HONG KONG, Sept 16 (Reuters) - If investors in China's
biotech industry needed one more sign that the sector is coming
of age, then a major licensing deal RemeGen Co Ltd
struck last month with Seattle-based Seagen Inc fits
The agreement to co-develop cancer treatments using a
RemeGen antibody drug conjugate is regarded as one of the
biggest of its kind between a Chinese biotech and a Western
firm. It provides for up to $2.4 billion in milestone payments,
in addition to $200 million upfront as well as royalties if
It is also at least the fifth out-licensing deal potentially
worth more than $1 billion clinched by a Chinese biotech. Nearly
all were signed in the past year, underscoring China's still
small but growing role in developing innovative cancer drugs
that will be used worldwide.
"China is clearly already an important and integral part of
the global biopharma industry, not a separate ecosystem," said
Franck Le Deu, senior partner at consultancy McKinsey in Hong
China's government has made cancer treatments a top priority
for the industry. The world's most populous nation last year
accounted for 30% of cancer deaths globally and 24% of newly
diagnosed cases, according to one study.
Supportive policies for the sector over the past five years
are also now bearing fruit and Western firms have come knocking
at Chinese biotech doors.
For Seagen, the RemeGen deal will allow it to directly
challenge breast cancer treatments from Roche Holding
and AstraZeneca/Daiichi Sankyo. The antibody
also shows promise in tackling bladder and stomach tumors.
Other notable deals include a Novartis AG agreement
worth up to $2.2 billion for a BeiGene Ltd drug. The
two are co-developing an antibody similar to Keytruda from Merck
and Opdivo from Bristol-Myers Squibb which help
the immune system attack several different types of cancer and
which have reaped billions of dollars in sales.
AbbVie has also partnered with I-Mab to
co-develop a monoclonal antibody for several types of cancer in
a deal worth up to $1.9 billion.
FLOURISHING ON FUNDING
Chinese biotechs have proliferated in a relatively short
amount of time - a key catalyst being the return of
overseas-trained Chinese scientists, dubbed "sea turtles," that
began a decade ago and who have become increasingly attracted by
domestic opportunities as the government pushes to develop the
More recently, China in 2017 and 2018 aligned regulatory
standards with international norms, rapidly speeding up the
review system for new drugs. The sector also has seen a surge in
funding after Hong Kong's stock exchange changed its rules in
2018 to allow listings of biotechs that have yet to earn
Success in the West is still fledgling - just three drugs
developed in China which include BeiGene's Brukinsa for a type
of non-Hodgkin's lymphoma - have been approved by the U.S. FDA.
Investors are also concerned about frothy valuations and it
remains unclear how many firms will succeed due to the lengthy
process of drug discovery and the massive costs involved. That
said, there appears to be more than enough funding to propel the
"We are looking at a turning point because of the capital
supply and the regulatory approval regime," said Simone Song,
founding partner of healthcare venture capital fund ORI Capital.
Nineteen Chinese biotechs made their trading debuts last
year, mostly in Hong Kong, raising a combined $5.2 billion, up
from 13 raising around $2 billion in 2019, Refinitiv data shows.
So far this year, 20 have listed, raising $4.6 billion and the
Hong Kong bourse has flagged nearly 30 more in the pipeline.
According to McKinsey's Le Deu, the combined market value of
Chinese biotechs listed in Hong Kong, on Shanghai's STAR board
and on the Nasdaq was some $180 billion as of May, which
compares to just $1 billion in 2016.
The number of large out-licensing pacts for Chinese biotechs
is only set to grow, industry experts say.
I-Mab, Innovent Biologics, Junshi Biosciences
and Legend Biotech are likely candidates
for further licensing deals with Western firms, said Morningstar
analyst Jay Lee, citing their existing partnerships and pipeline
I-Mab says it is seeking strategic partners to help develop
and commercialize its products, while Legend said it is open to
collaboration. Junshi and Innovent did not respond to requests
Legend was in 2017 one of the first Chinese biotechs to win
an out-licensing deal with a major Western pharmaceutical firm.
Its CAR-T bone marrow cancer drug co-developed with Johnson &
Johnson is set to be reviewed by the FDA in November.
Though few in number, the more established Chinese biotechs
have even bigger ambitions.
BeiGene, which is 20.5% owned by Amgen Inc and
valued at $34 billion, out-licenses some products but built its
own U.S. and European sales teams for Brukinsa. It has also
announced it will build a new R&D and manufacturing center in
"We are really trying to brand ourselves as a global
company...we just happen to have labs right now in China," said
Angus Grant, BeiGene's chief business executive.
Hutchmed, the first Chinese company to have an
in-house innovative cancer drug unconditionally approved in
China, is not planning to partner in the United States or at
home now that it has grown, said Chief Executive Christian Hogg.
"We have got around $1.2 billion in cash on our balance
sheets, we have got the capabilities, resources, financial and
organizational resources to pretty much do whatever we want to
do outside of China," he said.
(Reporting by Farah Master; Editing by Miyoung Kim, Michele
Gershberg and Edwina Gibbs)