2020 has been eventful – perhaps the understatement of the year – but despite the novel coronavirus being discovered in China around the beginning of 2020, the country bounced back from the COVID-19 outbreaks by mid-year to deliver the hottest year for Chinese biopharma yet.
The Chinese biopharma sector has been spectacularly transformed over the past decade – and especially from 2016 – due to a perfect storm of supportive regulatory reforms, cash-rich and opportunity-hungry investors, and waves of returnees and local talent – and the industry is maturing rapidly. PharmaBoardroom highlights the five most noteworthy trends in Chinese biopharma in 2020, which might give us an inkling of what 2021 has in store for one of the world’s largest healthcare markets.
1. The IPO party continues … in Shanghai
According to a tally by MSQ Ventures, over 68 Chinese healthcare companies IPOed in 2020, raising a staggering USD 20+ billion. The prize for largest healthcare IPO goes to JD Health, the digital health arm of one of the largest e-retailers in China, which raised a whopping USD 3.4 billion on the Hong Kong Stock Exchange (HKEX).
While the HKEX made waves in April 2018 when it started to allow pre-profit biotech companies to list via a special chapter, the Shanghai Stock Exchange quickly followed suit in July 2019 with its Science and Technology Innovation Board (STAR board), which went a step further and removed many of the restrictions that used to be imposed on mainland China IPOs.
Just over a year later, the verdict is clear: Shanghai seems to have outmanoeuvred Hong Kong here, with over 40% of Chinese healthcare companies opting to IPO on the STAR board versus around 34% going to HKEX. Of course, NASDAQ is the biggest loser here, accounting for only 4.4% of Chinese healthcare IPOs in 2020.
However, HKEX continues to remain popular with biotech companies specifically. Over 22 biotech companies have already IPOed, and more are waiting by the sidelines.
2. Turning of the tides
While the modus operandi for Chinese biotechs over the past decade or so have been to capitalize on the healthcare technology gaps between developed markets and China by licensing in novel assets from either Big Pharma players or innovative biotechs on both sides of the Atlantic, in 2020, the tides started to turn. As Chinese biotechs increasingly mature – and more mature biotechs form – their leadership teams have increasingly worked on graduating from developing ‘me-too’s or ‘me-better’s to innovating ‘first-in-class’ or ‘best-in-class’ therapies.
In 2020, the fruits of their labor had clearly begun to ripen, with a number of high-profile deals announced where Chinese biotechs were out-licensing their own assets to global players instead of the other way around. Perhaps the most noteworthy was I-Mab Biopharma’s global strategic partnership with AbbVie for the development and commercialization of TJC4, an innovative anti-CD47 monoclonal antibody internally discovered and developed by I-Mab for the treatment of multiple cancers, which may be worth up to USD 2 billion. Another exciting – and very topical – deal was between Junshi Biosciences and Eli Lilly for JS016, developed jointly by Junshi and the Institute of Microbiology, Chinese Academy of Sciences, which was aimed at the prevention and treatment of COVID-19.
The outflows were not limited to biotechs. One of China’s most established pharma companies, Hansoh Pharma, licensed ex-China rights for a cancer drug, almonertinib, to a US biotech, EQRx, for USD 100 million in upfront, development and regulatory milestones. Almonertinib is already approved in China for EGFR T790M mutation-positive non-small cell lung cancer (NSCLC).
3. Consolidation within service provider space
While the glitzy biotech world is more eye-catching, the biopharma boom in China has also invigorated the CRO and CDMO space, with demand far outstripping supply across many core services. For instance, the CRO market is growing at a stunning CAGR of 20.3%. As the market grows and matures to meet overwhelming demand, a wave of M&As within the service provider sector is to be expected – and the ride has already begun.
In August, Viva Biotech announced a USD 369 million deal to acquire an 80 percent stake in a CDMO and API company, Zhejiang Langhua Pharma. Just a month later, Viva Biotech announced another acquisition: it would pay USD 80 million to acquire fellow CRO SYNthesis Med Chem, a preclinical small molecule CRO specializing in high-end pharmaceutical chemistry and synthetic chemistry services, with labs in China and Australia.
Another significant development is the merger of two pre-clinical China-US CROs, BioDuro and Sundia, which would make them one of the largest CDRMOs with operations in the two largest healthcare markets in the world. The deal was backed by Advent International, which has held a majority stake in BioDuro since early-2019 and will now also have a majority stake in Sundia.
4. European pharma investment in China continues unabated
With China increasingly representing a significant proportion of global revenues for Big Pharma players, many are, accordingly, investing in China-specific projects and expanding their presence across the mainland.
For instance, in July, Boehringer Ingelheim (BI) established a new Shanghai hub to gather its R&D, BD and VC operations in China so that they could access Chinese drug developers in a more efficient manner and holistic manner. The so-called External Innovation Hub is intended to immerse the German company – one of the top 20 pharma companies globally – more fully within the Shanghai biopharma R&D ecosystem. Thus far, BI has yet to announce any collaboration or deal with a domestic innovator.
Another European player, this time Danish midcap Novo Nordisk, also announced grand plans for integrating their global and Chinese operations, this time with a focus on clinical development. With what it called the ‘China Essentials’ program, Novo Nordisk aims to file Clinical Trial Applications of new products simultaneously in China and globally for the first time, with a target of 90 percent by 2025. As part of this push, Novo Nordisk will also establish strategic partnerships with 20 hospitals across the country to expand their clinical trial network. Separately, it also announced the plan to work with Microsoft to create a Chinese-language AI chatbot for diabetes patients in the country. 11 percent of the Chinese population is estimated to have diabetes.
On the manufacturing side, Bayer – another German pharma giant – is investing USD 59 million to upgrade and expand its production presence in the country. Bayer started construction on a new production and supply facility in Beijing, which is expected to boost yearly output by roughly 40 percent upon completion.
5. The tortoise and the hare – China and COVID-19 vaccines
The highlights and lowlights faced by Chinese vaccine developers in their race to deploy a COVID-19 vaccine provides an interesting microcosm of the overall industry’s state of development, perhaps. While Chinese companies were amongst the first globally to bring vaccine candidates into the clinic, validating the progress made by the overall Chinese biopharma sector and giving Chinese scientific research a significant boost in prestige globally, ultimately it was still a Big Pharma-backed vaccine – from Pfizer and German biopharma player BioNTech – that crossed the finish line first. While Chinese-developed COVID-19 vaccines have since been approved for use or emergency use within China and a number of countries globally, including the UAE, Egypt and Brazil, they have not been approved by the US or the EU – still seen as the gold standard regulators globally.
Of course, there are a myriad of factors behind the time gap – including the difficulty of recruiting participants to undergo clinical trials since the spread of COVID-19 was mostly controlled in China by June – but ultimately, just as this experience shows the incredible progress made by the Chinese biopharma sector over the past few years, it also highlights the long road that the sector still needs to walk.