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Latest type of biological therapy, monoclonal antibodies, tipped as having huge potential in China

Deutsche Bank analysts predict mAbs market to see 24pc compound annual growth from 2017 to 2022 after the first major approval in 2018

PUBLISHED : Thursday, 09 February, 2017, 12:37pm
UPDATED : Thursday, 09 February, 2017, 10:07pm

Deutsche Bank analysts expect to see substantial growth opportunities in China’s monoclonal antibodies (mAbs) market in the coming five years, naming 3SBio and Shanghai Fosun Pharmaceutical as among the first-movers in the sector.

Monoclonal antibodies are a type of biological therapy used in the treatment of serious conditions such as cancer, rheumatoid arthritis, Crohn’s diseases, and osteoporosis. Monoclonal antibody are target specific in action, by not affecting other cells of the body thus restores the immune system.

The latest data from Deutsche Bank predicts that as a distinctive therapeutic modal, the mAbs market expects to see a 24 per cent compound annual growth rate from 2017 to 2022 after the first major biosimilar approval in 2018. The market will reach 36 billion yuan in 2022 from 10 billion yuan in 2016, the data from Deutsche Bank showed.

The rising market is driven by “rising incidences, reimbursement expansion, and discount pricing by incoming biosimilars”, said Deutsche Bank analysts Jack Hu and Linc Yiu in their latest report.

And the market demand is strengthening.

The term biosimilars refers to almost identical copies of an original product, manufactured by a different company.

In China, cancer incidence has grown annually by 3.1 per cent in the past decade, far higher than 1.5 per cent in the US, while the five-year survival rate in China is only 37 per cent, much lower than the level of 66 per cent in the US, Deutsche Bank said.

There are approximately 5.5 million rheumatoid arthritis (RA) patients in China, but as a chronic disease, sufferers often cannot afford using drugs from global companies.

“We believe mAbs biosimilars targeting RA, for instance, could have significant upside,” said Hu.

However, the mAbs market supply is still weak and there are only 23 approved mAbs in China, far less than the 65 in the US.

“A huge market opportunity exists for mAbs in China,” added Hu. “It is likely to enjoy growth acceleration after its first major biosimilar approval in 2018.

“We expect multiple major mAb launches after then and believe domestic companies are likely to expand their market share significantly from 15 per cent in 2016 to 48 per cent by 2022,” said Hu.

All major mAbs have experienced limited price cuts over the past five years.

“In the long term, even with biosimilar launches we believe the competitive landscape for biological drugs would still be better than that of chemical drugs due to higher entry barriers,” he said.

“We believe domestic mAbs biosimilars, which are likely to be priced at a significant discount to the originals, will ramp up quickly and grab market share from global companies.”

A huge market opportunity exists for mAbs in China.It is likely to enjoy growth acceleration after its first major biosimilar approval in 2018
Jack Hu, Deutsche Bank analyst

Deutsche Bank has recommended buying stocks, particularly, in biotech company 3SBio Inc.

“It is likely that 3SBio may have one major product launch every year from 2017 to 2020, starting with Bydureon (an injectable medicine used to treat type 2 diabetes) in 2017,” said Yiu.

“Our risk-adjusted net present value analysis indicates that these pipeline products are valued at HK$1.51 per share, compared with the current company share price price of HK$7.9.”

Shanghai listed Tonghua Dongbao has also been given a “Buy” recommendation with Deutsche expecting insulin glargine – a long-acting insulin that starts working several hours after injection – to be filed in the first quarter of 2017.

“With four major products in the pipeline, we believe Tonghua Dongbao will ramp up its market share in insulin treatments starting from 2018 with the approval of insulin glargine,” added Yiu.

Shanghai Fosun Pharmaceutical, another leading Chinese pharmaceutical company, has a “Hold” rating from Deutsche Bank on the back of its Shanghai Henlius Biotech offshoot, which has six mAbs being developed in the pipeline, with four at the clinical stage.

Deutsche Bank warned, however, key risks in the Chinese sector include a lack of clinical data for Chinese biosimilars, delays in regulatory approval, and a still over-capacity of cell culture treatments, which might lead to a price war.