US-China Partnership: Just Hitting its Stride, and Now Threatened

Curon, Chimagen, Hengrui, LaNova…the list goes on of Chinese biotech companies that have recently licensed potential blockbuster drug candidates for cancer,  autoimmunity and more to US pharma and biotech companies for further development.

Over the past year or so, there has been a dramatic increase in both the number of deals to obtain rights to assets discovered in China, and the prices paid for those assets.

China has become more than a source of low-cost, high-quality manufacturing and contract research services. It’s now an important source of new drug discovery. US and European companies are taking these new discovered-in-China assets forward into global development, in some cases sending back significant milestones and royalty payments to the company that did the original work.

A symbiotic relationship has been evolving between the US and China. But it all could come to a halt now if the incoming Trump Administration and new Congress deliver on the promise to crack down on trade with China.

The timing couldn’t be worse, just as US-China relations in biopharma have started to blossom.

While in the past many people in the West have traditionally been skeptical of the quality of drug discovery work performed in China, often assuming (wrongly, it seems) that Chinese assets either have liabilities due to cutting corners or amounted to nothing more than trivial ‘patent busts’ – uncreative modifications to molecules to work around a competitor’s published patents—there is today broad respect for the quality and in particular speed of work being performed by Chinese companies.

Companies on both sides are benefitting from this relationship. Here’s how:

• Typically, Western companies are still discovering and validating novel targets, as well as novel modalities and mechanisms
• Chinese companies, watching this novel discovery and early development work closely, quickly create new molecules that address the same target or imitate the novel molecular mechanism. In some cases, these are merely me-too ‘patent busts,’ but in other cases these are truly ‘me-better’ molecules that contain some meaningfully improved features over the original molecule (e.g., potency, half-life, etc.)
• The Chinese companies get the work done at a remarkably fast pace. Sometimes they stop once they have a preclinical development candidate, and sometimes they advance through phase 1 or even phase 2 studies in China, frequently with the intent of commercializing the new drug in China
• At any point along this continuum between late preclinical and mid-clinical stages, Western companies purchase or license these assets for development globally. In some cases, the Chinese company retains rights to develop and commercialize the drug in China. The Summit Therapeutics/Akeso collaboration for the PD-1/VEGF bispecific antibody ivonescimab is one example.

Thus, Chinese molecular discovery and early development work is bookended by Western mechanistic and target discovery work on one side, and Western late-stage development and commercialization on the other.

This situation is evolving rapidly. Over the past year or so, there has been a feeding frenzy among venture capitalists and scrappy entrepreneurs. US-based VCs have scoured Chinese patent literature in search of assets matching their interests, either by using Google Translate, or, for the lucky ones who can read Chinese, in the original language. More recently, some pharmas have strengthened relationships with Chinese companies and are gaining access to these assets directly.

Already, as Western companies become more familiar with this source of high-quality molecular assets and Chinese firms become more adept at marketing their products externally, prices have increased and now nearly match the price for similar assets that originated in the West.

It will be important to watch what comes next. Chinese companies will probably continue to adapt rapidly. Will they take on more of a Western presence, and begin to develop drugs for Western markets on their own?

There are already a handful of global biotech companies with Chinese roots. BeiGene recently rebranded to BeOne to distance itself from its Chinese origins. Zai Labs’s President & COO was previously a US pharma executive. Other Chinese pharmas and biotechs have already hired experienced US-based executives, particularly to execute on business development.

Perhaps Chinese companies will begin to take on more late-stage development and commercialization in Western markets. Some Chinese companies could establish US operations and begin to run clinical trials in Western countries and even build sales forces there.

However, for Chinese companies that are either state-owned or have close ties to the Chinese government, this may not be possible, necessitating continued dealmaking with Western companies to enable development of their assets in Western markets.

I do expect Chinese companies to encroach into the earlier-stage discovery work still dominated by Western companies. Now that they have established themselves as skilled drug hunters, Chinese companies will likely invest more into basic research to discover and validate novel targets and biological mechanisms.

Rather than just being fast followers, Chinese companies will soon emerge as true competitors with Western firms on the cutting edge.

Western companies should be concerned. I am less confident that Western companies will adapt to remain competitive with the agility and relentless pace of Chinese companies. The speed with which they can create new molecules is impressive and should be studied. It may be hard to replicate.

Western biotech and pharma companies at times focus too much on elegant and innovative science at the expense of speed. ‘Cool’ science doesn’t always translate to better drugs, and it usually takes more time and costs more money.

On the other hand, Paragon Therapeutics is a US company founded in 2021 that has adopted a model of developing me-better and me-too biologics that imitate approved or otherwise derisked drugs and bring them expeditiously through clinical trials. It’s not the most creative approach scientifically, but it has led to exceptional financial returns on the public markets (see: Apogee, Spyre, Oruka, Jade, and Crescent).

Not only are Chinese labs moving fast to discover assets, but they also move fast into the clinic. While similar data packages are often required for a Phase 1 IND in China as in the US, there are timeline efficiencies in drafting regulatory documents, review, and subsequent trialing that enable rapid readouts.

Especially for a complex product like antibody-drug conjugates and cell therapies, where iterations on multiple components of the overall construct are needed, China has proven to be an effective Phase 1 testing ground for identifying the optimal product, gathering data quickly and efficiently not just from animals, but from healthy volunteers and patients. 

Cell therapies developed in China often start with investigator-initiated studies, for example, to rapidly progress through multiple iterations of these cellular constructs. Will FDA and European regulators increase flexibility to enable Western companies to better match the speed of their Chinese counterparts?

All of this progress is threatened by the geopolitical tension between China and the US. The BIOSECURE Act has made it more difficult for US companies to work with certain Chinese companies, but it has not yet seemed to impede the in-licensing and purchase of discrete assets from China. Chinese government restrictions have made it difficult to transfer certain data and materials outside of China (e.g., genetic data and patient samples), but so far we have not seen major issues with acquiring molecular assets for development outside of China.

The decision to partner with a Chinese company for drug manufacturing is not without its risks. In recent years there have been several Form 483s and Warning Letters issued by FDA to Chinese manufacturing firms for issues ranging from lack of sterility to willful destruction of documents. Of course, plenty of US-based contract manufacturers have had challenges with regulatory compliance, but there is a question of increased scrutiny for foreign-based manufacturers.

Politicians and government officials in both countries may feel pressure to show that they are tough on trade between the two countries. The flow of Chinese assets into Western companies has only recently begun in earnest, yet it feels like the spigot could be turned off at any time. Until it is, however, biotech and pharma professionals from both countries will be busy negotiating deals to bring attractive drug candidates into Western countries.

 

Thanks to Aimee Raleigh for her excellent comments on a draft of this article.