HONG KONG The biotech sector in greater China ended the financial year on a high note. Companies on the Hong Kong Stock Exchange reported better-than-expected results, including seven pre-revenue startups that went public over the last year, adding to the energy in the biotech space.
Among the major players in the pharmaceutical field, Luye Pharma Group Ltd. (HKG:2186), Sino Biopharmaceutical Ltd. (HKG:1177) and CSPC Pharmaceutical Group Ltd. (HKG:1093) all recorded a surge in earnings.
Luye saw revenues jump almost 36% in 2018 to ¥5,173.4 million (US$770.5 million) and net profit up 33%. Its acquisition of Astrazeneca plc's antipsychotics, Seroquel (quetiapine fumarate) and Seroquel XR, last June contributed to the increase in revenue. Seroquel XR is the only quetiapine extended-release formulation in the Chinese mainland. The deal with Astrazeneca came with technologies and established sales networks in 51 markets. With Seroquel, Luye is looking to expand into markets outside of China. (See BioWorld, May 9, 2018.)
"We mainly sell products that are exclusive and protected by patents, so we do not get ourselves into overcompetition. This is how we sustain stable profitability," Sammy Jiang, Luye's vice president of strategy and business development, told BioWorld Asia.
Meanwhile, its research and development activity remained robust, with R&D expenses surging 70%. Luye has filed an NDA with to the U.S. FDA for Rykindo, a risperidone extended-release microsphere for injection to treat schizophrenia and bipolar disorder. The asset could become the first innovative drug developed by China to get marketing clearance in the U.S.
Sino Biopharm, which focuses on cardiovascular diseases and hepatitis, also reported better-than-expected full-year results. Its revenue and profit surged by 41% and 317%, respectively. Sino Biopharm's move to increase its stake in Beijing Tide, another pharmaceutical firm, to make it a subsidiary, led to a substantial increase in revenue. Through the acquisition, Sino Biopharm gained access to Beijing Tide's cardiovascular and pain treatments, such as the heart medicine Kaishi (alprostadil) and pain reliever Kaifen (flurbiprofen axetil). Sino Biopharm said those two were in a "leading position in their respective segments."
The pharma giant contributed about 10% of its revenue to R&D, which amounted to ¥2,091 million. During the past year, it was granted 18 production approvals and 23 clinical approvals, 18 of which were for innovative drugs not marketed anywhere worldwide and two for biosimilars.
CSPC Pharma, another pharma giant in China, recorded turnover of HK$21.03 billion (US$2.68 billion) in 2018, up 36% year-on-year. Net profit rose 32% to HK$3.7 billion (US$470 million). The finished drug business continued to be a major growth driver for CSPC Pharma, with sales up by 45%, while innovative drugs drove revenues up 57%.
In terms of R&D, CSPC Pharma said it has more than 300 projects in the pipeline, primarily focusing on the therapeutic areas of cardio-cerebrovascular diseases, metabolic diseases like diabetes, oncology, psychiatry and neurology, as well as anti-infection products.
Last year, Chinese pharma players benefited from a wave of health care reforms and favorable policies in place to make innovation a more significant driver for China's market. They cited policy reforms in China as an important factor to steer the development of the sector in the near future.
"The industry is highly constrained by government policy, which may cause great uncertainty during the development of pharmaceutical companies," Luye said.
The drugmaker noted that policies such as tendering and reimbursement are having a significant impact on the industry, especially the centralized procurement of 33 selected drugs in 11 pilot cities.
CSPC Pharma's chairman, Dongchen Cai, said 2018 witnessed a continuous deepening of the health care system reform. Regulators have improved the approval process for drug registration and introduced policies such as a clinical trial data protection system, moved to accept clinical trial data and a tacit system for clinical trial applications.
"These reforms effectively shorten the clinical development time of innovative drugs, and at the same time accelerate the launch of imported drugs in the domestic market, which has the impact of encouraging domestic enterprises to invest more in the research and development of innovative drugs," Cai added.
New pre-revenue entrants
Even as the largest companies saw their revenues and profits jump, more biotech firms tapped the public markets last year after the Hong Kong Stock Exchange in April introduced a new listing regime to welcome pre-revenue startups. (See BioWorld, April 2, 2018.)
To date, seven of them have been listed. They are Ascletis Pharma Inc. (HKG:1672), Beigene Ltd. (HKG:6160), Hua Medicine (HKG:2552), Innovent Biologics Inc. (HKG:1801), Cstone Pharmaceuticals (HKG:2616), Shanghai Junshi Biosciences Co. Ltd. (HKG:1877) and Cansino Biologics Inc. (HKG:6185).
Altogether, they have raised nearly $2.9 billion from the Hong Kong market, with Ascletis raising $400 million, Beigene $903 million, Hua Medicine $110.5 million, Innovent $421 million, Cstone $304 million, Junshi $394 million and Cansino $161 million.
Market sentiment toward those stocks has gone through a transition during the past year. Although most went on a downward trajectory due to high valuations of the companies at the beginning, the share prices have stabilized in recent months.
"Biotech stocks performed relatively robustly in the past three months from the bottom last December, suggesting that the market sentiment for the sector has turned bullish," Jialin Zhang, senior research analyst for China health care at ICBC International Research Ltd., told BioWorld Asia.
As of March 29, share prices of Junshi, Innovent and Ascletis had added 23.6%, 18.9% and 1.3%, respectively, while Beigene and Hua Medicine each dropped 8.2% and 7%, respectively.
But the increases in stock prices did not always much the actual performance for some of those companies. Annual financial figures were rather lackluster, as they are still struggling to make profits. Regardless, some of those companies are now making the shift from the clinical-stage to the commercial-stage.
Junshi's and Innovent's PD-1 inhibitors, Touyi (toripalimab) and Tyvyt (sintilimab), as well as Ascletis' hepatitis C drug, Ganovo, have been approved by Chinese drug regulators.
"In the past, investors looked at the companies' ability to innovate and their assets. Now, they look at their ability to commercialize their products, as they are no longer a clinical-stage company," Lewis Ho, a partner in the life sciences practice at law firm Loeb & Loeb LLP, told BioWorld Asia.
Also noteworthy to market sentiment was the launch of Shanghai's high-tech board which will also welcome pre-revenue biotech startups. Ho said it provides a new financing channel for the sector.
"It's good to see more companies go public to allow the biotech bloc to grow bigger," he added.