Pfizer Pumps $200M Into CStone for Rights to PD-L1 Cancer Drug in China

CStone Pharmaceuticals has touted its experimental drug sugemalimab as potentially the best in its class of cancer immunotherapies. Pfizer is placing a bet on that promise by making a $200 million equity investment in CStone for rights to that drug in China.

According to deal terms announced late Tuesday, Pfizer (NYSE: [[ticker:PFE]]) is purchasing nearly 116 million shares of CStone, equivalent to a 9.9 percent stake. The New York-based pharmaceutical giant gains exclusive commercialization rights to suegamalimab in mainland China, but CStone remains responsible for clinical and regulatory development of the compound for five types of cancer. Shanghai-based CStone keeps rights to the drug for all regions outside of mainland China.

Depending on the progress of the drug, Pfizer could owe its new partner up to $280 million in milestone payments, plus royalties from sales if it reaches the market. The partnership could also encompass other cancer drugs that come from the pipelines of either company or via licensing deals. The agreement calls for CStone and Pfizer to select late-stage cancer drugs that they will jointly develop for commercialization in China.

Sugemalimab, an antibody drug, was discovered by CStone with technology licensed from Ligand Pharmaceuticals (NASDAQ: [[ticker:LGND]]). CStone says that because sugemalimab mirrors natural G-type immunoglobulin 4, a type of antibody found in abundance in the blood, its antibody drug might offer a lower risk of immune responses and toxic effects, potentially giving it an advantage over other similar types of drugs.

The CStone drug is a type of cancer immunotherapy called a PD-L1 inhibitor. This class of drugs work by blocking programmed death ligand-1 (PD-L1), a “checkpoint” protein produced by tumors that enables them to evade detection by the immune system. Pfizer’s portfolio already includes PD-L1 inhibitor avelumab (Bavencio), which holds FDA approvals in Merkel cell carcinoma, urothelial carcinoma, and renal cell carcinoma. The class of PD-L1 checkpoint inhibitors includes AstraZeneca (NYSE: [[ticker:AZN]]) drug durvalumab (Imfinzi) and Roche’s atezolizumab (Tecentriq).

In China, CStone has advanced its PD-L1 drug to Phase 3 testing in non-small lung cancer, stages 3 and 4; gastric cancer, and esophageal cancer. The drug is currently in a Phase 1 study in the US.

CStone Pharmaceuticals was founded in 2015 and went public on the Hong Kong Stock Exchange last year. The biotech already has alliances with other companies, including deals to commercialize in China cancer drugs from the pipelines of Agios Pharmaceuticals (NASDAQ: [[ticker:AGIO]]) and Blueprint Medicines (NASDAQ: [[ticker:BPMC]]). But the Pfizer pact is the first in which CStone is outlicensing the China rights to one of its drugs.

For Pfizer, the partnership with CStone represents an opportunity to bring another drug to inits lineup of medicines sold in China, and potentially add others to its portfolio. It also marks the latest alliance between a big pharma company and a Chinese biotech. In July, Amgen (NASDAQ: [[ticker:AMGN]]) upped its stake in BeiGene (NASDAQ: [[ticker:BGNE]]) after initially investing $2.8 billion in the Beijing-based company. Eli Lilly (NYSE: [[ticker:LLY]]) last month expanded a licensing agreement for sintilimab (Tyvyt), a PD-1 inhibitor that it co-developed in China with Innovent Biologics. That partnership began in 2015. And in early September, AbbVie (NYSE: [[ticker:ABBV]]) paid $200 million for global rights to lemzoparlimab, an early-stage oncology drug that targets the CD47 cancer protein. That deal excludes China, Macau, and Hong Kong, where Shanghai-based I-Mab (NASDAQ: [[ticker:IMAB]]) retains the rights.

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