Bristol Myers Squibb turns to China’s Hengrui to replenish pipeline

One of America’s largest pharmaceutical companies announced this week that it will partner with a Chinese drugmaker to test some of its experimental drugs and discover new ones; It’s an agreement that could mark the next phase of intercontinental coordination.

Bristol Myers Squibb On Tuesday, it announced a potential multibillion-dollar partnership with Hengrui Pharma, one of China’s leading drugmakers. The companies will work together to develop about a dozen drugs, including four that Bristol discovered and which Hengrui will send to China to conduct early-stage clinical trials. The two companies will also collaborate to discover new drugs.

“This is a huge signal,” said Michael Baran, head of private investments at healthcare-focused hedge fund Affinity Asset Advisors and a former partner at Pfizer Ventures. U.S. drugmakers have previously partnered with Chinese companies to develop drugs, including Amgen’s collaboration with BeOne in 2019, he said.

But he said Bristol’s deal was important because it was more mutual. This raises the possibility that more U.S. drugmakers may pursue early drug development in China as they seek to bring treatments to market faster, and that Chinese companies may become global powerhouses.

Bristol and Hengrui will each contribute assets and work together to develop new drugs, making China look like part of the pharmaceutical industry’s global research and development operating system, rather than a one-off source of molecules, Baran said.

American and European biopharmaceutical companies Pfizer, Merck And AstraZeneca They are increasingly turning to China to find their next potential blockbuster. According to data from DealForma, which tracks deals in the industry, just over half of major pharmaceutical companies’ licensing deals came from China this year; this rate was 39% last year and 5% in 2022.

So far, the playbook has mostly been for major drugmakers to license drugs discovered and undergone early testing in China or essentially extract experimental drugs from China. Some US companies, such as Eli Lilly, have partnered with Chinese companies to discover and develop new drugs.

Bristol’s deal is different because it ships many experimental drugs to China.

Lieven Van der Veken, a senior partner at McKinsey, said Bristol’s partnership was different from others in some key ways. This is similar to a deal Hengrui recently signed with GSK, which gave the British drugmaker access to some of Hengrui’s experimental drugs. But with this deal, Bristol acknowledges that it has drugs it can develop faster and for less money in China. And he’s working with Hengrui to come up with new ideas.

“More and more companies are looking at this as a global network model where you basically say China is not a threat or a separate source of innovation, we need to leverage that over and over again,” said Van der Veken, global leader at McKinsey AI QuantumBlack. “You’ve got to be involved. You’ve got to be present. And people have tried to do that with local teams, people have tried to do that [venture capital]based investments. This is just next level.”

Chen Yu, founder and managing partner of crossover fund TCGX, was one of the early leaders in bringing Chinese medicines to the United States. He said the industry is now in a transformative period, with much of the early work shifting to China, where twice as many drugs can be studied in half the time and at one-third the cost.

“For the last 25 years, U.S. investors and entrepreneurs have had the luxury of not having to think about anyone else,” Yu said. “This will not be the future.”

By the end of the decade, the idea of ​​doing early-stage drug discovery in the United States may seem as realistic as making the iPhone in the United States, Yu said. He sees the early stages of drug development moving towards textile manufacturing, which is eventually largely moved to China.

Mid- and late-stage trials will need to be conducted in the U.S. to gain approval from the Food and Drug Administration, he said, but conducting initial studies in China could help companies introduce drugs more quickly than they can today.

Some companies are already conducting much of their early work in China. Ruud Dobber, who runs AstraZeneca’s biopharmaceutical business, said AstraZeneca is conducting much of its early work on its experimental cell therapy in the country. And he “definitely” expects the British drugmaker to make more on its production line.

People disagree on whether China’s rise is helping or hurting the U.S. biopharmaceutical industry. Some, like Yu, say making drugs faster and cheaper will help people who need them. Others, such as the industry advocacy group Biotechnology Innovation Organization, argue that China’s rise could come at the expense of U.S. companies.

There’s one thing they agree on: China will remain a power in drugmaking.