A Foundational Technology Powers a Billion-Dollar Market: How Chinese Companies Are Breaking Through Global Patent Barriers

In recent years, cell and gene therapy has been highly anticipated due to its remarkable efficacy. Similarly, the core underlying technology behind cell and gene therapy—gene editing tools—has also begun to emerge and gain increasing attention from more companies and investors.

On February 28, 2022, the United States Patent and Trademark Office (USPTO) ruled that Feng Zhang's team at the Broad Institute would continue to hold the patent for using the CRISPR gene-editing tool in eukaryotic cells. The "Nobel Prize team" (represented by Jennifer and Emmanuelle) once again lost this nearly decade-long intellectual property dispute. In response to the decision, Jennifer’s team stated they would file an appeal, indicating that this ten-year patent battle is far from over.

As an observer in the medical industry, VCBeat has also been closely following the new generation of gene editing tools based on CRISPR technology. To this end, we interviewed several gene editing tool developers/cell and gene therapy companies in China to hear the perspectives of scientists in the field. Next, you will learn about：

According to publicly available information, we can easily summarize the following pain points inherent to the CRISPR/Cas9 gene editing tool itself:

①Potential off-target risks (Detection and control of off-target effects).To control the potential off-target risks, the research team can try to avoid similar sequences when designing gene editing tools to prevent sequence dependency. Based on this, strict off-target validation can minimize the risk.

②Potential safety risks caused by cutting genomic DNA sequences.During this process, if a DNA double-strand break occurs, it may lead to the loss of large DNA fragments or changes in chromosome structure. However, large fragment loss and abnormal chromosomal changes usually result in cell survival difficulties. Currently, no related safety incidents have been reported, so this issue has not yet impacted the advancement of gene editing applications in the industry.

③ The requirement for PAM sequences limits its editable range on the genome.When CRISPR/Cas9 targets DNA for editing, it can achieve double-strand breaks in the DNA. On this basis, if related transcription factors are added, transcriptional regulation of certain genes can be achieved. However, the targeting sites of these genes will be restricted by PAM sequences, thus preventing gene editing from achieving the "point-and-shoot" magic.

④Design and combination of in vivo delivery systems.As a gene editing tool, how CRISPR/Cas9 pairs effectively with in vivo delivery systems while maintaining its editing capability and drug-like properties is also a point that requires continuous optimization. Currently, the relatively large molecular weight of CRISPR/Cas9 poses challenges for in vivo gene therapy when AAV is used for delivery, as the loading capacity limitations of AAV necessitate further miniaturization of the gene editing tool.

Overall, not only CRISPR/Cas9 but all protein families of CRISPR/Cas have their own advantages and disadvantages to varying degrees. No single CRISPR/Cas gene-editing tool can fully cover all application scenarios. If CRISPR/Cas9 is used for knocking out a specific gene, it is already sufficiently effective. As long as one can "focus on specialized fields" and apply gene-editing tools in suitable areas, they can allow these tools to "shine and excel."

Is the optimization of the CRISPR/Cas9 gene editing tool, based on patented technology monopolized by foreign entities, merely gilding the lily? Will previous efforts be in vain once patent monopoly occurs?

Before discussing this issue, we need to clarify the development path of CRISPR/Cas9 and the ongoing patent disputes that have accompanied its progress.

In August 2012, Jennifer's team co-published a landmark paper in the field of CRISPR/Cas9 in *Science*; in February 2013, Zhang Feng's team also published a paper in *Science*, and the raw data in the article indicated that their related experiments predated Jennifer's team. In 2014, the United States Patent and Trademark Office first approved the patent application from the Broad Institute where Zhang Feng’s team was based. In subsequent lawsuits, due to insufficient evidence from Jennifer’s team, Zhang Feng’s team consistently gained the upper hand, especially in securing the highly valuable patents for gene-editing tools used in mammals.

In October 2020, the Nobel Prize Committee announced the winners of the Chemistry Prize, with Jennifer and Emmanuelle receiving the honor for developing the gene-editing tool CRISPR/Cas9. Zhang Feng's "loss of the Nobel Prize" sparked heated discussions. On February 28 this year, the US Patent and Trademark Office ruled that the Broad Institute team, where Zhang Feng is located, holds the patent for using the CRISPR gene-editing tool in eukaryotic cells. The "Nobel Prize" team has temporarily lost this battle for intellectual property rights, but this patent contest, which has lasted for over a decade, is far from over.

The ownership of the CRISPR/Cas9 patent has been controversial, but it is clear that the basic patent technology of CRISPR/Cas9 belongs to foreign countries.

"Any technology has bottlenecks to be overcome in its early stages of development. For the inventors, they also need to address these bottlenecks to truly achieve successful industrial application of the technology. If domestic teams make significant enough optimizations to the CRISPR/Cas9 technology that even foreign teams need to use our 'enhancements,' it may be possible to resolve the issue of patent monopoly through cross-licensing of patents."Dr. Dali Li, Co-founder and Vice President of BRL Medicine, told VCBeat.

"Generally, enterprises will consider the IP attributes of key technologies when initiating projects. We can see that CRISPR/Cas9 patent holders have provided commercial licensing to many companies worldwide, covering various directions such as technical services and drug development. Companies need to pay licensing fees or reach licensing agreements with the patent holders to apply the relevant technologies. On the other hand, CRISPR/Cas9 technology continues to innovate and improve, and the derived technologies can also generate significant commercial value."Dr. Liang Juncheng, founder of Raygene Biomed, told VCBeat.

There are no shortage of examples where transferring or licensing technology to other companies for development has generated revenue. For instance, Bio Palette, a Japanese microbiome gene-editing therapy company, licensed the patent for using nickase Cas9 for single-base editing from Kobe University, made a series of innovations, and reaped profits. This technology represents an optimization of CRISPR/Cas9 technology. Another example is the cross-licensing agreement (with Beam’s authorization) between Bio Palette and Beam on base editing technology, which also brought benefits to Bio Palette.

"In the industry, gene editing companies in the United States will prioritize whether their underlying IP is clear at the time of establishment. For early-stage companies in China, recognition from capital and the market can be achieved by relying on team or platform advantages. As companies develop and accumulate technical optimizations, developing original innovative technologies is more conducive to promoting long-term and unrestricted growth."Dr. Yao Xuan, founder and CEO of Hui-Gene Therapeutics, told VCBeat.

Based on the understanding of industry insiders, we might as well be more "open-minded." If a technology indeed holds significant value, it is actually difficult for it to be monopolized by individual institutions. Such monopolization would only bury the value of advanced technology and hinder the amplification of its scientific research and commercial potential. Whether in academia or the industry, a large amount of continuous innovation is required to increase the social and commercial value of the technology itself.

Despite most companies in China believing that technology optimization based on CRISPR/Cas9 will not end in failure.However, when VCBeat asked companies whether they currently prefer to optimize based on foreign patented technologies or pursue independent research and development for fundamental innovation, they unanimously chose the more challenging path of fundamental innovation, despite any verbal reluctance.

Dr. Li Dali said, "BRL Medicine has developed many base editors and in 2020 created a series of ultra-high activity novel cytosine base editors (named: hyCBE). The related results have been published online in *Nature Cell Biology*. To date, it remains the most active cytosine base editor (with activity increased up to 20 times), and its editing window has significantly expanded compared to traditional editors, allowing for the editing of more sites. More importantly, this modification method is compatible—it is not only suitable for modifying cytosine base editors but also applicable to other base editors, showing broad application prospects in fields such as gene therapy. In June of the same year, the BRL Medicine team published another article in the prestigious international academic journal *Nature Biotechnology*, developing a new dual-base editing system. This achievement represents another major breakthrough in the field of base editing tool development and provides new directions and tools for basic research and the treatment of genetic diseases like β-thalassemia. Regarding the aforementioned base editors, BRL Medicine has applied for multiple patents and implemented a global layout."

Dr. Liang Junbin said: "Hui-Gene Therapeutics is currently developing a series of CRISPR/Cas tool enzymes. In terms of Cas13, we have taken the lead in patent layout. The novel proteins developed by Hui-Gene exhibit superior editing activity on specific RNA targets compared to the widely-used high-activity CasRx, with significantly lower off-target effects. One of the high-activity Cas13 variants is approximately 70 amino acids smaller than CasRx, making it more conducive for AAV delivery and offering significant advantages in drug development. Additionally, new Cas12 subtypes are also under development at Hui-Gene. We have engineered certain Cas12 proteins, achieving promising results that substantially enhance the activity of wild-type reference proteins without being restricted by existing Cas12 subtype patent barriers."

Dr. Yao Xuan said, "The Hui-Gene Therapeutics scientific team developed two new types of CRISPR/Cas13 RNA editing systems in 2020 through computational data analysis. In 2021, we published a related article in *Nature Methods*, detailing how we screened proteins in different databases to obtain highly efficient RNA editors. Over these two years, we have made numerous modifications and optimizations to Cas13, resulting in a high-fidelity version of the hf-Cas13 protein with strong specificity and low off-target effects. We have achieved positive efficacy and safety data in animal experiments. Cas12Max is a new DNA editor developed last year by the HuiEdit scientific team, a sub-brand of Hui-Gene Therapeutics. The optimized Cas12 protein can now achieve DNA editing efficiency comparable to spCas9 both in vitro and in vivo. Meanwhile, the team continues to optimize its PAM recognition region to further expand the targeting sequence range of Cas12. Regarding CRISPR/Cas12 and CRISPR/Cas13, Hui-Gene Therapeutics has filed corresponding global patents and established foundational patent coverage. Based on these achievements, Hui-Gene Therapeutics is actively negotiating patent licensing and joint development collaborations with multiple enterprises both domestically and internationally."

Why have China's gene-editing companies frequently reported innovations in底层技术 in recent years? There are three main reasons.

OneWhen the CRISPR/Cas9 gene editing tool technology first emerged, both companies and research institutions were still in the process of understanding and learning about it. At that time, domestic teams were still in the process of deepening their understanding and accumulating knowledge about the new tool, and could only optimize the underlying technology. This phase, corresponding to 2013 to 2018 in China, represents the first five years of the development of CRISPR/Cas9 gene editing tool technology in the country.

The Second, when sufficient experience has been accumulated, domestic teams have derived universal underlying logic based on previously optimized innovations, or relevant experience in developing gene-editing tools. Through technology transfer or technology compatibility, preliminary exploration of novel gene-editing tools has been carried out. This phase corresponds to the period from 2018 to the present in China.

The Third, Throughout the development history of gene editing tools, we can see that human understanding of microorganisms in nature is just the tip of the iceberg. There are still a large number of editing tools that can be continuously discovered. By moving forward in the direction of highly optimized or original technology development, we can keep improving existing gene editing tools.Carry out local innovation and iterative innovation.

Regarding the underlying innovations in gene editing tools, Chinese companies have long been making strategic moves. In recent years, there have been frequent breakthroughs in research related to CRISPR/Cas12 and CRISPR/Cas13 gene editing technologies.Why CRISPR/Cas12 and CRISPR/Cas13 are the first to "break out" among many family proteins?Actually, there is no specific reason.

This is mainly because, compared to the "airtight" patent protection scope of CRISPR/Cas9, CRISPR/Cas12 and CRISPR/Cas13 offer vast opportunities for patent layout.。

In terms of the gene-editing tools themselves, CRISPR/Cas12, CRISPR/Cas13, and CRISPR/Cas9 all utilize Cas family proteins, and these related tools share the advantages of simplicity and high efficiency (compared to ZFN and TALEN technologies). Some CRISPR/Cas12 and CRISPR/Cas13 systems also exhibit distinct characteristics compared to CRISPR/Cas9, such as smaller sizes for easier AAV and plasmid delivery, differentiated PAM sequences, no requirement for tracrRNA, and flexible editing strategy designs.

In addition, the CRISPR/Cas13 gene editing tool targets RNA, providing an RNA-level editing approach with high targeting specificity. It holds significant commercial value in drug development for non-genetic diseases. This is different from the drug development strategies of CRISPR/Cas9 and CRISPR/Cas12, which act at the DNA level. The RNA knockdown drug strategy using CRISPR/Cas13 is similar to chemically modified small nucleic acids, which are based on chemical synthesis principles. Industry experts believe that the application of CRISPR/Cas13 RNA editing tools will also find unique indications or application scenarios in the future.

Generally speaking, the practical application of Cas family proteins usually requires discovery and sequence optimization:

First, potential functional proteins must be identified through comprehensive analysis using AI, bioinformatics, and protein structural studies within a rich database at the terabyte (TB) level.

Secondly, various sequence optimizations, modifications, and adaptations must be carried out based on the wild-type protein. For families such as CRISPR/Cas9, CRISPR/Cas12, and CRISPR/Cas13 that have already been discovered, the wild-type proteins have certain limitations. Scientists optimize and modify their sequences to improve editing efficiency, PAM sequence recognition regions, specificity, reduce off-target effects, and optimize the size of the editing tools.

From the above, we can see that gene editing tools are like the cornerstone of the cell and gene therapy industry. Only by continuously developing and optimizing gene editing tools can the cell and gene therapy industry go further.However, we can also observe a phenomenon: most companies in China are very "low-profile" about the development and optimization of gene-editing tools and never promote them. There are three reasons for this phenomenon:

First, every company has its own image positioning and promotional preferences. Whether to promote gene editing tools or cell and gene therapy pipelines, companies have the freedom to choose.

Secondly, when most companies in this field extend to the industrial end, they may prefer to publicize the explicit milestones of the drug itself to enhance the brand influence of the company and its attractiveness to investors.

Moreover, achieving true foundational innovation is no easy feat. For instance, in the development of CRISPR/Cas12 and CRISPR/Cas13, the current approach generally involves first screening wild-type Cas12/Cas13 proteins. However, wild-type proteins often struggle to balance safety, efficacy, immunogenicity, and off-target effects when used for therapeutic purposes, necessitating certain engineering modifications. Only a handful of companies in China are capable of this kind of work. Especially for most startups, the dual scarcity of funding and talent leaves them without the resources or time for foundational innovation. Most companies will opt to make some technological innovations along the way while advancing their pipeline research and development.

In the future, the development and optimization of new CAS proteins or those based on existing CAS proteins will generally move towards higher activity, lower off-target risk, broader PAM recognition range, smaller size, and innovative molecular combination applications.

On the other hand, in the biopharmaceutical industries of Europe and the United States, startups can easily gain recognition from investors and secure substantial financing based on a new protein or a novel technology. In terms of the current investment landscape in China, most investors place greater emphasis on the progress of the drug itself. In this regard, domestic investors still need continuous education: foundational technology is the cornerstone of a company's future development.

As the industry continues to advance, investors are constantly being immersed in new knowledge. An increasing number of investors, while focusing on products, are also paying special attention to drug development companies with truly valuable technologies. Although different investors weigh the importance of products and technologies differently, these two aspects are inherently complementary. A product is the embodiment and amplification of a successful technology, while technology serves as the foundation and backbone of product development.

Special Thanks:

BRL Medicine, Hui-Gene Therapeutics, Ruifeng Biotechnology (ranked in no particular order, sorted alphabetically by initial letters) for their strong support during the writing of this article.

References:

Zhang Jiuqing, "Patent Disputes in Gene Editing Tools and the View of R&D Competition," Editorial, *Forum on Science and Technology in China*, Issue 3, 2022.