SHANGHAI – Innovent Biologics Inc., of Suzhou, has raised $260 million from government-backed and independent investors in what is the largest financing round ever for a private biopharma in China. The deal is also the second largest for the sector globally this year.

Moderna Therapeutics Inc.'s $474 million private financing in September is the largest globally. For 2016, second and third place private financings were Cstone Pharmaceuticals Co. Ltd., of Shanghai, which raised $150 million in a series A and Denali Therapeutics Inc., of South San Francisco, which landed $130 million in a series B.

Since its founding five years ago, Innovent has established a pipeline of 12 biosimilars and biobetter candidates along with the capability to manufacture biologics in commercial quantities. They focus on treatments for cancer, ophthalmology, autoimmune disorders and cardiovascular diseases.

In the last few months, Innovent has kicked off three phase III head-to-head biosimilar trials in China and expects to have its first products on the market in 2019.

"It is critical for the company to have product on the market," Michael Yu, CEO and founder of Innovent, told BioWorld Asia. "We are putting all our resources and my time toward meeting that priority." The funds will also be used to expand manufacturing. "We have a robust pipeline of products in different stages of product development," said Yu, "and this requires more manufacturing capacity."

CHINA'S PE: NOT AFRAID OF THE ODDS

The D round was led by a Future Industry Investment Fund (FIIF), a private equity (PE) fund managed by SDIC Fund Management Corp. Ltd., a subsidiary of State Development & Investment Corp., the largest state-owned investment holding company in China.

Other investors included China Life Private Equity Ltd., Milestone, Ping An and Taikang Insurance Group. Innovent's existing international investors, Legend Capital, Temasek and Hillhouse Capital, also participated in this latest round.

In October 2011, Fidelity Asia provided Innovent its first capital with an investment of $5 million. That was soon followed by a $30 million series B round in June 2012 with Fidelity Asia and Lilly Asia Ventures participating. In early 2015, Innovent raised $115 million in a round led by Legend Capital. (See BioWorld Today, Aug. 20, 2014, and Jan. 28, 2015.)

In addition, Biobay, a part of the Suzhou Industrial Park where Innovent is located, provided $140 million to cover the cost of the land and manufacturing facility. The facilities were provided rent-free for a number of years on a fixed-term lease. The biopharma acquired its facilities in 2015, which are now fully owned by Innovent.

Compared to earlier VC-backed rounds, this $260 million financing marks a shift toward greater involvement by private equity investors and insurance giants with close ties to the Chinese government.

BIOPHARMA REMAINS HOT AS OTHER SECTORS COOL

It also shows that China's biopharma sector – as a part of the "new economy" – is enjoying unheralded popularity with institutional investors as they turn away from more traditional choices in real estate, export manufacturing and construction. China's biopharma investment climate is heating up just as the U.S. is cooling.

"Biotech is the hottest sector for investment [in China] so there is a lot of money available," said Yu. "At the same time, when investors look around at what companies to invest in, there are not many options. This gives Innovent a huge advantage; we raised more money than we expected and we did not take all the money available to us."

For the handful of top biopharmas, more announcements can be expected as investors are flush with cash. For health care overall, VC and PE firms raised $10.9 billion in 2015 compared to $3.8 billion the year prior, according to data from Chinabio LLC. In just the first quarter of 2016 alone, $7 billion was raised by VC and PE funds.

Now the race is on to invest this cash, and a big portion is going toward China's drug companies. In 2015, 25 percent of VC investment in the health care sector went to drugmakers and increasingly PEs are moving toward investments in biopharma too. Hua Medicine Ltd. raised $50 million in August from a fund under Harvest Fund Management, another example of a PE-backed investment in a private biopharma.

INNOVENT RACKS UP INDUSTRY MILESTONES

Innovent, however, is in a class of its own. CEO Yu is building up Innovent's capabilities to outperform what he sees as their main competition: China's leading pharmaceutical companies that have the resources, government contacts and commercialization capability to direct the industry's future.

To set itself apart, Innovent has been driven to meet international standards of quality. This has led to a fruitful relationship with Indianapolis-based Eli Lilly and Co. with two milestone-setting deals: the first Chinese biologic out-licensed to a Fortune 500 pharmaceutical company and the first large (valued at $1 billion) co-development deal with a global pharma that depends on close collaboration from development to manufacturing. (See BioWorld Today, March 25, 2015, and Oct. 12, 2015.)

AVASTIN, RITUXAN, HUMIRA BIOSIMILARS

More recently, on Nov. 17, Innovent kicked-off the third phase III trial in three months with IBI305, a recombinant anti-VEGR MAb biosimilar of Avastin (bevacizumab, Roche AG).

The randomized double-blind trial will test IBI305 with paclitaxel in 436 patients with advanced or recurrent non-squamous non-small-cell lung cancer (NSCLC). The primary endpoint is overall response rate and secondary endpoints include duration of response, progression-free survival, disease control rate, overall survival, and safety and immunogenicity.

In September, Innovent pitted their two biosimilar candidates in head-to-head phase III trials with originators:

• • IBI301, a biosimilar for Rituxan/Mabthera (ritiuximab, Roche AG) for patients with non-Hodgkin's lymphoma;
• • IBI303, a biosimilar of Humira (adalimumab, Abbvie Inc.) for the treatment of ankylosing spondylitis. (See BioWorld Today, Sept. 15, 2016.)

THE COST OF QUALITY CLINICAL TRIALS

Running three phase III trials is not cheap, particularly in China, where returnee doctorate's command salaries higher than the U.S. Yu, who said "whatever the outcome or the quality of the program, the sponsor has to be responsible for it," has an audit team of people hired from overseas pharmaceutical companies to monitor the trials closely.

China's clinical trials can at times be riddled with poor quality data, something that Innovent is working hard to avoid. "We have quality control people in the field following through with every single patient, checking every single piece of data collected for integrity. This is a reason why we need so much money right now and why we likely spend far more than other companies."

For Yu, Innovent's success is all about one thing: quality. "When I look back at how the company has developed over the last five years, the Innovent difference is positioning the company to be high quality. That is the reason why we have been able to raise so much money and sign significant deals with Eli Lilly."