Baili Pharmaceuticals Receives $800 Million Upfront Payment from BMS for Global BL-B01D1 ADC Deal

On March 11, 2024, Biokin, a pharmaceutical company listed on the Sci-Tech Innovation Board, announced that as of March 7, 2024, the company had received the first payment of US$800 million (approximately RMB 5.7 billion) from Bristol-Myers Squibb for the development and commercialization licensing agreement of the BL-B01D1 (EGFR×HER3 bispecific antibody ADC) project. This payment is expected to have a positive impact on the company’s performance in 2024.

On March 11, Biokin's stock price surged over 10% at the opening of the market.

This scene seems familiar: On December 12, 2023, just as the cooperation project between SystImmune, a wholly-owned subsidiary of Biokin, and Bristol-Myers Squibb was disclosed, Biokin's stock price immediately hit the upper limit right after the opening of the A-share market.

SystImmune, a wholly-owned subsidiary, is a biotechnology company with self-developed key technology platforms, focusing on the development and production of biotherapeutic drugs for diseases such as cancer, autoimmune diseases, and infectious diseases. The technology platforms include four technology chains: monoclonal antibodies, bispecific antibodies, multispecific antibodies, ADCs, and fusion proteins, which can enhance the efficacy and safety of candidate products.

Bristol-Myers Squibb announced that it will pay Biokin an advance of 800 million US dollars and up to 8.4 billion US dollars in licensing fees, directly setting a record for the largest overseas licensing deal amount for Chinese innovative drugs in recent years.

It should be noted that, compared with single-antibody ADC drugs, the development of bispecific and multi-specific antibody drugs is more difficult, clinical trials are more challenging, and the number of approved bispecific antibody drugs is far less than that of single-antibody drugs. Therefore, Biokin's overseas licensing this time has received special attention.

Biokin's Trilogy of Generic Drugs, Innovation, and Going Global

Biokin was founded in 1996, originally named Baili Pharmaceutical. That was the 1990s when China's pharmaceutical industry entered a period of reform and development. Restrictions such as "pharmaceutical factories can only be state-owned" were no longer in place, leading to the emergence of a large number of private pharmaceutical enterprises.

At that time, except for traditional Chinese medicine (TCM), the pharmaceutical industry in China was dominated by generic drugs. Therefore, in its early stages, Biokin focused on developing chemical generics and TCM. Under the leadership of the company's founder Zhu Yi, a former researcher, Biokin launched its first generic drug in 1998 — Ribavirin Granules, an antiviral medication. In 1998, Biokin's first product, Ribavirin Granules, was approved for marketing and generated RMB 2 million in sales revenue that same year, quickly becoming the company’s flagship product.

Around 2000, Biokin continuously overcame challenges and expanded its generic drug business. During this period, products such as Huangqi Granules and Propofol Injectable Emulsion were approved for marketing and remain key products for the company, continuously generating revenue.

"Over five years, we have withstood the blow of a two-thirds price reduction, crossed the life-and-death threshold of GMP certification, endured the famine of a single-product lineup, survived the painful transformation of marketing reform, and weathered the洗礼of round after round of bidding." This was founder Zhu Yi's New Year message in 2004, revealing the storms of this journey between the lines.

As the company continued to grow, Biokin was officially registered and established in August 2006. The company's product portfolio now spans across generic chemical drugs and traditional Chinese medicine formulations, which are also the main sources of revenue for the company.

Although Biokin has long been deeply engaged in generic drugs, it has also been preparing for "true innovation." The founder and chairman of Biokin, Zhu Yi, once taught at the Department of Microbiology and Immunology of West China Medical University. Moreover, he has unique insights into the importance of innovative drugs and predicted that years later, countless companies producing generic drugs would compete, resulting in razor-thin profits.

It was not until 2010, after more than a decade of accumulation, that Biokin finally had the conditions to develop innovative drugs. With an annual stable cash flow of tens of millions, Biokin made a firm decision to go all-in on the research and development of innovative drugs, focusing on the development of targeted/immunotherapy drugs for cancer.

In 2014, Biokin established a wholly-owned subsidiary, Systimmune Inc., in Seattle, USA, focusing on the oncology field and specializing in the development of bispecific, multispecific antibody therapies and ADC drugs.

Thanks to the overly selective approach to pipelines (only pipelines that are globally leading are qualified to remain) and the strategy of shifting R&D products from red ocean tracks to blue ocean tracks, Biokin has now established an echeloned and systematic innovative biopharmaceutical R&D pipeline. The innovative drugs focus on bispecific/multi-specific antibodies, ADC drugs, fusion proteins, etc.

Among them, SI-B001, the drug with the fastest R&D progress by the company, is currently the world's only bispecific antibody drug targeting EGFR×HER3 in the clinical research stage. Through the STAR Market IPO, Biokin raised a net amount of 880 million yuan. In March 2023, Biokin announced the adjustment of the funding allocation for some of its fundraising projects, placing a heavy bet on ADC. As a result, three ADC drugs, including BL-B01D1, received an additional approximately 342 million yuan in R&D funding.

Bristol-Myers Squibb's "Bold Gamble" or Way Out?

However, BL-B01D1 is still in Phase I clinical trials. What exactly made Bristol-Myers Squibb willing to invest heavily?

It should be noted that, apart from the popularity of the ADC track itself, BL-B01D1 is also an EGFR/HER3 bispecific antibody ADC drug. Even on a global scale, its R&D progress is among the most advanced, with First in Class advantages.

Another reason lies within Bristol-Myers Squibb itself; "a gap in the pipeline," might describe the current state of Bristol-Myers Squibb's product pipeline.

In terms of older products, the patent expiration of Bristol-Myers Squibb's重磅 drug lenalidomide, used for treating multiple myeloma, has led to a certain degree of revenue decline; meanwhile, the sales performance of another key product, Opdivo (O药), also significantly lags behind Keytruda (K药).

As for new products, Bristol-Myers Squibb stated that the promotion of several new drugs, including the CAR-T drug Abecma, the cardiac treatment drug Camzyos, and the psoriasis drug Sotyktu, took longer than expected. Therefore, the sales of its new product portfolio failed to reach the target of $10 billion within the planned timeframe.

Therefore, Bristol-Myers Squibb must accelerate its efforts, enrich its pipeline, navigate through the transition period of old and new products, and quickly identify a completely new product portfolio strategy.

Thus, ADC assets were selected.

In April 2023, Bristol-Myers Squibb entered into a cooperation agreement with Tubulis for over 1 billion US dollars in total, utilizing the latter's P5 conjugated ADC technology platform to jointly develop a new generation of ADC drugs; In November of the same year, Bristol-Myers Squibb also paid Orum a prepayment of 100 million US dollars to introduce a potential FIC ADC drug, ORM-6151.

This time, in its cooperation with Biokin, Bristol-Myers Squibb made a "big gamble," offering an upfront payment of $800 million and a potential total amount of $8.4 billion, setting a record for the largest BD deal in the global ADC field.

Moreover, the special structure of this transaction has also sparked discussions within the industry. Some even argue that whether Bristol-Myers Squibb is really going to "take a gamble" remains debatable, as Bristol-Myers Squibb has left itself plenty of room for retreat.

Let's review the announcement again: Biokin needs to share the global development costs of BL-B01D1 with Bristol-Myers Squibb, as well as the profits and losses in the U.S. market. At the same time, Bristol-Myers Squibb will receive sales royalties in China. Outside the U.S. and China, Biokin will receive sales royalties from Bristol-Myers Squibb.

Therefore, despite the upfront payment of $800 million, Biokin will share the development costs of this drug with Bristol-Myers Squibb; as is well-known, the expenditure for developing a tumor drug is not low. Going forward, on issues related to BL-B01D1, Biokin will stand together with Bristol-Myers Squibb through thick and thin.

However, for Biokin at present, successfully granting the rights of BL-B01D1 might not be a bad choice. The transaction, valued at up to 84 billion US dollars, not only allows Biokin to make history but also adds a significant highlight to China's ADC overseas deals, bringing Chinese Biotech closer to the center of the global stage.