Investors inject $400M into licensing Chinese biotech obesity drugs

A newly formed biotechnology company, currently referred to as Hercules CM NewCo, has attracted significant attention and investment within the life sciences sector. The company has secured a $400 million investment from four major investors: Bain Capital Life Sciences, RTW Investments, Atlas Venture, and Lyra Capital. According to a disclosure on the Shanghai Stock Exchange, Hercules CM NewCo has licensed a portfolio of weight loss medications from Jiangsu Hengrui Pharmaceuticals.

Hercules CM NewCo has acquired three drug candidates from Hengrui in exchange for an upfront and near-term payment of $110 million along with approximately a 20% equity stake in the company. The agreement also outlines potential additional payments to Hengrui: up to $200 million contingent on meeting specific clinical and regulatory milestones, and as much as $5.7 billion if the drugs are approved and achieve certain sales targets.

The most advanced drug in Hercules' portfolio is HRS-7535, an oral incretin currently in Phase 2 clinical trials targeting Type 2 diabetes and obesity. This drug aims to stimulate the gut hormone GLP-1, similar to Novo Nordisk’s injectable drug Wegovy and other experimental treatments in development by companies like Novo and Eli Lilly. Another promising candidate, HRS-9531, is being tested in multiple mid-stage studies for diabetes and obesity. HRS-9531 targets both GLP-1 and GIP hormones, akin to Eli Lilly’s Zepbound, and is being developed as both a weekly injection and a tablet. Lastly, HRS-4729 is in preclinical development.

The leadership and board composition of Hercules CM NewCo remain undisclosed. When approached for comments, RTW declined, and Bain Capital, Atlas, Lyra, and Hengrui did not respond.

The financial structure of Hercules reveals a substantial investment breakdown: Bain contributed $225 million, securing a 39% stake; RTW invested $110 million for just over 19% equity; Atlas provided $50 million, resulting in a nearly 9% stake; and Lyra invested $15 million, acquiring a roughly 3% share.

The emergence of Hercules CM NewCo is indicative of the intense investment activity in the competitive field of pharmaceutical research focused on weight loss and diabetes treatments. Industry leaders like Novo Nordisk and Eli Lilly already have market-ready products and multiple successors advancing through trials. However, a wave of potential competitors is also making headway. Companies like Amgen, Roche, and Boehringer Ingelheim are advancing their own medicines through clinical trials, alongside publicly traded biotechs such as Viking and Structure Therapeutics. Additionally, new startups like Metsera, which recently raised $290 million, are entering the fray.

Jiangsu Hengrui Pharmaceuticals has been actively involved in collaborations within the biotech sector. It previously partnered with Atlas and Bain Capital to support Aiolos Bio, a biotech firm that licensed an asthma drug from Hengrui. This partnership led to a significant $1 billion buyout by GSK in January.

The creation and investment in Hercules CM NewCo underscore the high stakes and fierce competition within the pharmaceutical industry, particularly in the realm of diabetes and obesity treatments.