Is there a bubble in China’s cell and gene therapy industry?
Release Date:
2023-03-27 17:51
At the beginning of 2023, following a high-profile yet now decidedly less vibrant JP Morgan conference in the United States, biotech companies that had endured three harsh winters under capital scarcity not only failed to see a thaw in funding but instead faced a wave of successive layoffs, company closures, and asset sales: Aristea in the large-molecule space shut down, while Goldfinch and Xenikos initiated liquidation proceedings; in the cell and gene therapy sector, Editas and Century carried out workforce reductions, and Rubius closed its doors.
By contrast, in China, while the large-molecule sector—already characterized by a high volume of products either commercialized or in late-stage clinical development—is locked in relentless internal competition driven by pressure on reimbursement prices and the race to differentiate increasingly homogeneous offerings, the cell and gene therapy space appears to be steadily heating up. In the first two months of 2023 alone, the website of the Center for Drug Evaluation listed more than 20 companies—including Tuohua Bio, Nuowei Technology, Hengrui Yuanzheng, Fangtuo Bio, Zehui Chenxing, Huidagene, Bendao Gene, Newfoss, Cojie Pharma, Heyuan Bio, Meditong Pharmaceutical, Dabo Bio, Yimufeng Bio, Jinlan Gene, Huaxia Yuan, Baiji Bio, Xinhe Bio, and others—submitting clinical trial applications for over 20 novel CGT drugs. Adding these to the more than 70 applications filed in 2022, China has now seen over 100 novel CGT drugs enter the registration‑clinical phase over the past 14 months. This frenetic activity stands in stark contrast to the cooling trend emerging in European and U.S. markets, prompting the question: Is there a bubble in China’s CGT industry?
Defining a bubble is no easy task, but clarifying the following questions may help us make a better judgment: 1. How much more capital can be invested? 2. How many technologies will be successfully commercialized? 3. What is the success rate of commercialization? 4. Can profitability be achieved?
First, how much more capital can be invested?
I don’t know, but one thing is certain: they’re rich. Here’s a brief rundown of a few news stories from 2023:
February: Yuanshi Bio completed a US$45 million Series B1 financing round; Renjing Bio closed a nearly RMB 100 million Pre-A+ round; JiaChen Xihai secured two rounds of financing totaling close to US$100 million; Bozhi Yanxin raised another round of funding in the hundreds of millions; Heluo Xintu closed an Angel+ round worth tens of millions. March: Enze Kangtai completed a tens-of-millions RMB A++ round; Xingyao Kunze successfully closed a Pre-A round exceeding RMB 100 million. Although much of this capital has been directed toward CXO services or used for facility construction and equipment procurement, it has at least been invested in new drug development.
Second, how much technology has been commercialized?
We’re not sure, but one thing is certain: the likelihood is extremely low. To summarize briefly a few common practices—and their outcomes—among China’s academic leaders when translating research into commercial applications: after founding a company, they typically assume the role of majority shareholder; even when they hire a professional CEO, they insist on making key business decisions themselves, which, under normal circumstances, leads to a preponderance of poor decisions; they fill numerous positions in the company with their own former students, who, lacking formal training in drug development, either operate in a haphazard manner or are driven by personal interests; they are eager to publish high-impact papers but pay insufficient attention to robust clinical-development plans; and, for the same therapeutic indication, they often let scientific curiosity dictate the approach, pursuing multiple technologies and research directions simultaneously—resulting in the wasteful dispersion of limited resources. Isn’t the most efficient way to develop drugs precisely to apply a single technology across different indications?
Third, what is the success rate of commercialization?
The success rate is relatively high: compared with small-molecule drugs, CGT therapies—driven by a large pipeline of rare-disease products and their inherent personalized nature—significantly reduce both the workload and the duration of clinical trials. Estimates suggest that the success rate for small-molecule programs is about 1 in 24; however, based on publicly available regulatory data, roughly 1 in 10 CGT projects ultimately advance to late-stage clinical development and commercialization. Of course, from a purely physical standpoint of human progress, such a high success rate inevitably translates into only moderate returns, making the question of whether these therapies can be profitable relatively straightforward to answer.
Fourth, can it make money?
Based on the few CGT products already on the market, achieving meaningful profitability remains a distant prospect. Among FDA-approved CGT therapies, only four companies—Novartis (Kymriah/Zolgensma), BMS (Abecma/Breyanzi), Gilead (Tecartus/Yescarta), and Johnson & Johnson (Carvykti)—have annual sales exceeding $100 million. Together, these four products generated roughly $4 billion in 2022, a total that would barely place them within the top 15 on the single-product antibody sales ranking—less than 20% of the sales of the “blockbuster” drug Humira. The profit outlook for companies like WuXi AppTec’s Jiantong is even more concerning: given the inherently limited patient population for personalized CGT therapies, expanding indications and demonstrating superior efficacy may be the only way to steer these products toward sustainable profitability. At the end of this article, we provide the capital expenditures for the commercial manufacturing facilities of these major companies; based solely on current profit performance, it would take approximately 20 years after a CGT product launches to recoup all initial investment and achieve full profitability.
Even the most irrational markets are far more level-headed than investors and scientists. After a wave of industry hype, only the products that ultimately win market acceptance will endure. It is our sincere hope that China’s market will see CGT therapies achieve success by leveraging their therapeutic advantages.
Company Production Base | Product | Investment amount |
Novartis Swiss Production Site | Kymriah | US$91 million |
Novartis New Jersey Manufacturing Facility | Kymriah | US$43 million (acquired from Dendreon) |
Kite Maryland Production Base | Yescarta | US$92 million (US$7.5 million in initial investment, US$85 million in follow-on funding) |
Legend/Johnson & Johnson U.S. New Jersey Manufacturing Facility | Carvykti | US$500 million |
Juno/BMS Seattle Production Base in the United States | Breyanzi | US$232 million |
AveXis/Novartis U.S. North Carolina Manufacturing Facility | Zolgensma | US$115 million |
WuXi AppTec Juno Suzhou Manufacturing Base | Relakirecel Injection | US$30 million |
Spark’s Philadelphia Production Base in the United States | Luxturna | US$575 million |
Koji Pharmaceutical’s North Carolina Production Base in the United States | US$157 million | |
Iovance’s Philadelphia Manufacturing Facility in the United States | Lifileucel | US$125 million |
Bluebird U.S. North Carolina Production Base | Sold for US$110 million to National Resilience | |
(Reposted from E-Pharmacy Barometer )
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