The China BioPharma ETF holds China focused biopharmaceutical companies that are listed either on the Hong Kong Stock Exchange or Nasdaq. One such Nasdaq listed company is CASI Pharmaceuticals (Nasdaq: CASI). CASI’s business model is to license drugs from U.S. or European companies and help commercialize them in China. Its focus is currently on hematology. View all holdings of the China BioPharma ETF.
The last few months have been a busy time for CASI. The company has recently licensed a new CD38 drug and CD19 CAR-T therapy. In addition, and most notably, CASI has also launched its first commercial product in China, EVOMELA. Given all of the news, we thought it would be a good time to check in with the company. In mid-August, we caught up with Wei-Wu He, CASI Chairman and CEO at a biotech event in New York. Below is a transcript of our interview with Dr. He, which has been minimally edited for clarity.
Dr. Wei-Wu He discusses China biotech with Loncar Funds.
CHNA ETF: Can you please introduce yourself and describe your background.
Wei-Wu He: I am the Chairman and CEO of CASI Pharmaceuticals. I am a molecular biologist by training. I came to the United States in 1986 to do my Ph.D. and in 1993 I started to build biotech companies. I have been building biotech companies for more that 20 years.
CHNA ETF: When was CASI founded?
Wei-Wu He: CASI has actually been around for a while but we got involved with CASI because I was a venture partner with a large investment fund called IDG. We invested in 2012 and then we transformed this company into an in-licensing model for the Chinese market. We have been involved as a major shareholder of the company since 2012.
CHNA ETF: You recently became the full-time CEO just a couple of months ago. You also had some exciting news last week (this interview was conducted on August 15), which is that you are commercializing your first product, EVOMELA. What is EVOMELA and what unmet need does it serve in China?
Wei-Wu He: It is really a very exciting time. Since our investment in 2012 we have always been trying to execute a new business model because our thesis is that China, with 1.4 billion people aging, will want to have access to more modern medicines. CASI’s business model is to work with U.S. and European companies that have innovative products and license them and help them commercialize those medicines in China. With this business model after so many years, our first commercial launch is finally happening this week.
EVOMELA is a proprietary formulation of melphalan. Melphalan is the preconditioning agent for autologous transplants for multiple myeloma. It is the standard of care for multiple myeloma. If a person in the United States has multiple myeloma, their first treatment is an autologous transplant because approximately 13% of people who receive one live more than 20 years. It is almost a functional cure for them. However, melphalan as a functional drug was not available in China. This new formulated melphalan is a better version. We are the only approved drug in China.
I will give you some numbers. In the United States there are 10,000 transplants per year using melphalan for multiple myeloma. China only does 800. Historically for those 800, they have needed to illegally smuggle the drug from Hong Kong to China. But now finally this week they will have access to a better and legal version of melphalan through CASI. We are happy that we have finally made a drug available to China and are saving people’s lives.
“It is really a very exciting time. Since our investment in 2012, we have been trying to execute a new business model because our thesis is that China, with 1.4 billion people aging, will want to have access to more modern medicines.”
—Wei-Wu He, Ph.D., Chairman and CEO, CASI Pharmaceuticals
CHNA ETF: When a lot of people think of China, they think of the scale. Given that you are turning into a commercial stage company, how many people do you need to hire to roll this out? What will it take to make it a success?
Wei-Wu He: For melphalan, it is very much a specialty drug. We are targeting the hematology/oncology market. So far we have built a 55 sales rep team. These are all people from large pharmaceutical companies. They are doing a good job detailing the physicians in China. Ultimately how big of a team will be needed will depend on our product line.
Personally, I am very bullish on China. When I came to the United States in 1986, there was not a single private ownership of automobiles in China. 30 years later China is the largest automobile market in the world. Pharmaceuticals and healthcare currently lags behind in China. It is probably the last major sector that has not truly been globalized. With the National Medical Products Administration (NMPA) regulation changes I think the Chinese government is really embracing a new regulatory standard. We thank NMPA because they waived the need for new clinical trials for us with EVOMELA because there is such an urgent need in China for it. The drug was approved without doing any local trials in China. This really speaks volumes about how the NMPA is trying to speed up global adoption of drugs in China.
CHNA ETF: Another important reform that is happening is that the national reimbursement list is starting to get updated more frequently. Getting on the list is very important for drug makers. As you are rolling this drug out, how do patients pay for it and are you trying to get on the national reimbursement list?
Wei-Wu He: Typically an imported drug like this initially is self-pay. We are targeting the self-pay patient population right now. But we have full intention to get onto the Chinese government reimbursement schedule. My understanding is that it usually takes a year or two. You have to show to the government that this is an essential drug, and document the need, and you have to get the physicians to convince the government that this is an essential drug.
CHNA ETF: Can you describe some of the other drugs you have licensed and are working on right now?
Wei-Wu He: We have a few exciting projects. One is a CD19 CAR-T, which we licensed from the Tianjin Hematology Institute. This is one of the best hematology institutes in China. It is a domestically developed product. The drug is ready to go into the clinic.
CHNA ETF: We have heard statistics that there are more cell therapy trials happening in China today than the United States. How do compete with all of that going on?
Wei-Wu He: We see a lot of non-NMPA trials, but we don’t believe there will be many genuinely approved NMPA approved cell therapies. You see a lot of trials that are institution-sponsored trials. A hospital in China can sponsor a trial that is not NMPA approved. We are going for the real approval, which is a very expensive and lengthy process. You need to have very high standards, including CMC (chemistry, manufacturing, and controls) and a GMP (good manufacturing practices) plant. Personally I don’t think you will see as many NMPA approved products as PD-1s. My prediction is that there will be more PD-1 approvals than CD19 CAR-T products. The hurdle is higher for cell therapy.
CHNA ETF: Do you feel like you will need to be competing with those hospitals? What would a commercial rollout of a CD19 CAR-T look like? Which patients will get the NMPA approved product and which patients will get the hospital-based products?
Wei-Wu He: Our understanding is that as soon as a CD19 CAR-T is approved by the NMPA, the local one will be stopped. The only reason they can use a local one is if there is no NMPA approved product available. If there is an approved product, the legal risk is very high for the locally produced CD19 CAR-T. CAR-T is a very risky therapy. People get cytokine release syndrome. The hospital is probably not going to be willing to take the legal liability if they use the unapproved CD19 CAR-T.
I’ll give you another example. Technically you can still smuggle melphalan from Hong Kong but the physician runs the risk of having his or her license suspended. Now that there is a legal melphalan, why would you want to take the risk?
CHNA ETF: Another drug you have licensed is a CD38. There is a big drug in the United States called Darzalex that is marketed by Johnson & Johnson that is a CD38. What does a CD38 drug do and what is the need in China for one?
Wei-Wu He: Here again we are focusing on a hematology/oncology franchise. Darzalex is monoclonal antibody for CD38 and is a wonderful drug for multiple myeloma. The data from Johnson & Johnson is very impressive. We licensed our drug from a company called Black Belt Therapeutics. They engineered a new version of anti-CD38 using Darzalex as a benchmark. Sometimes with a lot of these monoclonal antibodies the third or fourth one developed can be a lot better than the first one. Look at Humira, for example. I think Humira is the fourth TNF inhibitor but it is a far better molecule than Remicade. When a drug is approved, you can look at its strengths and weaknesses and try to improve upon it. We think that what we have is the best in class in terms of it being a different epitope, a better antibody-dependent cellular cytotoxicity, and better infusion reaction.
On top of that, we are going to manufacture it domestically in China. So far in China, this type of drug is all imported. Imported drugs are typically more expensive. If we want to get onto the government reimbursement program, we believe we will have a better chance with a domestically manufactured CD38. We have global rights for the drug. Our unique China strategy is that we will try to manufacture it in China, do trials in China, and launch it as a me-better or best in class in China.
CHNA ETF: When do you think the trials for that will begin?
Wei-Wu He: Our phase 1 trials will likely start early next year.
CHNA ETF: Are there any other programs you would like to highlight?
Wei-Wu He: We still have two other drugs we have licensed from Spectrum Pharmaceuticals (the maker of EVOMELA). One is ZEVALIN, which is a radioactive isotope labeled anti-CD20 antibody. Because it is a radioactive isotope labeled drug, the trial is going to last a little longer. We expect the drug to come out in 2023 or 2024 in China.
CHNA ETF: It sounds like you are still active in looking for new assets and licensing other drugs. I’m guessing if there are any U.S. biotech companies reading this right now that might have interesting assets available, they should call you?
Wei-Wu He: Absolutely, we will be continuously looking for diamonds in the biotech space.
CHNA ETF: Most of your programs are in hematology, so blood cancers and blood diseases. Are you willing to go beyond that?
Wei-Wu He: We are opportunistic. If we find a molecule for which there is a huge unmet need in China, we would always consider it. However, it is also easy to be focused. Hematology/oncology is our first major commercial focus.
CHNA ETF: Lastly, you touched on the overall opportunity in China earlier. If a U.S. investor doesn’t have China’s biopharma sector on his or her radar right now, what would you say to them? How would you describe the opportunity?
Wei-Wu He: China is the country with the largest population in the world. It is industrializing and it is aging. Like all human beings, as people become older and wealthier, they are more willing to spend money on healthcare. It is a given. If you look at the percentage of gross domestic product (GDP) spent on healthcare, it is always correlated to per capita GDP. The higher the per capita GDP, the higher the percentage of GDP spent on healthcare. When people get richer, they spend even more money on healthcare. If you already have food and shelter and have extra money, you want to spend on potentially having a longer life. We see that trend in China. I think for anyone who wants to catch this wave, which is 1.4 billion people getting wealthier and aging, the Chinese pharmaceutical market to me looks attractive.
“China is the country with the largest population in the world. It is industrializing and it is aging. Like all human beings, as people become older and wealthier, they are more willing to spend money on healthcare.”
—Wei-Wu He, Ph.D., Chairman and CEO, CASI Pharmaceuticals
CHNA ETF: The China BioPharma ETF is an investor in CASI and we wish you the best of luck. Thank you for your time today.
Wei-Wu He: Thank you!
Thank you for your interest in the China BioPharma ETF. Please be sure sign up for email alerts below if you would like to receive notification of news, company interviews, and research that we publish from time to time.
Opinions expressed are those of the author, interviewee, or Funds and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. Fund holdings and allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Johnson & Johnson and Spectrum Pharmaceuticals are not a holding of the Fund or affiliated with the Fund.