MSQ Viewpoints
The year 2023 witnessed significant milestones, including a substantial volume of cross-border transactions, with out-licensing deals surpassing in-licensing deals, signaling a shift in the balance of cross-border transactions. Key developments in oncology therapeutics underscored China’s contributions to cutting-edge treatments and collaborations. Notable FDA approvals further highlighted China’s increasing impact on global drug innovation and regulatory achievements.
In the evolving landscape of China’s biopharmaceutical industry, the outlook for 2024 appears promising, building upon the developments and trends observed in 2023.
Over the past 2 years, the number of In-Out licensed deals totaled over 200+, where out-licensing has out-paced in-licensing in 2023. In our opinion, this is largely driven by the capital constraints this year delving from the China domestic market, which we believe should improve as we approach 2024.
In November, we noticed a continued uptick in cross-border deals, now totaling 27 over the past 3 months, with the total number of deals ex-China continuing to surpass last year's total. There was a notable slowdown going into November with out-licensing five (5) ahead of one (1) in-licensing, however, the month recorded the largest deals of the year for both In and Out (see below). We expect this transaction trend to build up steam as we look towards the start of a new year.
In October, we noticed a continued uptick in cross-border deals, now totaling 28 over the past 3 months, a noticeable green shoot for transactions. October alone garnered 12 deals, with a slight lead in out-licensing (7) ahead of in-licensing (5). We expect this transaction trend to build up steam as we head towards 2024.
There were 15 out-licensing deals from China-based biopharma over the past 3 months August to October, with over 50% of the territories licensed for Global or Worldwide ex-China rights. Another 30% were for US, UK or EUR geographies. With regards to the development phase of the asset, over 50% of the deals were pre-clinical or phase 1. Oncology dominates the out-licensing space, with Infectious Disease and Metabolic Disease on the rise.
Cross-licensing deals are expected to rebound in 2024. In 2023, small and medium-sized biotech companies have become more prudent with in-licensing. Global (Ex-China) out-licensing continues its growing trend from Chinese biotech.
Chinese companies are continuing to search for cutting-edge technology to differentiate themselves in the market. A trend is continuing involving Preclinical and Phase I deals being made, indicating a focus on early-stage research and development. While the low-hanging fruits in the market have already been identified, companies are continuing to look for new opportunities distinguished by the mechanism of action and disease state. Oncology remains a dominant field, but there is also growing interest in metabolic, inflammation/autoimmune, and infectious disease pipelines.
ADC drug development has seen transformative advancements in oncology landscape, including emerging site-specific conjugation technology, higher drug-to-antibody ratios (DARs), and optimized linker stability. Encouraged by high profile approval of Enhertu in Her2-low breast cancer and Pfizer & Seagen acquisition, the market for ADCs is set to elicit strong interests of all stakeholders and grow further as novel ADCs moving toward late-stage development and expanding into indications beyond oncology.
This report provides an overview of the global ADC drug development with a focus on exploring cross-border partnership opportunities. We conducted a gap analysis of China versus global ADC drug approval status, top indication and targets of development, partnering strategies and deal comparables, as well as regulatory considerations.
We expect cross-border licensing deals to maintain its growth momentum in 2023. Small and medium-sized biotech companies are becoming more prudent with in-licensing opportunities, and out-licensing should continue as an ongoing trend for Chinese biopharma. Ophthalmology and infectious disease areas should continue to grow, as neurology is emerging. Chinese biotech companies are showing more interest in therapeutic areas other than just oncology. Chinese companies will continue to search for true cutting-edge tech to differentiate in the market. Collaboration between Chinese companies and MNCs are becoming more frequent and flexible, as R&D capabilities of Chinese companies are being better recognized. In our 2023 Outlook, we include 2022 highlights, analysis and insights on cross-border in-out licensing deals, China-originated healthcare company IPOs, relevant case studies - ie Beigene’s Zanubrutinib head-to-head win over Ibrutinib, innovative ways to raise funds, and updates on new NMPA published regulations.
China biotech companies are gearing up to step into the CNS field through building their own platforms and creating cross-border partnerships. Despite high risks, the rewards of developing the next neurology remedies appear to be much higher, encouraging biotech and biopharma players to keep one foot sturdily in the door when it comes to neuro-pharma development. Platform progress is opening the door for CNS dealmaking. Big biotechs expand their neurology pipeline through cross-border partnerships.
The cross-border licensing activities remains steady despite the pandemic lock down and global turmoil. We expect China's out-licensing deals to grow steadily in 2H 2022, driven by domestic innovation and the further endorsements by MNC. Co-development of early-stage assets and technology-based collaborations are emerging, in addition to the well-established licensing model. Oncology will keep its dominant position, while other therapeutic areas, such as autoimmune diseases, ophthalmology, infectious and agingrelated diseases, are expected to gain more traction. And with regulatory and government support, Chinese companies are seeking access to more lucrative, global markets. Looking into 2H 2022, BIC drug, rather than FIC candidate may remain to lead China biopharma's outlicensing mandate.
In China, 5% of adults have been diagnosed with autoimmune diseases. The number of patients is estimated to be 3x the US patient population. The market for autoimmune disease drugs in China is experiencing rapid growth. The major drivers include the improvement of access to care, diseases awareness, diagnostic technology, and wide availability of advanced therapeutics.
In the last several years, Chinese pharmaceutical and biotechnology companies have transformed the ways patients access therapies and the way industry develops medicines. As their capabilities advance and they set their sights on larger markets, they face an inevitable question: do they focus on the increasing competition at home or the even bigger, global market for new and innovative drugs.
The National Medical Products Administration (NMPA) in China approved a wide variety of new drugs in 2021, while overcoming a number of challenges in responding to the COVID-19 pandemic. Of note, among the 64 new drugs approved, 28 are domestically developed drugs, and this is a clear sign that the home-grown innovation in China is rapidly advancing.
Western and Asia-Pacific companies have successfully struck a dozen major licensing deals with Chinese companies in the first two months of 2022. Due to the need for R&D and utilization licensing to fill unmet disease treatment gaps, we believe in-licensing is expected to dominate cross-border transactions in the next 3-5 years, as out-licensing from China continues as a secular growth trend as well. China’s leading biopharma is also delivering on successful partnered FDA approvals and global collaborations
Feb 28, 2022 is the 15th Rare Disease Day. Over 7,000 rare diseases affect more than 300 million people worldwide. China is estimated to have the largest number of rare disease patients in the world. However, the management of rare disease in China is far from satisfactory. The unmet needs of rare disease treatment in China create tremendous market potential. In recent years, policies spark new opportunities of rare disease market in China. Rare disease market in China is expected to grow faster in the near future.
On Feb. 10th, 2022, after a 5-hour live hearing, by a vote of 14-1, FDA’s Oncologic Drugs Advisory Committee (ODAC) recommended against approving Innovent (HK: 1801.HK; Mkt Cap US$6.04bn) and Eli Lilly’s (NYSE: LLY; Mkt Cap US$232.5bn) anti-PD-1 inhibitor Sintilimab.
With the booming of biopharma in China, most of the industry R&D and external collaboration efforts are concentrated in oncology, immuno-oncology in particular. As the intense competition heats up, for example among the PD-1 checkpoint inhibitors, we should keep in mind that no matter how big the cake is, there are only enough pieces, big or small, for a handful of players to share. Thus, as a drug developer, it is wise to be open-minded to embrace other novel and innovative opportunities, both within oncology and other therapeutic areas. Ophthalmic space is an excellent alternative.
Our MSQ’s viewpoint for China Biopharma 2022 deal outlook will likely see investments in high growth areas across all the subsectors. Pharma is expected to continue investing in oncology as well as cell and gene therapy, but also in other areas such as neurology and cardiology as developments there attract greater interest. Technologies such as mRNA /RNAi have already begun to gain more traction. Larger companies will look to further diversify their portfolios and into innovative technology platforms. As China Biopharma grows, more global deals, in addition to gaining regional rights, will be expected.
China biopharma kicked off 2021 by grabbing Nasdaq’s first biotech IPO listing (Ticker: GRCL) on January 8th, followed by strong funding influx both domestically and from ex-China. The cross-border licensing activities kept up with good momentum, opening a new era for China biopharma deals, transition from “China for China”, to “China for global”. Looking forward, we expect China biopharma industry in 2021 H2 to grow rapidly, and play a significant role at the global stage.
In 2020, the global biopharma industry was growing strong, especially the China biopharma industry which has made a breakthrough year with strong capital investment in the private and public market, and global transactions of license in/out driven by local innovation-focused policies. We expect that the China biopharma industry in 2021 will keep the steady growth and will play a more integrated role for global new drug development.
There are compelling opportunities to bring innovative drugs into China’s biopharmaceutical market from the perspectives of the regulatory landscape, market access, reimbursement system, and intellectual property protection.
In this Healthcare newsletter, we introduce COVID-19, Public Perception of Pandemic Infections, and Western Perspective of Other Prevalent Infectious Diseases in China.
In this month’s China Market Healthcare newsletter, we introduce China’s secondary market growth opportunities post our China’s Healthcare Equity Capital Market’s Commentary.
On Oct 15, 2018, to lighten the burden of national basic medical insurance, the General Office of the State Council, National Healthcare Security Administration, National Health Commission, and National Medical Products Administration together established the Joint Procurement Office – published the Paper on Centralized Drug Procurement in “4+7 Cities”.
As the living standard in China has been increasing steadily with a growing aging population, the nutraceutical market in China is expanding at an unprecedented speed. In China, nutraceutical products are regulated by the National Medical Products Administration (NMPA), governed by the State Administration for Market Regulation (SAMR). The registered nutraceutical products are eligible to use the “blue hat” icon on the packaging and allowed to claim the approved functions and benefits.