HONG KONG – Encouraged by new policies to boost drug development, biopharmaceutical companies in China are increasingly investing in innovative drugs overseas that are at late R&D stages and bringing the candidates to the domestic market for further clinical studies.

Case in point is Beijing-based Apollobio Corp., which recently said it will acquire exclusive rights to develop and commercialize in Greater China markets Inovio Pharmaceuticals Inc.'s VGX-3100, a DNA immunotherapy product designed to treat precancers caused by human papillomavirus (HPV). VGX-3100 is the first therapeutic vaccine being developed for HPV precancers, according to Inovio.

"This agreement opens up Greater China for our lead program and first phase III product," said Joseph Kim, president and CEO of Inovio. "We believe that Apollobio is a strong partner that brings significant capabilities and expertise related to product development, the Chinese regulatory landscape and the health care market in China."

The aggregate investment is expected to be completed in the first half of 2017.

The debate as to whether that strategy of bringing in late-stage candidates is more effective than developing drugs from scratch is still raging, but Apollobio's strategy may be an efficient way to meet rapidly growing demand for new and innovative products in China's pharmaceutical space.

"This collaboration, license and equity investment marks our determination to introduce late-stage, new innovative drugs to address severely unmet medical needs within the Greater China region," said Weiping Yang, CEO of Apollobio.

Many patients in China still lack access to new treatments, while patients with the same diseases in some other countries have ready access to therapies that lead to speedy recovery. The lag between the release of new drugs in the west and their introduction in China can range from just a couple of years to as long as a decade.

For example, Glaxosmithkline plc's HPV vaccine was finally approved for marketing in mainland China in July of last year after a long wait. Before that, Those from China had to fly to Hong Kong in order to get vaccinated. The vaccine, meanwhile, has been widely used in the U.S. for about 10 years.

"Some major problems in the industry in China have not been solved yet. One is that although we have many drug firms, most are producing generics; we are still lagging behind in developing original drugs," said Qiu Sinian, chairman of Apollobio, during a recent seminar.

To deal with that challenge, Apollobio started to invest in high-quality foreign drugs at late stages of development, bringing them to the China market.

The company raised ¥370 million (US$53.2 million) in 2016 to further purchase drugs that are in phase III development and are expected to receive approval from the U.S. FDA. The company is targeting liver diseases, cardiovascular diseases and cancers.

TARGETING HPV

VGX-3100 is designed to work by activating certain functional T cells, which help in clearing the HPV infection and reversing the development of precancerous cervical dysplasia.

Currently, the primary choice for high-grade cervical dysplasia is usually surgical excision of the precancerous lesion. However, surgical excision does not treat the underlying HPV infection that causes cervical dysplasia. There is a 10 percent to 16 percent risk of disease recurrence, according to Inovio, and women with a persistent HPV infection after surgical excision remain at high risk for cervical cancer.

Cervical cancer kills more than 250,000 women globally, and statistics released by the World Health Organization show that an additional new case of cervical cancer is detected every minute on average; a woman dies of cervical cancer every two minutes.

In China, according to guidance issued by the National Health and Family Planning Commission in 2013, cervical cancer is the second most common cancer in women ages 15 to 44, with an estimated 130,000 new cases every year. China accounts for more than 28 percent of the world's new cervical cancer cases every year.

Under the deal, San Diego-based Inovio will first receive $15 million, including an initial $3 million signing fee and a $12 million milestone fee when the FDA lifts the existing VGX-3100 phase III pre-initiation clinical hold, which was issued in October 2016. The U.S. drug watchdog rejected the launch of the proposed phase III VGX-3100 trial, as it required additional data. Apollobio will further fund all clinical development costs and will pay Inovio up to $20 million for regulatory milestones in the U.S., China and Korea, and double-digit royalties on net sales of the product. According to Inovio, the biotech company expected that the start of the phase III program will be pushed back to the first half of 2017.

Separately, Apollobio will make an equity investment of up to $35 million in Inovio as well.