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

Li Yun | Written by

Old Dream | Editor

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

Almost at the same time, Zai Lab released its 2023 annual report, showing total product revenue for the year of $266.7 million, a year-on-year increase of 25%. Upon the announcement, the share prices in both the U.S. and Hong Kong rose, 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-on-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 raised a lot of questions.

BMSThe behavior can be understood. According to the 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 price 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 Junshi Biosciences' collaboration with AstraZeneca on the Toripalimab Injection is used as an analogy.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 price reduction trend, profits can't cover costs, and even Junshi couldn't hold out in the end.”

But some业内人士 believe that Zai Lab's move is precisely for "Take a relatively mature drug to train his team, and combine it with the sales of their new drug to improve personnel efficiency.”。After all, sales are a super cost center for a pharmaceutical company, requiring continuous product investment to function properly. As for Zai Lab, "O"Drug," as a product, is already an excellent choice, at least in terms of clinical value.

-01-

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.2020Year7Month, Zai Lab announced andTurning 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 fortress.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 involved in oncology 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 Electric Field Therapy for First-Line UseNSCLCBrain Metastasis (METISResearch), Adagrasib for first-lineNSCLCAnd second-line and above NSCLCThe research 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 stomach 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 Starting treatment in the first quarter of the year.

ZaiFor example, Zai Lab obtained Odronextamab from Regeneron, for the treatment of patients with relapsed or refractory B-cell non-Hodgkin lymphoma.

Zai Lab is known in the industry as an advanced buyerThe name "Hand" is not lacking in tumor pipelines 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 therapeutic 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 relatively high market acceptance and a wide range of indications may become a key to integrating resources and reducing costs.

OMedicine is one such representative:The indications approved for this drug in China include8Including 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., which can cover Zai Lab's diverse pipeline under research.

-02-

Marketing Controversy

According to the company's annual report, Zai Lab's sales, general, and administrative expenses in 2023 were US$281.6 million, an increase of approximately US$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 Weijia, partially offset by a reduction in professional service fees. Last year, the company's net loss reached US$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 necessary.""The aforementioned industry insider mentioned."Of course, this is also a common problem for most biotechs that are just beginning to venture into commercialization, going from zero to one.

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 Zelboraf 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 Class 1 new drug PARP inhibitor in China 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 Zejula has continued to decline.

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

In summary, 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 of product and sales.

This time, Zai Lab takes over the Opdivo business 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 solve the issue of "product sourcing."Nowadays, as combination therapy becomes a trend, the lack of an in-house PD-1 product will become a disadvantage for a company. In this situation, forming a deep cooperative relationship with companies whose product lines overlap yet complement each other will 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 introduced subsequently.

For example, Ripretinib, which is already in progress, as well as future commercial candidates Efgartigimod and Adagrasib, all have the shadow of BMS behind them.Although the rights in China and overseas are separate, the clinical data behind the product and the (post-market) development resources can be shared, laying the foundation for in-depth cooperation between the two parties.

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 collaboration similar to the "product + equity" model between Sanofi and Innovent is not out of the question.

-03-

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 chaotic era. Under the rough development model, as long as one had connections, a prestigious title, or a compelling story, money would flow in continuously from all directions.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 back 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.

......