By Marie Powers, Staff Writer

May 19, 2014

Although innovation is the topic of muchconversation in China’s biopharma industry, Western companies are likely toobserve that the notion of innovative drug development in China is more hypethan reality. However, participants at the Chinabio Partnering Forum, held inSuzhou earlier this month, offered compelling evidence that Chinese biotechsare, indeed, transforming cutting-edge discoveries into drug pipelines, withpartnering opportunities very much welcomed.

No one disputes that the opportunities fordrugmakers in China are enormous. Characterizing the country as a BRIC nation,along with Brazil, Russia and India, is a misnomer at this point, according toRay Stevens, co-founder of Ruiyi Inc. and professor in the departments ofmolecular biology and chemistry at the Scripps Research Institute. Stevenscontended that China “is ahead of every other BRIC national by 10 years.” That assessment isn’t far off. A recent Thomson Reuters whitepaper, “Overcoming Clinical Challenges in BRICMarkets,” citing Feb. 18 data from CortellisClinical Trials Intelligence, indicated that more than 4,200 clinical trialswere started in China over the past five years, compared to approximately 1,200in Brazil, 2,600 in Russia and 2,300 in India over the same period. In fact,China is the only BRIC nation seeing an increase in the number of clinicaltrials initiated each year, according to the white paper. Forecasts suggestthat China will become the second largest pharmaceutical market in the world in2017, overtaking Japan.

China’s potential is attracting droves ofreturnees – Western educated Chinese nationals – including tens of thousands of scientistswith advanced degrees. Many also have work experience at big pharmas orbiotechs and are eager to apply their knowhow to the Chinese market.

Chinesebiotechs in hunt for partners

Consider Shenogen Pharma Group. After eightyears of effort, the Beijing-based company advanced its lead compound, SNG- 162(lcaritin), into a phase II study in China. Shenogen was co-founded by two labmates: Kun Meng, chairman and CEO, who completed his postdoctoral training atHarvard University and the Washington University School of Medicine, andCharlie Wang, chief science officer, who completed postdoctoral training at PrincetonUniversity and served as an associate professor at Harvard Medical School. Wangalso is a professor of pathology at Creighton University.

Jun Bao, the company’s senior vice president, chief businessofficer and acting chief financial officer, holds a PhD from the University ofKansas. Bao’s resume includes tenureat Glaxosmithkline plc in China and at U.S. firms Onyx Pharmaceuticals Inc.,Icos Corp. – acquired in 2006 byCialis (tadalafil) joint venture partner Eli Lilly and Co. – and Cell Therapeutics Inc. (See BioWorld Today, Oct. 18, 2006.)

Shenogen is targeting first-in-class drugdevelopment. Its SNG-162 is a naturally derived traditional Chinese medicineknown as yingyang huo, a perennial grass whose name translates as “horny goat weed.” The small molecule, which targets theestrogen receptor ER-alpha 36, is in a phase II study in China, withapplications in liver and breast cancer as well as leukemia. Shenogen wasstarted with just $100,000 in seed money, according to Bao, and now has 80employees. The company’s business acumen andscientific prowess last year helped Shenogen attract a $20 million series Cfrom a syndicate that included Qiming Venture Partners LLC, of Shanghai, andLegend Capital, of Beijing, an affiliate of tech company Lenovo, along withChina Investment Wealth Venture Fund and Shenzhen Venture, a venture arm of themunicipal government. Lead investors from Shenogen’s series B, including IDG Venture andLapham Group Inc., also joined. (See BioWorld Asia, Nov. 6, 2013.)

Bao attended Chinabio seeking partners. “We’d like to find one or two partners for themarket outside China,” he told BioWorld Insight, “and in China we are also open forcollaborations.” The fact that SNG-162has shown activity in solid tumors as well as leukemia is intriguing, Bao said,“and we’ve observed in the clinic, not just inanimal studies, that every time we saw activity, we saw it first atmetastasized sites. We’re thinking that, if youcombine our drug with some chemotherapy, it can wipe out metastasized sites aswell as the primary tumor site, which would be a nice combination. But we canonly do one or two trials at a time with our resources. A partner can domultiple trials.”

‘The quality of the science is outstanding’

Suzhou Alphamab Co. Ltd. is another modelof innovative drug discovery. Founded in 2008, the company has 90 employees,including more than 65 scientists in its R&D operation. Alphamab isadvancing biosimilars as its bread and butter but also building a pipeline ofnovel oncology drugs. For example, KN-014 is a genetically engineered therapeuticprotein that inhibits various isotopes of VEGF, PIGF and PDGF, with the goal oftreating lung, bladder, colorectal and other metastatic cancers, as well as wetage-related macular degeneration. KN-010 is a bispecific antibody that bindsdifferent epitopes on cancer cells to prohibit cancer cell growth andproliferation through a variety of mechanisms. Designed for improved efficacyagainst tumors while preventing resistance, the drug is being developed totreat breast cancer and other solid tumors.

Founded last year, Mabspace Biosciences Co. also is focusing on antibodiesfor therapeutic and diagnostic applications. Using immune tolerance breakingtechnology, the company has identified three therapeutic antibodies, MSB-001,MSB-002 and MSB-003, and one diagnostic application, MSB-004, that it isseeking to partner. MSB-001 is designed as a best-in-class antibody thattargets the tumor microenvironment for treating gastric and lung cancers.MSB-002 is a first-in-class antibody with the potential to treat tissuefibrosis and cancer, and MSB-003 is an antibody-targeted immunotherapy for lungcancer, renal cancer and melanoma. 

And Ruiyi has a bi-coastal strategy in its effort to develop novel drugsfor the Chinese market. The company is headquartered in La Jolla, Calif., buthas its discovery efforts and research facility in the Zhangjiang Hi-Tech Parkin Shanghai. Earlier this year, Ruiyi netted a $15 million series B round fromits existing investors, which include 5AM Ventures, Versant Ventures, Apposite Capital,SR One, Merck Serono Ventures and Aravis SA. (See BioWorld Asia, April 2, 2014.)

Ruiyi is using its intermembranous Conformation Antigen Presenting System,or iCAPS, technology to leverage therapeutic specificity across a set oftargets from the large G proteincoupled receptor (GPCR) family. Although nearlyone-third of approved drugs modulate GPCRs, traditional drug discovery methodshave been stymied in exploring many of the selective targeting GPCRs – especially those with small extracellulardomains. Ruiyi’s iCAPs changed thatequation, enabling the purified, isolated, conformationally correctpresentation of functional GPCRs, optimized to identify selective antibodyinhibitors or activators with greater specificity, resulting in the potential developmentof more effective antibodies and other biologics.

The company’s lead candidate, RYI-008, is an anti-IL-6 monoclonal antibody with potential uses in autoimmunediseases and cancer, with rheumatoid arthritis as a proposed initialindication. (See BioWorld Today, May 17, 2013.)

Ruiyi’s Stevens was lured toChina by the energy and entrepreneurship in the nation’s science community. After teachingstudents from China for more than a decade and hearing the hype about theirhome country, he wanted to answer three questions: Is the science real? Is ithigh quality? And how would it lead to innovative drug development? “I’ve been coming to China for 20 years, and Iused to see a lot of empty buildings,” Stevens told BioWorld Insight. After three years on theground in Shanghai, he’s convinced the science “is very real.” His students at the iHuman Institute atShanghaiTech University – a research universitymodeled after the Massachusetts Institute of Technology and developed from theground up by the Shanghai Municipal Government and Chinese Academy of Sciences – already are publishing papers in Nature and Science.

“The quality of thescience is outstanding,” Stevens said, addingthat the opportunity to conduct drug development is better in China than almostanywhere else in the world, including the U.S. “Putting Ruiyi in China was exactly theright thing to do,” he said.

‘youhave to be fully invested’

That’s not to say innovativedrug development in China is a cakewalk. Locals cite challenges with importingcells, gaining access to radioactivity and interfacing with the China Food andDrug Administration (CFDA), along with mundane tasks such as making bankdeposits, which can require a half-day of standing in line. The perception ofdrug development also is different in China, where biosimilars remain thestandard and domestic investors view phase II as early stage.

For that reason, Ruiyi’s lead compound useswell-established biology that is sufficiently innovative to help the CFDA gainexperience working with the company’s technology. “Once we have that one going, we can followsuit with our GPCR antibodies, which are innovative,” Stevens said. Pursuing innovative drugdiscovery and development in China requires commitment, he added.

“Everything is changingrapidly, so if you want to do drug development here, you can’t do it part-time,” he maintained. “You commit or you don’t. If you care about quality, you have to

be fully invested.”

In some ways, however, China reminds Stevens of California, which was the “wild, wild West” in the early days of biotech. “No one has really hit it big yet in China” in terms of innovative drug development,he said, “but our investors knowthis is where they need to be. We know a breakthrough drug is going to happen.”

Until it does, patience is the key. “Don’t come to China because you think that’s where the money is,” Stevens advised. “Instead, come to China if you have a reallygood business model. There’s double-digit growthpotential and a large population of treatment-naive patients with unmet medicalneeds. But you need long-term thinking, not just one or two years.”