What China is accomplishing in R&D “has implications for everyone playing in the R&D or innovation world,” McKinsey’s Fangning Zhang says.
Pharmas heading to China are starting to pick up more than just promising assets there. As they strike their billion-dollar licensing deals, they’ve begun to wonder if the Chinese approach to drug discovery and R&D could make their companies more efficient overall.
This is playing out in the subtext of deal announcements, according to Fangning Zhang, McKinsey & Company’s leader of the life sciences practice in Greater China. A pharma may highlight a clutch of assets that will be the meat of a potential licensing partnership, but underneath the multi-national licensor is also hoping to learn a few things about R&D efficiency.
“Some of the recent deals, at least on paper, it is a licensing deal,” Zhang, who is based in Shanghai, told BioSpace. “But part of that thesis is actually because the licensor believes the speed and cost efficiency of these China innovators actually could help them [get] into clinical trials faster and potentially cheaper.”
This is happening as these major companies, hungry for new assets, are starting to think about their long-term commitments in China, Zhang said. Do they want to simply dip in for a drug or two, or take some lessons in other areas of biopharma while there?
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What China is accomplishing “has implications for everyone playing in the R&D or innovation world,” Zhang said.
“What I’ve seen over this past year is a much higher level of curiosity to learn and understand the R&D capabilities that are happening in China in terms of the efficiency and speed.”
The Holy Grail
Improving R&D efficiency and development timelines has always been the pharma Holy Grail. The average drug takes about 10 to 15 years to move through the development process, costing billions. Improving that process in any way can maximize potential revenue.
In recent years, pharmas have been spending billions on AI technologies to find better targets and candidates faster, while myriad biotechs pop up promising next-generation machine learning tools to do just that.
Zhang, who has been following China’s slow rise over the past decade, acknowledges that Chinese assets still have to prove themselves in populations more similar to the U.S. to ensure they will be successful in that market. Summit Therapeutics, one of the early biotechs formed around a Chinese-developed asset to handle the U.S.-side of the development process, has struggled to achieve global results for its drug comparable NAME OF THE DRUG AND INDICATION to the data gleaned from the trials conducted in the Asian nation.
Nevertheless, it makes sense to conduct early-stage trials in China as a form of “early signal seeking,” according to Zhang. Clinical research is simply cheaper and easier in China, allowing global pharmas to do some de-risking before going all-in on expensive American-focused studies.
Beyond traditional pharma companies, Western investors are also paying attention to the clinical trial signal seeking opportunity, exempified by the strategy of forming new biotechs around Chinese assets, Zhang said.
At the same time, the Chinese companies are learning to adapt their early programs to potential multi-national partnerships, tweaking their early-stage clinical programs to be more friendly to future regulatory processes abroad.
One deal that exemplifies an evolving deal environment is Massachusetts-based Crescent Biopharma and Sichuan Kelun-Biotech’s asset-swap agreement announced on December 4. The companies are each bringing a drug to the partnership: Crescent a PD-1/VEGF inhibitor called CR-001 while Kelun-Biotech brings an antibody-drug conjugate SKB105. Both companies will test combinations of the therapies in their respective regions.
“By leveraging China’s abundant clinical resources and execution efficiency, we aim to expedite clinical development while rigorously maintaining the highest global standards,” Kelun-Biotech CEO Michael Ge said in a statement. “We believe this partnership creates a powerful synergy to maximize the potential of these two drug candidates for the treatment of patients in both China and the rest of the world.”
All of this is happening in a rapidly expanding deal environment. Zhang said that Chinese deals have gone from 8% of global licensing activity to 30% in about two years. As both East and West see more opportunity together, they need to learn from each other.
“I would anticipate that every group of these players would actually do their homework, and eventually they need to figure out what’s the right strategy, what’s the right kind of playbook to capture the opportunity,” Zhang said. “But the first is understanding.”
