Dongcheng Pharmaceutical and Eli Lilly Invest $6.5M in XING2 Diagnostics to Advance Alzheimer's PET Tracer Development in China

On the evening of April 8, DC PHARMA's wholly-owned subsidiary, Dongcheng International (Hong Kong) Limited ("Dongcheng Hong Kong"), ELI LILLY AND COMPANY ("Eli Lilly and Company"), and XING2DIAGNOSTICS, INC. ("Target Company") signed the "Convertible Note Purchase Agreement."

According to the announcement, DC PHARMA Hong Kong subscribed to convertible bonds issued by the target company with a cash payment of 4 million US dollars (approximately 28.93 million RMB), accounting for 61.54% of the convertible bonds issued this time; Eli Lilly and Company subscribed to convertible bonds issued by the target company worth 2.5 million US dollars (approximately 18.08 million RMB), accounting for 38.46% of the convertible bonds issued this time.

According to the announcement, the target company focuses on the research and development of radiopharmaceuticals for diagnosis and treatment of neurodegenerative diseases such as Alzheimer's disease (AD). It is developing PET/CT-related tracer products in China for clinical diagnosis of neurodegenerative diseases like AD.

Among the information, the two most noteworthy sentences are: ① The target company has obtained the commercialization authorization in China for products such as Florbetapir (AV-45) and Flortaucipir (AV-1451) from Eli Lilly and Company. ② After the agreement is signed, the CMO and CDMO businesses of the target company in China (excluding Hong Kong, Macao, and Taiwan regions) will be prioritized to be entrusted to DC PHARMA for implementation, provided that the needs of the target company are met.

This means that DC PHARMA, by subscribing to the convertible bonds issued by the target company this time for less than 30 million yuan (4 million US dollars, approximately 28.93 million yuan), indirectly obtained the production rights in China for two tracer products from Eli Lilly and Company. This gives people the impression that there might be more to it, as if "the intention of the old wine-drinker is not the wine itself, but the CDMO orders."

For the two key tracer products that the target company focuses on, Florbetapir (AV-45) and Flortaucipir (AV-1451). The former was approved for marketing by the U.S. FDA in 2012, and this product has already completed Phase III clinical trials in China and has submitted an application for marketing in China. The latter has already obtained the IND approval in China.

Especially the product Florbetapir (AV-45), which has significant advantages in the diagnostic process. It possesses specific recognition ability for Aβ protein, enabling specific imaging. Moreover, Florbetapir (AV-45) also demonstrates clear clinical diagnostic value. Publicly available clinical trial data shows that this product has good sensitivity and specificity as an Aβ protein tracer, with a favorable safety profile.

Regarding the subscription to the convertible bonds of the target company this time, DC PHARMA stated that it is committed to deploying a radiopharmaceuticals operation platform across China. This investment in the target company will help the company improve the product line of its radiopharmaceuticals platform, increase synergies in the research and development, production, and distribution of radionuclide drugs, reduce the per-unit operating costs of future nuclear medicine production bases, and enhance the core competitiveness of the company’s products. This aligns with its strategic layout and development strategy for the nuclear medicine industry.

In fact, with the impact of various social factors such as the global aging population in recent years, the number of AD patients is rapidly increasing, and the AD diagnosis industry is also in a period of rapid development. According to data from Huafu Securities, the market space for AD diagnosis in China is expected to exceed 24 billion yuan by 2030.

Through Positron Emission Tomography/Computed Tomography (PET/CT), it is possible to identify preclinical patients without symptoms and those with mild cognitive impairment (MCI) at an early stage, which helps improve the diagnostic accuracy for dementia patients.

In the "14th Five-Year Plan for the Allocation of Large Medical Equipment," it was proposed that by 2025, PET/CT equipment would achieve full coverage in tertiary hospitals in China. Encouraged by policy incentives, the number of PET/CT installations in China has rapidly increased in recent years. Additionally, AD-related imaging tracers have been approved for marketing, driving the rapid growth of the domestic early AD PET/CT diagnosis market. According to the 2020 National Survey on the Status of Nuclear Medicine, China had 427 PET/CT units in 2019; according to data from MedTech Research Society, China's PET/CT inventory reached 873 units in 2022.

In China, the nuclear medicine enterprises that have developed rapidly in the field of AD tracers are Xian Tong Medicine and DC PHARMA.

In September 2023, Xiantong Pharmaceutical's Ouvining (Fluorine [18F] Betaben Injection) received formal approval from the NMPA, becoming the first Aβ-PET tracer approved in China for the diagnosis of Alzheimer's disease. Its international cooperation partner, LMI, supplies Aβ-PET imaging agents abroad for clinical studies of multiple AD treatment drugs, such as Lecanemab. Additionally, Xiantong Pharmaceutical has also laid out plans in the Tau-PET field with the Tau-PET imaging agent MK-6240, which is currently in Phase I clinical trials.

DC PHARMA's layout speed is also impressive.

In February 2021, DC PHARMA reached an investment and cooperation agreement with Aprinoia to lay out in the field of neurodegenerative diseases.

On December 8, 2022, Yitai Medicine, a wholly-owned subsidiary of DC PHARMA, plans to purchase the clinical approval documents and research materials for the Tau protein positron emission tracer product used in PET imaging diagnostic drugs from Aprinoia and XING2DIAGNOSTICS for $8 million in cash, RMB 14 million, and a $2 million milestone payment. This acquisition grants Yitai Medicine the rights to clinically develop and manufacture the product in mainland China. Notably, this product entered Phase III clinical trials in China in 2020.

In August 2023, Aβ-PET imaging agent [18F] Florbetapir Injection, co-developed by DC PHARMA's subsidiary Andico, has been submitted for marketing approval.

In addition, PET imaging tracers belong to radiopharmaceuticals, an industry with high barriers that requires the simultaneous establishment of radiopharmaceuticals and radiopharmaceutical production centers. As of the end of March 2023, DC PHARMA has already put 27 radiopharmaceutical production centers into operation, and currently, 11 positron radiopharmaceutical production centers are under construction. According to DC PHARMA's 2022 annual report, by the end of 2023, the number of radiopharmacies in operation will exceed 30, which will basically meet the nuclear medicine needs of 93.5% of China's population in the future.

In addition to continuously expanding the nuclear pharmacy and nuclear medicine production centers across China, DC PHARMA has also established nuclear medicine subsidiaries or branches in dozens of cities throughout the country. In recent years, DC PHARMA has acquired companies such as Chengdu Yunke Pharmaceuticals and Shanghai Yitai Medicine, completing the full industrial chain layout from diagnostic nuclear medicines to therapeutic nuclear medicines. In 2017, DC PHARMA acquired 100% equity of Nanjing Andike Positron Research and Development Co., Ltd., further enriching its presence in the nuclear medicine field and becoming a company capable of providing comprehensive nuclear medicine solutions in the Chinese market.

Currently, DC PHARMA has initially formed five stable platforms: radionuclide supply platform, drug incubation platform, transformation service platform, production and distribution platform, and diagnosis and treatment marketing platform. It has basically completed the industrial chain layout of nuclear medicine from raw material supply, research and development, clinical transformation, production to sales, constructing a complete DC PHARMA nuclear medicine ecosystem.

For more than 20 years, DC PHARMA initially built its foundation on heparin raw materials, and later invested over 3 billion yuan to enter the nuclear medicine field. It has formed a layout covering diagnostic nuclear medicines, therapeutic nuclear medicines, and nuclear pharmacies, occupying half of the domestic nuclear medicine market. In the future, what will become of China's leading nuclear medicine company? Let us wait and see.

References:
1. "2023 AD Diagnosis Industry Research Report: New Alzheimer's Drug to Be Approved for Market Launch in China, How to Assess the AD Diagnosis Industry Space?"

2. "Leader in China's Nuclear Medicine Industry, DC PHARMA: Leading Domestic Business, Innovation Driving New Growth"