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Barry Cohen
Barry Cohen
Articles (245) 

High-Potential Chinese Biotechs: Hua Medicine, I-MAB and Innovent Biologics

A look at the prospects of 3 emerging biotech companies

In a GuruFocus article on Nov. 17, I took a look at three of the nine public Chinese biotechnology companies that are projected to become major international competitors in the coming years, according to FiercePharma. In this article, let's take a look at the prospects for numbers four through six on the list.

Hua Medicine

Shanghai-based Hua Medicine (HKSE:02552)is somewhat of an outlier on the list since the company is working on drugs for diabetes and central nervous system disorders (unlike the others on the list whose focus is cancer).

Hua is banking heavily on its diabetes drug dorzagliatin, which is aimed at a glucose sensor in the pancreas and liver. The hope is the drug can combat type 2 diabetes by activating defective glucokinase to restore the normal regulation of glucose balance.

If dorzagliatin does what it's supposed to, Hua will have succeeded where several members of Big Pharma have failed, including Roche (RHHBY), Merck & Co. Inc. (MRK), Amgen Inc. (AMGN), and Array BioPharma Inc. (ARRY).

Dorzagliatin is close to market, according to FiercePharma.The size of the opportunity is huge. China is home to about 116 million (or a fourth) of the world's diabetes patients, according to the International Diabetes Federation. When approved, however, the Hua drug will be going against some formidable competitors with deep pockets, including Eli Lilly and Co. (LLY), Novo Nordisk (NVO) and Sanofi (SNY) internationally, plus a few domestic firms.

To take on these industry giants, Hua has partnered with Bayer AG (BAYN), which will be responsible for all marketing in China while Hua handles clinical development, regulatory affairs and supply. In the deal, Hua gets $45 million upfront, with another $425 million if it reaches established milestones.

At $0.65 apiece, Hua shares are just about where they were a year ago. Analyst data for the company is unavailable.

I-MAB

Since going public in January at $14, shares of I-MAB (IMAB)are up more than 170% to about $38. Six analysts rate the company as a buy or strong buy, with a median target price of more than $50 according to Yahoo Finance.

I-MAB was launched in 2016. The company's CEO, Joan Shen, joined the firm a year later after working in R&D at Johnson & Johnson (JNJ) and Pfizer Inc. (PFE). The company's business strategy has two elements: It tries to license distinctive cancer and autoimmune disease drugs that have already demonstrated they work. At the same time, it's developing its own pipeline.

I-MAB plans to file for Chinese approval of two of its cancer drugs in the second or third quarter of next year. However, what's drawn most investor attention is the deal I-MAB signed in September with Big Pharma's AbbVie Inc.(ABBV). I-MAB collected $180 million upfront in a pact that could eventually total $2 billion to work with AbbVie on a highly promising cancer drug. The added importance of the deal is that it recognized I-MAB's scientific know-how.

Innovent Biologics Inc.

Innovent Biologics Inc. (HKSE:01801) gained attention when it partnered with Eli Lilly on Tyvyt, a type of cancer drug known as a PD-1 inhibitor. The drug was first approved in China in December 2018 for a type of Hodgkin's lymphoma after at least two other types of therapy were tried.

The opportunity for PD-1 inhibitors is huge. The market is expected to reach nearly $80 billion globally by 2030, with China accounting for more than 15% of the total, according to Frost & Sullivan. It's little wonder that dozens of PD-1/L1 drugs are being developed in China, all trying to equal or even outdo Bristol-Myers Squibb Co.'s (BMY) Opdivo and Merck's Keytruda.

Tyvyt has the potential to be the best drug in its class based on its higher affinity to its target relative to Keytruda and Opdivo, and it appears to occupy more of the PD-1 binding sites than Opdivo, according to FiercePharma.

Innovent wants to be known for a great deal more than Tyvyt, and as a result has established a pipeline filled with more than 20 drugs targeting cancer, metabolic, ophthalmology and autoimmune diseases.

In the past 12 months, Innovent shares have doubled from about $3.50 to $7. No analyst data is available.

Disclosure: The author has a position in Amgen, Eli Lilly, Sanofi, Johnson & Johnson, Pfizer, AbbVie. and Bristol-Myers.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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