.
· Underwriters/Sponsors: attract investors, ensure valuation, Pricing, etc; The issuer should utilize an experienced underwriter as early as possible to obtain advice on the potential timeline, market appetite, etc.
· Issuer Counsel: communication with the regulatory authority and the exchange; drafting prospectus, legal opinions, etc.
· Auditor: financial reporting.
Biotech Listing Regime – Listing Rules and Guidance Letters
In general, companies in any business sector seeking a listing on the Main Board of the Hong Kong Stock Exchange shall comply with the set of conditions set out in Chapter 8 of the Rules Governing the Listing of Securities on the Exchange. The Main Board market in Hong Kong is designed for more established companies with a predetermined level of market capitalization/revenue/profit scale. However, most of the biotech companies are at the pre-revenue stage at a time when they plan to go public. There are still many biotech companies that have completed their IPOs successfully in HK. We needed to understand what they did to succeed and what was unique about the HKEX that nurtured that success.
Biotech companies could apply for listing under Chapter 18A if they don’t not meet any of the financial eligibility tests under Chapter 8. For this, guidance Letter HKEx-GL92-18 and HKEx-GL107-20 are key documents to review. For detailed requirements, applicants should consult with legal counsel experienced in Hong Kong IPOs for further information.
Principles Underlying Biotech Issuer Eligibility at high-level (Evaluation of this on a case by case basis would require legal counsel)
· At least one core product beyond conceptual stage
· Product regulated by Competent Authority
· Must possess patents and/or intellectual property relating to the core products
· Directly engaged in the R&D for developing its core products
In cases where the core product(s) were in-licensed or acquired as part of a transaction (Biotech or Pharma)
· (If only one in-licensed or acquired core product) Complete at least one regulated clinical trial in human subjects
· (If all in-licensed or acquired core products) the company must demonstrate R&D progress since the in-licensing/acquisition
For medical devices, the requirement will be slightly different, and the applicant should consult with legal counsel.
Other requirements include but are not limited to the following
·Meaningful investment from at least one sophisticated (experienced or well-known) investor
· Current market cap ≥ HK$1.5 billion
· Track record for at least 2 years (current line of business and the same management team)
· Working capital requirement
· Public float and IPO subscription
· Special measures to manage risk
COMPANY PRESENTATION
There were in total 12 companies presenting their assets during the summit. The companies were:
Radiopharm Theranostics, Ionis Pharmaceuticals, Neoleukin Therapeutics, Inc., Neurophth Therapeutics, Inc., Ultimovacs, D&D Pharmatech, Destiny Pharma, FluoGuide, Enyo Pharma, AB2 Bio, Chimeric Therapeutics, and ViCardia Therapeutics Inc.
MSQ Ventures was thankful to all the participants and attendants for joining this summit with us. During this summit, we witnessed how different thoughts come together. We hope to see you again at our next event in 1H2022!
Any inquiries, please contact us at event@msqventures.com