China biotech moving to first, best in class

High-speed clinical research pathway for cell therapies creates competitive advantage, Panacea’s Huang says 

The increasing focus of China’s biotechs on best-in-class molecules is creating a magnet for cross-border deals despite the industry’s slow rebound from the global biotech downturn, Panacea Venture’s James Huang told BioCentury.

Western companies struck 7x more deals to access Chinese tech last year than in 2013 as China’s life sciences industry has grown from generics-heavy to innovation-focused. 

China’s biotechs are rapidly evolving from being “very good” at developing “me too” therapies to developing molecules that are best in class, said Huang, who is founding managing partner of Panacea and a veteran of KPCB China and Vivo Ventures. He sees this trend extending to first in class.

“What people need to watch out for in the coming 10 to 20 years is within China they will come up with first-in-class molecules,” he said. “We are already starting to see that.”

Large pharmaceutical companies have already taken notice, he said, and predicted that next year could have “10 times or more” deals than a decade ago. 

“There’s no stopping this train,” Huang said. “It’s moving faster and faster. Either people recognize it and do something about it, or they will be left behind.”

He cited gene and cell therapy as areas of particular interest in cross-border deals, and noted that he sees China’s biotechs holding a particular advantage in cell therapies, as companies can test their products in patients faster than in Western countries via investigator-sponsored trials. 

“One thing we have noticed over the years is that animal models are not very good predictors of efficacy,” he said. “As a result, a lot of the companies are skipping these animal studies and going straight into patients within China.”

The investigator-initiated trial pathway in China allows companies to rapidly collect data from small clinical studies that can be used to inform decisions about Phase I trial designs.

For gene therapies, companies in China are able to develop products at a “fraction of the cost” of similar therapies in the U.S., he said. 

Huang, whose firm invests in early stage private companies as well public companies in Asia, Europe and the U.S., stressed the importance of building companies globally to take advantage of the best talent, research capabilities and clinical trial sites wherever it may be and thereby “achieve maximum efficiency.” 

“We really believe that research and development has no boundary,” Huang said.

Developing a global infrastructure is particularly important for companies based in mainland China, Hong Kong and Taiwan so that they can tap the global capital markets as they scale up, he added. 

Huang also discussed the state of the global capital markets; the impact of geopolitical tensions on biopharma, including the Biden administration’s Aug. 9 executive order on outbound investments; and his advice for Panacea’s China-based portfolio companies as they navigate their first bear market.