Vectura establishes strategic partnership in China

Kinnovata to commercialise products in fast growing Asian respiratory markets

Vectura Group has established Tianjin Kinnovata Pharmaceutical Company in China with two partners: Tianjin KingYork Group, a leading Chinese pharmaceutical company and specialist manufacturer of corticosteroid based products, and Zendex Bio Strategy, a private equity investor based in Hong Kong.

Kinnovata will develop, manufacture and commercialise respiratory products for the rapidly growing domestic Chinese and other regional markets in Asia. The new company will initially exploit Vectura’s Clickhaler and Duohaler dry powder inhaler technology platforms to address current unmet needs in the Asian asthma and chronic obstructive pulmonary disease (COPD) markets.

Recent estimates suggest the overall incidence of asthma in China is approximately 2%, representing a patient population of more than 25 million people. Approximately 42 million people are suffering from COPD in China, and forecasts estimate that this number will increase to nearly 56 million by 2021.

Despite Government-led healthcare initiatives in recent years, there remains a pressing need for more affordable inhaled products in China. Both asthma and COPD are expected to increase significantly over the next 20 years, in part driven by population growth, increasing urbanisation and an ageing population coupled to the extremely high smoking rates among Chinese adults, especially men (approximately 75% of male adults in China are either current or former smokers).

Kinnovata will be an independent company with its own development and manufacturing operations located in Tianjin. KingYork is expected to hold a 50% equity share; with Vectura holding 35% and Zendex and partners 15%. Vectura’s holding is expected to have a nominal value of RMB140m (£14.6m) on close. Vectura will also receive royalties through to 2030 on certain products sold by Kinnovata. The equity stake and potential future royalty streams equate to the value attributed to the intangible and tangible assets relating to the Clickhaler and Duohaler

devices. The assets include manufacturing equipment, formulation know-how and the regulatory dossiers for European approved products including salbutamol and budesonide delivered in Clickhaler.

KingYork and Zendex are expected to contribute assets of RMB260m (£27.1m) including cash of £19.8m, certain technology assets, intellectual property and land at KingYork’s pharmaceutical business park in Tianjin where Kinnovata will establish its manufacturing facility. Chris Chan, previously an advisor to Zendex, has been appointed CEO of the company.

Vectura has been working with KingYork and Zendex since late 2011 on the development of the product pipeline. Vectura is also providing training and other expertise to Kinnovata as the company prepares to undertake its first Clickhaler clinical studies in Chinese patients. An application for the import of Asmasal Clickhaler (salbutamol) has been filed with the Chinese State Food and Drug Administration (SFDA).

In addition, a separate R&D Cooperation Agreement has been established between Kinnovata and the Shanghai Institute of Pharmaceutical Industry to undertake the development of a number of DPI products on behalf of Kinnovata.

Completion of the transaction is subject to final Government clearances in China.

‘There is a clear, large and growing need in China and other Asian markets for more affordable, locally-produced asthma and COPD products, and for some time we have been looking for the best means of entry,’ said Dr Chris Blackwell, CEO of Vectura. ‘Combining Vectura’s established technology with KingYork’s local regulatory expertise and experience in corticosteroid products, Kinnovata has an opportunity to capture a significant market share of the growing Asian respiratory market.

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