After purchasing two new Chinese drugs, this American pharmaceutical company raised 2.5 billion yuan. | Focus Analysis

In mid-September, an overseas innovative pharmaceutical company, Candid Therapeutics, which publicly announced a fundraising of $370 million, has sparked intense discussions in China. In addition to setting a record for the highest fundraising in the biopharmaceutical industry in 2024, another point that attracts the most attention is that both of its two core products were purchased from the newly established overseas NewCo companies of Chinese pharmaceutical companies, and they are both popular TCE bispecific antibody varieties for autoimmune (hereinafter referred to as "autoimmune") diseases.

The two NewCos are TRC004, jointly established by Genor Biopharma and Two River, etc., and Vignette Bio, incubated by EpimAb Biotherapeutics and Foresite. Among them, Vignette Bio made its public debut less than a week earlier than Candid.

In 2024, product licensing transactions represented by NewCo are the most frequently mentioned words in the Chinese pharmaceutical industry. If it is necessary to mention the difference between it and the traditional outbound licensing, then, NewCo is generally led by financial capital to establish a new company overseas. Chinese pharmaceutical companies will divest their products and license them to it, and obtain certain cash and equity compensation.

The most ideal expectation of the planners for the outcome of NewCo is that when the product development is relatively mature after a few years, it will be acquired by multinational pharmaceutical companies at a high price or be listed on the US stock market.

It is indeed rare to complete the integration of multiple financings, licensing and mergers and acquisitions as quickly as Candid Therapeutics.

Looking back at the beginning and end of this transaction, why did the smart financial capital choose these two NewCos? Is there a problem of unreasonable initial structure design by using a project company to encircle a project company? How to view the current situation of TCE bispecific antibodies going overseas, and how will the related pipeline development proceed after the licensing is completed?

With these questions, we interviewed Dr. Chenbing Wu, the founder of EpimAb Biotherapeutics, one of the participants in this transaction. As the product licensor at the starting point of the transaction, EpimAb Biotherapeutics received a total of $60 million as an upfront payment in the form of cash and equity from its cooperation with Foresite, as well as up to $575 million in milestone payments for later product development and listing.

Chenbing Wu frankly stated that this is a "very satisfactory cooperation for both parties", and it is also the first successful outbound licensing of EpimAb Biotherapeutics, which is a good endorsement for the company's TCE bispecific antibody platform and R & D capabilities. "We will continue to focus on the autoimmune field. Currently, we have also begun to apply for the development of related indications ourselves, hoping that this successful experience can be replicated in subsequent pipeline research."

Until the day the board of directors was held, TS was still being received

The product that EpimAb Biotherapeutics participated in this NewCo transaction is the company's TCE bispecific antibody EMB-06 for the treatment of multiple myeloma, with a target combination of BCMA/CD3.

This is an innovative bioengineered antibody, and its advantage is that it can bind to different antigens on two cells simultaneously. Generally, one end is the CD3 molecule on the surface of T cells, and the other end is a specific antigen of cells related to tumors or autoimmune diseases. Compared with traditional monoclonal antibodies, the design of TCE bispecific antibodies can spatially bring T cells closer to the target cells, thereby activating T cells and achieving a stronger "killing" effect.

At the end of 2023, after EMB-06 first disclosed human trial data and showed "better performance than similar molecules" in terms of effectiveness and safety, EpimAb Biotherapeutics began to look for international cooperation opportunities for it.

Initially, the company's attempts were still mainly in the tumor direction, which it is more proficient in. On the one hand, this is the positioning of EpimAb Biotherapeutics at the beginning of its establishment; on the other hand, TCE bispecific antibodies have shown "blockbuster" potential in the tumor field. Currently, more than 10 TCE bispecific antibody drugs have been listed globally, mainly in the field of hematological tumors, and the expected peak sales of related products have reached $5 billion.

However, as the competition of TCE bispecific antibodies in the tumor track becomes increasingly crowded, and breakthroughs in technical development such as safety, it has become a major trend for domestic and foreign enterprises to shift their attention to the autoimmune field.

The attitude of the buyers may best illustrate the problem. In January of this year, When Chenbing Wu took the tumor data of EMB-06 to the J.P. Morgan Healthcare Conference (JPM) in the United States, the overseas pharmaceutical companies and funds basically asked about the development of autoimmune indications.

In addition to the market prospects, clinical data is the most important factor. "Although our data is in the tumor field, there are many explorations of biomarkers in the research and development process, and the mechanism is interlinked to the autoimmune field, which indirectly verifies the potential of this molecule in the autoimmune field in the future."

It is reported that among the top 10 pharmaceutical companies in the world, two or three have negotiated with EpimAb Biotherapeutics. In addition, At present, enterprises interested in this field also include some "more aggressive Biotechs that shift from tumors to immunology", as well as some VC institutions, including Qiming Venture Capital, which later participated in this NewCo transaction.

"This year, the transaction heat of TCE bispecific antibodies can be clearly felt. Everyone hopes to introduce such products as soon as possible," Chenbing Wu said with a smile: "In overseas cooperation in the autoimmune field, basically others come to us. For the EMB-06 project, from the beginning of the negotiation to the final confirmation, we received several different types of TS. Until the morning of the board of directors' meeting to approve the transaction, we still received one."

The licensor's view on NewCo:

Using external funds to push the product value to a high point earlier

Although the popularity of the NewCo model is constantly rising, there are also some controversies. When implementing the licensing of EMB-06, EpimAb Biotherapeutics had many options. Why did it ultimately adopt this method?

Chenbing Wu explained that this is mainly considered from the perspectives of market competition and the future development of the licensed pipeline. Currently, the industry generally recognizes that the market potential of TCE bispecific antibodies in the autoimmune field is stronger, but "different partners have different data requirements for TCE bispecific antibodies", Large pharmaceutical companies tend to choose molecules with more clinical data for introduction, especially data on the effectiveness of the indications to be developed soon.

Standing at the time node of the first half of this year, the industry's disclosure of TCE bispecific antibody data is mainly focused on the CD19/CD3 target combination. For example, Amgen's Blinatumomab announced that it has shown certain efficacy in the treatment of refractory rheumatoid arthritis. And the research on the BCMA/CD3 target combination that EpimAb Biotherapeutics focuses on has only recently shown early clinical data.

"Relatively speaking, Large pharmaceutical companies trust CD19 more and want to wait a little longer for BCMA molecules. And VC capital has a stronger willingness to take risks and acts quickly, and can have a more in-depth exchange soon." Chenbing Wu mentioned.

From this perspective, for domestic innovative pharmaceutical companies, the significance of doing NewCo is not only to quickly obtain an income, but more importantly to catch up with the trend. Because once the result is established, the market moves very quickly. For example, in August, Toripalimab and Merck & Co. reached a licensing agreement worth a total of $1.3 billion for the CD19/CD3 combination, ranking among the forefront of domestic bispecific antibody molecules going overseas.

On the other hand, from the perspective of the future development of the product, whether one has the ability to do it and the buyer's willingness to develop need to be considered. The requirements for clinical capabilities in tumors and autoimmune diseases are completely different, and a Phase II clinical trial may require the completion of hundreds of cases. Transformation means starting from scratch and requiring a lot of financial support. Considering the current market situation and the company's subsequent pipeline development plan, it may not be a suitable choice.

Doing NewCo can introduce external funds at an earlier stage of product research and development, and seek other cooperation opportunities after quickly "pushing the project to a value-inflated high point".

The story of Candid Therapeutics unfolds from this. It is understood that in the early stage of facilitating the transaction, Foresite Labs, which is both an investor in the NewCo projects of EpimAb Biotherapeutics and Genor Biopharma, played an important role; in the future pipeline promotion, it is mainly the responsibility of the executive team that later joined Candid Therapeutics, and the innovative drug project company previously managed by this team was recently acquired by Bristol-Myers Squibb for $4 billion.

"They looked at about 50 opportunities. When they encountered the TCE bispecific antibody project, they were very interested and believed that this is a breakthrough point in the autoimmune field. This cooperation can be said to be a two-way pursuit."

From the perspective of the licensor, EpimAb Biotherapeutics is happy to see the facilitation of this transaction. "When NewCos are blooming everywhere, in fact, everyone is quickly raising a little money and taking a project, and no company will be very outstanding. Therefore, resource integration will be very attractive to capital. Especially the mechanisms of these two TCE bispecific antibodies do not overlap, and there are certain differences in the mature stages of B cells they target, which will form a good complementary mechanism in the subsequent indication selection and risk management. The financing performance of Candid Therapeutics proves this point, which also helps us obtain the future overseas development milestone payments as soon as possible." Chenbing Wu said.

This time, in response to the question that the outside world is curious about whether there is an unreasonable problem in the initial transaction design by using a project company to encircle a project company, Chenbing Wu also responded to us. He mentioned that this transaction does not have this problem, "The transfer agreement itself and the equity design basically maintain our rights and interests."

At the same time, Chenbing Wu also agrees that not all types of products are suitable for doing NewCo. One of the characteristics of the project company is that it will pursue "tens of times of return", so it attaches great importance to the potential scale of the patient population. At the same time, having early clinical data "will be somewhat helpful. If it is only a project in the early research stage, it may be difficult to see where the value is."

"Bottom-fishing" for new drug assets in China,

The overseas market values "molecules with clear mechanisms"

After completing the fundraising, Candid Therapeutics has publicly stated that the two Chinese TCE bispecific antibody products it acquired both have the "potential to become the best-in-class therapy in the autoimmune field".

In the current situation of difficult fundraising, obtaining a certain income through outbound licensing has basically become a consensus in the domestic biopharmaceutical industry. Only in the bispecific antibody field, in addition to EpimAb Biotherapeutics and Genor Biopharma, this year, several pharmaceutical companies such as Kangnoi, ImmuneOnco, and Toripalimab have achieved BD going overseas, with the highest price reaching $2 billion.

In the current increasingly competitive situation, what types of products are more likely to be favored by multinational pharmaceutical companies or capital?

Chenbing Wu recalled the process of this transaction and mentioned that initially, when the company was looking for cooperation for EMB-06, it was not sure which enterprises would be interested, but during the communication process, it could be felt that the cognition of the molecular mechanism and the clinical design are two relatively important factors.

"The basis for convincing overseas pharmaceutical companies is that the enterprise has a full understanding of how its molecules work, and the verification from molecular design, specific expression, to the final animal model and clinical manifestations should be very clear step by step. But In some cases in China, the enterprise has this data, but they don't know why they got such data."

In addition, overseas pharmaceutical companies have high requirements for the quality of clinical data, and it is necessary to show the differences compared with the same type of products, or the differences in race and indications, which "tests the ability of the clinical department". Taking EMB-06 as an example, one of its advantages is that the safety control is relatively stronger. In addition, more than half of the related clinical enrollments were completed overseas, "The patient combination is more diverse, which will have certain advantages in the overseas deal."

In this process, another issue that has received much attention is whether it is necessary to separately retain the rights and interests in the Chinese region.

From our current communication, we can feel that the attitudes of practitioners towards this are not consistent, but the main starting point is whether the product is the core asset of the enterprise and whether the Chinese market is large enough.

The former is relatively easy to understand. Specifically for the latter, taking the autoimmune field as an example, many indications can be derived, especially in the context of an aging population and a mature innovative payment system, and the subsequent market size is relatively more considerable.

Also considering this point, when EpimAb Biotherapeutics was licensing outbound, it chose to retain the rights and interests of EMB-06 in China. "There are certain ethnic differences in autoimmune diseases. Overseas companies may not necessarily personally conduct all indications suitable for Chinese people. We believe there are opportunities in this; on the other hand, they are interested in the 'China only' opportunities and are willing to cooperate in some cases where only the rights and interests of the Chinese market are involved." Chenbing Wu said.

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