Evopoint Biosciences Races Ahead in China's Innovation Drug Race with Potential BD Revenue Exceeding RMB 10 Billion

At the start of 2023, Chinese innovative pharmaceutical companies demonstrated impressive license-out capabilities. In January, Evopoint Biosciences closed two business development deals within a single week, setting itself apart in the domestic innovative drug sector.

On January 6, Evopoint Biosciences announced that it had entered into a global exclusive licensing agreement with METiS Therapeutics Inc. for its SOS1 inhibitor program. Under the terms of this agreement, Evopoint Biosciences is eligible to receive upfront and milestone payments totaling up to hundreds of millions of US dollars, as well as tiered royalty payments based on future annual global net sales.

On January 10, Evopoint Biosciences entered into an exclusive agreement with AmMax Bio, Inc., a clinical-stage biopharmaceutical company dedicated to developing innovative therapies in oncology, for the global research, development, and commercialization rights (excluding Greater China) of an innovative antibody-drug conjugate (ADC) for the treatment of solid tumors. Under the terms of the agreement, Evopoint Biosciences is eligible to receive up to $870 million in upfront and milestone payments, as well as double-digit percentage royalties on sales.

On April 6, Evopoint Biosciences announced a collaboration with Merck & Co. to conduct clinical trials combining XNW5004, a highly selective and potent EZH2 small-molecule inhibitor independently developed by Evopoint, with Merck’s PD-1 inhibitor KEYTRUDA® (pembrolizumab). According to Liu Xiaojun, Chief Business Officer of Evopoint Biosciences, the company is currently in negotiations for several other candidates and expects to close more blockbuster deals in the future.

In fact, this is merely a microcosm of the active performance of domestically developed innovative drugs on the business development (BD) stage. Over the past two months, Chinese innovative pharmaceutical companies such as Keymed Biosciences, Hutchmed, and WuXi Biologics have finalized significant pipeline licensing deals. According to incomplete statistics from VCBeat, nine domestic innovative drug companies announced 10 pipeline licensing transactions in January and February 2023, a figure significantly higher than the six recorded in the same period of 2022, the three in 2021, and the single transaction in 2020, setting a new historical high.

As of 2023, the global market has become a frequently cited keyword within China’s innovative drug sector. This reflects a clear trend in the shifting underlying logic of domestically developed innovative drugs.

On one hand, the cooling of investment and financing enthusiasm in the primary market has rapidly transmitted pressure to the new drug R&D sector. A review of the innovative drug industry from 2019 to 2021 reveals that single-round financing amounts in the primary market repeatedly hit record highs, with investors even competing fiercely for allocation quotas. Data shows that total industry financing reached RMB 88.375 billion in 2020, representing a 107.6% increase compared to 2019. However, since the second half of 2021, both secondary market performance and the primary market financing environment in the pharmaceutical industry have undergone drastic changes. Companies specializing in innovative drugs and medical devices have found themselves trapped in a predicament characterized by financing difficulties, unmonetized pipelines, and substantial follow-on investment requirements.

Meanwhile, intense competition has driven up R&D and clinical trial costs, making the competitive landscape for innovative drugs in China increasingly fierce. Since 2017, the number of accepted clinical trial applications for innovative drugs has risen from 483 to 1,821, with 1,428 of these being domestic innovations. The number of approved registration applications has grown from 23 to 65, the vast majority of which were also submitted by Chinese companies. Furthermore, the strategic layouts of biotech firms have become increasingly homogeneous.

An analysis of overall investment in innovative drugs reveals a significant cliff-like decline in activity among late-stage investors over the past two years. The investment focus has shifted earlier, concentrating primarily on companies around Series A rounds. Capital is predominantly flowing into high-innovation hotspots such as Cell and Gene Therapy (CGT), synthetic biology, and nucleic acid therapeutics. Compared with the fervor of the previous two years, biotech companies are now facing substantially heightened financing pressures.

On the other hand, the few innovative drugs that have successfully gone public are facing pressure in the clinical market, prompting Chinese innovative pharmaceutical companies to rethink their development strategies. However, even with smaller operations, it is difficult for them to change course. At the end of 2018, the National Healthcare Security Administration launched the "4+7" pilot program for centralized drug procurement and use organized at the national level. In 2019, the scope of the pilot was expanded. For enterprises, inclusion in the National Reimbursement Drug List can lead to rapid growth in product sales and accelerate the commercialization process. However, because drugs included in centralized procurement face price reductions, the sales ceiling for innovative drugs is under pressure, significantly reducing the value of their pipelines. The logic used to estimate future cash flows for individual drugs is also under considerable strain. Additionally, as the generic drug market shrinks, pharmaceutical companies have fewer resources ("bullets") available for innovative R&D.

It took Takeda Pharmaceutical of Japan more than half a century to explore overseas markets before it ranked among the top ten global pharmaceutical companies. This demonstrates the substantial resources, extended timeframes, and significant challenges required for pharmaceutical companies to achieve commercialization in international markets. Given the limitations of the domestic market space, many Chinese innovative pharmaceutical companies are also pursuing comprehensive internationalization strategies.

Very few innovative drugs led by Chinese companies have gained approval in the United States. The performance of their overseas sales teams has been lackluster, failing to penetrate local markets or gain international recognition. Most domestic biotech companies still rely primarily on the license-out model for internationalization. Although the total value of overseas licensing deals reached $12.5 billion and $14.5 billion in 2020 and 2021, respectively, the proportion of pharmaceutical companies capable of securing such international transfers remains low relative to the number of clinical-stage projects and biotech firms in China.

For a long time, greater attention has been paid to the product development capabilities of innovative pharmaceutical companies rather than their business development (BD) capabilities. However, as China’s innovative drug ecosystem continues to advance into more complex and mature stages, domestic innovative pharmaceutical companies with strong BD capabilities have begun to take the lead among their peers.

In the global pharmaceutical market, business development (BD) is one of the hallmarks of a mature innovation ecosystem. For large pharmaceutical companies, determining which therapeutic areas to pursue, selecting targets, deciding on drug candidates, and negotiating collaboration frameworks are among the most critical responsibilities of the CEO. In a sense, the caliber of BD determines the success or failure of large pharmaceutical companies in future competition. Statistics show that the majority of the top 20 best-selling drugs worldwide were acquired through BD, with most of these deals struck after the assets had entered clinical trials.

In recent years, fueled by the biotech capitalization boom, China’s innovative drug ecosystem has grown rapidly, making business development (BD) an advantageous strategy for more innovative pharmaceutical companies to expand into global markets. Successful BD operations not only inject sustained funding into innovative drug development internally but also significantly enhance the valuation of innovative pharmaceutical companies in the capital market externally.

VCBeat has observed that Evopoint Biosciences, founded in 2017, had previously secured three license-out deals. With two additional transactions this year, the total value of its deals has reached $2 billion, firmly establishing it as a “veteran” in the business development arena.

On September 17, 2021, Evopoint Biosciences announced that it had entered into an exclusive global collaboration agreement with China Antibody Pharmaceuticals Ltd. (“China Antibody,” HKEX: 3681.HK) and Everest Medicines Limited (“Everest Medicines,” HKEX: 1952.HK), granting Everest Medicines the exclusive rights to develop and commercialize XNW1011 (referred to as “SN1011” by China Antibody) for renal diseases worldwide. The transaction includes an upfront payment and milestone payments totaling up to $560 million, plus tiered royalties in the high double-digit percentages on net sales.

Previously, the autoimmune indications of Evopoint Biosciences’ XNW1011 had already attracted interest from Chinese antibody companies, achieving a successful “dual-purpose” business development (BD) deal. In addition, Evopoint Biosciences has previously completed favorable BD transactions in the hepatitis B virus (HBV) field.

According to statistics, Evopoint Biosciences has already generated hundreds of millions in revenue from license-out transactions, with potential future cumulative revenues exceeding RMB 10 billion (USD 2 billion). These revenues support the research and development investment in Evopoint’s pipeline, facilitating further optimization of asset allocation. In contrast, most innovative drug companies listed on the STAR Market under the fifth set of listing criteria have disclosed nearly zero revenue, relying entirely on financing to fund pipeline development. Lacking self-sustaining revenue generation capabilities, these companies face significant cash flow risks in subsequent R&D phases; once financing is hindered, they are highly susceptible to capital chain ruptures and operational stagnation.

“Whether there are collaborations with industry leaders or international pharmaceutical giants; once an influential license-out partnership is established, the company’s value will rise rapidly.” A business development professional at a pharmaceutical company told VCBeat. Therefore, securing landmark deals with renowned pharmaceutical companies for competitive pipelines can enhance corporate valuation and serve as a stabilizing anchor for the company’s value.

Taking Akeso, Inc. as an example, among numerous license-out deals, Akeso-B (09926) set a new record for overseas drug licensing transactions by Chinese pharmaceutical companies with a deal value of $5 billion. Influenced by this news, Akeso’s stock price opened significantly higher, rising more than 30% at one point during trading. As of the market close on December 14, 2022, compared to December 6, 2022, before the announcement of the business development (BD) deal, the company’s stock price had increased by 37.72% over this period, and its market capitalization had risen by RMB 9.882 billion.

Coincidentally, Henlius (02696.HK) secured a total deal value of $538 million for the license-out of its HLX11 pipeline, which drove a RMB 531 million increase in the company’s market capitalization following the announcement.

Assuming a $1 billion license-out deal with an upfront payment of $50 million, regulatory approval and market launch achieved after five years, peak sales reached after five years on the market, and average annual royalty payments of $20 million, the discounted cash flow (DCF) value is approximately $600 million at a 15% annual discount rate. Drawing from secondary market cases, such a $1 billion license-out transaction can similarly be expected to drive a valuation increase of RMB 2–4 billion for the company.

Evopoint Biosciences is a company that believes in long-termism. Successful business development stems from the collaborative efforts of the industrial, scientific, and medical communities, working backward from unmet clinical needs to target screening and molecular R&D, and seeking innovative drugs with clinical demand from a market-oriented perspective.

In 2021, building on its first “Five-Year Plan,” Evopoint Biosciences upgraded its R&D system, completing the transition from a “product-oriented” to a “platform-oriented” company, and established three major technology platforms: targeted therapy, PROTAC, and antibiotics. Leveraging an efficient R&D system and exceptional R&D capabilities, Evopoint Biosciences secured several landmark deals for its preclinical pipeline assets, continuously generating high-quality candidates and earning market recognition. Among the company’s current five license-out transactions, the majority involve earlier-stage pipeline assets.

For instance, XNW1011, a drug targeting BTK developed in collaboration with Ailist Biotech and Everest Medicines, was licensed out during its Phase I clinical trials. Transactions involving HBV, SOS1, and ADC assets attracted significant investment from renowned pharmaceutical companies even at the preclinical or candidate compound stage. This fully demonstrates the success of Evopoint Biosciences’ differentiated R&D strategy, proving that its three major R&D platforms possess core competitiveness in their respective fields and have gained high market recognition.

Evopoint Biosciences has achieved success in target selection. As the starting point of innovative drug development, target selection determines the clinical success probability of pharmaceutical R&D projects. Once a target is confirmed, substantial investments in manpower, capital, and time are required for druggability validation, entailing significant costs. Therefore, leveraging proprietary technological advantages to select the right targets is of paramount importance for all pharmaceutical R&D companies.

Qiang Jing, Chairman of Evopoint Biosciences, told VCBeat that the company maintains rigorous standards for product project initiation.

First, the target research team must identify indications and related targets with significant unmet clinical needs from the perspective of clinical demand. This is what Evopoint Biosciences refers to as “looking backward.”

Then, the project initiation team must articulate a significantly differentiated design and development strategy that distinguishes it from the market, covering aspects such as biological understanding, medicinal chemistry design, platform technology application, and clinical trial protocol design. Only products with a significantly differentiated strategy can pass the review. This is Evopoint Biosciences’ approach to “building competitiveness and market value through a significantly differentiated development strategy.”

Finally, the CMC (process development) and regulatory affairs teams provided their input on relevant issues. Throughout the entire process, teams from biological validation, medicinal chemistry design, translational medicine, clinical design, CMC, regulatory registration, and marketing were fully involved. “A good product is the result of integrated and efficient operations across all functional sectors of drug R&D,” summarized Qiang Jing.

To date, Evopoint Biosciences has established a robust, multi-tiered pipeline characterized by continuous innovation. For traditional pharmaceutical companies, sustained output from sales teams is a core operational pillar, necessitating a well-structured pipeline as a strategic safeguard: when a product’s patent expires or it loses competitiveness, another product must be ready to fill the gap.

“The biggest fear for pharmaceutical companies is that once their pipeline faces a gap, with insufficient drugs to ‘feed’ the sales team, it will turn into a cost center, and the entire sales team may become akin to a gold-swallowing beast. This is truly terrifying.” Such concerns were voiced by a business development professional at a pharmaceutical company.

Therefore, Evopoint Biosciences’ tiered pipeline demonstrates particularly targeted value, enabling revenue generation across different stages and therapeutic areas. For instance, the company has completed landmark, high-value transactions in multiple R&D fields—including covalent reversible BTK, SOS1, and antibody-drug conjugates (ADCs)—at varying stages of maturity, with multiple business development (BD) deals secured for its BTK program. By recouping capital through BD arrangements for its early-stage pipeline, the company has alleviated the financial pressure associated with building a sales team, allowing it to focus on its core products with competitive advantages and thereby maximize the value of its R&D pipeline.

Of course, Evopoint Biosciences’ robust in-house business development capabilities are also an indispensable component. All of this requires the foresight and vision of senior executives. Discussing Evopoint’s development philosophy, Qiang Jing repeatedly emphasized, “The growth rate of the core team must outpace that of the company. The establishment of talent systems and organizational structures must fully support the company’s continuous evolution.” Evopoint has built a highly competitive R&D pipeline. “All products at Evopoint are initiated based on potential clinical needs and a strategy of significant product differentiation. Differentiation is competitiveness; products lacking significant differentiation are liabilities.”

Time is the best testament to a concept. The value of Evopoint Biosciences’ pipeline has been recognized by multiple pharmaceutical companies, with five license-out deals completed to date, carrying a maximum cumulative potential value of approximately USD 2 billion and hundreds of millions of yuan in confirmed revenue, thereby pioneering a new path for Chinese biotech firms going global. Among all companies listed on the STAR Market under the fifth set of listing criteria, Evopoint Biosciences ranks first in the number of license-out projects, with its total potential deal value second only to RemeGen. It is the innovative drug company with the highest potential value from completed business development (BD) transactions among non-publicly traded companies.

Nowadays, China’s innovative drug sector is shifting from a license-in to a license-out model, and the market will increasingly favor innovative pharmaceutical companies that possess core independent intellectual property rights and can efficiently translate technological achievements into business outcomes.

Writing Reference:

PharmaCube: Perseverance, Breakthroughs, and Outlook in the Winter of Innovative Drugs