The search for anti-cancer drugs has strong support from the Chinese government which has spurred investors to pour money into the sector. What's hot this year seems to be immuno-oncology and the related field of precision medicine.
Traditional chemotherapy indiscriminately attacks cells, whether they are cancerous or not. But more advanced oncology treatments seek to activate a body's own immune system to destroy cancer cells. This is called immuno-oncology (I-O), which is more efficient and has fewer side effects.
It is becoming an investment focus for 2019, according to Kevin Xie, co-founder and head of the healthcare advisory team at China Renaissance.
“This is different from an early trend of investing in small molecule drugs. Technology has developed and people want more clinical treatment for cancer,” Xie said.
Investors are looking for higher-potential projects too; not simply in-licensed or slightly-improved drugs, he explained. Given the market demand, investors want to see original and high-tech drug developments for cancer treatment. The valuation of companies that can do so will increase as those which control core technology can survive better in a competitive market.
It is important too that investors participate in the right fundraising stage and assure themselves of the commercialisation of these anti-cancer drugs.
The potential size of the anti-cancer drugs market in China is huge with the illness the leading cause of death in the country. A study published by the American Cancer Society estimated that there were 4.3 million new cancer cases and more than 2.8 million cancer deaths in China in 2015, with lung cancer the most common.
The market is growing quickly. Sales of oncology drugs have been growing at a 20% a year, according to CIConsulting, and the market is expected to be worth Rmb220 billion ($32.9 billion) by 2020.
No surprise then that Investors are flocking to the sector in growing numbers. Investment in drugs and treatments jumped by more than 60% to 191 in China last year and by 82% to Rmb30.9 billion by investment volume.
INVESTOR INTEREST
Investors have been looking at advanced medical research such as precision therapy and biological treatment. But immuno-oncology is the hot category.
Since 2017, investors have favoured the later fundraising stages of cancer drug manufacturers as they have more solid research results and can start mass production after clinical trials.
Singapore government investment company Temasek, for example, recently led the $85 million Series B investment in precision therapy specialists Gracell Biotechnologies.
Gracell is developing a cancer treatment called CAR-T that uses genetically reformed immune cells to attack cancer cells. It attracts the immune cells of each patient and sends them back to the body after they have been modified.
The demand for this treatment is huge, but it is also expensive. Gracell plans to develop a low-cost CAR-T treatment and said its research is already at the clinical stage.
THE NEXT TREATMENT
Another company is I-Mab Biopharma, which could float in Hong Kong market in the second half of the year.
It is focussing its research efforts onto a particular type of next-generation immuno-oncology treatment using antibody CD47 and CD73. Unlike the traditional programmed cell death protein 1 (PD-1) or Programmed death-ligand 1 (PD-L1) treatment that uses drugs to activate T-cells in the human body to kill the cancer cell, the antibody CD47 activate macrophage in the immune system with fewer harmful side-effects.
There are currently around two dozen Chinese firms researching PD-1 treatments for cancer, not to mention intensive competition from overseas companies such as Merck Sharp & Dohme and Bristol-Myers Squibb.
But I-Mab has out-licensed its own PD-L1 antibody and is now devoted to new targets such as CD47 and CD73 antibody development, as it believes they are more effective treatments and have even fewer side-effects.
CD47 antibodies can block cancer cells’ “don’t eat me” signal and hence activate macrophage cells to “eat” cancer. More to the point, CD47 treatments are perceived as the next potential blockbuster in immuno-oncology for its broad antitumor response involving both innate and adaptive immunity.
“It is our decision to focus on the future technologies in a relatively less competitive area,” said I-Mab's chief financial officer Jielun Zhu.
Exact timing for an IPO will depend both on the progress of its research and the stability of the stock market. But the company definitely wants to attract sufficient funding for further clinical research and mass production of its product, he said.
“We need to increase our R&D budget considerably this year,” Zhu said. “We have seven different drug research programmes underway and would like to have enough money for them.”
Zhu added that I-Mab is trying to increase commercialization of its product this year and will add a manufacturing base near Shanghai, where it is headquartered. The company intends to out-license two to three of its sideline products this year and in-license a late-stage immuno-oncology product from Europe or the US.
This article has been corrected in pargaraphs 15,17 and 22
