Pharmaceutical & Biotech Weekly Report: AI-Driven Drug Discovery Accelerates with Robust BD Collaborations

Main Points

AI Drug Development Sees Surge in Collaboration Activity, with BD Deal Values Standing Out (1) Recently, XtalPi announced the signing of a letter of intent with DoveTree LLC, established by Gregory Verdine, a tenured professor at Harvard University in the U.S., a legendary entrepreneur and investor in the American pharmaceutical industry. A final agreement is expected to be signed soon based on this letter of intent. According to the letter, XtalPi will leverage its end-to-end AI drug discovery platform powered by AI and robotics to discover and develop small molecule and antibody-based drug candidates for multiple targets selected by DoveTree in the fields of oncology, autoimmune diseases, and neurological disorders. Under the terms of the letter, XtalPi will receive upfront payments of $51 million and $49 million within 10 days and 180 days after the signing of the final agreement, respectively. Additionally, XtalPi is eligible to receive potential development and sales milestone payments totaling billions of dollars, as well as royalties potentially in the single-digit percentage range based on annual net product sales (subject to the final agreement). DoveTree will obtain exclusive global development and commercialization rights to these products. (2) On June 13, 2025, AstraZeneca and CSPC entered into a strategic research collaboration. The two parties will collaborate on high-priority targets to advance the discovery and development of novel oral drug candidates for the treatment of various diseases. Under the agreement, CSPC will receive an upfront payment of $110 million and is eligible to receive up to $1.62 billion in potential development milestone payments and up to $3.6 billion in sales milestone payments, along with potential single-digit royalties based on annual net product sales. According to the terms of the agreement, AstraZeneca and CSPC will jointly discover and develop preclinical drug candidates for multiple targets, which are expected to treat chronic conditions, including a preclinical small-molecule oral therapy for immune-mediated diseases. (3) In January 2025, Insilico Medicine announced a licensing agreement with Menarini Group, a leading international pharmaceutical and diagnostics company, and its wholly-owned subsidiary Stemline Therapeutics. Stemline will obtain the exclusive global development and commercialization rights to one of Insilico Medicine's preclinical anti-cancer drug candidates. This candidate, developed with the assistance of Insilico Medicine’s generative chemistry engine Chemistry42, is a highly selective, potential best-in-class small-molecule inhibitor with promising applications in the treatment of various solid tumors. In preclinical studies, the molecule demonstrated broad anti-tumor activity across selected cancer models and has been designated as the preclinical candidate for the program, currently in the IND-enabling development phase. Under the agreement, the total value of the licensing deal exceeds $550 million, with Stemline paying Insilico Medicine an upfront fee of $20 million, followed by subsequent development, regulatory, and commercial milestone payments. On January 5, 2024, Menarini licensed the preclinical candidate KAT6 inhibitor MEN2312 from Insilico Medicine in a deal worth over $500 million (with an upfront payment of $12 million). MEN2312 shows promise for the treatment of ER+/HER2- breast cancer and other cancers; the project was in the preclinical stage at the time of the transaction early last year and has now entered Phase I clinical trials.

The AI pharmaceuticals market is experiencing rapid growth, with domestic companies actively making strategic investments. In drug discovery, AI analyzes massive amounts of biomedical data to identify potential drug targets and assist in molecular drug design. Using machine learning algorithms, AI can predict the structure, activity, and toxicity of compounds, rapidly screening out candidate drugs with clinical potential and shortening the drug development timeline. According to the Toucan Research Institute, China’s AI pharmaceuticals market size grew from 0.7 billion yuan in 2019 to 4.1 billion yuan in 2023, with a compound annual growth rate (CAGR) of 57.4%. It is projected that from 2024 to 2028, the market size will increase from 7.3 billion yuan to 58.6 billion yuan, with a CAGR of 68.5%. According to incomplete statistics, there are over 92 AI pharmaceutical companies in China, primarily concentrated in Beijing, the Yangtze River Delta, and the Greater Bay Area, which together account for more than 90% of AI pharmaceutical companies. Among these, Beijing, Shanghai, and Shenzhen stand out, each hosting more than 15 companies. Compared to international markets and foreign companies, China’s AI pharmaceuticals industry started relatively late, but in recent years, the overall market enthusiasm has shown a significant upward trend.

Investment Advice

We believe that AI can accurately identify drug molecular properties and predict biomolecular structures, and is considered a key factor in accelerating the new drug development process. The market size of the AI pharmaceuticals sector continues to expand, with advancements in AI technology driving the industry's growth, leading to high market enthusiasm and notable recent collaboration deals. Suggested companies to watch: XtalPi Holdings Limited, Insilico Medicine, CSPC PHARMACEUTICAL GROUP LIMITED, and Pharmaron.

Risk Warning

Risk of price reduction for pharmaceuticals/consumables; risk of industry policy changes; risk of intensified market competition, etc.