BeiGene Regains Global Rights to PD-1 Inhibitor Tislelizumab in Amicable Split with Novartis: A New Chapter for Chinese Innovation

China’s Challengers to Opdivo and Keytruda Face New Shifts in the U.S. Market: On September 19, BeiGene announced that it had signed a “Mutual Termination and Release Agreement” with Novartis regarding their collaboration on tislelizumab, thereby jointly terminating the license agreement. After more than two and a half years of partnership, BeiGene has regained full global rights for the development, manufacturing, and commercialization of tislelizumab.

Regardless of which party initiated the termination, this move demonstrates that Chinese innovative pharmaceutical companies have shed some of their naivety and gained greater sophistication in commercial maturity.On one hand, BeiGene’s global clinical registration and commercialization capabilities have matured significantly, enabling it to independently advance or seek new partners for the global development of its PD-1 inhibitor following the termination of the collaboration. On the other hand, Chinese innovative pharmaceutical companies, represented by BeiGene, have been actively seeking new growth curves in recent years.The Story of China’s Innovative Drugs: A New Chapter Unfolding Across All Dimensions

In recent years, Chinese innovative pharmaceutical companies have continuously pursued global expansion, striving for FDA approvals. Encouraged by the successes of BeiGene’s zanubrutinib and Legend Biotech’s CAR-T therapy, ciltacabtagene autoleucel injection, the number of products going overseas has increased significantly, while pipeline returns in cross-border transactions have become increasingly common.The return of an asset is not necessarily solely due to the product itself; it may also be related to various factors such as the company’s new strategic layout, capital planning, and partnership relationships.Even for multinational corporation (MNC) buyers with relatively ample capital and higher risk tolerance, the decision to proceed with an asset requires comprehensive consideration of multiple factors.For instance, Novartis has demonstrated interest in innovative therapies such as cell and gene therapy and small nucleic acid drugs in recent years; the reduction of its solid tumor pipeline can be viewed as part of a broader corporate strategic adjustment, with tislelizumab being just one example.Therefore, the termination of a license-out deal should not be viewed as purely negative news.

The termination of the collaboration on tislelizumab,The "breakup" between BeiGene and Novartis can be described as dignified,The termination will not affect the $650 million upfront cash payment that BeiGene had already received from Novartis. Meanwhile, Novartis will provide transitional services to the Company to ensure the smooth progress of key matters in the development and commercialization plans for tislelizumab, including support for manufacturing, regulatory submissions, drug safety, and clinical affairs.Termination agreements represent one of the most challenging aspects of BD transactions. BeiGene has secured its upfront payment, and the project progressed smoothly prior to termination—the U.S. FDA had accepted a marketing authorization application for tislelizumab as first-line treatment for patients with unresectable locally advanced, recurrent, or metastatic esophageal squamous cell carcinoma (ESCC). Furthermore, BeiGene has maintained its partnership with Novartis even after the termination, demonstrating the maturity of BeiGene’s commercial operations as a representative Chinese biopharmaceutical company.

However, it is worth noting that many of the projects discontinued in recent years were PD-1 pipelines redirected to overseas markets in an attempt to avoid intense domestic competition. Nevertheless, Opdivo and Keytruda continue to hold an unshakable position in the United States, the largest innovative drug market globally. Notably, in December 2021, Dr. Richard Pazdur, Director of the FDA’s Oncology Center of Excellence, published an article criticizing the overcrowding of me-too PD-1 candidates in this therapeutic area.The decline in the overseas commercial value of PD-1 inhibitors is inevitable. As Chinese innovative pharmaceutical companies navigated the FDA’s regulatory landscape, they quickly realized that low-hanging fruit was scarcer than anticipated, necessitating the search for new growth drivers.

Although PD-1 is no longer “deified,” it remains attractive, and differentiated advantages in indications can offer products a pathway to commercial breakthrough.For exampleHenlius’s First Innovative Drug, H Drug Hansizhuang® (Serplulimab)In March of this year, it achieved monthly sales exceeding RMB 100 million in China for the first time, expanding into the “untapped” therapeutic area of small cell lung cancer (SCLC). As the first anti-PD-1 monoclonal antibody approved globally for first-line treatment of SCLC, its market share in this indication is now significant.Compelling data underpin the commercial success of Drug H, with an overall survival (OS) of 15.8 months, setting a new record for OS in first-line small cell lung cancer.

The new battlefield extends far beyond oncology; the high value of the metabolic disease sector has long been recognized by domestic innovative pharmaceutical companies,Innovent Biologics began developing its PCSK9 inhibitor when oncology drugs were still the biggest hotspot, aiming to capture a share of the $22 billion lipid management market.Last month, Xinbile®, the first domestically developed long-acting lipid-lowering injection, was launched, becoming Innovent’s tenth marketed product. Innovent’s pipeline includesAnother product, mazdutide, demonstrates the best weight-loss efficacy among GLP-1 receptor agonists.At 24 weeks, weight loss ranged from a minimum of 10.9 kg to a maximum of 14.7 kg.

Innovative pharmaceutical companies are also awakening to the autoimmune disease sector. Due to limited long-term payment capacity, this therapeutic area has historically received far less attention in the Chinese market than in Europe and the United States. In terms of market education, both patients and physicians have lacked sufficient disease awareness. However, with the inclusion of autoimmune drugs represented by dupilumab (Dupixent), an IL-4Rα-targeted agent, in the National Reimbursement Drug List, affordable pricing will drive rapid volume growth for autoimmune therapies.Domestic innovative pharmaceutical pioneers have already embarked on this journey. Examples include Keymed Biosciences, which has CM310, a potential first-in-class domestic IL-4Rα antibody; InnoCare Pharma, which boasts a robust portfolio of TYK2 inhibitors; and Quanxin Biotech, an upcoming player that is one of the few biotechs in China fully focused on autoimmune diseases. Its QX001S, developed in collaboration with Huadong Medicine, is poised to become the first ustekinumab biosimilar approved in China.

In a previous interview, Mr. Zhu Jun, CEO, President, and CFO of Henlius, stated, “Approximately 40% of pharmaceutical companies in the United States focus on oncology, whereas around 80% of such companies in China are engaged in this field. However, we have observed that an increasing number of Chinese enterprises are expanding into areas such as autoimmune diseases, respiratory conditions, chronic disease and pain management, and even neurological disorders. This is a positive trend.”

Nor does the market demand that an innovative pharmaceutical company be profitable at all times. During this year’s earnings season, some investors expressed their “favor” toward BeiGene: “Rather than short-term profitability, investors are more concerned with product potential. As seen in the financial reports of companies like BeiGene, although they are operating at a loss, their expenditures are primarily directed toward R&D and innovation. Achieving profitability is not difficult for BeiGene; the company’s reluctance to do so at the expense of cutting R&D reflects its emphasis on long-term development and competitiveness.”

BeiGene’s 2023 interim report shows that the average compensation per employee in its global R&D team reached RMB 423,000 in the first half of the year, implying an annualized average salary of nearly RMB 1 million. The number of global R&D staff increased by 450 year-on-year.By targeting genuine clinical needs with such investment, BeiGene and other Chinese innovative pharmaceutical companies still have ample opportunities.