Pfizer bets 6.05 billion on 3SBIO, stirring up waves in the global PD-1/VEGF dual antibody market

Key Highlights:

• Pfizer and 3SBIO have reached a global development and commercialization agreement (excluding mainland China) for the PD-1/VEGF bispecific antibody SSGJ-707, with an upfront payment of $1.25 billion and a total amount of $6.05 billion, along with a $100 million equity investment in 3SBIO and commercialization options in China.
• Clinical data for SSGJ-707 shows positive results, demonstrating potential in indications such as NSCLC, making it an important strategic move for Pfizer in this hot target area. Previously, Pfizer collaborated with Summit to conduct clinical trials for multiple product combinations.
• The U.S. Inflation Reduction Act (IRA) and broader drug price control measures (including the international reference pricing MFN approach) are profoundly impacting MNC's BD strategies, balancing cost-effectiveness and clinical value.
• Kangfang Biotech/Summit's Ivosidenib (AK112/SMT112) faces more direct competition, with its commercial prospects and further capital operations adding uncertainty under high valuations.

The global pharmaceutical market's attention is once again focused on Chinese innovation.

On May 20, 3SBIO (01530.HK) announced that it had signed an exclusive licensing agreement with Pfizer for its self-developed PD-1/VEGF bispecific antibody SSGJ-707.

According to the agreement, Pfizer will obtain exclusive rights for the development, production, and commercialization of SSGJ-707 globally (excluding mainland China). 3SBIO will receive an upfront payment of $1.25 billion, as well as up to $4.8 billion in milestone payments for development, registration, and sales, plus a tiered double-digit percentage royalty based on net sales in the licensed regions. It also retains commercialization options for China.

At the same time, Pfizer will subscribe to $100 million worth of newly issued ordinary shares of 3SBIO at the 30-day volume-weighted average price.

This milestone transaction not only sets a record for the amount of external licensing for Chinese innovative drugs in recent years but also indicates that competition in the global PD-1/VEGF bispecific antibody space will further intensify, with more high-quality Chinese products likely to see BD opportunities.

With ample cash flow from its COVID-19 products, Pfizer's significant investment is undoubtedly a key move in the field of tumor immunotherapy, particularly targeting Chinese innovative assets.

Although the news was disclosed only this morning, 3SBIO and 3SBIO Guojian began to surge yesterday afternoon, with 3SBIO closing up 13.81% and 3SBIO Guojian hitting a 20% limit up. The market had anticipated BD for 3SBIO 707, but the record $1.25 billion upfront payment still exceeded market expectations.

SSGJ-707: 3SBIO's "Ten Years of Grinding a Sword"

SSGJ-707 is an innovative dual-antibody drug independently developed by 3SBIO's subsidiary, 3SBIO Guojian, based on its proprietary CLF2 platform. From clinical data, SSGJ-707 shows considerable potential. According to 3SBIO's announcement, SSGJ-707 has initiated multiple clinical studies in China.

In terms of first-line treatment for PD-L1 positive, locally advanced or metastatic non-small cell lung cancer (NSCLC), the Phase III clinical study of this drug has been approved for initiation by the National Medical Products Administration's Center for Drug Evaluation (CDE) and has received breakthrough therapy designation.

The clinical data released by the company at this year's JPM conference shows that the objective response rate (ORR) of SSGJ-707 as a monotherapy for first-line PD-L1 positive NSCLC in Phase II clinical trials reached 70.8%, with a disease control rate (DCR) of 100%; in the Phase II clinical study of combined chemotherapy for first-line NSCLC, the ORR for squamous NSCLC (sqNSCLC) was 81.3%, and the ORR for non-squamous NSCLC (nsqNSCLC) reached 58.3%, with both DCRs at 100%.

These data demonstrate that SSGJ-707 exhibits good potential in both monotherapy and combination therapy. At the same time, this product has also received IND approval from the U.S. FDA for new drug clinical trials.

For 3SBIO, the collaboration with Pfizer is an important avenue for maximizing the commercial value of its R&D achievements. In addition to significant near-term and long-term cash flow injection, more importantly, it can leverage Pfizer's strong global clinical development system and commercialization network to accelerate the global market launch process of SSGJ-707.

Pfizer's Strategic Considerations: A "Cunning Game" under IRA and MFN

Pfizer's choice to "marry" with 3SBIO, rather than further deepen its collaboration with Summit Therapeutics (whose core product, evorpacept SMT112, is licensed from CanSino Biologics), is intriguing and may be closely related to the increasingly stringent drug cost control environment in the U.S.

In recent years, the U.S. government has continuously promoted drug price reforms, among which the most far-reaching is the Inflation Reduction Act (IRA). The IRA grants the federal Medicare program the power to negotiate prices for certain high-cost drugs and imposes hefty rebates on drugs whose price increases exceed inflation, aiming to curb the rising drug expenditures.

Moreover, although the direct "Most Favored Nation" (MFN) clause—requiring U.S. drug prices not to exceed the lowest prices in other developed countries—faced significant resistance in the final legislation, the international reference pricing concept it represents has always been an important component of the discussions on U.S. drug price reform and continues to exert pressure on the industry This series of policy directions has forced multinational pharmaceutical companies (MNCs), including Pfizer, to place equal importance on the "economic value" and "clinical value" of drugs when making decisions regarding the introduction and commercialization of new drugs.

In this context, when evaluating external introduction projects, MNCs increasingly consider not only efficacy and safety data but also the overall cost-effectiveness of the project, future pricing potential, and expected return on investment as critical factors. Summit Therapeutics' deal to introduce Ivosidenib (AK112) from CanSino Biologics amounts to a total of $5 billion (including a $500 million upfront payment and potential milestone payments of $4.5 billion), plus sales sharing.

As of last night's close, Summit's market capitalization was $17.8 billion. If Pfizer considers obtaining global deep licensing or making an acquisition of Ivosidenib from Summit, it will significantly raise the overall financial threshold and process of the transaction.

In contrast, 3SBIO's SSGJ-707, as its original research product, may provide Pfizer with greater flexibility and potential cost advantages in the transaction structure, especially in the macro environment where future global (particularly U.S. market) drug pricing and profit margins are expected to be compressed.

CanSino/Summit: New Challenges Under First-Mover Advantage

Pfizer's important choice in the PD-1/VEGF dual antibody track undoubtedly poses new challenges for CanSino Biologics and its partner Summit Therapeutics. CanSino's Ivosidenib (AK112) has been approved for marketing in China due to its first-mover advantage and is being developed and commercialized overseas through Summit. Summit's market capitalization has also significantly increased due to expectations surrounding SMT112 (the overseas code for AK112).

However, competition in the PD-1/VEGF dual antibody field is becoming increasingly fierce, with not only already marketed products but also numerous latecomers eyeing the market. A report from Guosen Securities pointed out that 3SBIO's 707 (SSGJ-707) is already ahead in the development progress among similar products. Now, with the strong backing of pharmaceutical giant Pfizer, the subsequent global clinical advancement, registration approval, and commercialization capabilities of SSGJ-707 will be greatly enhanced, inevitably posing strong competition to Ivosidenib's global market share.

For CanSino and Summit, although Ivosidenib has excellent clinical data and has made progress in some markets, after Pfizer's choice, their window for seeking similar-scale global strategic cooperation or being acquired at a high price from other large MNCs may be somewhat affected.

Especially in the context of MNCs becoming more cautious in their investment decisions, the higher Summit's valuation rises, the less likely it is to be acquired. Ultimately, Summit may have to face the situation of commercializing in developed countries like the U.S. on its own, which would be completely different from the initial market expectations.

Industry Insights: Rebalancing Innovation Value and Commercial Returns

The transaction between Pfizer and 3SBIO adds a significant chapter to the internationalization of Chinese innovative drugs and reaffirms that innovative products with core technologies and high-quality clinical data still possess strong appeal in the global market At the same time, this also reflects that under the backdrop of increasingly stringent global drug price regulations and intensified market competition, the BD strategies of MNCs are adjusting towards a greater emphasis on "cost-effectiveness" and "differentiated value."

For Chinese biopharmaceutical companies, this not only brings opportunities to achieve value through high-quality innovation but also highlights the challenges of fully considering global market access, pricing environments, and commercial competition patterns from the outset of project initiation.

In the future, only those innovations that can truly address unmet clinical needs, possess global competitiveness, and achieve commercial success will stand out in the fiercely competitive global pharmaceutical market