BEIJING – Beigene Ltd. out-licensed its anti-PD-1 monoclonal antibody tislelizumab to Novartis AG in a deal worth up to $2.2 billion, including $650 million up front.

“We believe in science. The science seems to say that all PD-1s are not the same,” Beigene’s CEO John Oyler said Tuesday during a press conference in Beijing, addressing concerns that too many PD-1s are being developed. He added that tislelizumab has been “designed with great epitope binding.”

Novartis gains rights to develop and commercialize tislelizumab in the U.S., Canada, Mexico, the EU, the U.K., Norway, Switzerland, Iceland, Liechtenstein, Russia and Japan. Beigene retains the rights for China and other countries. Beigene (NASDAQ: BGNE; HKEX: 06160) is eligible for up to $1.3 billion in regulatory milestone payments and $250 million in sales milestones as well as royalties.

Tislelizumab is designed to minimize binding to FcyR on macrophages. The drug is structurally differentiated by its unique binding epitopes and binding kinetics. It has a different binding orientation to PD-1, which leads to higher affinity to PD-1 than Keytruda (pembrolizumab, Merck & Co. Inc.) and Opdivo (nivolumab, Bristol Myers Squibb Co.), with about 100-fold and 50-fold slower than that of Keytruda and Opdivo, respectively.

John Oyler, CEO, Beigene

Oyler said Novartis is interested in tislelizumab because it is seen as one of the most promising PD-1 drugs, and the clinical data available have demonstrated its performance in the clinic. Tislelizumab was previously partnered with Celgene Corp., but the deal was terminated after Bristol Myers Squibb acquired Celgene.

SBV Leerink analyst Andrew Berens praised the deal and Beigene. “We see this deal as further affirmation of the evolving Chinese biopharma industry, with Novartis validating Beigene's internally developed PD-1 on the global stage. It is this increasing relevance of the Chinese industry and Beigene's positioning in this industry that makes the company one of our top picks for 2021.”

Tislelizumab is already approved in China for two indications, classical Hodgkin lymphoma after at least two prior therapies and locally advanced or metastatic urothelial carcinoma with PD-L1 high expression. It is also awaiting approval for three more indications: first-line treatment of advanced squamous non-small-cell lung cancer (NSCLC) in combination with chemotherapy, first-line treatment of advanced non-squamous NSCLC in combination with chemotherapy and previously treated unresectable hepatocellular carcinoma.

The company expects to file for an NDA in the U.S. this year but has yet to reveal detailed plans.

Shoring up margins

For Beigene, the mega deal with Novartis further highlights its global presence and attempts to seize overseas market share. Oyler said the deal will help Beigene build a commercial team across North America to help commercialize tislelizumab.

Chinese biopharmaceutical companies are looking for ways to boost thin margins on PD-1 drugs, as China’s national drug reimbursement program has been actively pushing prices down for these drugs. One avenue has been to out-license PD-1 products to foreign companies for sales abroad.

Beigene is the third Chinese firm to out-license its PD-1 drug to a foreign player. In August 2020, Innovent Biologics Inc. out-licensed ex-China rights of Tyvyt (sintilimab) to Eli Lilly and Co. in a $1.03 billion deal. In May 2020, Jiangsu Hengrui Medicine Co. Ltd. out-licensed the South Korea rights of its camrelizumab to Crystalgenomics Inc. in an $87.75 million deal.

Combo therapy in focus

The use of PD-1 in combination therapies is emerging as a growing trend. Following the deal, both Beigene and Novartis are free to conduct clinical trials globally to explore combinations of tislelizumab with other cancer treatments.

“A lot of the value for PD-1 will be in combinations and having the strength of our portfolio from research and development and the strength of [Novartis’s] increases the opportunities to help patients with more indications,” Oyler added.

Novartis said in a statement that both companies "have identified multiple tislelizumab plus Novartis therapy combination clinical trial opportunities in solid tumors.”

Replacing spartalizumab?

The deal has raised questions about whether tislelizumab will replace Novartis’ internally-developed PD-1 candidate spartalizumab, after the company reported disappointing data last August.

In the phase III COMBI-i trial, spartalizumab failed to meet the primary endpoint of investigator-assessed progression-free survival. The study aimed to evaluate spartalizumab in combination with Tafinlar (dabrafenib) and Mekinist (trametinib) compared to Tafinlar plus Mekinist alone for treating advanced BRAF-mutated melanoma.

Novartis has plans to combine spartalizumab with a slew of agents, such as the little known DKY-709 in NSCLC or melanoma, TLR7 agonist LHC-165 in advanced cancer, TGFB1 inhibitor NIS-793 in combination with gemcitabine/nab-paclitaxel in first-line metastatic pancreatic ductal adenocarcinoma, IL-15 agonist NIZ-985 in checkpoint inhibitor relapsed advanced solid tumors and lymphoma, as well as porcupine inhibitor WNT-974 in advanced cancer.

For now, it remains to be seen how Novartis will make use of Beigene’s tislelizumab in combination therapies.

“The reason why Novartis in-licensed our PD-1 is to speed up exploring combination clinical trial opportunities,” Lai Wang, Beigene’s head of global research, clinical operations and biometrics and APAC clinical development, said during the press conference.

Oyler noted that spartalizumab is active in two very niche indications – thyroid and pancreatic cancers – areas that no other PD-1s have been in or have a high probability of working.

He was concerned that it could be unlikely to get approvals for these indications eventually. “I think they understand a lot about their PD-1,” he said. “From that perspective, certainly in the big indications where PD-1 matters, they're interested in our PD-1.”