China’s rapidly evolving deal landscape — The BioCentury Show
China biotech investor, executive James Li on the rise of China biotech and why it’s only just the beginning
The frenzy among Western companies to access China’s biotechnology innovation is reshaping the landscape for cross-border dealmaking, with assets becoming more expensive and partnerships earlier and broader than ever before. That’s being driven by exceptional capital efficiency, access to patients and speed of development, said Frazier Life Sciences’ James Li on The BioCentury Show podcast.
Among multinational pharmas, “every company has an army on the ground hunting for assets,” said Li, who has more than 30 years of biotech experience, as an investor, company builder, and executive in both pharma and biotech. He was co-founder and CEO of Shanghai-based CAR T company JW Therapeutics Co. Ltd. (HKEX:2126), GM of Greater China at Amgen Inc. (NASDAQ:AMGN), and a partner at Kleiner Perkins Caufield & Byers.
Li said China’s life sciences ecosystem has come a long way in the past few years, a sea change triggered by regulatory reforms a decade ago and the creation of a pathway for unprofitable biotech companies to go public in Hong Kong. The China biotech sector’s strengths have fostered the current gold rush mentality for China’s innovative assets among global BD teams, and Li sees new strengths developing that will push China biotech to new heights.
“China is getting better in new biology, looking to new modalities.”
“China has been very, very good in terms of capital efficiency, in terms of getting to clinical testing, in terms of accessing patients, in terms of speed of development. So these are all very efficient,” Li said. “China is getting better in new biology, looking to new modalities.”
The rise in cross-border deals involving China has prompted a shift to earlier deals and strategic collaborations, such as the partnership between Harbour Biomed, formally HBM Holdings Ltd. (HKEX:02142), and AstraZeneca plc (LSE:AZN; NASDAQ:AZN) to develop next-generation multispecific antibodies for immunology and oncology. The deal included a $105 million equity investment.
Even bigger collaborations have followed, such as a tie-up between GSK plc (LSE:GSK; NYSE:GSK) and Jiangsu Hengrui Pharmaceuticals Co. Ltd. (Shanghai:600276; HKEX:1276) to co-develop up to 12 drugs for $500 million up front.
“GSK did a very smart deal,” said Li. “Secure the front-running asset and, at the same time, get access to multiple assets in multiple therapeutic areas.” Hengrui is a “powerhouse in terms of R&D,” he added, noting that the company doesn’t have the capacity to develop the sheer volume of its assets.
Along with what Li calls “basket deals,” he sees an increase in deals in which the China partner is taking on more risk and, in turn, better future economics.
For all the change, though, Li still believes Western companies can find a discount on assets in China, just not as deep as before. “There’s no doubt that deals are getting more expensive in China because people increasingly recognize the value of these assets coming out of China” he said.
One upshot from China’s bear market has been the rise of the NewCo Model — VCs building Western start-ups around assets in-licensed from Asia.
A flurry of NewCo deals at the start of the year helped make China biotech the talk of the annual J.P. Morgan Healthcare Conference in San Francisco. Li believes the trend is here to stay, even as it faces stiff competition from the increasingly large upfronts MNCs and Western biotechs are willing to pay. He sees the model evolving toward earlier-stage assets and a rise in China-China NewCo deals. “Most Chinese biotech companies are thirsty for funding, for cash.”