Chinese PD-1 Cancer Drugs: Global Competition for Big Pharma

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PD-1 inhibitors have boosted survival rates for many cancer patients since their introduction in the US five years ago. Last year, MSD and BMS began selling these expensive therapies in China, but local players are already releasing their own drugs, sometimes at a third of the price. This represents a threat to US companies both in China – the world’s second largest pharma market – but also internationally, with many of these Chinese firms having global ambitions of their own.

 

Pharmaceuticals has been designated one of ten priority development sectors by the Chinese government in its ‘Made in China 2025’ plan. There has been a national push to develop a world-class domestic pharmaceutical industry at speed, with increased state funding for research, a flood of expertise returning to China from abroad, and faster approval times for innovative treatments.

 

Cheaper in China

Against this backdrop, Chinese firms are beginning to launch innovative therapies that can theoretically compete with similar treatments from international companies, often at a fraction of the cost. In December 2018, Shanghai Junshi Biosciences began selling its drug, Tuoyi, in China for CNY 187,000 (USD 27,105) for a year’s dose for skin cancer, melanoma. This represents just one third of the cost of using MSD’s Keytruda in China for the same condition over the same period, according to data compiled by Guosen Securities.

And Junshi is not alone. Another biotech firm, BeiGene, has filed for approval for its own PD-1 drug in China and, yet another, Innovent Biologics, currently has a PD-1 therapy on the market in China that is less pricy than those of MSD and BMS. Jiangsu Hengrui Medicine, one of China’s largest pharma companies, received regulatory approval for its PD-1 product at the end of May 2019.

MSD’s and BMS’ PD-1 drugs are already facing pricing pressures in China, having put their treatments on the Chinese market at a price far below that in the US. A vial of Keytruda retailing for CNY 17,918 (USD 2,587) in China compared to CNY 33,000 (USD 4,765) in the US. Additionally, both firms have special programs to offer the medicines at discounts for low-income patients in China.

 

Taking it to the World

The likes of Junshi, BeiGene and Innovent are not, however, content to rest on their laurels in the domestic market and see potential for their more affordable PD-1 therapies in the US and beyond. Junshi and BeiGene are both currently conducting clinical trials to enter the US market and BeiGene president Wu Xiaobin is, “confident in our own patent around the world… We have been well prepared for this because we’ve always planned to go global.”

Having validation from a company like Eli Lilly gave current and potential investors more confidence in us

Michael Yu, Innovent Biologics

Big Pharma is cognizant of this trend and some firms are looking to license these Chinese drugs globally. For example, Innovent has a licensing agreement with Eli Lilly, through which the US firm will also be responsible for clinical trials, further development work, and marketing the medicine overseas.

Speaking earlier this year, Innovent’s Michael Yu told PharmaBoardroom that his company, “benefited immensely from this deal, not just in terms of the financing for our R&D but also through the validation of the quality of our innovation from Big Pharma. Having that financing from Eli Lilly meant that we needed to raise less money from other investors. The deal also increased the capitalization of our company, thereby raising the potential returns for our existing investors. Having that validation from a company like Eli Lilly also gave current and potential investors more confidence in us. That, in turn, caused other sources of capital to start flowing in.”

 

Uncertain Futures for US Pharma in China

Although no PD-1 drug, domestic or imported, has yet been added to China’s medicine reimbursement list and patients currently have to pay for these treatments out of pocket, it seems only a matter of time before things change. Junshi’s CEO Li Ning foresees companies cutting prices to get their medicines listed, with Chinese firms better positioned to win a race to the bottom on pricing.

However, China – long-focused on generic treatments and chemical drugs – is new to developing innovative medicines, so managing their safety and efficacy remains a risk. MSD is bullish on its future prospects in China, stating that Keytruda, the only PD-1 therapy approved in China for both melanoma and lung cancer, is well positioned, noting that later entrants will face more barriers. BMS, for its part, is taking a more conciliatory approach, calling for greater collaboration between foreign and local firms to address unmet patient needs.

China sees around four million new cancer patients annually and is projected to account for a fifth of what is projected to be a USD 78.9 billion PD-1 therapies market by 2030. Having seen local firms snatch up to 85 percent of the market for a generic drug or medical device in recent years, Innovent’s CFO Ronald Ede foresees that, “this will happen in the PD-1 market as well, and it’ll come faster.”

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