SHANGHAI – With abundant venture capital and favorable policies, Chinese biotech companies are actively turning themselves from generic makers into innovation-driven players, but the market is getting crowded by too many companies focusing on the same area and even the same targets, a reality that is leading to a lack of differentiation in biotech innovation.

In China, 67% of biotech companies focus on oncology, and much of that focus is on PD-1/PD-L1 receptors that are considered the most promising targets. In China, there are 45 companies working on PD-1/PD-L1 antibodies and more than 100 clinical trials on those agents as of March this year, according to Frank Jiang, CEO of Cstone Pharmaceuticals Ltd.

Investors are also drawn by the profitability of PD-1/PD-L1 antibodies, which keeps them pouring capital into that area and supporting many similar projects.

That has raised concerns among the panelists at the Chinatrials 12 Summit. It has become necessary to address how Chinese biotech companies can differentiate from each other in the domestic market, if everyone's pipeline includes at least one PD-1 drug candidate.

But optimistic biotech executives believe they can make their PD-1 products different from others.

"The key to standing out is to find a combination therapy with PD-1," said Lianshan Zhang, senior vice president and global R&D president at Jiangsu Hengrui Medicine Co. Ltd., adding that PD-1 can be a backbone therapy and companies should find a niche area to focus on.

Hengrui is considered an R&D giant in China's oncology space. Its PD-1 candidate, camrelizumab, was approved as a third-line treatment for recurrent or refractory classical Hodgkin lymphoma in China in June. The drugmaker is collaborating with LSK Biopharma to co-develop a combination therapy of camrelizumab and VEGFR-2 inhibitor rivoceranib for patients with advanced hepatocellular carcinoma. Hengrui is also developing PD-L1 antibody SHR-1316 and has a bispecific antibody, SHR-1701, that targets PD-L1 and TGFbetaR2.

Another way is to differentiate the PD-1/PD-L1 agents from their clinical profiles. "We can see whether it can improve efficacy, safety or patient compliance," said David Liu, chief medical officer at 3D Medicines Corp. The company is developing the first subcutaneous injection PD-L1 drug, which it believes will bring greater convenience and cost benefits to patients.

But, at present, there is still a lack of differentiation among all those PD-1/PD-L1 products, said Jing He, an oncologist and site head of pharma development in Shanghai for Roche China. For China, there is no need for that many PD-1/PD-L1 agents.

China's PD-1 market is fierce already with five approved products and Beigene Inc.'s PD-1 agent due to enter the picture by the end of this year.

Having too many similar drug candidates "is not a sustainable economy," either, said market watcher Ling Su, a venture partner at Lilly Asia Ventures. "Sometimes it's even unethical to subject patients to a new class since you already have products on the market."

Instead of trying to differentiate the PD-1/PD-L1 antibodies, it's time to call for a stop. "Some biotech companies need to say no and just realize that they might be too late for this," Su said.

China vs. the rest

The overwhelming enthusiasm for PD-1/PD-L1 antibodies reflects that Chinese biotech companies are at the incremental innovation stage. They start with fast follow-up drugs to build up R&D capabilities, and there is hope that they will gradually expand to first-in-class and best-in-class assets over time.

For anyone that is already thinking about competing in the global biotech innovation landscape, a broader question is how Chinese biotechs can truly innovate differently from their foreign peers and sustain innovation in the long run.

Hengrui's Zhang has an answer. A firm believer in the value of preclinical discovery, he said that "we need to leverage our knowledge in selecting targets and disease areas." He stressed the importance of identifying niche areas to stand out from the crowd, as Chinese drugmakers already have strong capabilities in biologics development.

That is just one approach, though. 3DMED's Liu said he believes innovation comes from many aspects, such as operations. On the clinical trial design front, with the help of statistics design, a well-calculated sample size and quality data can speed up drug development and improve success rates. His company focuses on the integration of biological characteristics, clinical diagnosis and treatment, and drug R&D data.

In order to sustain innovation, besides differentiation, there needs to be a continuous supply of medical talent and capital. One of the major bottlenecks is that many of the venture capitalists in China are still risk-averse and prefer late-stage products.

But that is changing, said Vivo Capital's managing partner, Chen Yu.

With Hong Kong and Shanghai's stock exchanges embracing early stage biotech companies, investors can contribute the funding that is necessary to move forward innovative programs, he said. "We're likely to see investment concentrate more on better companies with great teams and good science."

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