The Chinese biopharma sector is undergoing a transformative evolution, driven by the emergence of NewCos—innovative, newly established entities designed to advance specific drug assets on a global scale. This pioneering business model has gained significant traction in 2024, reshaping how companies develop, license, and commercialize their pipelines while fostering unprecedented levels of global collaboration and investment.
Notable deals, such as Hengrui Pharmaceutical’s $6 billion collaboration, Keymed Biosciences’ strategic licensing of bispecific antibodies, and Genor Biopharma’s acquisition by EddingPharm, underscore the model’s potential to unlock both financial and strategic value. These transactions highlight how NewCos enable Chinese firms to expand their global footprint while driving innovation in drug development and commercialization. However, challenges like intellectual property (IP) management and governance remain hurdles to navigate. Despite these complexities, the NewCo model positions China at the forefront of global pharmaceutical innovation.
China’s pharmaceutical industry is at a pivotal moment. Over the past decade, it has transitioned from being a low-cost manufacturing hub to an innovation powerhouse. The rise of biopharma NewCos represents a bold step forward in this evolution. A NewCo is an independent entity created to advance specific drug candidates, funded by global investors, and structured to share financial risks and rewards. Unlike traditional licensing, the NewCo model enables originating companies to retain equity stakes, ensuring alignment across stakeholders.
In 2024, landmark deals have brought this model into the spotlight, redefining strategies for drug development and global market expansion.
What Are NewCos? – NewCos are newly established companies designed to focus on specific drug candidates or therapeutic areas. They are often funded by venture capitalists and private equity firms. The NewCo model stands out from traditional licensing through several key distinctions, including:
• Equity Retention: Originating companies retain equity stakes, benefiting from long-term asset growth.
• Risk Mitigation: By sharing development risks with partners, companies can focus on their core pipelines.
• Access to Global Expertise: Partnerships provide access to international capital and specialized expertise.
The NewCo optimizes resource allocation, extends cash runways for core projects, and provides access to global capital and expertise.
Detailed Analysis of Key Transactions –Several transformative deals illustrate the growing adoption of the NewCo mode:
1. Hengrui Pharmaceutical NewCo: On May 16, 2024, Hengrui partnered with Bain Capital Life Sciences, RTW Investments, Atlas Venture, and Lyra Capital, to form Hercules CM NewCo Inc., licensing GLP-1 class drugs. The deal included $110 million upfront, milestone payments of up to $5.925 billion, and a 19.9% equity stake for Hengrui.
This collaboration is aimed at accelerating the global commercialization of GLP-1 therapeutics.
2. Frontage Biotech NewCo: Frontage raised $300 million to fund early-stage oncology asset development (specific date not available). This capital injection enables the company to focus on advancing its pipeline of innovative cancer therapies.
3. ChinaBio Innovations NewCo: ChinaBio secured over $1 billion to develop assets for global out-licensing, with a strategic emphasis on forming partnerships with Western pharmaceutical companies (specific date not available). This deal exemplifies the potential for cross-border collaborations to drive innovation.
4. BioValley Therapeutics NewCo: BioValley obtained $450 million to commercialize oncology and central nervous system (CNS) drug assets globally (specific date not available). This funding positions BioValley to accelerate its growth and enhance its international presence.
5. Keymed Biosciences NewCo: On July 9, 2024, Keymed granted exclusive rights to two bispecific antibody drug candidates to Delaware-based Belenos Biosciences Inc. In return, Keymed received $15 million upfront and is eligible for $170 million in milestone payments. Keymed also acquired a 30.01% equity stake in Belenos, highlighting the strategic depth of this collaboration.
6. Genor Biopharma NewCo: Acquired by EddingPharm for $395 million in September 2024, this deal strengthens EddingPharm’s pipeline and reinforces Genor’s position in the biopharma market.
Advantages of the NewCo Model – The NewCo structure offers several compelling benefits for Chinese pharmaceutical companies:
• Shared Long-Term Returns: By retaining equity, originating companies benefit from the asset’s future growth, whether through commercialization, acquisition, or public offerings.
• Access to Global Capital: The model enables companies to secure significant funding without requiring large upfront investments, as evidenced by the substantial sums raised in the 2024 deals.
• Resource Optimization: Spinning off specific assets allows companies to focus on their core pipelines while partners advance other projects.
Challenges and Considerations – While the NewCo model has proven transformative, it introduces complexities. Companies must navigate intellectual property licensing, ensure robust corporate governance, and manage potential conflicts of interest in affiliated transactions. Clear agreements and transparent operations are essential to realizing the full potential of these collaborations.
A Strategic Shift in Chinese Biopharma – The rise of NewCos signals a strategic shift in how Chinese pharmaceutical companies approach global markets. By leveraging the NewCo model, these firms are not only accessing international capital and expertise but also positioning themselves as competitive players in the global biopharma industry. As the model continues to evolve, it promises to redefine the future of pharmaceutical innovation and commercialization, making China a hub for transformative biopharma strategies.
Perspective for the Future – The NewCo model represents a strategic shift for Chinese biopharma companies, enabling them to compete more effectively on the global stage. By leveraging this structure, companies can attract substantial investment, optimize resource allocation, and de-risk drug development. Looking ahead, the continued evolution of NewCos will likely drive greater innovation, enhance cross-border collaborations, and solidify China’s role as a key player in the global pharmaceutical industry. Future advancements, such as the integration of AI-driven drug discovery and precision medicine, could further amplify the impact of NewCos, making them indispensable in the global biopharma ecosystem. However, addressing challenges related to intellectual property, regulatory compliance, and governance will be crucial for sustainable growth.
The rise of biopharma NewCos are transforming the Chinese pharmaceutical landscape, offering a blueprint for innovation, collaboration, and global competitiveness. By adopting this model, Chinese companies can:
• Attract substantial global investment.
• Optimize resource allocation.
• De-risk drug development.
The NewCo model unlocks unprecedented opportunities, enabling Chinese companies to advance their innovative pipelines while sharing financial risks with global investors.
With the addition of emerging technologies and robust governance practices, NewCos are set to redefine the future of drug development and commercialization. As the model matures, it will cement China’s position at the forefront of the global biopharma industry. For stakeholders, from investors to regulators, this transformation represents a compelling opportunity to participate in an era of unprecedented growth and innovation.
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Author: Dr. Jean Chatellier
Partner, EVP & Managing Director
KYBORA
Email: jean@kybora.com
