Who Will Lead China's Cell Therapy Revolution? Fosun Pharma Doubles Down on CAR-T Through Full Ownership of Fosun Kite
Fosun Pharmaceutical
Healthcare Industry Group
Fosun Kairos
Developer of Tumor Immune Cell Therapy Technologies and Products
CAR-TWhen will it dawn in China?
When Gracell Biotechnologies was acquired by AstraZeneca, Legend Biotech was also reported to have received overseas capital merger and acquisition offers, triggering concerns about "the death of China's CAR-T". When CAR-T products failed twice to be included in medical insurance, the commercialization gloom lingered.
An innovative therapy that can cure cancer cannot benefit only a few people for a long time, nor can it go without the support of the national payment system for an extended period. The turning point will eventually come; the key is whether one can afford to wait. The recent intensive investment in cell therapy by China's Big Pharma must indicate positive changes on the horizon.
During the industry bottleneck period, who will take up the banner of China's cell therapy? As the "first person to eat crab" in China's cell treatment field, Fosun Pharmaceutical actively rises to the challenge.
On September 13, Fosun Pharmaceutical announced its plan to hold 100% of Fosun Kite and increase capital. After the completion of this transfer, Fosun Kite will be included in the scope of Fosun Pharmaceutical's consolidated financial statements as a subsidiary, and it is proposed to be renamed Fosun Kite Biotechnology Co., Ltd. It will serve as Fosun Pharmaceutical’s core platform for cell therapy technology, continuing to focus on the field of tumor immunotherapy and promoting the expansion of CAR-T cell therapy products in China.
Last month, Huadong Medicine once again moved to commercialize the licensing of CAR-T products, and Shijiang Group's CAR-T was approved for SLE clinical trials. Behind this wave of enthusiasm is the fact that the enlightenment education phase of CAR-T products in China has been completed, with improvements in payment and technological innovation heading towards a dual convergence at the accessibility inflection point.
CAR-T Products Have in Fact Conducted a Stress Test on Payment Capabilities in China, Also Accelerating the Formation of a Diversified Payment System. Currently, Commercial Health Insurance Can Cover the Entire Cost of Medication and Hospitalization for Patients Using Yikaida® (Fosun Kite's CAR-T Product, Axicabtagene Ciloleucel Injection), Significantly Reducing the Financial Burden on Patients.
Meanwhile, the cost of marketed CAR-T products is being reduced while production lines are improved (with continuous cost reductions on the production side, and development towards treating frontline patients and outpatient medication). Moreover, CAR-T is breaking out from the field of hematological tumors to expand into solid tumors and chronic diseases with large patient populations. This means that, driven by economies of scale, CAR-T products will gradually become more affordable.
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A Determination to Bet on Innovative Therapies
How to Evaluate China's Big Pharma Heavily Betting on Innovative Therapies?
Fosun Kite, established in 2017 through a joint investment by Fosun Pharmaceutical and Kite Pharma, achieved the approval and market launch of China's first CAR-T product, Yikaida®, in June 2021. This marked the beginning of China’s CAR-T treatment era and represented a groundbreaking milestone in China’s cell therapy field, transitioning from 0 to 1.
Fosun Kite is about to enter a brand-new stage of development. Fosun Pharmaceutical Industry, a subsidiary of Fosun Pharmaceutical, plans to acquire 50% of Fosun Kite's equity held by Kite Pharma through a cash payment. After the transfer is completed, Fosun Pharmaceutical will hold 100% of Fosun Kite's equity and intends to make an additional capital contribution of 10 million US dollars or its equivalent in RMB as the sole shareholder.
In addition to the 50% equity transfer portion of this transaction, Fosun Kite has also comprehensively revised and restated the original license agreement with Kite Pharma, reaching an "Amended and Restated License Agreement." According to the license agreement, Fosun Kite shall pay Kite Pharma up to US$35 million in sales milestones based on the achievement of annual net sales of the licensed products. Meanwhile, Fosun Kite will pay royalties to Kite Pharma at varying rates of 7%-13% on the annual net sales of all licensed products within the licensed territory. This transaction is subject to the fulfillment of all the aforementioned agreement arrangements.
Fosun Pharmaceutical and Kite Pharma Upgrade Cooperation Model, Without Impact on the Subsequent Hospital Rollout of Yikaida®.
From now on, Fosun Kite will be better integrated into the Fosun Pharmaceutical system, with more flexible market-oriented operations and a more open pipeline system, no longer limited to Kite's products.
Against the trend, Fosun Pharmaceutical has made a significant move in the cell therapy field, demonstrating its determination to build Fosun Kite into a leading CAR-T company. In addition, Fosun Pharmaceutical has been implementing a strategy of asset reallocation and business focus in recent years, increasing its stake in core assets. This transaction also highlights its commitment to the development of innovative drugs.
Fosun Pharmaceutical Ranked TOP4 in the 2023 China Pharmaceutical Industry Top 100 List, with R&D Investment of 2.737 Billion Yuan in H1 2024, Including 2.406 Billion Yuan in Pharmaceutical Business R&D, Accounting for 16.39% of Pharmaceutical Business Revenue; Innovative Drug Revenue Maintained Steady Growth. Promoting Overseas Expansion of Self-Developed Innovative Products and Strengthening Global Market Layout, Fosun Pharmaceutical's Overseas Revenue Reached 5.51 Billion Yuan in H1 2024, Increasing by 15.13% Year-on-Year.
Since the drug review reform in 2015, the innovative drug industry has been less than 10 years old and is still a completely new field. The evaluation system for pharmaceutical companies' innovation remains relatively immature. The market is quite demanding on traditional large comprehensive pharmaceutical enterprises, expecting them to actively transform through innovation while ensuring profitability across all business lines. In this context, investing in emerging therapies that are still in the investment stage requires significant courage.
No matter how difficult it is, there is a future only with innovation. In the capital winter, Big Pharma has a comparative advantage in nurturing emerging therapies internally, providing long-term asset support for the R&D pipeline, and empowering commercialization through brand and channel enhancement.
Kite Pharma stated: "Now, Fosun Pharmaceutical is fully capable of independently operating Fosun Kite." In fact, Fosun Kite has been striving to enhance its self-research capabilities. The company has formed a complete CAR-T professional team and talent echelon, covering early research, clinical development, regulatory registration, production and quality, procurement and supply chains. Currently, the company's production, quality, and supply chain teams already possess extensive commercial production experience in CAR-T, ensuring high-quality product supply.
The spring of cell therapy will surely come, it just depends on who can last longer. In the embrace of Fosun Pharmaceutical, the future of Fosun Kite Biotechnology Co., Ltd. is promising.
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Quantitative changes will eventually lead to qualitative changes.
CAR-T seems to have stalled in China, but in fact, there have been advancements in payment processes, cost reduction and efficiency improvement, breakthroughs in indications, and technology updates.
Diverse Payment Methods
Yikaida® Has Benefited More Than 700 Lymphoma Patients Cumulatively; Fosun Kite Has Established Over 170 High-Standard Yikaida® Treatment Centers Across 28 Provinces, Municipalities, and Autonomous Regions in China, and Promoted the Inclusion of Yikaida® in More Than 110 City-Level Inclusive Insurance Programs and Over 80 Commercial Health Insurance Programs. Commercial health insurance can cover the full cost of Yikaida® medication and hospitalization expenses for patients. Typically, city-level inclusive insurance reimburses 70% of the drug costs for non-pre-existing condition patients and 30% for pre-existing condition patients using Yikaida®. For example, under Shanghai's HuHuiBao (Shanghai Inclusive Insurance), lymphoma patients are not differentiated based on pre-existing conditions, with each patient eligible for a maximum reimbursement of 500,000 yuan, effectively reducing their out-of-pocket medication expenses by 40%.
Exploring Payment Model Innovation: Fosun Kite and Chenxi Health, a health management and patient comprehensive service platform under Sinopharm Holding, jointly launched China’s first efficacy-based value payment plan for Yikaida® lymphoma treatment. Eligible patients who do not achieve complete remission (CR) after using Yikaida® will receive a refund of up to 600,000 RMB. This initiative provides a solid guarantee of the therapeutic value of Yikaida®. Since the project's launch on January 1, 2024, nearly 200 patients have enrolled, with over 58% of evaluated patients achieving complete remission (CR), further strengthening the company’s confidence in the Yikaida® product and its commitment to advancing innovative payment solutions.
It is expected that cell therapy products will continue to expand into commercial insurance and惠民保 (inclusive insurance), covering more cities. As the inclusion in commercial insurance lengthens and the base of potential patients increases, CAR-T products are bound to gradually gain market share.
This year, four CAR-T products have applied to participate in the medical insurance negotiation. It is estimated that the possibility of successful negotiation is still slim, but the exploration process itself is meaningful. The reimbursement mechanism for high-value therapies that bring unique clinical benefits to patients will eventually be established.
In the future, there is hope to form a diversified payment method with multiple channels, including national medical insurance, inclusive insurance, commercial insurance, and charitable donations, working together comprehensively to solve the payment issue for expensive medications.
Cost Reduction and Efficiency Improvement
According to the literature reported in the International Journal of Cancer, in the entire production process of CAR-T, upstream raw materials (culture medium, plasmids, nucleases, viral vectors) used for the culture and transduction of CAR-T account for approximately 49~51% of the total cost. Among these, the GMP production of viral vectors accounts for about 30% of the total cost.
When viral vectors are produced at scale, the production cost of CAR-T cell preparation can be reduced. Taking GlaxoSmithKline's lentiviral vector production as an example, the cost is approximately $25,000 per dose when producing 100 doses of CAR-T lentiviral vectors, approximately $4,000 per dose when producing 1,000 doses, and approximately $1,500 per dose when producing 10,000 doses.
Approximately 50% of the production cost of CAR-T is fixed costs. According to a research report by Southwest Securities, for a dust-free room with only one machine used for closed and automated production, the total annual fixed cost is approximately $584,131.
Chinese CAR-T companies are all striving to reduce costs. Taking Fosun Kite as an example, in terms of materials, under the premise of ensuring stable and reliable product quality, the company continues to promote domestic substitution, optimization and improvement of process technology, and data research, which will help the company better advance this work. For marketed products, through the cooperation agreement with Kite Pharma, the stable supply of viral vectors can be ensured. Newly introduced products will have more options for materials, including viral vectors. In terms of production processes, by building automated and intelligent platforms, labor efficiency is improved and preparation cycles are shortened. Regarding fixed costs, the existing production base capacity can meet current market demands. As economies of scale are gradually realized, the cost allocated to each CAR-T cell will decrease significantly. In the future, combining process improvements with production capacity, a more scientific production layout is expected to substantially reduce operating costs.
Expanding to a broader space for frontline treatment, Yikai Da® is the only CAR-T cell therapy product approved in China for second-line indications, marking a significant advancement. It brings new hope to adult patients with relapsed or refractory large B-cell lymphoma (r/r LBCL) who are either unresponsive to first-line immunochemotherapy or relapse within 12 months after first-line immunochemotherapy.
Technological Updates and Indication Breakthroughs
The democratization of CAR-T therapy is expected to begin with the commercial approval for autoimmune indications.
On February 21 this year, a team led by Professor Georg Schett from the University of Erlangen-Nuremberg in Germany reported in the journal *NEJM* that 15 patients with autoimmune diseases (8 with systemic lupus erythematosus, 4 with systemic sclerosis, and 3 with idiopathic inflammatory myopathy) experienced a remarkable recovery after receiving CAR-T cell therapy. These patients no longer exhibited symptoms or required new treatments, with the first group of treated patients remaining disease-free for over two years.
Autoimmune diseases generally cannot be cured and require long-term medication. The advantages of CAR-T are unparalleled, equivalent to a one-click restart of the patient's immune system, offering the possibility of curing autoimmune diseases.
Currently, there are dozens of CAR-T product pipelines being developed in China for the treatment of autoimmune diseases, most of which are primarily targeting SLE (systemic lupus erythematosus). Fosun Kite's BCMA/CD19 dual-targeting CAR-T product, FKC-288, has chosen indications spanning hematological tumors, autoimmune kidney disease, and the rare disease light chain (AL) amyloidosis.
With the expansion of autoimmune disease and solid tumor indications, as well as breakthroughs in off-the-shelf therapies, cell therapy is set to unlock a vast market potential. Production costs are expected to decrease significantly, leading to more affordable pricing.
Although it is temporarily difficult to replicate the火爆 of the ADC track, subtle progress in cell therapy is happening every day, and quantitative changes will eventually lead to qualitative changes.
As the pioneer of China's CAR-T market, Fosun Pharmaceutical has now proactively taken on the crucial role of a trailblazer. Axi-cel (Axicabtagene Ciloleucel Injection) is already the CAR-T product with the most extensive and largest real-world research data set globally, as well as the CAR-T product with the longest follow-up duration to date. Based on its mature R&D, production, and supply management system for cell therapies, Fosun Pharmaceutical will harness the power of time to unlock more innovative possibilities.
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