Previously, I took a look at six of the nine public Chinese biotechnology companies that are projected to become major international competitors in the coming years, according to FiercePharma. Now let's take a look at the prospects for the last three on the list.
Shanghai Junshi Biosciences Co. Ltd. (HKSE:01877, Financial)
Junshi Biosciences is another Chinese company -- Innovent Biologics Inc. (HKSE:01801) being the other-- with a drug in the large market for PD-1 inhibitors. But the company's Tuoyi is unique in that it is the first to get approved in China—or anywhere else--and also the first China-made product of its type to secure a breakthrough designation from the Food and Drug Administration.
In clinical studies, Tuoyi seems to be better at extending patients' lives than Merck & Co. Inc.'s (MRK, Financial) Keytruda, which was green-lighted in China five months earlier. On the other hand, Keytruda patients showed a better response rate.
Tuoyi generated $63.5 million in sales during the first half of 2020, with nearly 60% coming in the second quarter.
Junshi is also one of the scores of companies seeking to find answers for Covid-19. The company's antibody drug against the coronavirus drew the attention of Eli Lilly and Co. (LLY, Financial), which invested $10 million upfront and committed $245 million more for rights to the treatment outside China.
Junshi's pipeline includes treatments for cancer, as well as cardiovascular, autoimmune and neurological diseases.
In the past year, the company's shares have climbed more than 65% to $5.44. Analyst data on Junshi is unavailable.
Legend Biotech Corp. (LEGN, Financial)
Legend has been under a cloud since it debuted in June with a $424 million initial public offering. The stock has traded as high as $43 since then, but has slid more than 60% to $27.
In addition to disappointing investors, there appears to be a crisis of confidence in the company's management. That's the result of Frank Zhang, Legend's chairman, CEO and founder, being placed under residential surveillance by Chinese law enforcement. This came after a raid by China's Customs Anti-Smuggling Department. However, no charges have been filed and Legend has said operations continue as normal.
Getting back to its business, a Legend cancer drug showed such good response that Johnson & Johnson (JNJ, Financial) paid $350 million upfront for rights to the medication outside of China.
Legend has yet to generate any product sales, but did have third-quarter revenue of $11.7 million, compared to $17.7 million for the three months ended Sept. 30, 2019. The decrease of $6 million was primarily due to a milestone achieved in July 2019 under the agreement with Johnson & Johnson. Revenue for the first nine months of 2020 was $34.9 million, compared to $37.8 million for the prior-year period.
Analysts think the stock has plenty of upside. In the most recent rating, they have Legend between a buy and strong buy, with a median target price over $50.
Zai Lab Ltd. (ZLAB)
Zai Lab was founded in 2014 by Samantha Du, who, according to FiercePharma, many view as the godmother of China's biotech industry.
"She is widely regarded as one of the most influential biotech innovators and entrepreneurs in China," SVB Leerink analyst Jonathan Chang told Forbes in 2018.
The company's strategy centers on in-licensing drugs that have been approved in other countries. "Around 70% of innovative drugs have not yet been brought to China, even though they've been approved elsewhere," Du said in a Nature Review Drug Discovery interview in 2018. "So we started with thinking about picking this low-hanging fruit, by in-licensing post-approval projects or compounds that have made it past phase 3."
Zai has two approved drugs in China that combined for sales of nearly $36 million in the first half of the year. Drugs in the company's pipeline are in the early stages of development. Their focus is cancer, psoriasis and autoimmune diseases.
The company first listed on Nasdaq through a $173 million IPO in 2017. It just pulled off a secondary listing on the Hong Kong Stock Exchange in September, raising $761 million.
Shareholders have to be pleased with the company's performance. In the past 12 months, Zai's stock has risen more than 170% to about $104. Of the three analysts offering opinions, two have Zai as a strong buy and the other a hold. The median target price is $107.
Investors who want exposure to the Chinese biotech industry but prefer to spread their risk might consider the Global X China Biotech Innovation Exchange-Traded Fund (CHB, Financial). There are currently 27 companies in the index, the largest being Beigene Ltd. (BGNE, Financial), WuXi Biologics (HKSE:02269), Shenzhen Kangt Biological Products Co. Ltd. (SZSE:300601), Changchun High and New Technology Industry Group (SZSE:000661) and Sino Biopharmaceutical Ltd. (HSKE:01177).
Disclosure: The author has positions in Johnson & Johnson and Eli Lilly.
Read more here:
- High-Potential Chinese Biotechs: Hua Medicine, I-MAB and Innovent Biologics
- Chinese Biotechs Warrant Investor Consideration
- Does UnitedHealth Have Renewed Interest in Buying Amwell?​
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