Novartis Files Prospectus for China's First Foreign-Invested Radiopharmaceutical Manufacturing Base with 600M RMB Investment

On December 1, Novartis announced that it would invest in establishing a brand-new radiopharmaceutical production base in China to accelerate the introduction of innovative radioligand therapies into China, benefiting domestic cancer patients with clinical needs.

This production base will be located in the Nuclear Technology Application (Isotopes) Industrial Park in Haiyan County, Jiaxing City, Zhejiang Province, with a total investment expected to exceed 600 million RMB. It is projected to commence production by the end of 2026.

After the completion of this new radiopharmaceutical production base, it will become Novartis' second innovative drug production base in China. Currently, Novartis’ production base in China is located in Changping, Beijing, which was established in 1987 with a total investment exceeding 700 million RMB, with a maximum annual production capacity of 3 billion tablets and 400 million packages.

Why Did Novartis Choose Nuclear Medicine for Its Second Factory Layout in China?

Radioligand Therapy Combines Targeted Compounds (Ligands) with Radioactive Isotopes to Form Radioligands. Once in the Bloodstream, Radioligands Bind to Specific Markers or Receptors on Cancer Cells, Releasing Radioactive Isotopes Upon Binding to Destroy and Kill Cancer Cells. Compared to Traditional Tumor Treatments, Radioligand Therapy Offers the Advantages of Precise Targeting, Potent Killing, and Limited Damage to Surrounding Tissues, Playing a Critical Role in Clinical Oncology Treatment.

The Radioligand Therapy Platform is one of the four major therapeutic platforms of Novartis Oncology, primarily established through the acquisition of Advanced Accelerator Applications (AAA), a French innovative pharmaceutical public company. In October 2017, Novartis acquired AAA for $3.9 billion, along with its main product Lutathera and technological platform, further expanding the pipeline of oncology product development. In 2018, Novartis spent another $2.1 billion to acquire Endocyte, a biopharmaceutical company, which was merged under AAA. This acquisition provided Novartis with more drug candidates, including Pluvicto for the treatment of prostate cancer.

In 2018, Lutathera (177Lu-dotatate) was approved by the FDA for the treatment of patients with SSTR-positive gastrointestinal pancreatic neuroendocrine tumors. Pluvicto was approved by the FDA in March 2022 for the treatment of patients with castration-resistant metastatic prostate cancer.Radiopharmaceutical conjugates (RDC) represented by Lutathera and Pluvicto have widespread significance for the nuclear medicine market, accelerating the shift from diagnostic to therapeutic nuclear medicines.

In terms of drug structure, RDC is similar to ADC, mainly consisting of antibodies or small molecules (Ligand) that mediate targeting, a linker (Linker), a chelator (Chelator), and a radiopharmaceutical/imaging factor (radioisotope). The use of different radionuclides can achieve imaging or therapeutic functions, and some radionuclides even possess both capabilities. Since the radionuclide does not need to come into direct contact with cells, the linker does not need to break during the process, further enhancing the stability and safety of RDC drugs in the body.

At the same time, Novartis' precision imaging products are advancing alongside radioligand therapies. For example, the precision imaging product Illuccix was approved on March 16 as a companion diagnostic for Pluvicto in patients with advanced prostate cancer. As of 2023, Novartis has approximately 10 radioligand therapy-related products in its global pipeline, covering a range of oncological diseases.

Radioligand Therapy Has Two Main Components: A Radioisotope and A Cell-Targeting Compound or Ligand. Therapeutic Radioisotopes Are Produced in Special Nuclear Reactors or Generators and Then Shipped to Manufacturing Facilities Where the Radioisotope Is Combined with the Cell-Targeting Compound. The Finished Product Is Then Placed in Vials, Goes Through Quality Testing, Packaged into Special Lead-Shielded Containers, and Shipped Directly to Hospitals or Clinics as a Ready-to-Use Therapy.

The activity of radioactive isotopes diminishes over a specific period, necessitating timely delivery and administration to patients.Due to the limited time window for administration, these drugs are typically produced in single-dose forms and consider transportation distance and cycle for drug delivery. Not only are mature and complete upstream and downstream industries and radiopharmacy support required, but there also needs to be medical institutions with the qualification for clinical use of radiopharmaceuticals within a certain range.

As early as 2018, when Lutathera was launched, Novartis faced challenges in the transportation of radiopharmaceuticals and their clinical application—Lutathera's sales grew very rapidly in the first two years, achieving $167 million in revenue in the first year after approval, and increasing to $441 million in the second year, but then it plateaued.

The reasons are twofold: On one hand, the market space for Lutathera's approved indication—gastroenteropancreatic neuroendocrine tumors—is inherently limited. On the other hand, restrictions related to the qualifications of medical institutions and the production-transportation cycle have constrained the widespread adoption of Lutathera. If the patient capacity at qualified medical institutions becomes saturated, Lutathera’s sales will reach a bottleneck.

Currently, Novartis has established multiple radiopharmaceutical production bases in Italy, Spain, and the United States. According to foreign media Endpoints, in the first half of 2023, the global production and supply of Pluvicto encountered issues, leading to distribution delays and drug shortages. This caused patients to experience delays in receiving medication and hindered promotion, resulting in a situation where "patients were queuing but unable to access the drug."

Endpoints mentioned that Pluvicto used by American patients needs to be shipped from a factory in Italy, undergoing inspections by customs, the FDA, and others before finally reaching cancer centers. However, Pluvicto has a shelf life of only five days, and any weather impacts or inspection delays could lead to the drug becoming ineffective.

To meet the potentially surging demand, Novartis is constructing a new manufacturing plant in Indianapolis, hoping to open by the end of this year pending FDA approval. Additionally, Novartis will build another facility in Spain to expand its production capacity in Europe. CEO Vas Narasimhan stated that Novartis aims to deliver over 250,000 doses annually by 2024 through four facilities.

Even for Novartis, the global leader in nuclear medicine, there may be significant issues in the supply chain. Medium- and short-half-life radiopharmaceuticals must rely on a network of radiopharmacies for production and distribution, with each radiopharmacy having a radiation radius of 150-200 kilometers. This makes it essential to establish dispersed manufacturing facilities worldwide, but the radioactive raw materials and production approval for radiopharmaceuticals face qualification reviews and customs restrictions in different countries.

In China, policy promotion and industrial chain construction are continuously making efforts to break down the high barriers faced by nuclear medicine in the industrial chain and supply chain. The radiopharmaceuticals industry in China has become a strategically emerging industry that is prioritized and supported by the state, and it is one of the foundational industries promoting the high-quality development of healthcare.

In June 2021, the National Defense Science and Technology Industry Bureau, the Ministry of Science and Technology, the Ministry of Public Security, the Ministry of Ecology and Environment, the Ministry of Transport, the National Health Commission, the National Healthcare Security Administration, and the National Medical Products Administration, among eight departments, officially released the "Medium- and Long-Term Development Plan for Medical Isotopes (2021-2035)." This is China's first guiding document targeting the application of nuclear technology in the medical and health field, establishing an overall framework for the further development of the radiopharmaceuticals industry.

In April 2023, the National Medical Products Administration issued the "Opinions on Reforming and Improving the Review and Approval Management System for Radiopharmaceuticals."Encourage innovation in radiopharmaceuticals driven by clinical value, encourage the import registration of original radiopharmaceuticals already marketed overseas within China, and propose to grant priority review and approval for marketing authorization applications of radiopharmaceuticals urgently needed clinically.

This time, Novartis has established the Haiyan County Nuclear Technology Application (Isotope) Industrial Park, which covers an area of 1,900 mu. Relying on the unique advantages of the Qinshan Nuclear Power Heavy Water Reactor, it aims to create a national medical isotope industry demonstration base that integrates radionuclide research and preparation, isotope-labeled compound synthesis and application, radiopharmaceutical research and production, nuclear medicine basic research and clinical transformation, and nuclear emergency rescue. Currently, the park has introduced 16 projects related to radionuclide and radiopharmaceutical research and production, with a total investment exceeding 5.5 billion yuan.

China's nuclear pharmacy resources are mainly concentrated in two companies: China Isotope & Radiation and Dongcheng Pharmaceutical. According to the "2023 Nuclear Medicine Industry White Paper" by VCBeat, emerging nuclear medicine companies tend to build their own facilities during the R&D phase but choose to collaborate with nuclear pharmacy enterprises during large-scale commercialization. The "cooperative sharing" model is expected to become more prevalent. Due to the delegation of qualifications to provincial and municipal levels, self-building nuclear pharmacies face significant financial pressure, with a construction cycle of at least three years and an investment of over 40 million yuan per facility. Revenue of around 10 million yuan is required to break even.For Novartis, a foreign company "with no shortage of money," it is worth continuing to pay attention to whether the operational model of nuclear pharmacies will choose "cooperative sharing" or "going it alone."

At the same time, China has a huge market for the application of nuclear medicine. "Jiaxing Release" mentioned,This project will serve as the functional headquarters of Novartis' radiopharmaceuticals business in China, primarily focusing on the production and sales of Lu-177 nuclear medicine for the treatment of prostate cancer.Lu-177 is the most commonly used radionuclide in RDC currently, emitting β-particle radiation with a half-life of nearly one week. It is particularly suitable for clearing small-volume tumors and metastases. Approved drugs include Lutathera and Pluvicto. Taking Pluvicto as an example, its indication is for adult patients with metastatic castration-resistant prostate cancer (mCRPC) who are positive for prostate-specific membrane antigen (PSMA) and have previously received androgen receptor (AR) inhibitors and taxane chemotherapy.

The World Cancer Report shows that prostate cancer ranks 6th in the incidence rate of male malignant tumors and 9th in the mortality rate. In China, prostate cancer is one of the male malignant tumors with a heavy burden and has experienced the fastest increase in incidence over the past two decades, with more than 110,000 new cases in 2020. In addition to its high incidence, prostate cancer in China also exhibits a high mortality rate. According to statistics and forecasts by the International Agency for Research on Cancer (IARC) of the World Health Organization, the number of deaths from prostate cancer in China exceeded 50,000 in 2020.

For prostate cancer patients who are not suitable for radical surgery, the current first-line treatment is androgen deprivation therapy (ADT), including GnRH agonist and antagonist drug therapies, which can reduce androgen to very low levels (castration levels). Metastatic castration-resistant prostate cancer (mCRPC) represents the terminal stage of prostate cancer development, showing poor response to hormone therapy. Approximately 10-20% of advanced patients will progress to CRPC within five years, with a low five-year survival rate and high mortality. Pluvicto offers a novel targeted radioligand therapy for such patients.

Currently,Novartis has launched an international multicenter clinical study on Pluvicto in China.; Lutathera is currently undergoing Phase II clinical trials in China. Globally, Novartis is exploring the combination of Lutathera with other drugs and its application in glioblastoma and breast cancer, among others. Pluvicto is expected to become a second-line treatment for prostate cancer and is being expanded to metastatic hormone-sensitive prostate cancer.

On October 24, Novartis AG released its Q3 financial report for 2023. Global net sales in Q3 reached $11.782 billion, a year-on-year increase of 12%; core operating income was $4.4 billion, a year-on-year increase of 21%.Net sales in China were $848 million, an increase of 14% year-over-year.Global net sales in the first three quarters were $34.017 billion, a year-on-year increase of 10%.

Among them, the nuclear medicine Pluvicto performed well, with Q3 revenue reaching $256 million and the first three quarters' revenue amounting to $707 million. Previously, during the extremely tight supply in Q1, Pluvicto's sales still reached $211 million, a year-on-year increase of 18%; in Q2, sales continued to grow, reaching $240 million. At this growth rate, Pluvicto's sales this year are expected to exceed $1 billion, placing it among the blockbuster drugs.

This production base landing also marks the first foreign investment project in China's nuclear medicine field.This is also a signal that imported original research radioactive ligand therapies are gradually entering the Chinese market.At the same time, the competitive landscape of radioligand therapy in China has become increasingly intense. In 2022, nuclear medicine was the细分赛道 with the highest proportion of financing events exceeding 100 million yuan in the innovative drug sector.

According to statistics from VCBeat, there are 75 nuclear medicine pipelines under research in China, and nearly 7,000 pipelines overseas entering clinical trials, indicating a high-yield period for innovative nuclear medicine R&D. Moreover, many RDC development pipelines in China are对标 (aligned with) two approved products from Novartis, focusing on the development of仿制 (generic) or改良型新药 (modified new drugs). PSMA and SSTR are popular targets for research, with numerous pipelines targeting prostate cancer and neuroendocrine tumors, showing preliminary signs of同质化现象 (homogenization).

References:

White Paper on the Nuclear Medicine Industry: Analyzing Nearly 7,000 Pipelines Globally, Competing in Target, Ligand, and Radionuclide Innovation
https://mp.weixin.qq.com/s/dLCXg2qbOeBFxxAOgw7kRA 

VCBeat, VCBeat "2023 Nuclear Medicine Industry White Paper"