Zhongze Pharma Files IPO Prospectus to Tackle the Challenging CNS Drug Market with Innovative Pipeline

Not long ago, *Science* published an investigative report alleging that Sylvain Lesné, a neuroscientist in the field of Alzheimer’s disease (AD) research, committed academic misconduct in multiple papers. These include a landmark study published in *Nature* in 2006, which falls within the scope of the dominant “amyloid-beta hypothesis” of AD. According to *Science*, the *Nature* article is suspected of having misled global AD research for 16 years.

For years, the etiology of Alzheimer’s disease (AD) has remained unclear, and drug development efforts have faced repeated setbacks despite persistent attempts. The “amyloid-beta hypothesis,” which serves as the foundational theory for these efforts, has increasingly become “untenable” amid continuous clinical failures. Behind this challenging landscape, however, lies substantial unmet clinical need, significant market value, and historic opportunities.

According to Frost & Sullivan data, the global market size for central nervous system (CNS) drugs reached $124.5 billion in 2019, making it the fourth-largest pharmaceutical market; in the same year, China’s CNS drug market was valued at $29.6 billion. Over the next 15 years, the CNS drug market is projected to maintain steady growth. The U.S. National Institutes of Health (NIH) has invested more than $8 billion in neuroscience research in the 21st century, nearly ten times the amount spent in the 1990s. Alzheimer’s disease (AD) has become the third disease area to receive dedicated priority funding from the NIH, following cancer and HIV/AIDS.

To address unmet clinical needs, numerous start-up companies focused on the research and development of novel central nervous system (CNS) drugs have emerged in China in recent years. Shanghai Zhongze Pharmaceutical Technology Co., Ltd. (hereinafter referred to as “Zhongze Pharmaceutical”) is one such company. Its founder, Dr. Zhou Xianbo, brings over 30 years of experience in pharmaceutical R&D and offers unique insights and strategies for CNS drug development and its associated challenges.

Counting from 1989, when Zhou Xianbo launched his career by conducting his graduation project in the laboratory of Academician Tong Tanjun at Beijing Medical University (now Peking University Health Science Center), he has been engaged in pharmaceutical R&D for over 30 years. In 2004, Zhou began working on drug development for memory enhancement and neurodegenerative diseases, and in 2015, he started developing products for the early detection of Alzheimer’s disease (AD).

For several years, two things have left a deep impression on Zhou Xianbo.

The first thing was that during his work on CNS drug development, Zhou Xianbo discovered that both academia and industry were dominated by the unverified “amyloid-beta hypothesis.”Before a drug is launched on the market, it remains a hypothesis, and as such, it requires validation from multiple sources.“Typically, when a hypothesis fails validation, researchers generate a new hypothesis based on the newly acquired data and continue testing.”Zhou Xianbo told VCBeat New Medicine, “However, the Alzheimer’s disease (AD) industry seems firmly convinced that the beta-amyloid hypothesis is a druggable one. Whenever clinical trial data fail, the setbacks are invariably attributed to issues with patient samples, timing of administration, or dosage, rather than questioning whether the hypothesis itself may be flawed.”

Zhou Xianbo believes that, in the absence of a clear understanding of disease mechanisms, if a hypothesis has been investigated for many years without yielding valuable validation,Industry professionals should adopt a higher-level and alternative perspective to evaluate whether complex challenges can be comprehensively addressed through multi-mechanistic and multi-pathway approaches.Zhou Xianbo also shares insights on precision neurology: “While developing drugs, we should also consider whether we can create related early-detection tools to better enable precise diagnosis of CNS patients and formulate more targeted treatment plans.”

This is also the R&D philosophy that Zhou Xianbo has consistently adhered to since entering the CNS field.

Another incident occurred during Zhou Xianbo’s tenure as a postdoctoral fellow at Memorial Sloan Kettering Cancer Center. Under the mentorship of Professor Paul Marks, Zhou participated in the first-ever clinical study of a histone deacetylase (HDAC) inhibitor worldwide. During the dose-escalation trial, Professor Marks had a “disagreement” with a young project leader.

The project lead argued that maximum tolerated dose (MTD) trials should be conducted at an early stage to ensure that more patients would not be harmed in future clinical use. In contrast, Professor Paul Marks, a member of the U.S. National Academy of Sciences and then-President and CEO of the center, contended that although future efficacy remained uncertain, early MTD testing might pose risks to current patients. Both parties, each advocating for the best interests of patients, engaged in intense debate.

These two incidents have had a lasting impact on Zhou Xianbo to this day,“They all tell us that drug R&D is a process of multi-dimensional validation. We should be led by professional teams and driven by data to determine the direction of projects.”

Over the past two decades, Zhou Xianbo has participated in the establishment of two startups in the United States and founded and independently operated a wholly foreign-owned enterprise and a startup in Kunming, China.Among them, Aton Pharma, Inc., co-founded by Zhou Xianbo in 2001, was successfully acquired by Merck & Co. in 2004.

In 2015, Zhou Xianbo began focusing in Kunming on the research and development of new drugs for Alzheimer’s disease (AD), as well as on tools for early detection and efficacy monitoring. Through collaboration with a professor at Stanford University, he carried out secondary development and promotion in China of a digital memory testing product. As Zhou delved deeper into central nervous system (CNS) disorders, he increasingly recognized the substantial unmet clinical needs and the numerous unresolved challenges in this field.At the end of 2018, Zhou Xianbo began to reflect and engage in discussions with industry insiders on how to establish a CNS new drug R&D enterprise in China that could lead globally, particularly focusing on building an innovative R&D company specializing in Alzheimer’s disease (AD) therapeutics.

In 2020, Zhou Xianbo met his current partner. Zhou Xianbo recalled, “At that time, we exchanged views on systematic theories and methodologies regarding directional aspects across various fields, discovering many areas of consensus and a shared goal of addressing the needs of Alzheimer’s disease (AD) patients as soon as possible. We also conducted a detailed investigation into the current state of central nervous system (CNS) development both domestically and internationally.”

Central nervous system (CNS) diseases continue to face significant challenges, including unclear pathogenic mechanisms, a lack of reliable animal models, and substantial drug toxicity and side effects. Over the past two decades, pharmaceutical giants such as Merck & Co., Pfizer, Johnson & Johnson, Eli Lilly, Roche, and AstraZeneca have suffered successive setbacks in their research and development efforts for Alzheimer’s disease (AD).

In the face of the successive failures of major pharmaceutical companies, many investors and enterprises have also cast a skeptical eye on Zhongze Pharmaceutical:Big pharmaceutical companies have repeatedly failed; on what basis can a small company challenge such a global problem?

However, global data show that more than 60% of the drugs approved by the FDA in 2017 originated from small companies.Zhou Xianbo believes that “startups and big pharma companies are essentially engaged in a relay race when it comes to drug R&D. Small companies are more agile in early-stage innovation, while large pharmaceutical companies hold advantages in late-stage project advancement and commercialization.”

In August this year, Cerevance announced a strategic R&D collaboration with Merck & Co. to leverage Cerevance’s proprietary NETSseq transcriptomics technology platform for the discovery of innovative targets for the treatment of Alzheimer’s disease (AD). Under the terms of the agreement, Cerevance will receive an upfront payment of $25 million and is eligible for approximately $1.1 billion in milestone payments, as well as potential royalties on sales of approved products resulting from the collaboration.

This marks Merck’s first return to the Alzheimer’s disease (AD) R&D arena since it halted its late-stage AD drug development in 2018. As the pharmaceutical giant Merck regroups, biotech companies focused on innovative AD drug development, such as Cerevance, are seeing their own industry opportunities.

Support from major pharmaceutical companies and capital investors has gradually clarified the development trajectory of the CNS field.

Zhou Xianbo believes that, “Given the substantial unmet clinical needs, many forward-thinking individuals have already been contemplating and strategically positioning themselves to capture the immense value in the central nervous system (CNS) field. A breakthrough, once achieved, would constitute a milestone discovery within the domain.”“At that time, our partners were incubating a project focused on cognitive impairment in schizophrenia, so we planned to combine the R&D of psychiatric cognitive impairment with that of Alzheimer’s disease (AD), the most severe form of cognitive impairment,” emphasized Zhou Xianbo.Focusing solely on Alzheimer’s disease (AD) drug R&D in China carries relatively high risks, whereas a “difficult + simple” model helps companies rapidly launch products while continuing to pursue high-value R&D.。”

Zhou Xianbo’s prior professional experience was primarily overseas, with a focus on research and development. His partner’s experience has been mainly in China, with greater emphasis on the commercial management of pharmaceutical enterprises. The two complement each other in terms of perspective and areas of expertise.

After several rounds of discussions, the two parties decided in 2021 to leverage Shanghai Zhongze Pharmaceutical Technology Co., Ltd. as a platform for developing novel CNS drugs, thereby realizing their respective dreams.

With growing societal attention and an influx of capital, the CNS field is on the verge of an explosion. However, both domestic investors and the general public still require education to deepen their understanding of CNS disorders.

“Many believe that developing oncology drugs is easier than developing CNS drugs; in reality, the global R&D success rate for oncology drugs is lower than that for CNS drugs.”Zhou Xianbo remarked, “Before society and capital turned their attention to oncology, people were already terrified of cancer. However, because tumors affect survival while CNS disorders impact quality of life, the level of attention from both investors and the general public differs.”

In addition, to mitigate R&D risks, Zhongze Pharmaceutical has implemented a strategic layout across five dimensions.

First, complementary teams and pipelines.In terms of team composition, Zhongze Pharmaceutical has gathered talents from related fields both domestically and internationally, creating complementary advantages in resources and experience. Regarding its pipeline, the company develops two to three drug candidates for each indication, with each candidate offering potential for expansion into multiple indications and combination therapies.

Second, pipeline development progresses from easy to difficult.Zhongze Pharmaceutical has adopted a strategic approach that begins with indications relatively amenable to drug development, such as schizophrenia, and gradually expands into more challenging areas like degenerative diseases. Concurrently, the company is implementing a growth strategy extending from China to the global market. Taking into account national circumstances, Zhongze currently focuses its R&D efforts in China on diseases with large patient populations, while in Europe and the United States, it initiates new drug development for niche orphan indications. Recently, Zhongze Pharmaceutical secured recognition from an orphan indication foundation for two of its key priority projects. The foundation plans to support the validation of Zhongze’s drug efficacy in animal models for these indications.

Third, establish an R&D system based on the hypothesis of neuroplasticity.Guided by its hypotheses, Zhongze Pharmaceutical has strategically positioned itself in the field of precision neurology to develop clinical auxiliary diagnostic products for the central nervous system (CNS), thereby facilitating precise drug development. Additionally, Zhongze Pharmaceutical has established R&D focuses in phenotypic screening, combination therapy, and neuroimmunology, aiming to address critical challenges such as the unclear mechanisms of CNS animal models and suboptimal drug efficacy.

Fourth, achieve innovative breakthroughs on well-established targets to reduce R&D risks.

Finally, by repurposing existing drugs to accelerate R&D progress and reduce pipeline development risks.

In addition to the five strategies mentioned above for reducing risks in CNS drug R&D, Zhongze Pharmaceutical believes that being based in China offers two additional entrepreneurial advantages.

First, China boasts a vast patient population and high-quality clinical experts.Zhou Xianbo introduced, “Through our collaboration with the Health Management Center of Renji Hospital, we are able to collect offline data from nearly 25,000 individuals annually. Acquiring such a vast amount of data within a single year is difficult to achieve and even hard to imagine in countries with smaller populations, such as those in Europe and the United States.”

In addition to volume, domestic R&D costs are also relatively lower compared to those in Europe and the United States.To date, Zhongze Pharmaceutical has raised less than RMB 100 million in financing. Compared with a U.S. biotech company in the same field, which secured USD 500 million in funding last year, Zhongze’s platform layout and pipeline advancement progress are on par.

Building on its aforementioned strategic layout, Zhongze Pharmaceutical is currently focused on the field of cognitive disorders, with 11 candidates in its R&D pipeline. The indications covered include schizophrenia, depression, Alzheimer’s disease (AD), stroke, Parkinson’s disease, and epilepsy. The company has established collaborations with professors and hospitals from institutions such as Beijing Anding Hospital, Fudan University, and Stanford University.

Recently, the success of Karuna’s pivotal Phase III clinical trial for its schizophrenia drug triggered a significant surge in the market capitalization of its direct competitors. Hailed by U.S. media as the first-ever instance of “passive gains,” this phenomenon indirectly underscores the vast potential of the schizophrenia market and the strong demand for innovative therapies. Shanghai Zhongze Pharmaceutical Technology Co., Ltd.Core Project ZZ6398, by leveraging a model that combines established targets with mechanistic innovation, it demonstrates simultaneous efficacy against the three core symptom domains of schizophrenia in animal models within the same dose range. Given its therapeutic effects on negative and cognitive symptoms, it has the potential to become a blockbuster drug with annual sales exceeding $1 billion.

In its Phase I clinical trial, ZZ6398 has currently demonstrated favorable clinical safety and tolerability, with its pharmacokinetic (PK) data exceeding expectations.

In addition,Zhongze Pharmaceutical is simultaneously advancing two key projects, ZZ2301 and ZZ2103.ZZ2301 is a phosphodiesterase (PDE) inhibitor with a well-defined mechanism of action, demonstrating safety and efficacy (PDE inhibitors exhibit neuroprotective and immunomodulatory effects and have been successfully developed into peripheral drugs). Its lead compound has reached the Preclinical Candidate (PCC) stage. Currently, no PDE inhibitors have been approved for central nervous system (CNS) indications, with comparable products remaining in preclinical or clinical development stages. ZZ2103 exerts its therapeutic effects via the gastrointestinal vagus nerve, with a clearly elucidated mechanism of action and target profile; animal proof-of-concept (POC) studies have been completed. Regarding safety, ZZ2103 has completed the first-in-human, single-ascending-dose clinical trial in Australia, demonstrating favorable safety and tolerability profiles.

To accelerate pipeline advancement and team development more effectively and efficiently, Zhongze Pharmaceutical is currently conducting its Series A financing round,To rapidly launch differentiated innovative products that meet the clinical needs in CNS disorders. Looking to the future, Zhou Xianbo stated, “I envision Zhongze Pharmaceutical as a platform, not merely a company, where any like-minded partners can realize their value and dreams. Drug developers can fulfill their aspirations for new drug development, investors can accelerate the market launch of products and enterprises, and patients’ needs can be better addressed.”