Recently, Chinese innovative drug companies have been releasing their semi-annual reports. Although the stock market remains sluggish, a number of these companies have delivered better-than-expected results. Some are on the brink of breaking even, while others are moving toward sustained profitability. Each of these companies has found its own unique path to success, boosting confidence in the industry's ability to expand globally and shift towards original innovation. In the next decade, going global will serve as a "guiding light," while innovation will be the cornerstone for enduring success through market cycles.

BeiGene: Leading the Way from R&D to Global Expansion, Just a Step Away from Success

Due to the high barriers, lengthy processes, and significant costs associated with localization, few new Chinese drugs are able to directly enter the global market. BeiGene stands out as a prime example, having successfully localized its products for global markets and developed competitive product brands. It has also excelled in localizing its R&D, production, and sales operations. Following the U.S.FDA approval of its cancer drug Brukinsa (zanubrutinib), the drug has been approved in 70 markets globally. To support this, the company has built an international commercialization team of over 3,700 people, with more than 500 based in North America and Europe. Additionally, through partnerships and distributors, BeiGene has expanded its commercial capabilities to the Asia-Pacific, Latin America, and Middle East regions.

BeiGene, a company that has led the way in the industry, reported revenues of $1.681 billion for the first half of 2024, a 61% year-on-year increase. Product revenues reached $1.668 billion, up 73% year-on-year, while net losses attributable to the parent company narrowed significantly to 2.877 billion yuan, a 44.87% reduction year-on-year. According to predictions, the company is expected to break even in the fourth quarter of 2024 or the first quarter of 2025, putting it just a step away from financial success.

BeiGene's R&D pipeline Source BeiGene's official website

BeiGene's sales growth is primarily driven by two key products: the BTK inhibitor Brukinsa, which targets hematological diseases, and the PD-1 inhibitor tislelizumab. Revenue has steadily increased as the indications for these drugs have expanded. For example, Brukinsa received approval for treating follicular lymphoma (FL) in the U.S. and Europe during the first half of the year.

In the second quarter of 2024, product revenue reached $921 million, a 66.3% year-on-year increase. Brukinsa generated $637 million, reflecting a 107% year-on-year increase and a 30% quarter-on-quarter increase. This growth was largely driven by advancements in chronic lymphocytic leukemia (CLL) treatment, with the U.S. market contributing the most significant and fastest-growing revenue (reaching $479 million, up 114% year-on-year and 36% quarter-on-quarter). In Europe, sales amounted to $81 million, marking a 209% year-on-year increase, showing rapid market penetration. Meanwhile, tislelizumab continued its strong performance in China, generating $158 million in revenue (a 6% year-on-year increase and a 9% quarter-on-quarter increase).

Currently, Brukinsa accounts for over two-thirds of BeiGene's total revenue. With the approval of the FL indication, BeiGene is poised to start a second growth phase, while tislelizumab is also being progressively launched in Europe for various indications, marking key milestones in market expansion.

Notably, Brukinsa is priced at $15,000 per bottle (120 capsules) in the U.S., which is ten times its price in China, with European prices also reaching €7,000-8,000. Given the significantly higher incidence rates of its associated conditions in Europe and the U.S. compared to the Asia-Pacific, Brukinsa is naturally positioned as a blockbuster Chinese drug in Western markets. The high overseas pricing continues to drive revenue growth, contributing to the high expectations for the company’s financial breakeven.

BeiGene's journey from R&D to fully autonomous global commercialization, though the most challenging path for a new drug to succeed, also promises the highest rewards. China’s innovative drug industry needs more companies like BeiGene.

Zai Lab: A Licensing Powerhouse Entering a Critical Phase for Breaking Even, Validating the Potential of Original Innovation in China

In the first half of 2024, Zai Lab's revenue grew by 45% year-on-year to $100.1 million, with total losses narrowing by 21% to $133.7 million. Among Zai Lab's product pipeline, the PARP inhibitor Zejula has been a standout, generating over $168.8 million in revenue in 2023. However, with competing products entering the market, its revenue growth has slowed. Zai Lab must find a new growth trajectory, but fortunately, the company has a promising first-in-class drug, Zorway, an FcRn antagonist for treating generalized myasthenia gravis (gMG).

Zorway was approved for sale in China in late June 2023 and officially launched in September 2023. By the second quarter of this year, it had already achieved $23.2 million in sales, half of Zejula's revenue, demonstrating strong potential. As sales of Zorway continue to grow, Zai Lab's losses are expected to decrease significantly.

In the first half of the year, Zai Lab secured approval for three new pipelines in China: Qiluya, Ocera, and the expanded indication for Zorway. All of these products were obtained through licensing deals. Over the next 12 months, the company plans to submit four additional pipelines for approval. The success of these newly launched or soon-to-be-launched products will be crucial for Zai Lab's ability to break even, with 2025 being a pivotal year for achieving profitability.

Zai Lab's 2022 financial report discloses license in Information source: Jinduan Research Institute

Zai Lab is known as a "license-in" powerhouse, with most of its licensed products being the first of their kind globally or innovative therapies. Industry media have noted that if this model proves successful, it will send a clear signal to the market: as long as a company's pipeline has clinical value, it can achieve commercial success even with rights limited to the Chinese market. This could help China's innovative drug sector recognize the value of original innovation, rather than being stuck in the cycle of "me-too" competition and imitation.

Hutchmed: Riding the Wave with Big Pharma Partners, Reaping Rewards from Licensing Out

Hutchmed has strategically partnered with three pharmaceutical giants—Eli Lilly, AstraZeneca, and Takeda—by licensing out its core products, making it the only domestic company to collaborate with such major players for drug distribution.

In the first half of 2024, Hutchmed reported total revenues of $305.7 million and a net profit of $25.8 million. This round of profitability is different from the first; while the first was primarily due to one-time upfront payments, the second has been driven by sustainable income from sales royalties. Hutchmed’s effective cost control measures, including bringing administrative expenses to their lowest level in nearly three years and keeping sales expenses steady, have led analysts to believe that the company is on track to achieve sustainable profitability.

Among Hutchmed's key marketed drugs, fruquintinib, which has already entered the global market, has contributed the majority of revenue. Having received U.S. approval only in November 2023, fruquintinib achieved sales of $130 million in the first half of this year, outpacing the initial sales speed of BeiGene’s Brukinsa, Legend’s CAR-T therapy, and Junshi Biosciences’ toripalimab. Industry analysts suggest that Takeda, facing pipeline cuts and upcoming patent expirations on key drugs, has been vigorously promoting Hutchmed's product. This success is also attributed to fruquintinib's strong efficacy, particularly in the treatment of later-stage colorectal cancer, where it significantly outperforms the mainstream drug regorafenib by Bayer.

In addition, Hutchmed has licensed the Chinese distribution rights for fruquintinib to Eli Lilly, achieving $61 million in sales in the first half of the year. While this is less than half of the revenue generated by Takeda in the U.S., the difference in drug pricing between China and the U.S. is significant; one box sold by Takeda is equivalent to 24 boxes sold by Eli Lilly in China, indicating decent market performance.

Currently, Hutchmed’s other drugs also generate revenue through business development (BD) deals and royalties. With its innovative pipeline approaching maturity, the company’s sustained profitability is promising:

1. Fruquintinib’s overseas sales are expected to continue growing, with a marketing application submitted in Japan in September 2023, and approval anticipated in the second half of 2024.
2. Fruquintinib’s domestic approval for second-line gastric cancer was accepted by the NMPA in April 2023, with approval expected in the second half of 2024, providing a new growth driver.
3. Savolitinib (c-MET inhibitor), with global rights licensed to AstraZeneca, is expected to submit a U.S. FDA marketing application by the end of 2024 for second-line MET-amplified EGFR-TKI-resistant NSCLC, with a domestic submission expected by the end of 2025.
4. Sovleplenib (SYK inhibitor), targeting second-line ITP, had its NDA accepted in China in January 2024 and is expected to be approved this year; it is also in a small sample Phase I clinical trial overseas, showing potential for global expansion.
5. Surufatinib is progressing in a Phase II/III registration trial for first-line pancreatic cancer, with the first dose administered in May 2024.
6. Tazemetostat received NDA acceptance in China for FL (follicular lymphoma) in July 2024.

While Hutchmed's strategy of "riding the wave" by partnering with major global pharmaceutical companies may seem like an easy route to success, the actual royalties and sales share might not be very high—an inevitable trade-off for leveraging others' resources at this stage. Licensing out has become a crucial financing strategy for new drug development.

Conclusion

Breaking even is the first crucial step for innovative drugs to gain a foothold. Numerous factors influence this milestone, beyond just innovation; a company’s ability to operate commercially is also put to the test. This includes tailoring drug branding strategies to specific markets, maximizing the return on R&D investments, optimizing channel operations, and controlling costs effectively. Even when "riding the wave" with global partners, companies must understand the rules of engagement and carefully plan collaborations to achieve both short-term gains and long-term mutual benefits.

Innovative drug companies can strategically choose the best path to market based on their unique circumstances. For instance, instead of following the mainstream path of transforming into a biopharma company through the commercialization of blockbuster drugs, Harbour BioMed has opted to transition into a hybrid CXO (Contract Research Organization) and biotech company. By leveraging bulk business development (BD) deals to advance its own R&D pipeline, Harbour BioMed aims to achieve profitability and self-sustainability. Although this approach is less common, as long as it bears fruit and keeps the company in the game, the opportunity to make further strategic choices will always remain open for innovative drug companies.