We previously mentioned that the current standard treatment for cancer is gradually shifting from PD-1 + chemotherapy to PD-1 + ADC drugs. According to relevant data, the global ADC drug market size has grown from $7.9 billion in 2022 to approximately $20 billion in 2024, showing strong growth momentum. Among them, DS8201 (HER2 ADC), jointly developed by Daiichi Sankyo and AstraZeneca, has achieved remarkable efficacy, with sales expected to reach $3.48 billion in 2024, a year-on-year increase of 52%, making it a star product in the ADC drug market. Currently, Merck, which has the top-selling PD-1 drug Keytruda, and BMS, which has the second-place PD-1 drug Opdivo, are both globally acquiring various excellent ADC drugs. Among them are the ADC products from Kelun-Botai Biopharmaceuticals, which is listed on the Hong Kong Stock Exchange (a subsidiary of Kelun Pharmaceutical holding 54.8%), and BaiLi TianHeng, which is listed on the STAR Market. In May 2022, Merck obtained the commercialization rights outside of China for the TROP2 ADC drug SKB264 (MK-2870) from Kelun-Botai. According to the agreement, Merck paid a one-time, non-refundable payment of $30 million, along with milestone payments not exceeding $1.363 billion and sales royalties. In December 2022, Merck further packaged Kelun-Botai’s early ADC product line, acquiring overseas rights for seven ADC products with a $175 million upfront payment and $9.3 billion in milestone payments. This transaction also set a record for the highest overseas licensing amount for domestic innovative pharmaceutical companies at that time. Recently, in August 2024, Merck exercised its exclusive option and paid Kelun-Botai $37.5 million to obtain rights outside of Greater China for the EGFR/c-Met dual-target ADC SKB571 (MK-6204) for various solid tumors, including lung cancer and gastrointestinal tumors.
BMS (Bristol-Myers Squibb) reached an agreement with BaiLi TianHeng in December 2023: BMS obtained exclusive global (excluding mainland China) development and commercialization rights for BL-B01D1 (EGFR/HER3 dual-target ADC), while SystImmune (a wholly-owned subsidiary of BaiLi TianHeng) retains rights in mainland China and is responsible for local production and part of the drug supply. After the agreement takes effect, BMS will pay an upfront payment of $800 million, with potential additional payments of up to $500 million, and SystImmune could receive up to $7.1 billion in additional payments upon achieving milestones, bringing the total potential deal value to $8.4 billion. Additionally, both parties will share global development costs and profits and losses in the U.S. market, collaborating to advance development, registration, and commercialization.
Why are ADC drugs so popular today, gradually replacing chemotherapy as the standard treatment for cancer? This is because chemotherapy drugs typically attack human cells indiscriminately, causing significant damage to normal cells while killing tumor cells, leading to severe side effects.Monoclonal antibodies in ADC drugs can specifically recognize antigens on the surface of tumor cells, relying on precise targeted release of cytotoxic drugs, allowing cytotoxic drugs to primarily act on tumor sites, significantly reducing drug distribution throughout the body and minimizing damage to normal tissues, thereby reducing adverse reactions. In the early days, ADC drugs faced issues where linkers would easily break in the bloodstream, releasing cytotoxic drugs and causing systemic toxicity. The cytotoxic drugs used also had lower potency, making it difficult to achieve effective concentrations within tumor cells, thus failing to effectively kill tumor cells. Non-specific conjugation technology led to variable drug-to-antibody ratios (DAR), with uncertain conjugation positions and quantities affecting drug uniformity and efficacy, making their advantages over chemotherapy less pronounced. Today, after three generations of technological iterations, third-generation ADC drugs have shown significant advantages over chemotherapy. Through precise conjugation technology, they achieve accurate coupling of drugs to antibodies, improving the uniformity and stability of ADC drugs. Optimized linker designs have reduced drug release in non-target tissues, thereby lowering off-target toxicity. The development of new payloads has resulted in stronger cytotoxicity, such as the topoisomerase I inhibitor Dxd, whose anti-tumor activity is 100-1000 times that of traditional chemotherapy drugs. Additionally, third-generation ADC drugs exhibit a bystander effect, capable of killing adjacent heterogeneous tumor cells, further enhancing efficacy. It is evident that the technical barriers are quite high. As a leader among third-generation ADC drugs, SKB264 has shown excellent performance in domestic clinical data (with significant benefits in PFS and OS), prompting Merck to initiate a total of 14 global Phase III clinical trials around SKB264 (MK-2870) as a monotherapy and in combination with Keytruda, covering multiple tumor types including non-small cell lung cancer, endometrial cancer, breast cancer, gastric cancer, cervical cancer, and ovarian cancer (these are all potential revenue channels). Meanwhile, BL-B01D1 is also conducting over 20 clinical trials targeting various tumor types in China and the U.S., including Phase III monotherapy trials and Phase II combination therapy trials. BMS plans to initiate global registration clinical research for BL-B01D1 in solid tumors in 2025. Furthermore, BMS’s PD-1/VEGF dual-target antibody is also in the pipeline. With their strong technical capabilities, these two companies are paired with the global PD-1 sales champions. Why should they worry about future global sales? What’s even more exciting is that this is just one of their products; Kelun-Botai has several other ADC products that Merck is eyeing for global clinical trials, while BaiLi TianHeng is also conducting clinical trials for over ten dual-target, tri-target, and even quad-target ADC products in their pipeline, all of which could potentially become big products in the future. Therefore, investors are very optimistic about the company’s future growth and profit certainty, which is why their stock prices have remained robust even in a bear market.PS: Seeing the booming ADC market, WuXi AppTec has once again spun off a CRO company focused on ADC drugs for separate listing. We will discuss this opportunity later.