Innovative drugs go global, and milestone payments are gradually entering the harvest period.
▎In the normal state of high return and low fulfillment of innovation drug BD in China, fulfilling milestones has never been an easy task.
Text | Company Observation
Author | Cao Qian
Editor | Cao Shengyuan
This article was first published on Titanium Media APP
After the market closed on October 12th, Baili Tianheng (688506.SH) dropped a signal flare in the innovation drug overseas market track - the global phase II/III pivotal trial IZABRIGHT-Breast01 of its EGFR×HER3 bispecific ADC drug BL-B01D1 officially triggered the first milestone payment of $250 million under the cooperation agreement with BMS (Bristol Myers Squibb), and the payment will arrive in the account soon.
This amount刷新了 the record for the first milestone payment of a single ADC asset in China. Coinciding with the critical node of the company's third attempt to list on the Hong Kong Stock Exchange, it also injects a flow of liquidity into the capital dilemma the company faced in the first half of the year.
From an industry perspective, among the 62 license-out transactions completed in 2020, the return rate so far is as high as 40%. In the normal state of high termination of innovation drug BD in China, fulfilling milestones has never been an easy task. It often requires crossing multiple hurdles, including the uncertainty of clinical data, strategic adjustments, and the unclear commercialization prospects. Even so, the BD milestones of innovative pharmaceutical companies are still continuously breaking through, and the characteristics of the harvest period are gradually emerging.
01 Third Attempt to List on the Hong Kong Stock Exchange: $1.05 Billion "in the Pocket" to Supplement Liquidity
The arrival of the first milestone payment of $250 million comes at a critical node when Baili Tianheng is making its third attempt to list on the Hong Kong Stock Exchange. The capital dilemma it faced in the first half of the year is also expected to be alleviated.
Looking at the transaction itself, the cooperation between Baili Tianheng and BMS started in December 2023, with a potential total transaction value of $8.4 billion, setting a record for the total price of a single drug in the global ADC field for external licensing. Among them, the upfront payment of $800 million was fulfilled in March 2024.
According to the cooperation agreement, the company is also eligible for up to $250 million in near-term contingent payments; after achieving development, registration, and sales milestones, it will receive up to an additional $7.1 billion in payments.
Baili Tianheng is facing the real pressure of burning money in R & D and underperforming in terms of performance. In the first half of 2025, Baili Tianheng's revenue was only 171 million yuan, a year-on-year plunge of 96.92%, lower than all previous first - half revenues since it had publicly available data; the net loss attributable to the parent company was 1.118 billion yuan, and the net loss after deducting non - recurring gains and losses was 1.176 billion yuan. Compared with the previous year, it turned from profit to loss, and the loss exceeded the full - year loss in 2023.
Baili Tianheng's revenue and net profit both suffered a significant decline in the first half of this year
Source of picture: Wind
The decline in performance is mainly attributed to two points. On the one hand, the company has continuously invested a large amount of funds in innovation drug R & D. The R & D expenses in the first half of the year reached 1.039 billion yuan, a year-on-year increase of 90.74%, and the proportion of R & D investment in revenue soared to 606.69%.
For Baili Tianheng's 15 R & D projects, it invested 907 million yuan in the first half of the year alone, and the cumulative investment amount reached 3.396 billion yuan. It is expected that the total annual investment scale will further rise to 4.353 billion yuan.
On the other hand, the core driving force supporting its R & D comes from BD cooperation, but there was a lack of this additional financial support in the first half of this year.
In 2024, Baili Tianheng received an upfront payment of $800 million from the cooperation with BMS and recognized intellectual property income. In the total annual revenue of 5.821 billion yuan, more than 90% was related to the cooperation with BMS. After excluding this part, the product sales and other businesses only achieved an income of 490 million yuan, and the traditional businesses such as chemical drugs and Chinese patent medicines continued to shrink under the normal promotion of the volume - based procurement policy.
Baili Tianheng's "intellectual property licensing income" was 0 in the first half of this year
Source of picture: Wind
At the end of September this year, just after Baili Tianheng completed a private placement of A - shares worth 3.764 billion yuan, it planned to use no more than 700 million yuan of idle raised funds to supplement working capital, which shows the great pressure on its cash flow. As of the end of the first half of the year, Baili Tianheng had 3.15 billion yuan in monetary funds on its books, but the total liabilities were as high as 4.386 billion yuan, and the asset - liability ratio reached 61.05%.
After the arrival of this $250 million milestone payment, combined with the upfront payment, the cumulative "in - the - pocket" amount reaches $1.05 billion. This can not only cover the clinical trial costs of BL - B01D1 carried out simultaneously in China and the United States, promote the listing of iza - bren and achieve self - hematopoietic ability, but also add important chips for its listing on the Hong Kong Stock Exchange.
On September 29th, Baili Tianheng submitted its listing application to the Hong Kong Stock Exchange for the third time. The previous two applications automatically expired because they were not heard within six months. The market's expectations for Baili Tianheng highly depend on the core pipeline of iza - bren. As of now, including iza - bren, Baili Tianheng has not yet achieved the commercialization of any innovation drug.
The R & D progress of Baili Tianheng's pipeline; 6 innovation drugs are in the overseas clinical trial stage. Source of picture: Company official website
The ADC track has now entered the "red ocean" stage. As of the first half of this year, about 20 ADC drugs have been launched globally, and the new drug market scale has reached $8 billion, a year-on-year increase of 25%. It is expected to exceed $16 billion for the whole year. The common problem faced by all ADC overseas projects is that being recognized for technology is only the first step. The key lies in whether they can seize time and occupy market share in the global market.
02 Under High Return Rate, Capital Expenditure Flows to the Middle and Late Stages
From an overall industry perspective, while innovation drug BD transactions have achieved breakthroughs in continuously unlocking large - scale milestone payments, they also cannot hide the common problems of high termination and low fulfillment.
As Chinese innovation drugs upgrade from "me - too" to "best - in - class", the milestone fulfillment amounts of leading projects continue to break records. Before Baili Tianheng, Hutchison China MediTech licensed fruquintinib to Takeda in January 2023 and subsequently received two milestone payments totaling $55 million due to U.S. approval and sales exceeding the target, and there is still room for commercialization sharing in the future; Legend Biotech, a subsidiary of GenScript, received a single milestone payment of $410 million in 2024 thanks to the successful commercialization of ciltacabtagene autoleucel.
In the past two years, the BD milestones of Chinese innovative pharmaceutical companies have been continuously achieved. Just this year, many companies such as Lepu Biopharma, Hutchison China MediTech, GenScript, and CSPC Pharmaceutical Group have successively announced that they have received milestone payments.
Most of the currently disclosed milestones are concentrated in the critical clinical nodes and the early stage of commercialization. For example, Sichuan Kelun Pharmaceutical Co., Ltd. received a $75 million payment from Merck & Co., Inc. because its Trop2 ADC initiated three global pivotal phase III clinical trials; Chengdu C&Y Biopharmaceuticals Co., Ltd. received a $60 million payment from AstraZeneca after the first - in - human dosing of its GLP - 1 receptor agonist in phase 2b clinical trial.
Data from Stifel Financial Corporation shows that in 2024, although only 20% of the cooperation involved phase III or approved assets, far lower than 40% in 2023, the BD transferees' expenditures on phase III and phase II assets were $49 billion and $43 billion respectively, far higher than the expenditures of no more than $30 billion on phase I and pre - clinical assets.
This means that although early - stage projects account for a higher proportion in BD transactions, from the perspective of the global transaction capital pool distribution, middle and late - stage assets still occupy a larger share and are an important flow direction of funds in BD transactions.
However, it is by no means easy to obtain subsequent milestone payments. A report released by U.S. market research company SRS Acquiom shows that in the BD transactions in the biopharmaceutical field in the past nine years, more than 60% of the milestones were not achieved, and the milestone achievement rate in 2023 was only 22%. In BD transactions, pharmaceutical companies can actually obtain less funds through milestones, accounting for only about 3% of the total amount, and the achievement rate is lower in later stages.
The achievement status of milestone events at each R & D stage that expired in the middle of 2023. Source of picture: Yanfa Ke
Therefore, the market has often regarded the upfront payment as a key indicator in the past. However, even if a high - amount upfront payment is obtained, it does not mean that the BD transaction can proceed smoothly.
According to an incomplete statistics by Arterial Network, as of April 20, 2025, among the 62 license - out transactions completed in 2020, 25 have clearly terminated the cooperation, and the "return rate" is as high as 40%; the "return rates" in 2021 and 2022 were also around 20%. The reasons for termination are mostly concentrated on poor late - stage clinical data, strategic adjustments, unclear commercialization prospects, etc. In essence, the technical value of early - stage licensing did not meet expectations.
Without a clear agreement, such "returns" will not result in high - amount compensation.
