Biotech sector financing broke records globally in 2020
IPO’s worldwide went from 51 (2019) to 131 and the average amount raised from $120 million to $169 million
Chinese IPO’s in biotechnology stood out, signaling the country’s all-out push in medical research, by increasing their share of this growth segment from 24% of all IPOs to 36%
Quoted by Reuters, consulting firm ChinaBio reckons investments into Chinese healthcare hit $38 billion in 2021, up by a third from the previous year
According to a July 2021 Nature study, from which the data has been sourced,
A fast-growing cohort of Chinese biotech is developing differentiated medicines, not just for the large and increasingly innovation-friendly home market, but for the United States and other Western nations
Multi-billion dollar license agreements signed with major pharmaceutical groups, Johnson & Johnson
Geopolitical interests on both sides of the Pacific may squeeze these promising prospects as the U.S. are inclined to favor the protection of their domestic market - possibly at the cost of international R&D collaboration - and China pursues financial uncoupling from global (mainly U.S.) markets
The future has arrived - if the dismal stock performance of Chinese biotech over the past months are a harbinger of things to come
Making cancer treatments a strategic priority
As discussed in ‘the rising tide of chronic diseases’, China, with 18.5% of world population, accounted in 2020 for 30% of cancer deaths globally and 24% of newly diagnosed cases
With heightened expectations to address China’s healthcare urgencies, the biotech industry has meshed private initiative and healthcare policies
- return to China over the past decade of about 80% of Chinese scientists who used to live overseas
- streamlined regulatory standards since 2017-2018, aligned with international norms and speeding up the review system of new drugs
- rule changes on the Hong Kong exchange, allowing the listing of loss making biotech’s
- creation of biopharmaceutical industrial parks, infrastructures initiated by local governments to support biotech development with efficient services – 193 parks focused on the industry as of end 2019
- preferential tax policies
- financial incentives encouraging R&D, industrialization and access to the international market
The concentrated effort, stretching back over the past 5 years at least is clearly gaining momentum
Stock exchange listings by Chinese biotech firms raised $8 billion in 2020, mostly in Hong Kong ($5.2 billion) with further momentum in 2021: 20 listings in Hong Kong as of Sept. ’21 raising $4.6 billion and another 30 listings pending…
Topping NASDAQ IPO’s in 2021, Gracell Biotechnologies Invalid tag asset was listed in January (current market cap $330 million) and Connect Biopharma
Licensing deals with Western pharmaceutical companies are underscoring the growing recognition of China’s effort in the field
- RemeGen Co Ltd (9995.HK) licenses an antibody drug to U.S. Seagen Invalid tag asset - $200 million upfront and up to $2.4 billion in milestone payments
- BeiGene Ltd (6160.HK) Invalid tag asset co-develops an antibody helping the immune system with Novartis
– a deal valued up to $2.2 billion - I-Mab
partnered with AbbVie to co-develop a monoclonal antibody – a deal valued up to $1.9 billion - as early as 2017, Legend Biotech
inked a deal with Johnson & Johnson for its CAR-T bone marrow cancer drug (reviewed by the American FDA in November ’21)
I-Mab and Legend Biotech as well as Innovent Biologics (1801.HK) –
Intent on establishing themselves as global companies,
- Beigene, China’s largest biotech firm (20.5% owned by U.S. Amgen
) is organizing its own sales teams in the U.S. and In Europe and announced an R&D center in New Jersey - HUTCHMED –
is planning to distribute its in-house developed cancer drug directly as well
Troubled U.S. listings
| as of mid Jan.22 | Mkt Cap (in $ bn) | Return (1Y) | Return (3m) | |||
|---|---|---|---|---|---|---|
| Johnson & Johnson | US | 447 | 9,50% | 6% | ||
| AbbVie | US | 243 | 24,50% | 26,5% | ||
| Novartis | Swiss | 201 | 0,00% | 6,8% | ||
| Amgen | US | 132 | 1,00% | 13,8% | ||
| BeiGene | China | 23 | -19,5% | -30% | ||
| Seagen | US | 26 | -20% | -16% | ||
| Innovent | China | 8 | -62% | -48% | ||
| Legend Bio | China | 6,5 | 64% | -9,5% | ||
| HUTCHMED | China | 5 | -0,8% | 5,6% | ||
| I-Mab | China | 3 | -20% | -39% | ||
| Gracell Bio | China | 0,33 | -80% | -63% | ||
| Connect Bio | China | 0.27 | -72% | -66% |
During the last quarter of 2021, doubts about the viability of Chinese biotech listings on U.S. exchanges have set in
Close collaboration with Western pharmaceutical firms and numerous licensing agreements, signed or in the offing, had kept the industry immune from the geopolitics of uncoupling, roiling the technology sector
Indicative of heightened uncertainty, diverging stock performance has been ripping through the market since October '21
Earlier on, from a high point in July '21, the negative performance of listed firms such as contract drugmaker Wuxi Biologics
Strong headwinds on both sides of the Pacific do not seem to subside any time soon
- Rumors about U.S. sanctions on the industry have been seen as the cause of a large sell-off in December '21
- SEC audit requirements - which the Chinese regulators resist - will roil all Chinese listings, as they come into force (within 3 years)
- China has signaled for its part that work-arounds (called VIEs) facilitating foreign stakes in domestic companies may not benefit going forward from the tolerance investors had come to expect
In a nutshell, the future of Chinese biotechnology is bright... international collaboration much less so
U.S. listings of Chinese biotech could soon belong the past and Chinese authorities will encourage IPOs on their own terms, in Hong Kong and on the Mainland...Will foreign investors bite ?