Phanes Therapeutics Highlights China's Entry into the Era of Original Innovation with Two License-Out Deals in One Year

“China’s new drug development has gone through the ‘follow-on imitation phase’ and the ‘imitative innovation phase,’ and has now entered the ‘original innovation phase.’” This was disclosed by Jiang Lianghua, an academician of the Chinese Academy of Sciences and researcher at the Shanghai Institute of Materia Medica, during a public speech.

First-in-class drugs are novel therapeutics developed based on entirely new pathogenic mechanisms and novel targets. They represent the first therapeutic agent for a specific disease or offer disruptive therapeutic efficacy compared to existing medications. Compared with developed countries, China has historically faced significant shortcomings in new drug research and development. However, with increasing attention and investment from the government, capital markets, and the industry, Chinese enterprises are now beginning to achieve substantial progress in the development of first-in-class drugs.

September 2019,Phanes Therapeutics Announces License-Out Agreement with Hanmi Pharmaceutical, South Korea’s Largest International Pharmaceutical Company. Under the agreement, Hanmi is authorized to evaluate and use Phanes’ antibody sequences in multiple projects for the development of bispecific and multispecific antibodies for cancer immunotherapy.

In November of the same year,Phanes has begun exclusively providing Fosun Kite in China with multiple high-affinity humanized antibodies targeting two unique tumor antigens, to advance the development and commercialization of innovative CAR-T therapies for solid tumors.。

Phanes Became the Only Chinese Company to Complete Two License-Out Deals in 2019. If the product development goals for both transactions are fully achieved, it will bring more than $350 million in value to Phanes.Phanes, founded in September 2016, is a biotechnology company with extensive expertise in metabolic complications and oncology, which secured investment from Xianfeng Qiyun in 2018. Dr. Wang Minghan, President and CEO of Phanes, told VCBeat that while it typically takes 6–12 months to finalize a license-out agreement, Phanes initiated product transfer negotiations with interested parties as early as its second year of operation, demonstrating its robust scientific innovation capabilities and a strategy aligned with market demand for innovation.

Prior to founding Phanes, Dr. Wang Minghan served as Vice President at Johnson & Johnson. According to Dr. Wang, Phanes has remained dedicated to the research and development of biopharmaceuticals, with multiple first-in-class molecules in its R&D pipeline.

Dr. Wang Minghan, President and CEO of Phanes

In the 1980s, after earning his bachelor’s degree in Biology from the University of Science and Technology of China, Dr. Wang Minghan pursued further studies in the United States. Upon completing his Ph.D., he joined Parke-Davis (later acquired by Pfizer) to conduct postdoctoral research. During his tenure at Parke-Davis, Dr. Wang served as a Research Scientist and Project Leader, where he discovered that pharmaceutical R&D was both challenging and rewarding. Over the following two decades, Dr. Wang held senior executive positions at multinational pharmaceutical companies, including Pfizer, Amgen, and Johnson & Johnson.

Beijing Gan & Lee Pharmaceuticals was the first company Dr. Wang Minghan joined upon his initial return to China, where he served as Executive Vice President and Chief Operating Officer (COO), overseeing R&D, manufacturing, sales, marketing, and international business. During this period, he managed a team of over 1,000 employees and gained unique insights into commercial operations and strategy within the Chinese pharmaceutical market. Subsequently, Dr. Wang served as Vice President and Global Head of Metabolic Diseases at Johnson & Johnson’s U.S. R&D headquarters, where he was responsible for global metabolic disease R&D as well as Phase I and II clinical trials, accumulating extensive management experience. In 2016, he resigned from Johnson & Johnson and returned to China for the second time to found Phanes.

With a background in R&D and experience leading disease-area strategy at multinational corporations, Dr. Wang Minghan has always held a strong appreciation, even an obsession, for the business models of biotechnology companies. During his tenure at Amgen, nearly half of his team came from a small biotech firm acquired from San Francisco. The team members’ agility and willingness to experiment left a deep impression on him.

Around 2016, the pharmaceutical industry underwent continuous transformation, with the adoption of innovation becoming a primary strategic direction for multinational pharmaceutical companies. At that time, the trend of industrial restructuring in China’s pharmaceutical sector—shifting from generic drugs and me-too drugs to innovative medicines—began to emerge. “My original intention in founding Phanes in 2016 was to leverage pioneering innovation to address technical challenges that multinational pharmaceutical companies could not solve,” he stated. He noted that while multinational pharmaceutical companies excel in clinical development and product commercialization, pioneering innovation relies on small and medium-sized enterprises.

Reflecting on the past three-plus years of entrepreneurial journey, Dr. Wang Minghan believes that he and his team have been very fortunate. "In recent years, private equity funds have heavily invested in innovative new drug R&D companies, especially those founded by overseas returnees, driving rapid innovation and development in China's new drug R&D sector," Dr. Wang Minghan told VCBeat. "Many companies, after receiving capital injection, have purchased clinical projects from abroad and established robust product pipelines, creating a generally encouraging landscape. The recent listings of several domestic biopharmaceutical companies in Hong Kong serve as testament to this trend, and a few traditional Chinese enterprises have also performed remarkably well in the field of innovative drugs."

However, Dr. Wang Minghan believes that the domestic new drug R&D industry still faces severe challenges.

On the one hand, there is a lack of innovation, with an excessive number of projects showing no significant differentiation. Some investors lack the experience to evaluate the merits of early-stage projects, leading to substantial capital infusion and resulting in a scenario where dozens of similar molecules target the same therapeutic target.

At present, most domestic R&D enterprises are still focused on developing me-too drug molecules. Me-too drug molecules do not require the arduous early-stage scientific exploration needed to validate therapeutic concepts, making them a suitable choice for the initial phase of new drug development in China. However, this approach overlooks the commercial risks after the drug is launched. “Because the products lack differentiation, they can only compete on price post-launch, resulting in very low profit margins. This commercial risk was previously ignored by most domestic pharmaceutical companies and investors, but with the harsh realities witnessed from the recent launch of next-generation me-too products, the industry has now recognized the severity of this issue,” pointed out Dr. Wang Minghan.

On the other hand, medical insurance pricing is highly unfavorable for competing products with no significant differentiation. Price negotiation will likely become a critical competitive strategy in the future.

Furthermore, multinational corporations continue to exert pressure on China’s domestic innovative drug market. As pharmaceutical approval reforms intensify, barriers to entry for multinational pharmaceutical companies into the Chinese market have largely disappeared. The previously held “local advantage” of domestic enterprises is waning, while the influx of first-class innovative drugs from multinational pharmaceutical companies has raised the bar for differentiation in terms of efficacy and safety.

“Amidst multifaceted challenges, only original innovation can lead to commercial viability.” This precisely reflects the historical context in which Phanes has remained committed to original innovation. Dr. Wang Minghan emphasized that original innovation should involve developing the first molecule targeting a specific therapeutic target, or creating differentiated molecules for the same target. “Merely possessing patent-protected molecules does not constitute differentiation; true differentiation must be demonstrated through clinical trials showing clear advantages.”

In fact, before its R&D pipeline had taken shape, Phanes’ high-standard strategy of pursuing original innovation deterred many investors. Dr. Wang Minghan and his team were well aware that striving to become “world number one” entailed significant risks and uncertainties, requiring them to be mentally prepared for failure at any time. “Adhering to original innovation demands strong scientific innovation capabilities and flexible strategies; relentless effort and exploration are also essential. Leveraging the experience and lessons learned from the team and advisory experts is equally critical.”

Phanes established its early R&D center in San Diego, California, adjacent to numerous top-tier innovative biopharmaceutical companies, including startups founded by well-known industry leaders in the United States. “Since the announcement of two license-out deals in 2019, our reputation has rapidly grown, and we have received numerous inquiries regarding business collaborations and potential investments.” The recognition garnered by Phanes has bolstered Dr. Wang Minghan’s confidence in the persistence he demonstrated at the outset of his entrepreneurial journey. “Nevertheless, we clearly recognize that Phanes is still a start-up, and deeply cultivating our proprietary platform technology is an essential path to growth.”

“To address this, we independently developed a bispecific antibody platform aimed at overcoming the drawbacks of traditional bispecific antibody technologies,” explained Dr. Wang Minghan. “The most common challenges in constructing bispecific antibody molecules include avoiding heavy-chain and light-chain mispairing, preventing the reduction in antigen affinity that often occurs when transitioning from monoclonal to bispecific antibodies, and mitigating aggregation of bispecific antibodies at high concentrations or even after long-term storage at low concentrations.”

The root cause of aggregation in many bispecific antibodies lies in the significant structural deviation between protein-engineered molecules and their native conformations. This risk is difficult to predict using preclinical data, often remaining undetected until late-stage manufacturing or clinical trials. By that point, substantial capital has already been invested, leading to costly project terminations.

Phanes’ bispecific antibody platform addresses the aforementioned challenges, preserves the native structure of antibodies, enables the pairing of any two monoclonal antibodies to create a bispecific antibody, and facilitates straightforward purification. This approach eliminates the late-stage investment risks associated with traditional bispecific antibody technologies. “We have already filed patent applications,” Dr. Wang Minghan told VCBeat. He stated that Phanes’ mission is to become a major source of innovation in the global pharmaceutical industry. “We aim to leverage our core R&D innovation capabilities, engage in multifaceted collaborations, and complement our strengths with those of others to achieve high-efficiency innovation and substantial capital returns.”

It is understood that Phanes currently has four preclinical projects with relatively advanced R&D progress, including two First-in-class and two Best-in-class candidates. Dr. Wang Minghan believes that, in addition to conducting CMC activities purely through CMOs, these projects can also pursue risk-sharing collaborations with domestic pharmaceutical companies possessing CMC capabilities. Furthermore, Phanes has developed a portfolio of best-in-class monoclonal antibodies and bispecific antibodies, along with a substantial number of scFvs applicable to CAR-T cell therapy.

Meanwhile, Phanes is building another platform aimed at addressing a critical challenge in immunotherapy. According to Dr. Wang Minghan, the company has initiated its next round of financing, with the proceeds primarily allocated to supporting the expansion of its bispecific antibody platform and the clinical trials of two pipeline candidates.