Policy Support Fuels Innovation: China's Innovative Drug Sector Flourishes with Multiple Breakthroughs

Innovative pharmaceutical companies are showing a surge in R&D enthusiasm, with multiple enterprises recently reaping the rewards. Hengrui Pharma's first self-immune innovative drug, Funacizumab, issued the first prescription in China, and the marketing authorization application for the JAK1 inhibitor Imasatinib Sulfate Tablets (SHR0302 Tablets) has been accepted. Class 1 innovative drugs from companies such as Humanwell Healthcare Group Co. Ltd., Sino Biological, and Tian Guang Shi have been approved to commence clinical trials. Industry insiders indicate that, benefiting from policy support, the sales of innovative drugs in China will maintain robust growth, and the valuation of the innovative drug sector is expected to rebound.

● China Securities Journal reporter Su-Ying Fu

A Surge in Innovative Drug Development Achievements

Hengrui Pharma Achieves Significant Gains. Recently, the marketing authorization application for the company's JAK1 inhibitor, Imecitinib Sulfate Tablets (SHR0302 Tablets), was accepted by the National Medical Products Administration. This medication is intended for adult patients with severe alopecia areata. Currently, no domestically developed JAK1 inhibitors have been approved for marketing in China.

Funacizumab is the first innovative drug launched by Hengrui Pharma in the field of autoimmune diseases, and also the first domestically developed recombinant anti-IL-17A humanized monoclonal antibody to be approved, breaking the long-standing reliance on imported drugs of the same class.

GENRIX BIO recently announced that the company's self-developed Class 1 new drug, Selicrelumab Injection, for the treatment of moderate to severe plaque psoriasis, has been approved for marketing and nationwide commercial distribution in China. This product fills a domestic gap and offers a new option for psoriasis patients.

In addition, the marketing application of Serilizumab Injection for radiographic axial spondyloarthritis (ankylosing spondylitis) has been accepted by the Center for Drug Evaluation of the National Medical Products Administration and is currently under review for new drug approval.

Sanyuan Gene has a rich R&D pipeline. Recently, the company's inhaled interferon α1b nebulization treatment for pediatric respiratory syncytial virus (RSV) pneumonia has completed Phase III clinical trials, achieving the primary study endpoint. To date, the company has completed the organization of all registration materials and has communicated with the Center for Drug Evaluation of the National Medical Products Administration. Subsequent steps will follow the procedures to advance the project application process.

Multiple listed companies have received approval for their research products to conduct clinical trials. Sinocelltech recently announced that its self-developed recombinant shingles vaccine product, SCTV04C injection, has been approved to carry out clinical trials in healthy adults to prevent shingles and complications caused by varicella-zoster virus infection.

Humanwell Healthcare Group Co. Ltd.'s HW071021 tablet has been approved to conduct clinical trials, intended for patients with advanced solid tumors. Currently, there are no similar products available on the market in China. To date, the cumulative investment in the project's research and development amounts to approximately 43 million yuan.

Industrial Investment Funds Accelerate Establishment

On September 3, Hygieia Pharmaceuticals Co., Ltd. ("Hygieia Bio") announced the completion of a multi-million-yuan A2 round of financing. This round was led by Huangpu Biomedical Industry Fund, with Nanwan Biau Fund participating. Hygieia Bio is committed to the construction of a siRNA delivery technology platform and drug research and development, establishing a complete drug development platform from target discovery to clinical validation.

Policy Support for Innovative Drugs to Accelerate Development. On July 5, the executive meeting of the State Council reviewed and approved the "Full-chain Support for Innovative Drug Development Implementation Plan." Policies supporting the biopharmaceuticals industry have been rolled out in multiple regions. For instance, at the end of July, the General Office of the Shanghai Municipal People's Government released the "Several Opinions on Supporting the Full-chain Innovation and Development of the Biopharmaceuticals Industry," proposing to leverage the roles of Shanghai’s biopharmaceutical industry mother fund, biopharmaceutical industry equity investment fund, and biopharmaceutical innovation transformation fund to enhance strategic relief investments for promising enterprises and high-quality R&D pipelines.

The establishment of biopharmaceutical industry investment funds is accelerating, and the market environment is continuously improving. At the end of August, the Jiangsu Suzhou Biopharmaceutical Industry Special Mother Fund (Limited Partnership) was established with a target size of 6 billion yuan and a duration of 15 years. It focuses on innovative drugs, pharmaceutical R&D, medical devices, medical services, synthetic biology, and other fields. The fund is jointly held by Jiangsu Province's Strategic Emerging Industry Mother Fund Co., Ltd., Suzhou Innovation Investment Group Co., Ltd., and others. At the end of July, Shanghai's three major leading industry mother funds were officially launched with a total scale of 100 billion yuan, including integrated circuits, biopharmaceuticals, artificial intelligence mother funds, and future industry funds. These funds aim to promote the collaborative linkage of government resources and social capital, linking innovation resources in a market-oriented manner to support original innovation and the transformation of scientific achievements. Among them, 21.5 billion yuan will be invested in the biopharmaceutical field, covering innovative drugs and high-end formulations, high-end medical devices, biotechnology, and high-end pharmaceutical equipment.

China Merchants Securities stated that since 2024, the scale of newly established government biopharmaceutical funds has exceeded 55.5 billion yuan. In recent years, government investment funds have developed rapidly, becoming an important tool for promoting regional economic development and guiding social capital investment. As one of the strategic emerging industries, the biopharmaceutical industry is one of the key investment directions for government funds. Government fund investments are expected to stimulate new vitality in the industry.

Large Overseas Licensing Deals Appear Frequently

As Chinese innovative drug companies enhance their R&D capabilities, their recognition overseas is also increasing.

Recently, EpimAb Biotherapeutics and Vignette Bio announced a strategic collaboration for the development of the BCMA×CD3 bispecific antibody EMB-06. EpimAb Biotherapeutics will receive an upfront payment totaling $60 million and is entitled to receive up to $575 million in milestone payments related to development, regulatory approval, and commercialization, as well as royalties based on net sales.

In August, three drug overseas deals were reached. Merck invested $1.3 billion to introduce Tongrun Bio's CD3/CD19 bispecific antibody CN201; Genor Bio’s CD20/CD3 overseas licensing will receive tens of millions of dollars in upfront payment, $443 million in milestone payments, and tiered royalties; I-Mab Biopharma reached a licensing agreement with Instil Bio for the PD-L1 x VEGF bispecific antibody and the next-generation CTLA-4 antibody IMM27M, which will bring $50 million in upfront and near-term payments, with milestone payments exceeding $2 billion.

Overseas Licensing Has Become an Important Path for Chinese Innovative Drug Companies to Expand Abroad. Overseas licensing can help innovative drug companies quickly obtain financial support and market channels, while sharing the risks of research and development and market promotion. In the first half of 2024, China's innovative drug overseas licensing showed impressive performance, with 32 projects accumulating a total transaction value of over 20 billion US dollars, covering areas such as small molecules, antibody-drug conjugates (ADCs), and monoclonal antibodies. In the first half of 2023, the total transaction value of China’s innovative drug overseas licensing was 17.4 billion US dollars.

Hengrui Pharma Steadily Advances Its Internationalization Strategy. In May this year, the company licensed its self-owned intellectual property GLP-1 class innovative drugs HRS-7535, HRS9531, and HRS-4729 to U.S.-based Hercules Company. The upfront payment plus milestone payments could cumulatively reach up to 6 billion USD. The company will also acquire 19.9% of the equity in Hercules Company. To date, the company has achieved overseas licensing for 11 innovative drug projects. Additionally, the company is conducting nearly 20 international clinical trials for innovative drugs; four ADC innovative drugs have received Fast Track designation from the U.S. FDA; Camrelizumab, Haitripobart, and two other innovative drugs have been granted Orphan Drug designation by the FDA.

BOC International believes that the outlook for China's innovative drug exports is promising, with overseas markets expected to bring incremental market space for domestic innovative drug companies. Particularly promising is the U.S. pharmaceutical market, where per capita pharmaceutical spending is relatively high and the prices of innovative drugs are higher than in other countries.