Xiangxue Pharmaceutical Shifts from Failed Health Supplements to Precision Medicine with New Cell Therapy Pipeline

Xiangxue Further Expands Its Layout in Precision Medicine.

Recently, at the 12th China Bio-Industry Conference, GuangDong XIANGXUE LIFE SCIENCES LTD (hereinafter referred to as “Xiangxue Precision Medicine”), a subsidiary of Guangzhou Xiangxue Pharmaceutical Co., Ltd. (hereinafter referred to as “Xiangxue Pharmaceutical”), signed the “Framework Agreement on Strategic Cooperation” (hereinafter referred to as the “Agreement”) with Nanjingjinsirui Science & Technology Biology Corp. (hereinafter referred to as “GenScript”). The two parties will cooperate in areas such as plasmid and virus-related process development and clinical sample production for cell therapy projects.

Strategic Layout Prior to the "Dual-Track System"

Pursuant to the cooperation agreement, GenScript will serve as the service provider for cell therapy product vectors for Xiangxue Precision Medicine, providing process development of plasmids and viruses, as well as GMP manufacturing of clinical samples of plasmid-derived viruses. Currently, TAEST16001 Injection, the first product from Xiangxue Precision Medicine targeting soft tissue sarcoma, has obtained approval for new drug clinical trials and is poised to enter Phase I clinical studies.

GenScript is a supplier of life science research and application services and products, with businesses covering life science services and products (CRO business + CDMO platform), industrial synthetic biology products (industrial enzymes), and cell therapy. Outsourced biomedical R&D services are its main source of profit.

Chen Qiaoshan, an analyst at Analysys Medical, stated that Xiangxue Pharmaceutical’s previous strengths were primarily concentrated in traditional Chinese medicine. After establishing the Xiangxue Life Sciences Research Center in 2012, the company advanced precision medicine as a key strategic focus, with cell therapy—predominantly involving biologics—emerging as a new product line. Under these circumstances, the collaboration with Nanjingjinsirui Science & Technology Biology Corp. was a logical step, with the primary focus on clinical translation.

She further pointed out that the relevant provisions in the “Administrative Measures for Clinical Research and Translational Application of Somatic Cell Therapy (Trial) (Draft for Comments),” issued by the National Health Commission in March this year, indicate that China’s regulatory framework for cell therapy will implement a “dual-track system,” with the National Medical Products Administration and the National Health Commission conducting oversight separately according to category.

Simply put, “technologies approved by the National Health Commission are classified as medical techniques, while products approved by the National Medical Products Administration are classified as drugs.” Currently, Xiangxue Pharmaceutical primarily engages with hospital service providers, whereas GenScript’s strength lies in drug registration and approval. This collaboration is expected to combine the respective advantages of both parties, thereby further accelerating the rapid development of cell therapy.

Biological Drug Pathway

Xiangxue has been strategically positioned in the field of precision medicine for many years. According to a review by Modern Finance, in 2012, Xiangxue co-founded the Xiangxue Life Sciences Research Center with Dr. Li Yi, a distinguished expert under China’s National Thousand Talents Program, establishing a cutting-edge biotechnology pharmaceutical R&D base and translation platform with internationally leading capabilities.

Established in 2015, the holding subsidiary Guangdong XIANGXUE LIFE SCIENCES LTD (XLifeSc) primarily focuses on developing next-generation anti-tumor novel drugs and clinical application technologies for specific T-cell adoptive immunotherapy, leveraging its proprietary high-affinity T-cell receptor (TCR) core technology.

After years of preparation, Xiangxue Pharmaceutical has successfully advanced its TCR-T therapy into clinical trials, marking a milestone in the company’s strategic layout of the precision medicine industry. In addition to strengthening its internal R&D capabilities, Xiangxue Pharmaceutical has, in recent years, expanded the breadth and depth of its precision medicine platform through collaborations with renowned enterprises.

In July 2017, Guangzhou Xiangxue Pharmaceutical Co., Ltd., together with three other enterprises—Cyagen Biosciences, KingMed Diagnostics, and Da An Gene—initiated the establishment of the Guangzhou Bioindustry Alliance. Meanwhile, to build a novel clinical translation platform, the company planned to invest RMB 3 billion in constructing the "South China Precision Medicine and Translational Medicine Center" on Guangzhou International Bio Island. From January to August 2018, Guangzhou Xiangxue Pharmaceutical Co., Ltd. signed agreements with GE Healthcare Trade Development (Shanghai) Co., Ltd. and Guangzhou Nanfang Runkang Service Co., Ltd. (designated by Southern Medical University), respectively, to leverage complementary advantages and carry out cooperation in the field of precision medicine.

Industry analysts suggest that Xiangxue Pharmaceutical’s continued heavy investment in precision medicine is primarily driven by national policy influences, including restrictions on the use of traditional Chinese medicine injections and the introduction of lists for adjuvant drugs, among other factors.

Setbacks in Expanding the Health Supplement Market

In recent years, the traditional Chinese medicine (TCM) industry has experienced an overall downward trend. For companies whose past performance heavily relied on TCM injections and proprietary Chinese medicines, transformation has become imperative. Many listed companies with TCM as their core products are seeking to pivot, with health and wellness as well as biologics emerging as the two primary directions. Among those forging new paths in biologics are Xiangxue Pharmaceutical, Zhongsheng Pharmaceutical, and Tasly. Xiangxue Pharmaceutical had also aimed to break new ground in the health and wellness sector.

On December 15, 2010, Xiangxue was listed on the ChiNext board. Since then, it has been seeking additional growth drivers beyond its antiviral oral liquid, initially setting its sights on the health supplement sector.

According to disclosures by Xiangxue Pharmaceutical, in March 2011, the company used RMB 37.5 million of its excess raised funds to acquire a 100% equity stake in Guangdong Jiiji Biotechnology Co., Ltd. (hereinafter referred to as “Jiiji Biotech”), whose primary business activities included the production and sales of health supplements and related products. At the time of acquisition, Jiiji Biotech’s net assets amounted to only RMB 12.2173 million, implying an acquisition premium of approximately two times. In the year of acquisition, Jiiji Biotech generated merely RMB 5.1558 million in revenue and achieved a net profit of only RMB 99,800. The following year, its revenue reached RMB 15.0416 million, with a net profit of RMB 2.6102 million.

In the year of the acquisition, Xiangxue Pharmaceutical made an additional capital injection of RMB 65 million into Jiujie Biology, increasing its registered capital to RMB 80 million. According to information from the Ministry of Commerce’s Direct Sales Industry Management website, Jiujie Biology obtained its direct sales license on July 23, 2013. However, by 2017, Jiujie Biology’s net profit remained at approximately RMB 20 million, and it became embroiled in a pyramid-selling scandal. Xiangxue Pharmaceutical claimed that “these were individual actions by store owners of exclusive outlets and had nothing to do with Jiujie Biology or the company.” Nevertheless, it is undeniable that Jiujie Biology failed to realize Xiangxue Pharmaceutical’s vision of building a health supplement platform, despite the latter’s investment of nearly RMB 100 million.

Xiangxue Pharmaceutical’s high-profile announcement of its collaboration with GenScript appears to have instilled new hope among investors. Influenced by this news, Xiangxue Pharmaceutical’s stock opened 1.57% higher on June 11 and continued to climb throughout the trading session. As of 3:00 PM on the 11th, its share price had risen to RMB 6.62, bringing its market capitalization to RMB 4.379 billion.

(Editor:Wang Xing）

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