how does the Fast Follow-on Culture shape the Chinese biotech Industry

In my first blog, I described the rapid emergence of the Chinese biotech industry, consistent with "China Speed", yet the disappointing low ROI and a pessimistic market sentiment currently. The reasons behind these are complex, but it's important to start the analysis by looking at an important cultural element that is embedded in all business decisions in China, because it's part of the modern Chinese culture. By that, I am not referring to the traditional Chinese culture as in Confucianism, Daoism and Buddism. Rather, I am referring to the economic and social culture brought by the last 40 years of rapid industrialization, with an open market to the West. China was able to quickly jump to the world's second largest economy by GDP predominantly by manufacturing, exports, and infrastructure investment, made possible by an extensive workforce, robust governmental backing, internal and external infrastructural expansion, and an expeditiously expanding consumer market. As for innovation and high tech, China in general lags significantly behind the West and Japan. The reasons behind this is not the topic of this blog. With the new strategic initiatives, however, the mandate to pivot economy towards high tech including biotech has created pressure to identify the latest technological trends in leading countries, act quickly, and with unison, to catch up to the foreign innovators and markets at "China Speed". This "fast follow-on" culture certainly has its merit, especially if combined with China's natural resource advantages. It characterizes the agile and adaptive nature of Chinese industries in imitating successful innovations quickly, rather than pioneering groundbreaking ideas themselves. Through rapidly iterating and implementing proven concepts, making incremental improvements, and swiftly capitalizing on emerging trends, China could achieve success in the global market. The most notable examples include solar, battery, 5G, and electric vehicles. This is also the approach that China has been taking for its biotech industry.

The Waves of the "Fast Follow-on" Trends in Biotech - Biosimilar

In 2015, after working for over 20 years in the US for leading biopharmaceutical companies, I took a job as head of quality and compliance for one of the top 5 biotech companies in China. When I arrived, I was surprised by how many other companies were trying to do the same thing - that was, developing biosimilars to the blockbuster monoclonal antibody drugs that were approaching pattern expiration by the innovators. The entire China biotech was giving the same business plan, it seemed, using the same rationale. It goes like this - for a country to create a brand new drug sector, China should mimic the proven path charted by its chemical drug industry which is now a respectable player in the generics field, especially for the chemical APIs. Biosimilars, in this logic, were viewed as the equivalence of the "generics" for biologics. As the innovator's products are well characterized, and safety and efficacy well proven, this would likely be the surest and fastest way for China to catch up with the advanced markets in monoclonal antibodies and create more affordable life saving medicines for the Chinese people. From government to investors to entrepreneurs alike, this was almost guaranteed to work. That was my first experience with the "fast follow-on" culture in China.

I, on the other hand, had my doubts, having been involved in many of the blockbuster product launches and life cycle management in the US and EU, I know there are fundamental differences between chemical drug API and biologics drug substance. I know that knowing the molecular target, and the monoclonal antibody screening systems widely available in China, one could achieve quick R&D success. However, to generate a final biologics drug product that can show equivalency to the innovator products, so much more product development experiences would be required, experiences that most of the Chinese biotech companies at the time did not have, as most of the founders had come from R&D background. The most challenging area, as it turned out, was in GMP manufacturing and quality aspects of the product development as China also did not have a Quality culture, but this will be the subject of the future blog..

The Many Waves after Biosimilar-

The PD-1/L1 Wave:

Under the biosimilar wave, companies were competing for investment, government subsidies, industrial park spaces, talents, clinical PI and patient resources. It turned out, as expected, those companies that for one reason or another paid extra attention to CMC from early on, especially GMP quality management, were able to reach the finish line as planned. They included the company that I joined, as well as several companies that my consulting company helped in those early days. I was grateful that the top leadership in those companies recognized the importance of GMP quality in time for their first product commercial launches, as manufacturing and quality challenges become critical as stable process performance at scale up, with more lots produced depend on robust quality system and control strategies. As so many others in China struggled to move their biosimilars' pipelines from R&D to product launches, the second wave came into China biotech with the exciting clinical and commercial successes of the PD-1 pathway based immune checkpoint inhibitors, Keytruda and Opdivo. Between 2017-2019, PD-1/L1 became the hottest product for Chinese biologics industry and quickly surpassed biosimilars as the new favorite "fast follow-on" trend. Hundreds of PD-1 clinical trials were registered during that period, all trying to capture the Chinese market before the the western products obtained approval in China. The launch process and the competition amongst the first 3 PD-1 monoclonal antibodies from the Chinese biotech companies were one of the most closely watches races by the Chinese biotech industry. By June 2022, Chinese regulatory authority has approved 6 PD-1 antibodies. In the meanwhile, it also became clear that none of them would achieve the huge revenue the companies had projected. The push for these companies to get their drugs approved in the US or EU, or, at least out-license those rights to a non-Chinese partner became absolutely necessary and critical. I will not discuss the journey and outcome of those endeavors here but would not be discussed in this blog, but in general, they also did not meet the expectations. Therefore, it became necessary for the industry to create a new wave around late 2019, early 2020.

The Bi-specific Antibody, ADC and Biologics CDMO Wave

The next wave starting from 2018 went into a few directions almost simultaneously. Some existing and new biotech companies decided to follow the impressive success of WuxiBiologics, a biologics CDMO under WuxiApptec, which offered a good alternative to companies that had built the monoclonal antibody infrastructure, but now without viable pipelines to fill; others started to go heavily into the multi-target antibody pipeline competing on how many different targets each therapeutic antibody drug could be engineered to target against. Some others started to focus on Antibody-Drug Conjugate, which required a considerable level of technical specialty and facility investment due to the complex and cross-field nature of these drugs so did not become overly excessive. The ADC companies did, however, got a lot of funding during this phase as the previous waves had been considered no longer desirable. This mixture of divergence formed the third wave in China biotech industry. So far, there is only one bi-specific antibody developed by a Chinese company that is approved in China, Cadonilimab, a BsAb targeting both PD-1 and CTLA-4. The NMPA approved cadonilimab for marketing on June 29, 2022. There are many more dramatic failures reported for the front-runners of bi-specific antibody pipelines in China, especially that from Alphamab Oncology.

The CAR-T and Cell and Gene Therapy Waves

2017, the world's first 2 CAR-T therapy Kymriah and YESCARTA were approved by the US FDA, and the next year in EU. By 2019, a few Chinese biotech startups managed to form JVs with the CAR-T leaders in the US and started to introduce the same products into China. The first IND filing for a CD19-CAR-T, in collaboration with JUNO (which then became Celgene and BMS), took place in Nov 2019, and many others followed suits. This started a 4th wave in China biotech industry. Within 2019-2022, the number of CD-19 CAR-Ts and BCMA-CAR-Ts flooded into the Chinese clinical trials competing for all resources just like the previous waves. June 2021, the first CAR-T product, YESCARTA equivalent manufactured by FosunKite was approved by the Chinese regulatory authority, marking a remarkable success in a "fast follow-on" model. The year after, Carvykti, a BCMA-directed CAR-T immunotherapy was approved by the US FDA, and it was a novel CAR-T product that came out of the R&D and early stage clinical studies from Legend Bio, a Chinese biotech startup company. Even though the rapid launch of Carvykti in the US was the direct result of the Johnson Johnson partnership with Legend, who took over all the late stage development activities by the J&J teams in the US, this also gave a huge boost to the Chinese cell and gene therapy field. Many central and local government sponsored incentives were issued to boost the sector and, in addition to the product companies, some went into CDMO service sectors for cell and gene therapies, similar to the previous wave with monoclonal antibody CDMOs.

The mRNA Wave

2020 was the beginning of the COVID19 pandemic. Being the first in the world to have obtained the genetic sequence of the novel virus, China biotech sector, with the government's support made huge efforts in trying to get ahead of the West in developing vaccines and treatments. By Aug 2021, FDA approved the mRNA based vaccine by Pfizer/BioNTech. By then, Chinese biotech only had the traditional (made against the inactive virus) vaccine to offer to its 1.4 billion people, which would not be effective against the rapidly evolving variance of the COVID virus. Developing mRNA based COVID vaccines became something much more than a technical, medical endeavor for the nation, and this started another new wave. A few scientists with connections to the mRNA original research teams and technologies in the West had returned to China and founded companies based on mRNA and the lipid delivery systems as their technical platforms. Those companies suddenly became the new favorites of the VCs garnering historical amount of fundings within short period of time, as well as strong government support, all in a race to compete with the West on COVID vaccines and treatments. By late 2021, one of those companies received 1.1 billion USD within less than 3 yrs after its founding. As of today, these mRNA vaccines have never reached commercial success either in China, or in the West. Nevertheless, many more companies are still receiving funding in the past 2 years for other applications of RNA based therapeutics for indications other than the COVID19 vaccines.

What Do These Waves Mean for China Biotech

The above describes how Chinese biotech has developed in these waves, each lasting around 3 years. Although there are a lot more nuances within each wave, this represents a major difference between how the advanced countries have developed the biotech/biopharma eco-systems vs. China: In the advanced markets, specialties in different therapy platforms are developed more organically, as each of them would require a long time effort of many teams from basic research to translational research, and from therapeutic concept to product launch and commercial operation. Pfizer/BioNTech was successful in their COVID19 vaccine, in time to make a critical difference in humanity's fight against the corona-virus, because the culmination of long and painstaking efforts by many investigators spanning over 30 years of time before the pandemic hit. BioNTech's collaboration with a top pharmaceutical company, Pfizer, ensured that the manufacturing and quality are also reasonably assured before the vaccine got an emergency approval. The fast follow-on Culture in China, however, does not in general allow this organic development of a sub-sector, and therefore likely generates a lot of waste in resources of every kind through each of these waves, mostly lacking long term strategic agenda based on each company's true competitive edges against others. This becomes a particularly serious problem for an industry as complex as biotech, where each therapeutic platform has so many unique technical requirements and challenges which cannot be easily mastered, copied in short periods of time no matter how much money is thrown at it. For example, there were not enough trained biologics Quality management experts to support all the Chinese biotech companies at the same time. Therefore, this cultural manifestation in the biotech industry becomes a major hurdle in Chinese biotech's ambition to becoming a respectable player in the global stage, a hurdle not easily overcome due to the fact that it is part of the Chinese culture from its modern history.

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Free Text Input: The Fast Follow-on Culture of the Chinese Biotech Industries

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