Recently, Fosun Pharma (stock code: 600196.SH; 02196.HK) announced that its subsidiary, Fosun Pharma Industry, plans to invest $27 million in cash to acquire 50% of the equity of Fosun Kite held by Kite Pharma. Once this equity transfer is completed, Fosun Pharma will wholly own Fosun Kite and plans to invest an additional $10 million or its equivalent in renminbi as a capital increase for Fosun Kite.

On the same day the equity transfer agreement was signed, Fosun Kite and Kite Pharma comprehensively revised and restated their original licensing agreement, signing a "Revised and Restated Licensing Agreement." According to this agreement, Fosun Kite has obtained exclusive rights to develop, produce, and commercialize Yescarta® and Brexu-Cel (Fosun Kite's research project FKC889) in mainland China, Hong Kong, and Macau, and within the field of cancer treatment.

Additionally, Fosun Kite plans to change its name to Fosun Kairui and will function as Fosun Pharma's core platform in the field of cell therapy, focusing continuously on tumor immunotherapy.

Zhang Wenjie, Chairman of Fosun Kite, stated in an interview with China 21st Century Economic Report that Fosun Pharma is concentrating on niche markets within the pharmaceutical field that hold vast potential, including small molecule drugs, antibody drugs, and cell therapies. Fosun Kite is positioned as a leader in the field of cell therapy, which fundamentally differs from traditional drug modalities. Historically, in the cancer treatment realm, regardless of progress made, the ultimate goal has been to prolong patient survival and achieve clinical cures. The potential of cell therapy lies in its ability to offer more fundamental treatment solutions.

"This equity transfer has granted Fosun Pharma and Fosun Kite greater autonomy for future development, enabling them to independently create products under Fosun Kairui. The company will not only continue to retain exclusive rights for the development, production, and commercialization of Yescarta® and Brexu-Cel in China and Hong Kong, but will also plan and build a robust CAR-T product pipeline independently through this reorganization," Zhang further pointed out. He noted that, while the current six CAR-T products in the domestic market primarily focus on hematological diseases, Fosun Kairui has recognized significant market potential in autoimmune diseases and other areas, making reorganization beneficial for actively expanding into these segments.

China's Active Cell Therapy Research

The cell therapy industry has rapidly risen in recent years, becoming a forefront hot topic in the biomedical sector. With technological breakthroughs and the promotion of applications, this industry demonstrates immense development potential. Cell therapies utilize either the patient's own or donor cells to repair or replace damaged tissues and organs, widely applied in treatments for cancers, immune system diseases, and neurodegenerative disorders.

In recent years, the success of CAR-T cell therapies and advancements in stem cell treatments have led to the gradual clinical adoption of cell therapies, bringing hope to many previously difficult-to-treat diseases. According to market research and consulting firm Nova One Advisor, the global cell therapy market is expected to reach $4.85 billion in 2023 and exceed $37.42 billion by 2033, with a projected compound annual growth rate (CAGR) of 22.67% over the next decade. In 2023, the market size of China's cell medical health industry was 14.2 billion yuan, expected to reach 174.5 billion yuan by 2032, reflecting a CAGR of 32.1% from 2023 to 2032.

Data from Qichacha shows that in the past decade, the number of cell therapy-related enterprises in China has increased yearly, with 33,000 such companies registered by 2023, marking a record high over the last ten years. Currently, China has 114,000 existing cell therapy-related enterprises, with 23.8% from Guangdong, which alone has 27,000 such companies, significantly surpassing the second-highest region, Shandong. In terms of city distribution, Guangzhou has the largest number of existing cell therapy-related companies, totaling 17,000 and accounting for over 60% of Guangdong's total.

Moreover, in the past decade, the annual registration of cell therapy-related enterprises in China has risen sharply, with 2020 and 2021 seeing a doubling of registrations. Despite a slowdown in growth in 2022 and 2023, the number of registered enterprises still achieved year-on-year increases of 16.1% and 20.1%, reaching 27,800 and 33,400 respectively, marking the highest registration numbers in the past decade.

Discussing the current state of the cell therapy market, Zhang noted that CAR-T's effective targets (CD19, BCMA) are primarily focused on treating hematological cancers, although there are ongoing pipelines for solid tumors. Importantly, cell therapies extend beyond CAR-T; emerging technologies like TIL and TCR also show immense promise, potentially playing transformative roles in improving human health. The recent reorganization is strategically significant for the development of Fosun Kairui's product pipeline.

Fosun Pharma Chairman Wu Yifang previously stated during a semiannual report that China is one of the leading and most active regions globally in the CAR-T field. "According to our research, two-thirds of the world's CAR-T research is conducted in China. Six CAR-T products have already been approved for marketing, with many companies actively researching further developments. The potential of CAR-T in treating blood cancers, solid tumors, and autoimmune diseases is highly promising."

Various Efforts to Integrate "Famous" Treatments into Insurance

Cell therapy has become a core field of global technological and industrial competition. With positive policy support, the industry is expected to experience rapid development. On September 8, the Ministry of Commerce, the National Health Commission, and the National Medical Products Administration jointly issued a notification on expanding pilot open reforms in the medical field. This notification announced that foreign-invested enterprises in specific regions (including Beijing, Shanghai, Guangdong, and Hainan) would be permitted to conduct research and technological applications in human stem cells and gene diagnosis and treatment technologies to promote product registration and production.

The notification clearly states that all products registered and approved for production can be used nationwide. Foreign-invested enterprises wishing to participate in the pilot must comply with China's relevant laws and regulations and complete the necessary management processes.

This policy initiative provides clear guidance for foreign-invested enterprises in Beijing, Shanghai, Guangdong, and Hainan to develop and apply human cell and gene diagnosis and treatment technologies, enhancing the operability of these policies.

Additionally, some securities analysts in the pharmaceutical sector pointed out that to further expand the market space for cell therapy, more concrete and detailed policy support needs to be provided at the R&D level, and solutions must be swiftly found for the commercialization challenges associated with CAR-T and health insurance coverage.

As technology advances, the costs and prices of all new drugs typically decline from their inception to broader adoption. For instance, vaccines and antibody drugs have experienced price reductions as they became more accessible. Likewise, CAR-T therapies are expected to follow this trend, with widespread adoption anticipated in the coming decades.

Wu Yifang highlighted that even companies that have already launched products face losses. For example, Fosun Kite's CAR-T product has been on the market for over three years, but product costs remain high since 2021. If insurance coverage offers payments below the cost, it poses a challenge for any innovative pharmaceutical company.

"We have long hoped to see CAR-T therapies included in the health insurance system. Such technology and products, which have significant potential for cures, can bring considerable benefits and value to patients. Currently, the issue of payment capability is clearly a major barrier; support from insurance would greatly propel the development of the cell therapy industry," Wu stated.

Zhang Wenjie also pointed out that due to the limitations in indications and the high costs of CAR-T products, only 2% to 3% of patients can access CAR-T therapies. Consequently, upgrading production processes and reducing drug costs and prices are critical. "In terms of cost reduction, we have considered and implemented a payment-for-outcomes strategy."

Health insurance is a comprehensive decision influenced by various factors, with pricing models requiring multi-party discussions. According to public information, from 2021 to 2023, neither Fosun Kite's Aceptlucel injection nor WuXi AppTec's Regacel injection made it onto the health insurance negotiation list. However, in the preliminary examination of the national health insurance catalog adjustments for 2024, four domestic CAR-T products, including Fosun Kite's and WuXi AppTec's, appear on the initial drug list. This has made integrating domestic CAR-T products into health insurance a key topic in this year's negotiations. However, it's essential to emphasize that safety, efficacy, and accessibility are crucial for the promotion of CAR-T therapies. The industry should collectively strive for accessibility based on ensuring safety and efficacy rather than blindly pursuing the "lowest price."

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