How This New Biotech Billionaire Outmaneuvered Merck In China

Forbes

5 days ago

M ichelle Xia spent a dozen years in research and biotech in the U.S. before relocating back to her native China for a job at American life sciences contract research company Crown Bioscience. It didn't take long for her to realize that patients in her home country needed to wait a much longer time than Americans to get the newest and best medicines. Back then, she says, it took eight to ten years for drugs that had been approved in the U.S. to become available in China.
'There was not much innovation in China' in drug development then, Xia recalls. China was producing copies of U.S. drugs, but with a big lag time. Armed with the ambition to change that and ample industry experience, she launched a biotech company in 2012 with two former Crown Bioscience colleagues and one other cofounder in the southern city of Zhongshan–west of Hong Kong. She took the lead as CEO, chairwoman and president of the startup, which they named Akeso–after a Greek goddess of healing.
Now, five years after taking Akeso public on the Hong Kong Stock Exchange, the company's standout lung cancer drug has captured outsized attention in the pharmaceutical world. In a Phase 3 trial in China last year comparing Akeso's drug ivonescimab to Merck's Keytruda–the world's best-selling drug, with nearly $30 billion in 2024 sales–the Akeso drug outperformed Keytruda.
The fact that a drug from a little known Chinese firm beat Merck's bestseller has led to a runup in Akeso's shares, which nearly tripled in value in the past year. That has turned 58-year-old Xia into a billionaire–with a $1.2 billion fortune, based on her and her family's 8.5% stake in the company, Forbes estimates. She is one of just nine Chinese women billionaires in healthcare (including two who inherited their fortunes)–and one of 13 self-made women billionaires in healthcare globally.
More important to Xia is that her company has been an innovator. For its much-heralded cancer compound, Akeso combined two existing methods into one injectable drug: stimulating the immune system to attack the cancer cells and starving the cancer by cutting off the blood supply to the tumors. 'Usually that strategy [of combining two methods] is significantly ignored,' says Robert Booth, a former senior scientific executive at Roche and other firms and now a board member at Summit Therapeutics, which in 2022 licensed ivonescimab from Akeso for markets including the U.S., Canada, Europe and Japan. 'Michelle wasn't afraid to try that. She is confident in her own scientific judgement.'
Akeso's achievements are part of a recent wave of success for Chinese biopharma companies. Nearly one-third of drug candidates licensed by large pharmaceutical firms came from Chinese companies last year, up from zero in 2019, according to research firm DealForma. In April, a U.S. congressional commission, the National Security Commission on Emerging Biotechnology, warned in a report that the U.S. risks losing its edge in biotech–and that the government should put $15 billion in funding over five years to support biotech research and manufacturing.
'Over the past five years, China has transitioned from being a nice to watch market to a central pillar of global biopharma innovation,' PwC's pharmaceutical and life science deals leader Roel van den Akker wrote in May. Some of that progress is fueled by Chinese scientists who studied or worked in the U.S. and then moved back to China– just like Xia did.
Xia, who uses her given first name, Yu, in China, grew up in Gansu province in the country's northwest, the daughter of two university-educated engineers. After getting a degree in biochemistry at Sun Yat-sen University in Guangzhou in 1988, she obtained a scholarship and got a doctorate in molecular biology and microbiology from Newcastle University in the U.K. In 1996, she moved to the U.S. to do cancer research in a lab at the University of Louisville, in Kentucky, where she had some friends.
Four years later she took a job at Celera Genomics–a company best known for its founder, Craig Venter, and his work on the first draft sequence of the human genome. Summit Therapeutics' board member Booth became chief scientific officer of Celera in 2002 and organized research committee meetings that involved senior scientists, in part to train the younger staff. 'Michelle was probably the most junior scientist to join those meetings. She would ask the most probing questions,' he recalls.
Booth also set her to work using a complicated assay–a laboratory test employed in drug development–that had taken four very experienced scientists 10 weeks to get it to work when he was at Roche. 'I expected it to take months, but in two weeks she was producing good, reproducible results,'' he says. 'She was a very accomplished scientist, highly productive, and humble.' She later went on to work at Bayer and two other companies, and while in America obtained U.S. citizenship.
Xia put her results-oriented focus to work when she and her Chinese colleagues launched Akeso. At the outset, she and her partners were determined to recruit the best university graduates, so they traveled 50 miles to Guangzhou—home to several good universities—to interview students in a conference room at a hospital where a friend worked, she says via Zoom from China, smiling at the memory. Finding private investors was also difficult at first, but Xia's team initially raised about $3 million from wealthy southern Chinese entrepreneurs.
In 2015, Xia heard that pharma giant Merck was looking to license an immunotherapy drug candidate to target a protein called CTLA-4. It turned out that Akeso had one in early stage development. Xia, who had met someone from Merck's business development team at a conference, reached out and ended up arranging a deal to license Akeso's drug candidate to Merck for $200 million. It was the first time a Chinese company licensed a lab-developed protein (called a monoclonal antibody) to a global big pharma firm. 'That was a very good validation for us,' Xia recalls. 'We won [that deal] because of our quality and our speed.'
Xia has organized Akeso to emphasize scientific advances, with nearly a third of the company's 3,500 employees working in research and development. 'We focus on science and biology and the most advanced technology,' says Xia. 'I think that makes the difference.' Since it was founded 13 years ago, Akeso has gotten five of its drugs approved by China's regulator–including its Keytruda competitor, ivonescimab. Two more drugs it developed and licensed to other companies in China were also approved. Meanwhile, another of its drugs, to treat a rare form of head and neck cancer called nasopharyngeal cancer, was also approved by the U.S. Food and Drug Administration in April. Revenue for the company is expected to grow 59% this year to nearly $470 million, while it's likely to post a net loss of $27 million, according to analysts at Hong Kong-based CMB International.
The biggest factor putting Akeso into the spotlight of global pharma was its development of cancer drug ivonescimab. While Akeso had advanced the drug to Phase 3 trials and had presented promising research at ASCO, the big annual oncology conference, in 2022 big pharma was hesitant to do deals with Chinese companies. Says Ken Clark, a longtime biotech lawyer at Wilson Sonsini Goodrich & Rosati and a board member of Summit Therapeutics, 'All of the pharma companies passed on ivonescimab primarily because they didn't believe the data.'
Luckily for Akeso, Summit's co-CEOs Maky Zanganeh and Bob Duggan, both now U.S. billionaires, had instructed their small team that same year to scour the globe for a drug in Phase 3 trials to license. One executive who was originally from China, Fong Clow, suggested looking there, and within months the Summit team had narrowed their focus to Akeso's drug.
It turned out that Xia, Zanganeh and Duggan had a common tie: A drug candidate that Xia had worked on at Celera Genomics in the early 2000s was later purchased by Pharmacyclics, Duggan and Zanganeh's previous biotech company. Under their leadership, Pharmacyclics took the drug–called Imbruvica–through to FDA approval in 2013 for treatment of chronic lymphocytic leukemia, the most common form of leukemia. It became a blockbuster, and drug giant AbbVie bought Pharmacyclics for $21 billion in 2015.
That connection helped give Xia confidence in Zanganeh and Duggan, both of whom had unorthodox backgrounds for biopharma executives: Zanganeh started as a dentist and Duggan, a serial entrepreneur, had run a cookie company, a needlepoint kit seller and more before investing in a robotic surgical company, where he met Zanganeh. The two teams soon recognized they both had entrepreneurial cultures. 'They found me, and I think it's a perfect fit,' says Xia.
Akeso and Summit inked their licensing deal in December 2022, with Summit agreeing to pay $500 million upfront plus up to $4.5 billion in potential milestone payments. (Summit is now conducting its own Phase 3 trials of the Akeso drug in order to get approval from the U.S. FDA.) Xia joined Summit's board the next month. 'From the start, she built a company that could handle every step of drug development—from discovery to manufacturing—all under one roof. This gave Akeso speed, flexibility, and control in an industry where timing is everything,' Zanganeh says via text message.
At a lung cancer conference in San Diego in September last year, Akeso announced the results of its head to head Phase 3 clinical trial with Merck's Keytruda for patients with a specific type of lung cancer. The patients on Akeso's drug went a median 11.1 months before the cancer returned, compared to 5.8 months for those taking Keytruda. Akeso's stock jumped 16% on the news the next day. Friends from around China and the U.S. reached out to congratulate Xia.
Xia has even bigger goals. Akeso already has more than a dozen drug candidates it developed in clinical trials, and she wants to push the company beyond cancer drugs to pursue treatments for neurodegenerative diseases and autoimmune diseases, particularly as China's population ages. That means investing in new technology and new types of drugs, all with the goal of serving patients. Says Xia: 'We want to join the club and become a great company.'
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