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DBS Asian Insights

DBS Group Research • October 2019

Immunotherapy
Breakthrough in Fighting Cancer
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Immunotherapy
Breakthrough in Fighting Cancer

Mark KONG, CFA

mark_kong@dbs.com

Michael PAN, PhD

michaelpan@dbs.com

Special thanks to
Dr. Eugene Hong
for his contributions
to this report

Produced by:
Asian Insights Office • DBS Group Research

go.dbs.com/research
@dbsinsights
asianinsights@dbs.com

Wen Nan Tan Editor

Martin Tacchi Art Director
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04 Executive Summary

06 What is Immunotherapy
Immune Checkpoint Therapy

18 Clinical Trials in China

Implications of Successful Clinical Trials on Pharmaceutical Sector
Case Study: BeiGene
Case Study: EMD Serono Research & Development Institute and Merck

24 Industry Risks For Cancer Immunotherapy

25 Appendix
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Executive Summary
Immunotherapy to Immunotherapy is a breakthrough in cancer treatment. Instead of acting on limited specific
increase number of mutations/protein interactions like targeted therapy, it activates the patient’s immune system
curable patients in to recognise different cancer cells and kill them. Thus, its scope of curable patients in final
final phase cancers phase cancer is >50% larger, evidenced by a higher percentage of patients with tumour size
by over 50% reduced (objective response rate, ORR), e.g. 20% vs 10% in final phase liver cancer, 50% vs
30% in non-small-cell lung cancer (mostly in the final phase when detected).

It can be applied at all stages of cancers, while surgery and radiotherapy are mainly used in
early stages. Its side effect is milder than chemotherapy as evidenced by lower occurrence
of treatment-related adverse events of grade 3 (severe but not immediately life threatening)
or worse in the treatment of lung cancer (18% vs 41%). Because chemotherapy involves
the injection of toxins into patients’ bodies and impacts all cells.

Other than immune checkpoint inhibitor, there are four more types of cancer immunotherapy:

1. Adoptive cellular therapy

2. Monoclonal antibody

3. Therapeutic vaccines

4. Cytokine therapy

Immune checkpoint Adoptive cellular therapy can so far only be used to treat blood cancer, and for monoclonal
inhibitor most antibody or therapeutic vaccines. They can only tackle a series of cancers featured by
promising of all cancer specific bio-markers or tumour antigens. Immune checkpoint inhibitor is applicable in
immunotherapy multiple types of cancer. Relative to cytokine therapy, immune checkpoint inhibitor stays
longer in a patient’s body to kill cancer cells, thanks to a longer half-life (time taken for the
concentration of a substance to fall to half of its initial value in blood, 26 days vs 4 minutes)
Thus, it reduces the number of injections that are required.

Thanks to the advantages mentioned above, we expect the contribution of immune

checkpoint therapy to surge from 11% to 18% in 2018-22. Global market size of immune
checkpoint therapy was c.US$17bn in 2018 with programmed cell death protein 1 antibody
(PD-1) making up 83%. PD-1 is the major growth driver for immune checkpoint therapy.
2018 global and China market sizes of PD-1 were US$14bn and US$3.5m respectively. Its
expected sales CAGR worldwide and in China to be 27% and 534% in 2018-22, according
to Frost & Sullivan.
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Due to the great advantages of cancer immunotherapy, the number of clinical trials in this
respect surged in recent years, e.g. in China, the figure surged by >90% each year in 2017
and 2018. This will result in aggressive launch of new products in three years. There could
be c. 70 different cancer immunotherapy products to be launched in three years in China
based on our estimation. Their potential to cure incurable cancers should excite the market,
e.g, 90% of esophageal cancer relapse in China are incurable.

Based on Grand View Research, the total 2018 market sizes of cancer immunotherapy
worldwide and in China were US$58bn and US$2.9bn respectively, with expected
industry sales CAGR of 10% and 12% in 2018-26, thanks to its efficacy over other ways
of cancer treatment.

 
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What is Immunotherapy
Cancer is the leading cause of death by diseases in China and second worldwide.
Specifically, it accounted for 18% of deaths worldwide, and 30% of which can be
attributed to deaths occurring in China. Oncology drugs contributed a significant 10% to
sales in pharmaceutical industry worldwide and China in 2018, and sales CAGR in 2013-
18 was 15% and 17% respectively, outpacing the overall industry by 9ppts and 5ppts.

Top 10 causes of death by diseases in China

Source: China National Healthcare Commission, DBS HK

Top 10 causes of death by diseases in China

Source: World Health Organization, DBS HK

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Classic methods of cancer treatment include surgery, radiotherapy, chemotherapy and

targeted therapy. In 2018, the Nobel Prize in Medicine was awarded to the study of immune
checkpoint therapy. Since then, more market attention is being paid to immunotherapy.

Immunotherapy is a huge breakthrough in treating cancer. It activates or re-engages the

patient’s own immune system to recognise cancer cells as foreign to the body and kills them.

Compared to classic cancer treatments, immunotherapy has great advantages:

• Relative to targeted therapy

As it acts on the immune system instead of limited specific genetic mutations /
protein interactions like targeted therapy, its scope of curable patients in final phase
cancer is >50% larger. Immunotherapy showed better patients responses compared
to targeted therapy. In terms of percentage of patients with tumor size reduced vs
targeted therapy, it is 20% vs 10% in final-phase liver cancer, and 50% vs 30% in
non-small-cell lung cancer (comparison between PD-1 and bevacizumab which is a
famous targeted therapy medicine and the only anti-angiogenic agent approved for
the first-line treatment of non-small-cell lung cancer). Also, the patients survive longer
after undergoing such treatment without getting worse, e.g. it is 18-25 months vs 12
months for non-small-cell lung cancer.

• Relative to chemotherapy
The side effects of Immunotherapy is milder as chemotherapy injects toxins into
patients’ bodies and impacts all cells while immunotherapy only focuses on immune
or cancer cells and the substance injected is not poisonous. In lung cancer treatment,
only 18% patients receiving immunotherapy developed adverse effects that required
medical interventions, while the number of chemotherapy group was 41%.

• Relative to surgery and radiotherapy

Immunotherapy can tackle all stages of cancer while surgery and radiotherapy are
mostly performed during early stages of cancer.

However, immunotherapy also has its limitations. For example, immune checkpoint inhibitors
rely on the antigen on immune cell or tumor cell to work. If the amount of that antigen is
too low, immune checkpoint inhibitors cannot function. Pancreatic cancer, prostate cancer
and brain cancers are of this nature.

Immune checkpoint inhibitor has side effects too. As immune checkpoint inhibitor
activates the immune system to kill cancer, its side effects manifest in the form of an over-
activated immune response on other healthy parts of the body. Severe side effects include
lung inflammation (pneumonitis), heart (myocarditis), liver (hepatitis), etc. But these are
very rare and usually less than 5% of patients will develop these symptoms that require
medical intervention.
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Comparison of immunotherapy with other cancer treatments

Surgery Radiotherapy Chemotherapy Targeted therapy
Definition Physical removal of Using high energy Inject chemicals throughout Use small molecules or
tumor radiation to destroy the whole body, including monoclonal antibodies
cancer cells tumors and healthy tissues, to act on: a) specific
to stop or slow cancer cell genetic mutations that
growth and division. cause cancer; b) specific
interactions of proteins
that speed up growth /
division of tumor cells;
c) specific interaction
of proteins that causes
angiogenesis.
Limitations 1) Mostly used 1) Mostly used in Significant side effects. Targeted therapy acts on
in early stage early stage cancer. It a limited set of specific
cancer. It acts on a acts on a particular Example 1: 30-40% of genetic mutation or
particular part of part of the body patients suffer from protein interaction.
the body affected affected by a tumor chemotherapy-induced When there is mutation
by a tumor but but unable to catch peripheral neuropathy or interaction beyond its
unable to catch cancer cells that (often a painful side effect). scope, a targeted therapy
cancer cells that have spread to other drug might fail to function.
have spread to body parts.
other body parts.
2) Not applicable 2) Damage to Example 2: 9.7% of patients
to blood cancer. surrounding tissues suffer from chemotherapy-
(e.g. lung, heart). induced thrombocytopenia
(loss of platelets, increased
risk of serious bleeding).
Immunotherapy’s It can handle It can handle Milder side effects. As it acts on the immune
Asia iscan
advantages smaller than
cancers at all stages cancers at all stages system instead of limited
overcome
North above theoretically.
America and theoretically. Based on a study on the specific genetic mutations/
limitations. comparison of efficacy protein interactions like
Europe but growing and safety between targeted therapy, its
faster in the US$101B chemotherapy and scope of curable patients
global short-term rental pembrolizumab (medicine in final phase cancer is
for immunotherapy) against >50% larger, evidenced
sector lung cancer, occurrence of by a higher percentage
treatment-related adverse of patients with tumor
Retail Value of Short-term Rental
eventsinof
USD’bn
grade 3 (severe size reduced vs targeted
or medically significant therapy, e.g. 20% vs 10% in
but not immediately life final-phase liver cancer, and
threatening) or worse was 50% vs 30% in non-small-
41% in chemotherapy and cell lung cancer (mostly in
just 18% in pembrolizumab. final phase when detected).

This is because
chemotherapy involves
the injection of toxins
into patients’ bodies and
impacts all cells while
immunotherapy only focuses
on immune or cancer cells
and the substance injected is
not poisonous.
Source: DBS HK
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Immune Checkpoint Therapy

There are currently five types of cancer immunotherapy, but we believe immune checkpoint
therapy is the most promising one because:

1. It can help to treat most types of cancers (compared to adoptive cellular therapy,
monoclonal antibodies, therapeutic cancer vaccines)

2. Its production cost is much lower (compared to adoptive cellular therapy)

3. It stays in the human body for a longer period of time to kill cancer cells (compared to
cytokine therapy)

PD-1 and Programmed death-ligand 1 antibody (“PD-L1”) account for the bulk of immune
checkpoint inhibitors’ industry sales. Thanks to its advantages above, global sales of PD-1
and PD-L1 had expanded by 110% CAGR in 2015-18. Their 2018 market sizes worldwide
and in China were US$13.9bn and US$3.5m respectively with expected industry sales CAGR
of 27% and 534% in 2018-22, according to Frost & Sullivan.

Market size for PD-1 and PD-L1

Source: Frost & Sullivan, DBS HK

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Five types of cancer immunotherapy

Immune checkpoint therapy Adoptive cellular therapy

Mechanism: Interaction between proteins on immune Extract T cells from the patient. Genetic
cells and tumor cells could inhibit the engineering performed on the T cells in the
function of immune cells. For example, the lab to make it more effective against tumors.
interaction between PD-1 on T cells (immune The cells are then transferred into the
cell or a lymphocyte that participates in patient’s body to attack the tumor.
cellular immunity) with PD-L1 on tumor
cells could inhibit immune function of T
cells. By targeting the checkpoint molecules
(e.g. either targeting PD-1 or PD-L1), the
interaction between the protein on T cells
(e.g. PD-1) and the protein on tumor cells
(e.g. PD-L1) is disengaged, so that T cells can
recognize and kill cancer cells.

Major PD-1, PD-L1, cytotoxic T-lymphocyte- Chimeric-antigen receptor T cell therapy

products: associated protein 4 (“CTLA 4”, a protein on (CAR-T)
immune cell) antibody

Limitations: 1) Efficacy unclear in treating solid tumors.

Clinical studies of CAR-T in solid tumors are
mostly in early phases. No ongoing Phase 3
trials (final phase) involving CAR-T in solid
tumors found on Clinicaltrials.gov website
(a well-recognised professional registry of
clinical trials, useful in searching for clinical
information)

2) Current CAR-T products only allow T cells to

be obtained from the patient autologously.
This means CAR-T cells have to be developed
for each patient individually, which does not
allow the cells to be produced on a large scale
within a pre-defined standard, which puts
great pressure on the production capacity of
the drug makers.


Monoclonal antibodies
Injected into a patient’s body the
antibodies that recognize antigens
on tumor cells and label the cells
as a target of the immune system.
Rituximab
It relies on the identification of
a unique bio-marker for each
cancer type. Each bio-marker can
only enable the immune system
to tackle one series of indications,
which limits its application.
For example, rituximab is only
applicable for lymphoma with B
cell origin in cancer treatment.
Therapeutic cancer vaccines
1) Inject tumor specific antigens
directly or inject viruses to trigger
the release of a tumor antigen
inside the patient’s body to
immunize the patient, so that the
patient’s immune system is ready
to attack the developing tumor.
2) Or, a patient ‘s immune cells are
extracted and immunized with
the tumor antigen ex vivo. The
immune cells are then infused
back into the patient to attack the
tumor.
Oncolytic virus, Sipuleucel-T
(Provenge)
It relies on specific antigens
found on the tumor. Each
antigen will enable the immune
system to tackle one indication
which is a limiting factor. The
industrial preparation of a high
concentration of oncolytic virus is
challenging and the oncolytic virus
has to be injected directly onto the
tumor, which limits its application
to tumors at the surface of the
body only.
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Cytokine therapy
Improving communication
(relaying immune signals) among
different immune cells through
supplementing signaling molecules
to trigger immune responses and
attack cancer cells.
Interleukin-2, interferon alfa,
GM-CSF (granulocyte-macrophage
colony-stimulating factor)
Signaling molecules are usually
short-lived, meaning the patients
must receive multiple injections
before a response can be achieved.
For example, interleukin-2 therapy
has been approved by the Food &
Drug Administration of the US to
treat melanoma and renal cancers.
However, the popularity of this
therapy is limited because the
half-life (the time it takes for the
concentration of that substance
to fall to half of its initial value)
of interleukin-2 is only several
minutes. This affects its efficacy in
the human body.
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Five types of cancer immunotherapy cont.

Immune checkpoint therapy Adoptive cellular therapy

Immune 1) It can tackle solid tumors such as lung
checkpoint cancers, urothelial cancers, melanoma, while
therapy’s T cell therapy works well only in blood
advantages tumors.
over the above
limitations: 2) Checkpoint inhibitors can be produced in
batches at a lower cost (annual expense per
patient: >Rmb300k in China or >US$100k in
the US), while T cell therapy has to be tailor-
made for each patient and costs substantially
more (US$400k per treatment).

2018 Sales of Keytruda (PD-1 antibody, Merck): 7.2 Yescarta (CAR-T, Gilead): 0.3
major products
Opdivo (PD-1 antibody, BMS): 6.7 Kymriah (CAR-T, Novartis): 0.08
(US$ Bn)
Yevoy (CTLA-4 antibody, BMS): 1.3
Tecentriq (PD-L1 antibody, Roche): 0.8
Imfinzi (PD-L1 antibody, AstraZeneca): 0.6


Monoclonal antibodies
Compared to other monoclonal
antibodies, immune checkpoint
inhibitors have broader
applications as multiple cancer
types may utilise the same set of
immune checkpoints. Therefore,
one immune checkpoint may be
applicable to multiple cancers; this
is true for PD-1.
Rituxan (Rituximab, Roche): 6.9
Therapeutic cancer vaccines
Immune checkpoint inhibitors have
broader applications as multiple
cancer types may utilise the
same set of immune checkpoints.
Therefore, one immune checkpoint
may be applicable to multiple
cancers - this is true for PD-1.
Immune checkpoint inhibitors
can be applied systematically and
are much easier to prepare than
oncolytic virus.
Provenge (Sigpuleucel-T,
Dendreon): 0.3 (2017 sales)
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Cytokine therapy
Compared to cytokines, immune
checkpoint inhibitors, most of
which are antibodies, have a stable
molecular structure, meaning
a longer half-life. For example,
Pembrolizumab has a half-life of
26 days whereas Interleukin-2,
a cytokine drug that can boost
immune activity, has a half-life of
about 4 minutes.
As a result, pembrolizumab can
achieve better clinical results. For
example, in metastatic melanoma,
in terms of proportion of patients
with tumor size reduced, it is 36-
37% vs 16% for cytokine therapy
Proleukin (Interleukin-2, Novartis):
0.06 (1H18 sales)
Source: Bloomberg Finance L.P., Companies, DBS HK
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Summary of available immune checkpoint inhibitors on market

Market name Opdivo Keytruda

General name Nivolumab Pembrolizumab

Manufacturer Bristol Myers Squibb Merck

(“BMS”)
Target PD-1 PD-1
Indication approved by 1L/2L (note 1) 1L Melanoma
U.S. FDA Melanoma (note 2) 1L NSCLC (+chemotherapy)
2L NSCLC (note 3) 1L NSCLC with PD-L1 protein in the
2L SCLC (note 4) tumor cell
2L RCC (note 5) 2L SCLC
2L cHL (note 6) 1L(+chemotherapy)/2L HNSCC
2L HNSCC (note 7) 4L cHL
2L UC (note 8) 3L PMBCL (note 11)
2L CRC (note 9) 2L UC
2L HCC (note 10) Mostly 2L MSI-H high tumor (note 12)
3L GC (note 13) with PD-L1 protein in
the tumor cell
2L Cervical (note 14) with PD-L1 protein
in the tumor cell
2L HCC
2L MCC (note 15)
1L RCC (+ axitinib)
2L Endometrial carcinoma (+lenvatinib)
(note 16)
2L ESCC with PD-L1 protein in the
tumor cell (note 17)

Indication approved by 2L NSCLC 2L Melanoma

National Medical Products 2L HNSCC with PD-L1 protein in the 1L NSCLC (+chemotherapy)
Administration, China tumor cell 1L NSCLC with PD-L1 protein in the
("NMPA") tumor cell

Initial approval date Dec-14 Sep-14

Dosage 240 mg (1 quantity in 2 weeks) or 480 200 mg (1 quantity in 3 weeks)

mg (1 quantity in 4 weeks)
Price in US (USD) 2787 100mg/10ml 4935 100mg
Price in China (RMB) 9260 100mg/10ml 4591 40mg/10ml 17918 100mg

Drug donation program Buy 6 get 7 free Buy 3 get 3 free

(China)
Annual expense per 277,332 322,524
patient taking into account
of drug donation program
(China) (80 kg) (RMB)

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Yervoy Tecentriq Imfinzi

Ipilimumab Atezolizumab Durvalumab

BMS Genetech AstraZeneca

CTLA-4 PD-L1 PD-L1

Melanoma 2L UC 2L UC
1L RCC (+ Nivolumab) 1L (+chemotherapy)/2L NSCLC maintenance of NSCLC
2L CRC 1L TNBC (note 18)
(+chemotherapy)
1L SCLC (+chemotherapy)

N.A. N.A. N.A.

Mar-11 May-16 May-17

1mg/kg-3mg/kg, (1 quantity in 3 1200 mg (1 quantity in 3 weeks) 10mg/kg, (1 quantity in 2 weeks)

weeks)
7610 50mg/10ml 9279 1200 mg 900 120mg
N.A. N.A. N.A.
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Summary of available immune checkpoint inhibitors on market cont.

Market name Bavencio Libtayo

General name Avelumab Cemiplimab-rwlc

Manufacturer Merck / Pfizer Regeneron & Sanofi

Target PD-L1 PD-1

Indication approved by MCC CSCC (note 19)

U.S. FDA
2L UC

1L RCC (+ axitinib)

Indication approved by N.A. N.A.

National Medical Products
Administration, China
("NMPA")

Initial approval date Mar-17 Sep-18

Dosage 800mg (1 quantity in 2 weeks) 350mg (1 quantity in 3 weeks)

Price in US (USD) 1650 200mg 9509 350mg

Price in China (RMB) N.A. N.A.

Drug donation program

(China)
Annual expense per
patient taking into account
of drug donation program
(China) (80 kg) (RMB)

Source: FDA prescribing information, Drugs.com, companies, Healthcare Executive, DBS HK
Note 1: 1L/2L/3L/4L… - the order of treatment for a disease. First-line therapy is the one accepted as the best treatment. Subsequent treatment(s) may be used (i.e. 2nd line,
3rd line) instead if it doesn’t cure the disease or if it causes severe side effects.
Note 2: Melanoma – the most serious form of skin cancer that begins in the cells (melanocytes) that control the pigment in a patient’s skin.
Note 3: NSCLC – known as ‘Non-small cell lung cancer’ - is any type of epithelial lung cancer other than small cell lung carcinoma (SCLC). About 80-85% of lung cancers
are NSCLC.
Note 4: SCLC – known as ‘Small cell lung cancer’ - is a type of highly malignant cancer that most commonly arises within the lung. About 10-15% of lung cancers are
SCLC.
Note 5: RCC – known as ‘Renal cell carcinoma’ - is a kidney cancer that originates in the lining of the proximal convoluted tubule, a part of the very small tubes in the
kidney that transport primary urine.
Note 6: cHL – known as ‘Classical Hodgkin’s lymphoma’ - is a cancer of the lymphatic system, which is part of the immune system. It makes up c.10% of lymphoma cases.
Note 7: HNSCC – known as ‘Head and neck squamous cell carcinoma’ - is a cancer that arises from particular cells called squamous cells. Squamous cells are found in the
outer layer of the skin and in mucous membranes, which are moist tissues that line body cavities such as the airways and intestines. Head and neck squamous cell
carcinoma (HNSCC) develops in the mucous membranes of the mouth, nose, and throat.
Note 8: UC – known as ‘Urothelial Carcinoma’ - is a type of cancer that typically occurs in the urinary system. It is the most common type of bladder cancer and cancer of
the ureter, urethra, and urachus. It is the second most common type of kidney cancer, but accounts for only 5-10% of all primary renal malignant tumors.
Note 9: CRC – known as ‘Colorectal cancer’ refers to bowel cancer and colon cancer - is the development of cancer from the colon or rectum (parts of the large intestine).
Note 10: HCC – known as ‘Hepatocellular carcinoma’ - is the most common type of primary liver cancer. Hepatocellular carcinoma occurs most often in people with chronic
liver diseases, such as cirrhosis caused by hepatitis B or hepatitis C infection.
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Tyvyt Tuoyi Ailituo

Sintilimab Toripalimab Camrelizumab

Innovent Junshi Hengrui

PD-1 PD-1 PD-1

N.A. N.A. N.A.

2L or above (3L/4L…) cHL 2L Melanoma 2L or above (3L/4L…) cHL

Dec-18 Dec-18 May-19

200 mg (1 quantity in 3 weeks) 3mg/kg (1 quantity in 2 weeks) N.A.

N.A. N.A. N.A.

7838 100mg 7200 240mg 19800 200mg

Buy 3 get 2 free Buy 4 get 4 free Buy 2 get 2 free, then, buy 4 get
18 free
188,112 100,800 118,800

Note 11: PMBCL is known as ‘Primary Mediastinal Large B-Cell Lymphoma’. Primary mediastinal large B-cell lymphoma (PMBCL) is a rare type of non-Hodgkin lymphoma
(NHL). It mainly affects young adults and is more common in women. PMBCL develops when the body makes abnormal B-cells – the lymphoma cells. B-cells are
white blood cells that fight infection. The lymphoma cells build up between the lungs and behind the breast bone, in an area called the mediastinum.
Note 12: MSI-H high tumor – known as ‘Microsatellite instability high tumor’ - describes cancer cells that have a greater than normal number of genetic markers called
microsatellites. Microsatellites are short, repeated, sequences of DNA. Cancer cells that have large numbers of microsatellites may have defects in the ability to
correct mistakes that occur when DNA is copied in the cell.
Note 13: GC – known as ‘Gastric cancer’ or stomach cancer - is a cancer that forms in tissues lining the stomach.
Note 14: Cervical - Cervical cancer occurs when the cells of the cervix grow abnormally and invade other tissues and organs of the body. When it is invasive, this cancer
affects the deeper tissues of the cervix and may spread to other parts of the body (metastasis), most notably the lungs, liver, bladder, vagina, and rectum.
Note 15: or neck. Merkel cell carcinoma is also called neuroendocrine carcinoma of the skin. Merkel cell carcinoma most often develops in older people. Long-term sun
exposure and/or a weak immune system may increase your risk of developing Merkel cell carcinoma.
Note 16: Endometrial carcinoma is a cancer that arises from the endometrium (lining of womb).
Note 17: Squamous cell carcinoma of the oesophagus.
Note 18: TNBC – known as ‘Triple negative breast cancer’ - is a kind of breast cancer that does not have any of the receptors that are commonly found in breast cancer.
Note 19: CSCC – known as ‘Cutaneous squamous cell carcinoma’. Squamous cell carcinoma (SCC), the second most common form of skin cancer, is an uncontrolled growth
of abnormal cells arising from the squamous cells in the epidermis, the skin’s outermost layer. It is sometimes called cutaneous squamous cell carcinoma (CSCC) to
differentiate it from very different kinds of SCCs elsewhere in the body. SCCs often look like scaly red patches, open sores, warts or elevated growths with a central
depression; they may crust or bleed.
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Clinical Trials in China

Due to the great advantages of cancer immunotherapy mentioned earlier, the number of
clinical trials in this respect surged in recent years.

The Chinese market has exhibited great potential for cancer immunotherapy for two main
reasons:

1. Out of 9.6m cancer deaths globally in 2018, China contributed 2.9m or 30% of them.
There is huge potential demand for cancer immunotherapy products.

2. Number of clinical trials in cancer immunotherapy in China surged drastically.

The figure registered at Centre for Drug Evaluation in China (“CDE”) surged by >90%
each year in 2017 and 2018.

The above two factors have resulted in aggressive launch of new products in three years.
We estimate that there could be c.70 different cancer immunotherapy products to be
launched in three years in China. Their potential to cure previously incurable cancers should
excite the market.

For example, 90% of oesophageal cancer relapsed in China are incurable. BMS has a product
in clinical trial phase 2 to treat that. If it succeeds, that would drive its share price. Many
other clinical trials have similarly huge potential. We expect the launch of new products to
enable the contribution of immune checkpoint inhibitors to global oncology drug sales to
surge from 11% to 18% in 2018-22.

Type of biologics tested in clinical trials registered at CDE that involve cancer
immunotherapy

Source: CDE, DBS HK

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Implications of Successful Clinical Trials on Pharmaceutical

Sector
Drastic surge in number of clinical trials for cancer immunotherapy is also expected to
improve the quality of the sector. As mentioned above, the number of clinical trials for
cancer immunotherapy in China has increased drastically. Two points on those clinical
trials are worth highlighting.

Firstly, the number of clinical trials under phase three has been increasing significantly
since 2016. The accumulated number of phase 3 clinical trials stood at 120 over the
period from 2014 to 1Q19. As it is the final phase before NMPA’s approval to launch the
product, the clinical data released in this phase will have a bigger impact compared to
other phases.

Furthermore, based on historical data, 59% of clinical trials involving oncology in phase 3
should be able to succeed with a subsequent launch of the product in the market in 3-5
years. This implies that potentially, >70 cancer immunotherapy trials can be translated
into products to be launched in the market within 3-5 years. These are potential catalysts
to drive share price performance of the sector.

Number of clinical trials involving cancer immunotherapy

*Others represents trials that are not classified by clinical phases, such as bio-equivalence tests of biosimilars.
Source: CDE, DBS HK
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Secondly, while most of the products under clinical trials are targeting well known immune
check points including PD-1, PD-L1, cytotoxic T-lymphocyte–associated antigen 4 (“CLTA-4”),
a significant portion of the trials are looking at new checkpoints. New checkpoints could
expand the number of patients cured by immunotherapy which will be positive to sector
performance. For example, EMD Serono Research & Development Institute and Merck are
targeting a new immune checkpoint – transforming growth factor β (“TGF-β”) for treatment
of non-small cell lung cancer (“NSCLC”, makes up >80% of lung cancer cases). This medicine
may be able to treat patients that PD-1 / PD-L1 / CTLA-4 were unable to. In clinical trial phase 1,
its ORR is better than Pembrolizumab (PD-1) (85% vs 39%). This is a promising development.

Number of clinical trials with different immune checkpoint targets registered at CDE

Source: CDE, DBS HK

Number of clinical trials with different indications registered at CDE that involve
cancer immunotherapy

BC, Breast Cancer, CRC, Colorectal carcinoma, ESCC, Esophageal squamous cell
carcinoma, GC, Gastric Cancer, HCC, Hepatocellular carcinoma, LC, Lung cancer
Source: CDE, DBS HK
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There are some potentially impressive products to lift market sentiment. Among all those
clinical trials in the final phase, the following have a higher chance of delivering strong results
and driving market sentiment on this sector.

Case Study: BeiGene Ltd.

BeiGene conducted a study of Tislelizumab in combination with chemotherapy to treat non-
small cell lung cancer (NSCLC) with the squamous subtype.

In terms of incidence rate and mortality rate among different cancers, lung cancer has the
highest rates. NSCLC makes up >80% of lung cancer cases.

Incidence rate of different cancer types in China

Source: Frost &

Mortality rate of different cancer types in China Sullivan, DBS HK

Source: Chinese Journal of

Oncology, DBS HK
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Study of Tislelizumab (PD-1) in Combination with Chemotherapy Versus just Chemotherapy in Advanced
Lung Cancer
Trial ID: CTR20180292, NCT03594747
Sponsor: BeiGene Ltd.

Estimated enrolment: 342 participants

Estimated study start July 2018

date:
Estimated primary February 2020/December 2020
completion date /
study completion date:
Treatment arms Experimental: Tislelizumab Experimental: Tislelizumab Active Comparator:
combined with carboplatin combined with carboplatin Carboplatin and paclitaxel
and paclitaxel and nab-paclitaxel
Carboplatin with a
Tislelizumab administered Tislelizumab will be plasma concentration
at a dose of 200 mg administered at a dose of (AUC) 5, D1 of each cycle,
intravenously (IV) Q3W. 200 mg intravenously (IV) administrated as an IV
Carboplatin with plasma Q3W. Carboplatin with infusion over 15 to 60
concentration (AUC) a plasma concentration minutes, for 4 to 6 cycles
5, D1 of each cycle, (AUC) 5, D1 of each cycle, Paclitaxel 175 mg/m2, D1
administrated as an IV administrated as an IV of each cycle, administered
infusion over 15 to 60 infusion over 15 to 60 as an IV infusion over 1 to
minutes, for 4 to 6 cycles minutes, for 4 to 6 cycles 3 hours, for 4 to 6 cycles
Paclitaxel 175 mg/m2, D1 Nab-paclitaxel 100 mg/
of each cycle, administered m2, D1, D8, and D15 of
as an IV infusion over 1 to each cycle, administered
3 hours, for 4 to 6 cycles as an IV infusion over 30
minutes, for 4 to 6 cycles

Primary outcome Progression free survival (“PFS”. It is the length of time during and after the
measures: treatment of cancer that a patient lives with the cancer and does not get worse)
Secondary outcome Objective response rate (“ORR”, it the proportion of patients with tumor size
measures: reduction of predefined amount and for a minimum time period). Duration of
response (“DOR”, time from response to progress/death), Overall survival (“OS”,
the length of time from either the date of diagnosis or the start of treatment for a
disease, such as cancer, that patients diagnosed with the disease are still alive)
Why is it critical: This study examines the efficacy of BeiGene’s PD-1 antibody plus carboplatin,
paclitaxel or nab-paclitaxel in treating squamous non-small cell lung cancer. Early
phase 2 studies indicate that Tislizumab with paclitaxel and platinum-based drugs
can lead to an ORR of 80%.
Source: Company, ClinicalTrials.gov, CDE, DBS HK

Case Study: EMD Serono Research & Development Institute

and Merck
Beside targeting PD-L1 which is one of the three common immune checkpoints (PD-L1,
PD-1, CTLA-4), EMD Serono Research & Development Institute and Merck are targeting
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a new immune checkpoint – transforming growth factor β (“TGF-β”) for treatment of

NSCLC. This medicine may be able to treat patients that PD-1 / PD-L1 / CTLA-4 were
unable to. In clinical trial phase 1, its ORR is better than Pembrolizumab (85% vs 39%).
This is a promising development.

Study of M7824 Versus Pembrolizumab as a First-line Treatment in Non-Small Cell Lung Cancer

Trial ID: CTR20190305, NCT03631706

Sponsor: EMD Serono Research & Development Institute, Inc;
Merck KGaA, Darmstadt, Germany
Estimated enrolment:
300 participants (30 patients in China)
Estimated study start date:
Oct 2018
Estimated primary Oct 2021 / Jun 2026
completion date /
study completion date:
Treatment arms Drug: M7824 Drug: Pembrolizumab

Participants will receive an intravenous Participants will receive an intravenous

infusion of 1200 milligrams (mg) M7824 infusion of 200 mg Pembrolizumab once
once every 2 weeks starting from Day every 3 weeks starting from Day 1 up to
1 up to disease progression (cancer is disease progression.
growing, spreading or getting worse).

Primary outcome ORR, PFS

measures:
Secondary outcome OS,
measures:
Treatment related adverse event (“TRAE”, adverse event that occur or worsen only
after treatment initiation)

Complete response (“CR”, the disappearance of all signs of cancer in response to

treatment)

Why is it critical: The trial has a good chance of success because this antibody has shown clinical
efficacies in early phase I trials. It achieved an ORR of over 85% in NSCLC with
high PD-L1 expression as monotherapy. As a reference, the ORRs for the above
indication for Pembrolizumab monotherapy is 39%. This study is a head-to-head
direct comparison of PD-L1/ TGF-β bi-specific antibody and PD-1 antibody in
treating advanced non-small cell lung cancer.

If this trial is successful, it will be a strong signal that other than the currently
available PD-1/PD-L1/CTLA4 antibodies, we may see new antibodies for use in
immune checkpoint therapy to enable superior clinical outcomes in treating
cancers.

Source: Company, ClinicalTrials.gov, CDE, DBS HK

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Industry Risks For Cancer

Immunotherapy
Despite the promising future of cancer immunotherapy industry, there are two risks for players
in the industry:

1. Failure of clinical trials

The success rates of oncology drug clinical trials are intrinsically lower than average
levels when all kinds of drugs are considered. According to an industry analysis done by
Biotechnology Innovation Organization based on clinical trials from 2006 to 2015, the
success rates (progression to the next phase of clinical trials) of oncology drugs in Phase I,
II, III were 62.8%, 24.6% and 40.1%. These ratios were 1ppt, 20ppts and 31ppts below
average. Most drugs including oncology fail Phase II trials, where efficacies are tested.
Oncology drugs have much lower Phase III success rates compared to average, particularly
clinical trials involving solid tumours, which is only 34%. Approximately 70% of the failures
was due to inadequate clinical efficacies and safety issues.

2. Price-cut risk

Major immune checkpoint inhibitors - PD-1 and PD-L1, are facing price-cut risk in future. As
mentioned above, there are at least 8 domestic players involved in this segment in China.
They have launched products or are pending government approval to launch or in clinical
trial phases 2 /3. As these are similar products targeting the same immune checkpoints (PD-
1 or PD-L1), price cuts among players to gain market share is possible in the future.

The price competition could be intensified after their patents are off. Because by then, other
companies are allowed to produce same products and to gain market share through price
cut. For domestic companies launched their PD-1 or PD-L1, their core patent protection will
end in following dates: Innovent Mar 2039, Junshi Nov 2037, Hengrui Jan 2038.
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Appendix
Appendix 1:
Overview Of Oncology Drugs Market

Global oncology drugs market 2013-30E

Period CAGR
2013-2017 11.0%
2017-2022E 12.8%
2022E-2030E 9.2%

Source: Frost & Sullivan

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Evolution of cancer treatment

Surgery
1881, first successful surgery performed for stomach cancer

Radiotherapy
1903, first successful use of radiation to cure skin cancer

Chemotherapy
1949, FDA approved first chemotherapy drug-nitrogen mustard -for the treatment of
Hodgkin lymphoma

Targeted therapy
1997, FDA approves the first molecularly targeted cancer drug, rituximab

Immunotherapy
2011, FDA approved the first checkpoint inhibitor, Ipilimuab

Source: Frost & Sullivan

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China oncology drugs market 2013-30E

Period CAGR
2013-2017 13.7%
2017-2022E 13.5%
2022E-2030E 12.1%

Source: Frost & Sullivan

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Incidence rate of different cancer types in China

Source: Frost & Sullivan, DBS HK

Source: Frost &

Mortality rate of different cancer types in China Sullivan, DBS HK

Source: Chinese Journal of Oncology, DBS HK

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Appendix 2:
Summary Of Indicators For Clinical Trial Efficacy And Safety

Indicator Abbreviation Definition

Complete Remission/ CR The disappearance of all signs of cancer in response to
Response treatment. This does not always mean the cancer has been
cured.
Partial response PR A decrease in the size of a tumor, or in the extent of cancer in
the body, in response to treatment.
Duration of response DOR Time from response (R) to progression/death (P/D).

Objective response rate ORR The proportion of patients with tumor size reduction of a
predefined amount and for a minimum time period. Response
duration usually is measured from the time of initial response
until documented tumor progression. ORR = CR + PR

Overall survival OS The length of time from either the date of diagnosis or the
start of treatment for a disease, such as cancer, that patients
diagnosed with the disease are still alive. In a clinical trial,
measuring the overall survival is one way to see how well a new
treatment works
Progression free survival PFS The length of time during and after the treatment of a disease,
such as cancer, that a patient lives with the disease but it does
not get worse. In a clinical trial, measuring the progression-free
survival is one way to see how well a new treatment works.
Adverse Event AE An unexpected medical problem that happens during treatment
with a drug or other therapy. Adverse events may be mild,
moderate or severe, and may be caused by something other than
the drug or therapy being given. Also called adverse effect.
Treatment related adverse TRAE AEs that occur or worsen only after treatment initiation.
event
Source: National Cancer Institute, FDA, the BMJ, Journal of Thoracic Oncology, DBS HK
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Appendix 3:
Grading scale of adverse event severity

Grade Definition
1 Mild; asymptomatic or mild symptoms; clinical or diagnostic
observations only; no intervention indicated.
2 Moderate; minimal, local or noninvasive intervention indicated;
limiting age-appropriate instrumental activities of daily living
(ADL).

3 Severe or medically significant but not immediately life

threatening; hospitalization of prolongation of hospitalization
indicated; disabling; limiting self-care ADL.
4 Life-threatening consequences; urgent intervention indicated.

5 Death related to AE.

Source: NCI Common Terminology Criteria for Adverse Events, DBS HK

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Disclaimers and Important Notices

The information herein is published by DBS Bank Ltd

(the “Company”). It is based on information obtained
from sources believed to be reliable, but the Company
does not make any representation or warranty, express
or implied, as to its accuracy, completeness, timeliness
or correctness for any particular purpose. Opinions
expressed are subject to change without notice. Any
recommendation contained herein does not have
regard to the specific investment objectives, financial
situation and the particular needs of any specific
addressee.

The information herein is published for the information

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Company, or any of its related companies or any
individuals connected with the group accepts no
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The information herein is not to be construed as an offer

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