In this new economic climate, biotech companies are reaching outside Chinese borders for drug candidates

China’s biotech sector has seen staggering growth over the last decade, making the leap from a barely-existent field to a major source of economic activity, with more than 1,000 biotech companies currently in existence. China’s rapid economic growth, the Chinese people’s higher levels of disposable income, and increasing demand for biopharmaceutical products are all factors behind this success.

Furthermore, many Chinese-born scientists who were trained overseas are now returning to their home country, bringing a wealth of technical knowledge and experience. Venture capital investment from within China is also on the rise, with a record USD 17.4 billion invested in 2018. The Chinese government is taking note, with policies being put in place to speed up the approval process for innovative products. With economic growth in mind, China’s government has stipulated that its biotech sector should exceed four percent of gross domestic product by 2020.

In this new economic climate, biotech companies are reaching outside Chinese borders for drug candidates they can commercialise and are increasingly eager to buy global rights to preclinical drugs to carry out their clinical studies in China and then market them globally. In 2018, Chinese biotechs struck 164 international licensing deals, double the amount from just five years ago, with spending on licensing agreements reaching more than USD 13 billion.

Everest Medicines, based in Shanghai, struck a deal with US-based Immunomedics for USD 65 million for the Chinese rights to its cancer drug. This amount will be followed by USD 60 million if the drug is approved in the US, and another USD 710 million may be received upon sales of the drug.

Another Shanghai biotech, Zai Lab, will pay USD 20 million to US-based Deciphera for its cancer drug candidate, later paying up to USD 185 million upon successful commercialisation.

Immunomedics and Deciphera are joined by British company ReNeuron, which struck a deal with China’s Fosun Pharma for the rights to its stem-cell therapies for eye disease and strokes, in which ReNeuron may receive more than GBP 80 million. This increased demand for international drug candidates has led to an enormous price inflation; however, this inflation has not deterred biotech companies from continuing to strike up international partnerships and the trend shows no sign of slowing down.

These international deals provide biotech companies in Europe and the US with funds for further new drug discoveries, as well as the ability to leverage their Chinese partners’ regulatory expertise to enter the Chinese market, opening a vital route into a country that can otherwise be difficult to penetrate. Chinese companies stand to mutually benefit from these partnerships by gaining access to world-class technology, helping these Chinese firms to become globally recognised.