Advice for biopharmas in China? Mind the gap

SHANGHAI – In China, meeting the country's unmet medical needs is a frequent topic of discussion. For biopharmas, that can mean filling the substantial gap between which drugs are available in developed markets and which are available for patients here.

Nobody underscored that topic more indelibly than Michael Yu, founder and CEO of Innovent Biologics Inc., of Suzhou, who presented during the two-day China Healthcare Investment Conference, or CHIC, event. Innovent is a company clearly on a roll. A biologics developer and manufacturer, it has raised more than $200 million in investment and signed a historic billion-dollar development deal with Eli Lilly and Co. (See BioWorld Today, Oct. 14, 2015.)

It has 12 products in the pipeline, eight investigational new drug (IND) filings, three clinical trial application approvals with two products in the clinic.

But when Yu said he looks at the top 20 drugs sold in China by market share, innovative biologics are nowhere to be seen. In 2014, the top-selling drug in China was sodium chloride, according to research done by Citi Research. The third is human serum albumin. Yu noted that is in stark contrast to the top 10 best-selling drugs globally, where biologics dominate seven of the top spots – Humira (adalimumab, Abbvie Inc.), Remicade (infliximab, Johnson & Johnson), Enbrel (etanercept, Amgen Inc. Lantus (insulin glargine, Sanofi SA), Rituxan (rituximab, Biogen Inc. and Roche AG), Avastin (bevacizumab, Roche AG) and Herceptin (trastuzumab, Roche AG).

It is not that China's regulators have declined to approve biologics. According to CFDA Center for Drug Evaluation data compiled by Yu, as of 2014, China has approved 96 biologics, although "99 percent are copies, not even biosimilars," he said. If broken down by category, China has approved 42 cytokines, 17 growth factors, 15 insulin products, seven enzymes, seven monoclonal products and two fusion proteins (with five more unspecified).

Out of the 96 marketed biologics, four were invented in China and classified by Yu as innovative: Gendicin (2003), Oncorine (2005), Iodine[131I] Metuximab (2005) and Conbercept (2013). Yu was in fact involved with the invention of both Oncorine, the world's first oncolytic virus product, indicated for head and neck cancer, and Conbercept, China's first novel antibody product for ocular diseases.

For Yu, China's biologics market is not an arduous uphill battle to educate doctors and patients on the value of quality biologics; rather it is an incredible market waiting to be supplied. "The China market for biologics is large and growing," he said. "Biologics are growing two to three times faster than the pharma industry as a whole."

Starting from a low point in 2009, the biologics market had a 27 percent compound annual growth rate (CAGR) in the six years ending 2014, for a market value of $9.53 billion. That growth will only continue, he said, thanks to an aging population with a rising prevalence of diseases such as cancer and autoimmune disorders, for which biologics have proved to be highly effective with fewer side effects.

In the next five years, the biologics market is expected to grow 21 percent CAGR, he predicted.

That is backed up by health care expert and McKinsey partner, Fangning Zhang, who shared data that China's pipeline of local innovative class I oncology drugs (biologics and new chemical entities) is reaching scale: 37 IND candidates; 41 candidates in human study, with 20 seeking new drug application approval. A tipping point might be just around the corner.

CLEAR CONSTRAINTS

When trying to close the gap, it also helps to see how wide it is. In the U.S., biologics are 20 percent of the overall drug market. But in China, they comprise only 5 percent. If the U.S. can be viewed as a benchmark, then it indicates there is a long way to go.

When narrowing in on monoclonal antibodies (MAbs), they are the fastest growing segment in China. The MAb market grew by 40 percent between 2010 and 2013, according to Equity Research data, capping off at $670 million in 2013. Yet with only 6 percent market penetration in China, MAbs are a great growth opportunity, Yu said.

The only glitch in that otherwise rosy picture is finding a way to pay for high-priced biologics. Innovent's strategy is to develop both biosimilars and novel candidates as a way to tackle both the high-volume business possible if included on the National Drug Reimbursement List, as well as the high-margin business of those who can afford self-pay.

"But the rewards for innovation face clear constraints," said McKinsey's Zhang. "Despite the economic growth of the past decade, China per capita spend for health care still significantly lags behind developed countries."

China only spends 5.6 percent of GDP on health care expenditure, while the U.K. spends 9.1 percent and Japan spends 10.3 percent. Meanwhile, the U.S. spends 17.1 percent GDP on health care, according to World Bank and World Health Organization figures compiled by Zhang.

Put another way, China spends $370 per person each year, adding up to about $510 billion in total health care expenditure. In contrast, the U.S. spends $9,150 per person, for a total health care expenditure of $2.87 trillion.

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