Pharmaceutical stocks surged across the board! Pfizer bets $6 billion on China's anti-cancer drugs

Pfizer invests $6 billion in China's cancer drug research, driving Chinese pharmaceutical stocks to continue soaring.

On Tuesday, the 20th, biopharmaceutical stocks surged, with the Hong Kong Hang Seng Biotechnology Index rising over 4%. Within the sector, 3SBio surged over 35%, Rongchang Bio rose 14%, and Hansoh Pharmaceutical, CSPC Pharmaceutical Group, and others all saw gains. CATL rose nearly 17% on its first day of trading on the Hong Kong Stock Exchange.

Wallstreetcn previously mentioned that Pfizer reached an agreement with 3SBio in Shenyang, China, for the PD-1/VEGF bispecific antibody SSGJ-707, with an upfront payment of $1.25 billion and a total of $6.05 billion for global development and commercialization (excluding mainland China), along with a $100 million equity investment in 3SBio and commercialization options in China.

This deal sets a new record in licensing transactions among Chinese pharmaceutical companies, and 3SBio could receive up to $480 million in milestone payments in the future. It also indicates that competition in the hot field of global PD-1/VEGF bispecific antibodies will further intensify, with more high-quality Chinese products likely to see business development opportunities.

Rebecca Liang, a senior analyst in pharmaceuticals and biotechnology at Bernstein, stated that Pfizer's collaboration with 3SBio is the largest foreign licensing deal to date for a Chinese biotech company. She believes that the market reaction indicates investors view this as recognition of the increasing quality of innovation across the industry.

Pfizer bets on China, drug innovation becomes a new market highlight

It is worth noting that Pfizer will also make a $100 million equity investment in 3SBio. 3SBio sells a range of drugs in China for diseases such as cancer, autoimmune diseases, kidney diseases, and skin diseases.

SSGJ-707 is an innovative bispecific antibody developed by 3SBio's subsidiary, 3SBio Guojian, based on its proprietary CLF2 platform. Clinical data shows that SSGJ-707 has significant 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 the drug has been approved for initiation by the National Medical Products Administration's Center for Drug Evaluation (CDE) and has received breakthrough therapy designation.

Pfizer's entry is not just a financial investment; it is a strong recognition of global capital for Chinese innovative drugs. Over the past year, many of Pfizer's peers have also bet on locally developed drugs in China to supplement their product lines According to GlobalData statistics, the scale of licensing transactions for Chinese pharmaceutical companies in 2024 has reached a record high, accounting for 28% of global innovative drug licensing. This year, Novo Nordisk and Merck also invested $200 million each to introduce cancer and cardiovascular drugs.

3SBio's drug targets Keytruda, competitive landscape is noteworthy

Pfizer's collaboration can also be seen as a key layout in the "cancer drug battlefield," expected to compete with Merck's Keytruda (the world's best-selling drug). The drug target of 3SBio is similar to a well-performing drug from Akeso Inc., which outperformed Keytruda in one trial. Notably, Merck also acquired a similar drug from the Chinese biotech company LaNova Medicines.

Previously, Pfizer collaborated with Akeso's U.S. partner Summit Therapeutics to test the combination of Akeso and Summit's drugs with Pfizer's own therapies. Daiwa Capital Markets analyst Wilfred Yuen stated that this research agreement would not be affected by the new deal.

As giants like Pfizer, Novo Nordisk, and Merck increase their investments, Chinese pharmaceutical companies are gradually accelerating their "going global" pace. Citigroup analysts raised the target price for 3SBio from HKD 13 to HKD 21, indicating market confidence in Chinese innovative drugs.

3SBio plans to initiate late-stage research within the year, Pfizer will produce the drug in the U.S.

3SBio plans to initiate the first late-stage research of the drug in China this year. Although Pfizer did not outline its own clinical plans, the company stated in a release that it will produce the drug in the U.S.

Citigroup analysts wrote in a report that this new deal should alleviate investors' concerns about geopolitical risks that could affect licensing trends, a trend that has already boosted the development of Chinese biotech companies.

Citigroup analysts wrote: "Global expansion is a key investment theme for innovative pharmaceutical/biotech companies." After the agreement was reached, Citigroup raised the target price for 3SBio from HKD 13.00 to HKD 21.00 ($2.70).