Writing by Lv Shuting and Chen Xiaoping
An American earns 70 billion yuan from a Chinese drug.
On October 6th, Summit Therapeutics Inc. (SMMT), a Nasdaq listed company, had a market value of approximately $14 billion, up from just a few hundred million dollars two years ago.
The dramatic turning point occurred in December 2022.
Robert Duggan, the controller of SMMT, has signed an agreement with China Kangfang Biotechnology to acquire commercial rights to the drug Ivosi (AK112) in major developed countries.
In mid September, clinical studies conducted by Ivosi showed that its efficacy was superior to that of the globally renowned drug K, the unknown SMMT, which skyrocketed. From the beginning of the year to the present, its highest increase has exceeded 10 times.
Dugen himself holds approximately 78% of SMMT's equity, which, according to the latest market price, amounts to around 11 billion US dollars. Even after deducting his investment costs, the book value has increased by over 10 billion US dollars, equivalent to approximately 70 billion RMB.
Believing in the power of China's innovation and daring to make heavy investments, the American earned a lot.
Wealth skyrockets
The temporary high point of Dugen's wealth appeared on September 16th.
On that day, SMMT's stock price soared to $33.89, and Dugan's equity value approached $20 billion at one point.
The outbreak occurred when Kangfang released research data.
The newly developed PD-1/VEGF bispecific antibody drug Ivonescimab was compared head to head with K-drug (pembrolizumab) in a phase III clinical study for locally advanced or metastatic non-small cell lung cancer patients (first-line treatment with PD-L1 expression positive).
The effect of Ivosi is even more excellent.
It reduces the risk of disease progression or death by half, with an objective response rate of 50.0% vs 38.5% for the target patient, a disease control rate of 89.9% vs 70.5%, and fewer serious adverse reactions.
K-drug is Merck's star product, the world's best-selling drug in 2023, with annual sales of $25.1 billion, equivalent to approximately RMB 180 billion.
As soon as the result came out, Yiwu naturally rose in popularity.
In just one week starting from the 9th, the main body of its research and development, Kangfang Biotechnology, saw a maximum increase of 50%; Dugan's SMMT equity is even more exaggerated, with a maximum increase of about 176%.
So, why is SMMT rising more sharply?
The key is that in December 2022, Dugen and Kangfang reached an agreement, and SMMT bought out its equity in major developed markets.
Therefore, SMMT may benefit more from this new drug than Kangfang.
In fact, the positive trend of Yvoxi has long been a concern for the market.
On May 30th, its stock price suddenly jumped from $2.85 to $11.25, with preliminary results from head to head research showing "statistically significant and significant clinical benefits".
From then on, within about four months, SMMT surged by about 11 times at most, and Dugan's equity value quickly soared to billions of dollars.
22 months ago, before reaching a deal with Kangfang, SMMT's stock price was as low as $0.66, with a market value of less than $500 million.
Now, the equity value of Dugan alone is about 11 billion US dollars, and its total investment is estimated to be less than 1 billion US dollars.
Re bet on gambling
Dugen's good luck lies in choosing the right partner.
In early December 2022, he reached a deal with Xia Yu, CEO of Kangfang Biotechnology, to obtain exclusive commercial licensing rights for Ecovaci in North America, Europe, and Japan for a bid of $5 billion and a low double-digit percentage of net sales commission.
Afterwards, Dugan quickly paid a prepayment of $500 million, including $474.9 million in cash and 10 million shares equivalent to $25.1 million. At the same time, it granted Xia Yu a board seat.
At the time of the transaction between Kangfang Biotechnology and SMMT, their financial situation was very thin. As of September of that year, they had only $122 million in cash on their books and approximately $100 million in net assets.
Fortunately, Dugan himself was a millionaire, with Forbes estimating his wealth to be around $2 billion that year.
As the major shareholder and CEO of the company, he provided SMMT with $500 million in cash to basically solve the problem of advance payments, while increasing his shareholding to 78.2%.
The timing of Dugen's decision was just right.
At that time, Xia Yu's team was already advancing head to head research on benchmarking K drugs, and its commercial potential was about to emerge. However, Kangfang Biotechnology's own financial resources are not sufficient to support subsequent research expenses.
From January to June 2022, Kangfang's revenue was 163 million yuan, with a six-month loss of 630 million yuan. Its cash was only 2.2 billion yuan. In November of that year, it had just raised funds from Guangzhou High tech Zone Group with only 500 million yuan, and its capital reserves were very thin.
Meanwhile, for Kangfang, commercial partners are also needed.
In this case, the conditions provided by Dugan were in line with Kangfang's needs at that time, and his legendary history in biopharmaceuticals was also a good endorsement.
In the field of biopharmaceuticals, there is a lot of uncertainty. For Yu Dugen and SMMT, taking out $500 million in advance is also a bet, and if Ivosi is not satisfactory, he may lose up to 1/4 of his net worth.
Fortunately, everyone is happy. In the spring of 2023, after receiving the advance payment, the Xia Yu team was able to smoothly promote Yiwoxi to Phase 3 clinical trials worldwide.
According to Citigroup's forecast, the annual sales peak of Ecovaci in the US and Europe will reach 7.8 billion US dollars, and if other markets are included, it can exceed 10 billion US dollars.
It is reported that Kangfang Biotechnology still has two drugs on hand - Cardonili AK104 and Lefali AK117, showing great commercial potential.
Some people believe that even after achieving great success with Ivosi, Dugan still has the opportunity to collaborate with Xia Yu's team on these two drugs.
Pharmaceutical Gold Rush
Dugen's discerning eye for pearls, coupled with Kang Fang and Yi Woxi, is not entirely accidental.
According to public information, he was born in 1954 and started from scratch. During his college years, he embarked on a journey of gold mining, investing in stocks, and later running household sewing tools, chain biscuit companies, computer network companies, etc., earning tens of millions of dollars.
In the 1990s, he first entered the healthcare industry by investing in surgical robot company Computer Motion and serving as its CEO. According to Fortune, in 2003, he sold it for $68 million to the da Vinci surgical robot.
Dugen entered the biopharmaceutical field with a unique personal experience. He had a son who suffered from a brain tumor and passed away in pain.
I know more about brain tumors than ordinary people on the street because we have to seek help in treating my son
Dugan recalled that he then invested in the innovative drug company Pharmacyclis, which is currently developing the drug Xcytrin for the treatment of brain cancer.
When Xcytrin applied for listing with the FDA, it repeatedly encountered setbacks and other investors showed little interest. Du Gen acquired a large amount of equity and raised $50 million out of his own pocket for it, hoping to persevere. However, he has not been able to wait for Xcytrin's success.
Coincidentally, in 2006, they introduced three drugs under development for $6.6 million.
Among them, the BTK inhibitor Imbruvica has become a major surprise, as it is highly effective in treating chronic lymphocytic leukemia and has significant therapeutic effects on rare disease mantle cell lymphoma.
Dugen reluctantly accepted the expert committee's recommendation and redirected resources towards developing the more promising Ibrutinib. In 2011, he acquired the partnership rights with Johnson&Johnson, receiving a $150 million advance payment to advance drug research and development, while cleverly retaining market rights in the United States.
Later, Ibrutinib was successfully launched, with global annual sales approaching $10 billion during its peak period.
In 2015, Dugan led negotiations to sell Pharmacyclics for a sky high price of $21 billion and cashed out.
It is estimated that the transaction will bring a return of $1 billion to it.
In 2020, Du Gen acquired 69% of the shares of Summit Therapeutics, a pharmaceutical listed company, and became the CEO of the company, beginning to search for new prey.
Having been immersed in the biopharmaceutical industry for many years and having dealings with multiple major pharmaceutical companies, it was his vision and insight that helped secure the deal for Kangfang, ultimately leading to a $500 million heavy investment.
The case of Ibrutinib is in the forefront, and it is widely predicted that Dugan will also sell SMMT.
Regardless of the outcome, as long as the efficacy of Ivosi is confirmed, this is expected to be the largest investment that Dugan will earn.