Hansoh Pharma: The Chinese Innovator Behind Merck's $2 Billion GLP-1 Bet

Author: Yuntan, Editor: Xiaoshimei

There is no denying that the era of GLP-1 has arrived.

In nearly a month, three GLP-1 deals were reached successively, involving an amount exceeding 4.4 billion US dollars. Among them, the most notable one is the collaboration between Merck and Hansoh Pharma, with a cooperation amount surpassing 2 billion US dollars.

This deal narrowly made it into the fourth largest scale of China-produced innovative drug License-out in 2024, prompting the world's third-largest pharmaceutical company to spend lavishly, and Hansoh Pharma also gained significant attention.

【In Search of the "King of Medicine" Successor】

At the turn of the year, there has been a constant stream of news about Hansoh Pharma's international cooperation.

On January 7, GSK5764227 (HS-20093), introduced by its partner GlaxoSmithKline, was granted Breakthrough Therapy Designation (BTD) by the U.S. FDA.

On December 18, 2024, global renowned multinational pharmaceutical company (MNC) Merck announced that it had reached a cooperation agreement exceeding 2 billion US dollars with Hansoh Pharma, which granted Merck the global exclusive license rights for HS-10535.

Immediately following, Jixing Pharmaceuticals acquired the global (excluding Greater China) development and commercialization rights for GLP-1RA CX11 from Wentai Pharmaceuticals; on January 10, Verdiva Bio acquired the rights to Xianweda Bio's once-weekly oral enavogliflozin (currently in Phase II clinical trials).

The deal between Merck and Hansoh Pharma is the largest in scale. HS-10535 is an investigational oral small-molecule GLP-1 receptor agonist. With the continuous rise in the incidence of obesity and type 2 diabetes, the glucagon-like peptide-1 (GLP-1) market remains highly popular. Among this, oral GLP-1 drugs have garnered significant attention due to their convenience, leading to intense competition within the small-molecule space.

Three GLP-1 Drug BD Deals Have Made Chinese Pharmaceutical Companies Richer, Adding Fuel to the Already Hot GLP-1 Race. For Hansoh Pharma, Its Global BD Operations Are Gradually Entering a Mature Phase.

In 2023, Merck generated $60.1 billion in revenue, ranking third among global pharmaceutical companies. Its top product, pembrolizumab ("K drug"), achieved an annual sales revenue of $25.011 billion, marking a 19% year-over-year increase. The revenue from this single product is seven times higher than the annual revenue of Hengrui Medicine, often referred to as the "leading pharmaceutical company" in China.

But Merck also has its worries. The core patent for Keytruda will expire in 2028, and once the patent protection period ends, the launch of generic drugs will quickly erode its sales revenue. As the "patent cliff" approaches, Merck urgently needs to find a replacement.

In the past two years, the great success of GLP-1 drugs has also made Merck very envious, prompting it to accelerate its layout.

For Merck, this collaboration has increased its "stakes" in the GLP-1 field. It is worth noting that Novo Nordisk's semaglutide generated revenue of $21.201 billion in 2023, becoming the world's first GLP-1 to join the "tens of billions of dollars club," with a gap of less than $4 billion from Keytruda (K药).

On January 2, Eli Lilly's GLP-1 receptor agonist tirzepatide (Mounjaro) was officially launched in China and sold out within 3 seconds of its debut on Meituan. Mounjaro achieved revenue of $3.018 billion in the first three quarters of 2024, placing it alongside Novo Nordisk's semaglutide in the top tier. Its launch in China has intensified industry competition.

It can be foreseen that the birth of a new generation of "blockbuster drug" in the GLP-1 category is almost certain. Merck's frequent moves into GLP-1 indicate its hope to find the successor to the "blockbuster drug."

For Hansoh Pharma, through the licensing partnership, it will not only receive an upfront payment of $112 million but also be eligible for up to $1.9 billion in milestone payments based on the drug’s future development, regulatory approval, and commercialization progress, bringing the total to over $2 billion.

In 2023, Hansoh Pharma's revenue was only 10.104 billion yuan. This transaction brought considerable cash flow to the company in advance, replenished ammunition for multi-line R&D, and demonstrated the company's global innovation strength and forward-looking vision.

Both parties get what they need, and the strategic significance behind it is even greater than this 2 billion US dollars.

【Global Realization of Innovation Value】

The drug review reform in 2015 marked the beginning of China's innovative drug era. After a decade of persistent efforts, it finally broke the embarrassing record of having zero "billion-dollar molecules."

Whether it can showcase its strength on the global stage is the fundamental test of the essence of China's innovative drug enterprises.

Since 2023, Hansoh Pharma has achieved three major international milestones. In addition to this collaboration with Merck, in October and December 2023, the company granted GlaxoSmithKline (GSK) exclusive overseas licenses for the development and commercialization of HS-20089 (B7-H4 ADC) and HS-20093 (B7-H3 ADC), respectively, for a total amount of $1.57 billion and $1.7 billion.

Currently, the company has received two upfront payments totaling $270 million from GSK for overseas licensing. The total amount (maximum) of the three deals has exceeded $5.2 billion, and these innovative R&D projects have already realized market value for the company in advance.

Globalization BD is a fast track for innovative pharmaceutical companies to rapidly expand and grow, a "second engine" to solidify their R&D capabilities, and a new benchmark for evaluating corporate competitiveness.

Data shows that nearly half of the pipelines of the world's top ten pharmaceutical companies rely on external innovation, and for Pfizer, which excels in BD, this figure is as high as 80%.

Hansoh Pharma, with its own vibrant pipeline as the foundation and BD products as synergy, accelerates the realization of innovative value through dual approaches: introducing differentiated R&D (License-in) projects and expanding BD collaborations globally (License-out).

On the journey of China's innovative drug development, relying solely on independent innovation is not enough.Since 2019, Hansoh Pharma has accelerated its external cooperation pace, cumulatively achieving over 20 BD projects in the past five years.

At the License-in level, in 2024, the company has successively partnered with three enterprises: in March, it introduced Hansoh Pharma's EGFR/c-MET bispecific antibody HS-20117 from Pumis; in April, it brought in Quanxin Biologics' IL-23 monoclonal antibody QX004N; and in August, it reached a collaboration agreement for Lupon Pharma’s next-generation BTK inhibitor LP-168. The company has cumulatively introduced 11 projects so far, with 9 currently in clinical stages and the remaining 2 projects having entered the commercialization stage.

Hansoh Pharma's BD collaboration is quite representative and worth learning and referencing by peers in China. For instance, the FIC drug Sinuoke, introduced in 2019, is the world’s first approved CD19 monoclonal antibody; Aumolertinib is their self-developed product, and the aforementioned introduced EGFR/c-MET bispecific antibody can synergistically enhance the combined use with Aumolertinib, offering a better treatment option.

The "combination therapy" formed by self-research and BD allows introduced products to directly enter the clinical research and development stage, greatly improving R&D efficiency. It can further strengthen the practical value of the self-developed pipeline, achieving a complementary effect of 1+1>2.

At the License-out level, Hansoh Pharma adheres to the strategy of reserving high-potential projects such as First-in-Class (FIC) or Best-in-Class (BIC) in the same赛道, and enters the international market through cooperation with MNCs.

▲Hansoh Pharma License-in Projects from 2019 to Present, Source: Company Announcements, MenetNet

R&D in China and international R&D support each other, relying on full-chain R&D capabilities such as international multicenter studies to achieve global synchronized R&D and realize Hansoh Pharma's internationalization strategy.

The collaborations with GSK and MSD are the best examples of this internationalization path. The recent transaction with MSD regarding GLP-1 ranks fourth in the 2024 China-produced innovative drug License-out deals.

▲Top 10 License out Deals for Innovative Drugs Produced in China in 2024, Source: Public Data, Pharma Intelligence

Currently, the company has a wealth of early- and mid-stage products in its pipeline. Through this "borrowing a boat to go global" approach, Hansoh Pharma can not only reduce the risks associated with international expansion but also fully leverage the pioneering capabilities of multinational corporations (MNCs) to accelerate the global market success of innovative drugs.

【Towards World-Class Big Pharma】

On the journey to the vast ocean of innovative drugs, Hansoh Pharma is a strong candidate in China that can grow to rival world-class Big Pharma companies.

Hansoh Pharma initially established itself with generic drugs, but subsequently, almost all of its core generic drugs were included in the centralized procurement program, causing the company's performance growth rate to begin slowing down in 2019.

At that time, the company began to take steps towards the transformation into innovative drugs, with the revenue share of its innovative products being less than 20% at the time of its IPO in 2019. It was not until the approval and market launch of its leading product, Almonertinib (Amelie), that the revenue from innovative drugs started to gain momentum.

In 2022, innovative drugs accounted for half of the market, reaching 5.06 billion yuan, officially becoming the core driver of the company's performance; in 2023, the revenue from innovative drugs and collaborative products increased to 67.9%, further rising to 77.4% in the first half of 2024, with a plan to exceed 80% by 2025.

It can be said that,Hansoh Pharma is already a distinctive innovative pharmaceutical company.

▲Hansoh Pharma Revenue and Innovative Drug Income Proportion, Source: Company Financial Report

Currently, the company has eight approved innovative products on the market (two in collaboration), six of which are the "first domestically produced" in their respective categories. These include: China's first self-developed third-generation EGFR-TKI, Almonertinib (brand name: Amelotinib); the first self-developed novel second-generation TKI for chronic myeloid leukemia, Flumatinib; the first self-developed oral anti-hepatitis B virus drug, Emetine Tenofovir Alafenamide Fumarate (brand name: Hengmu); the first self-developed once-weekly GLP-1RA, Liraglutide (brand name: Fulaimi); as well as the world's only approved EPO mimetic peptide, Roxadustat (brand name: Shengluolai).

Especially Almonertinib, which was approved for marketing in March 2020 and received its third indication in 2024, is the first domestically produced third-generation EGFR inhibitor in China that can rival Osimertinib, breaking the latter's monopoly. This has allowed Almonertinib to fully benefit from its first-mover advantage, significantly enhancing Hansoh Pharma's innovative profile. In 2023, the drug's contribution reached the 3 billion yuan level.

At the same time, the company is actively promoting the overseas expansion of Ameitinib and is currently advancing the marketing authorization procedures with the UK and European Medicines Agencies. After breaking into the international market, the growth ceiling will be further raised.

Continuous R&D investment is also a key factor in Hansoh Pharma's successful transformation "from generic to innovative." From 2018 to 2023, its R&D investment ratios were 11.41%, 12.91%, 14.41%, 18.09%, 18%, and 20.8%, showing a consistently increasing trend. In the first half of 2024, the company invested 1.2 billion yuan in R&D, a year-on-year increase of 28.7%, accounting for 18.4%.

High-level BD operations + intensive R&D investment have enabled Hansoh Pharma to build a rich R&D pipeline. Its R&D platforms cover cutting-edge fields such as monoclonal antibodies, ADCs, siRNA, bispecific antibodies, and fusion proteins, spanning areas like oncology, anti-infectives, central nervous system, immunology, and metabolism.

As of now, the company has储备超过30个在研创新药, conducted over 50 clinical trials, and the projects laid out in the early stage are continuously advancing to later stages, consistently contributing to revenue growth.

In the first half of 2024, Hansoh Pharma achieved a revenue of 6.506 billion yuan, representing a year-on-year increase of over 44%. Sales of innovative drugs and collaborative products surged by 80%, accounting for nearly 80% of the total. The company secured a net profit of 2.726 billion yuan, marking a significant year-on-year growth of 111%, with abundant innovative achievements.

Since 2020, the company has been able to maintain 8-10 IND applications and 1-3 new product approvals (including new indications) annually, demonstrating strong momentum. It is expected that by 2025, over 15 innovative drugs (including new indications) will be launched.

To step onto the world stage and become a world-class innovative pharmaceutical enterprise is a significant challenge left by the times for China's pharmaceutical companies. In the fiercely competitive super-track, Hansoh Pharma has delivered a convincing answer.

Joining hands with MNC to target the international market, the R&D pipeline features differentiation and high quality. In the past two years, its innovation capability, international standards, and cooperative business models have reached new heights.

Compared with world-class pharmaceutical companies such as Johnson & Johnson, Roche, Bristol-Myers Squibb, and Pfizer, China's pharmaceutical industry still has a significant gap. However, Hansoh Pharma is a BigPharma seed player in the rise of China's pharmaceutical technology.

Disclaimer

This article involves content related to listed companies and is based on the author's personal analysis and judgment of information disclosed by listed companies in accordance with their legal obligations (including but not limited to interim announcements, periodic reports, and official interactive platforms). The information or opinions in this article do not constitute any investment or other business advice. Market Value Observer assumes no responsibility for any actions taken as a result of adopting the content of this article.

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       Title: What’s Behind the Chinese Pharma Company That Made Merck Spend $2 Billion?