pLOG

2024-04-17

The dream of prospering in China through in-licensing

Founded in 2020 by the U.S. investment firm Perceptive Advisors, the startup company LianBio relies on in-licensing investigational medicines from the United States or Europe and developing and commercializing them in China. In its IPO filing, the company stated, "Our vision is to serve as the gateway for Western biopharmaceutical companies to enter China."

IPO: Initial Public Offering

What is In-Licensing?

In-licensing refers to the purchase of rights to develop, commercialize, or market a drug or product from another company. Companies pay an upfront fee to the licensor and negotiate milestone payments and future royalty payments to gain access to the subsequent development, clinical trials, and commercialization of the product in specific countries or regions.

Money Flowing into China From 2019 to 2021, several companies were attracted by the massive market, pouring hundreds of millions of dollars into licensing deals in China. However, the market quickly collapsed due to pricing pressure, intense competition, and global funding shortages.

A Rising Star Falls LianBio had raised over $700 million from investors such as RA Capital and Venrock. By 2023, LianBio had undergone strategic reviews, sold back rights to two candidate drugs, rejected an acquisition offer, and witnessed departures from its management team. Within months, it announced it would wind down operations and return funds to investors.

The Chinese market remains the world's second-largest pharmaceutical market, with significant demand for innovative drugs, but companies indeed need to consider how to enter the market and succeed. The idea of leveraging overseas resources and Chinese R&D expertise to accelerate the launch of advanced drugs in China is not new. In-licensing transactions of this kind began to rise in 2018, peaked in 2019, and appeared to rebound after the nadir of the COVID-19 pandemic.

NRDL: National Reimbursement Drug List

What's Next?

 Analysts believe that selectively choosing drugs with large markets or few competitors, this business model can still work. The pricing of drugs on the NRDL also shows early signs of improvement. "The issue is not with the basic business model, but with raising funds," as their primary task lies in late-stage development and commercialization, which requires substantial funding.

More Prudent Benefit Assessment In addition, licensors today will pay more attention to the quality of patent ownership. Companies typically seek products with longer patent protection to avoid having profits squeezed by generic drugs under China's quantity-based procurement system.

Reference: https://endpts.com/startups-raised-millions-to-in....../