Behind the O药 Deal: A Commercial Collaboration Experiment by a Biotech in Transition

Apr 19, 2024 11:22 CST Updated 11:22

Zai Lab

Innovative Global Biopharmaceutical Company

Bristol-Myers Squibb

Biopharmaceutical and Nutritional Product R&D and Sales

Recently, Bristol-Myers Squibb (BMS) granted Zai Lab the sales rights for nivolumab injection "O drug" and ipilimumab in 10 provinces in Greater China, including Yunnan, Guizhou, Guangxi, Inner Mongolia, Xinjiang, Gansu, Ningxia, Qinghai, Hebei, and Shanxi.

Almost simultaneously, Zai Lab released its 2023 annual report, showing total product revenue for the year at $266.7 million, a 25% increase year-over-year. Following the announcement, share prices rose in both the U.S. and Hong Kong markets, providing a much-needed boost to the stock that had been lingering at the bottom.

However, Zai Lab, despite its good performance, still lacks a blockbuster product to prop up its market value. The company's best-selling product remains Zejula, with last year's sales revenue at $168.8 million, representing only a 16% year-over-year increase from the previous year. It seems this company, often praised for its sharp eye in licensing-in, has reached a transformative period where it needs to consolidate its niche market segments.

Zai LabBMSThe cooperation has aroused a lot of people's confusion.

BMSThe behavior can be understood. According to data from MiNe Network,2023First Half of the YearOThe sales revenue in China was only4100 million yuan, isKHalf of the drugs are produced in China.PD1Under siege, its market share shrinks every year.In a situation where neither pricing nor sales network holds an advantage, it is a wise move to relinquish sales rights in non-core cities and cut marketing expenses in China.But what is Zai Lab for?

Someone takes over Zai LabBMS, and compare it with the cooperation between Junshi Biosciences and AstraZeneca on the Toripalimab Injection.A pharmaceutical representative from a foreign company does notAgree with this comparison:"Junshi's drug has been included in the medical insurance,AZThere is also a strong county-level team, these two pointsONeither Bristol-Myers Squibb nor Zai Lab possesses.Moreover, under the current trend of price reductions, profits can't cover costs, and even Junshi couldn't hold out in the end.”

But some industry insiders believe that Zai Lab's move is precisely to "Use a relatively mature drug to train his team, and combine the sales of their new drug to improve personnel efficiency.”。After all, sales are a super cost center for a pharmaceutical company, which requires continuous product input to function properly. As for Zai Lab, "O"Medicine," as a product, is already an excellent choice at least in terms of clinical value.

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Integrated Track

ROS1 and NTRK Targeted Inhibitor Repotrectinib is Zai Lab's Key Focus for 2024. The application for ROS1-positive non-small cell lung cancer (NSCLC) indication has been listed by the company as a potentially approved project this year.

Ripretinib is also Zai Lab andBMSThe Beginning of Fate.2020Year7In the month, Zai Lab announced its collaboration withTurning PointThe company has reached a cooperation agreement, obtaining the exclusive development and commercialization rights for Ripretinib in Greater China.2022Year6Month,BMSAnnounced again that it will invest more than40Billion-dollar acquisitionTurning Point, thereby incorporating Ripretinib into its R&D pipeline.

The Potential Treatment Market for Ripretinib isROS1、NTRKAndALKPositive solid tumors, with non-small cell lung cancer being the first stronghold.Non-small cell lung cancer is an extremely important and highly competitive cancer type, back in the dayKDrug Sales ExceedOThe reason for the drugKDrugNSCLCThe approval of first-line treatment indications has now become an essential indication for every pharmaceutical company producing tumor drugs.

This year, Zai Lab will also submit Adagrasib for second-line and above.NSCLC, Tumor electric field treatment for second-line and aboveNSCLCThe listing application.

Zai Lab has two major events planned around lung cancer this year:Tumor Treating Fields (TTFields) for First-Line UseNSCLCBrain Metastasis (METISResearch), Adagrasib for first-lineNSCLCAnd second-line and above NSCLCThe study will announce key clinical data.

The above is Zai Lab's layout in lung cancer.In other cancer types, Zai Lab has many more.license-inGood products in hand, such as those targeting gastric cancerBemarituzumab,Zai Lab has joined the drug combination in Greater ChinaODrug Used for First-Line Treatment Worldwide3The initial research is expected to enroll the first patient in Greater China by 2024 Began treatment in the first quarter of the year.

ZaiFor example, Zai Lab obtained Odronextamab from Regeneron to treat patients with relapsed or refractory B-cell non-Hodgkin lymphoma.

Zai Lab is known in the industry as an advanced buyerThe hand's name does not lack a tumor pipeline or products that synergize with tumors.But the key issue is that if the product line is spread too wide, it’s not worthwhile to develop a sales network for a single product or indication.Because, considering the current competitive landscape and product strength, the cost-performance ratio is a very debatable issue.

"Zai Lab's approach is somewhat different from other pharmaceutical companies.ItThe treatment areas of our products are relatively niche.Less competition is an advantage, but the flip side is that the cost of market education is relatively high."The aforementioned foreign pharmaceutical representative mentioned."

In this situation, a product with high market acceptance and a wide range of indications may become a key to integrating resources and reducing costs.

OMedicine is one of the representatives:The drug has been approved for use in China.8Including lung cancer, head and neck cancer, gastric cancer, esophageal cancer, liver cancer, renal cancer, colorectal cancer, urothelial cancer, melanoma, Hodgkin's lymphoma, pleural tumors, etc., covering Zai Lab’s diverse pipeline of ongoing research.

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Marketing Controversy

According to the company's annual report, Zai Lab's sales, general, and administrative expenses in 2023 were $281.6 million, an increase of approximately $30 million compared to the same period last year. The company explained that this growth was mainly due to the increase in general sales expenses to support the launch of Wevicta, partially offset by a reduction in professional service fees. Last year, the company's net loss reached $334.6 million.

"The marketing expenses of Zai Lab have also been somewhat controversial, and as a company that has been commercialized for many years, adjustments are indeed needed.""The aforementioned industry insider mentioned.Of course, this is also a common problem for most biotech companies that are just starting to venture into commercialization.

For some products that rely on the licence-in model, all the money is spent on acquisitions, and the battle lines are getting longer and longer.But the better the thing, the hotter it is to handle — if you don't have the capacity to build channels, good things will go to waste in your hands.

For example, the Zeloria mentioned at the beginning.In 2016, Zai Lab obtained the exclusive license for the development and commercialization of Zejula in China from TESARO. It became the first domestically produced National Class 1 new drug PARP inhibitor and was the highly anticipated potential blockbuster drug of that year.

But the results were not as expected.As AstraZeneca, Hengrui Medicine, and BeiGene have all entered these fields, the sales growth rate of Zai Lab's Zejula has continued to decline.

Unlike the former, the commercialization of many licensed-in products also involves additional expenses such as collaboration patent fees, milestone payments, and royalty sharing.Therefore, the commercialization requirements for them are relatively higher.This comes with some leverage.

All in all, Zai Lab has quite a few FIC products in hand:Optune, co-developed with NovoCure, is the world's only approved and marketed tumor electric field therapy.Efgartigimod, co-developed with Argenx, is the world's first FcRn antagonist.For this license-in model to continue running smoothly, it is essential to buy well on one end and, more importantly, sell well on the other, fostering a virtuous cycle between product and sales.

This time, Zai Lab takes over the O-medicine market in China.It is equivalent to purchasing the base of a sales platform.。"The injection of existing products in these provinces, and a product that synergizes with their team, I think it can be considered a win-win situation," the aforementioned industry insider analyzed.

On the other hand, although Zai Lab's self-developed model has shown some progress, it has ultimately failed to completely resolve the issue of "product sourcing."Nowadays, as combination therapy becomes a trend, the lack of an in-house PD-1 product may become a disadvantage for a company. In this context, forming a deep cooperative relationship with companies whose product lines overlap yet complement each other may become an option.

Therefore, after the news came out, many industry insiders speculated that the sales rights of O-yao in ten provinces might only be part of the cooperation project between Zai Lab and BMS, and more reciprocal terms would be announced subsequently.

For instance, Ripretinib, which is already in progress, as well as the future commercialization candidates Efgartigimod and Adagrasib, all have the shadow of BMS behind them.Although the rights in China and overseas are separated, the clinical data behind the product and the (post-marketing) development resources can be shared, which lays the foundation for their in-depth cooperation.

And considering the "beyond reach" of multinational pharmaceutical companies,In the future, BMS and Zai Lab may form a "core + grassroots" combination approach in commercialization.；A deeper cooperation similar to the "product + equity" model between Sanofi and Innovent is also not impossible.

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The core logic of Biotech is people, products, and money, but essentially, it is still a scientific issue.But the pharmaceutical industry is a business that needs to consider competition, conversion, return on investment...

In the past, China's biopharmaceutical industry emerged from a primitive era, where money poured in ceaselessly from all directions as long as one had connections, a prestigious title, or an appealing story, under a rough-and-tumble growth model.Nowadays, after a cycle in the industry, everyone is becoming more "practical" and mature, and various cooperation models are also becoming more refined.

But the development of the industry always comes down to the same principle: in the end, it depends on what kind of needs you can meet, whether they are those of doctors, patients, or other pharmaceutical companies, and what kind of results you can achieve.

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