Kelun-Biotech's $250M Placement: Riding China's Biopharma Innovation Wave and Global Dealmaking Momentum

China's biopharmaceutical sector is undergoing a transformative shift, driven by regulatory reforms, rising R&D investment, and a surge in global partnerships. At the epicenter of this shift is Kelun-Biotech, a subsidiary of Kelun Pharmaceutical (002422.SZ), which recently secured $250 million through a strategic share placement. This move underscores the company's ambition to capitalize on two critical trends: China's push for biopharma innovation and the growing momentum of cross-border dealmaking in the global oncology market.

A Strategic Capital Raise Amid Regulatory and Market Evolution

On June 5, 2025, Kelun-Biotech priced 5.9 million H shares at HK$331.8, raising $250 million—exceeding its initial $200 million target. The placement attracted strong demand from global institutional investors, including long-only funds and sovereign wealth funds, signaling confidence in the company's long-term value. Proceeds will fund R&D, clinical trials, and the commercialization of therapies targeting cancer and metabolic disorders. Notably, the discount to the previous closing price (7.58%) was offset by a premium to the five-day average, reflecting balanced investor sentiment.

The timing of this placement aligns with pivotal shifts in China's biopharma landscape. The National Medical Products Administration (NMPA) has accelerated approvals for innovative drugs, with 84 new approvals in 2024—a 12% increase from the prior year. Simultaneously, the National Reimbursement Drug List (NRDL) now covers over 3,160 medicines, including 25% dedicated to oncology, though at steeply discounted prices. While this creates affordability, it also pressures companies to diversify revenue streams through global markets.

Kelun-Biotech's Dual Play: Domestic Innovation and Global Partnerships

Kelun-Biotech's strategy is twofold: leverage China's domestic R&D ecosystem while accessing global markets through partnerships. Its proprietary ADC platform, OptiDC™, underpins a robust pipeline of over 30 drugs, including three approved therapies and multiple candidates in late-stage trials. The lead asset, sacituzumab tirumotecan (sac-TMT), has already secured three NMPA approvals for solid tumors, with a fourth indication under review.

The company's collaboration with Merck & Co. (MSD) exemplifies its global ambitions. MSD is leading global Phase 3 trials for sac-TMT in combination with its checkpoint inhibitor, pembrolizumab, targeting NSCLC and TNBC. This partnership not only expands sac-TMT's addressable market but also leverages MSD's regulatory and commercial infrastructure. Such alliances are critical for Chinese biotechs seeking to navigate stringent international standards and avoid the “investment winter” plaguing domestic profitability due to price controls.

Riding the Oncology Market's Growth Tailwind

The China oncology therapeutics market is projected to reach $42.19 billion by 2028, driven by rising cancer incidence, aging populations, and advancements in precision medicine. Kelun-Biotech's focus on ADCs—a $10.2 billion global market by 2028—is particularly strategic. ADCs combine the targeting precision of monoclonal antibodies with the cytotoxic power of chemotherapy, offering superior efficacy in hard-to-treat cancers.

The company's pipeline and partnerships position it to capture a significant share of this growth. Its 10+ clinical-stage programs, including ADC candidates for autoimmune and metabolic diseases, further diversify its risk profile.

Risks and Considerations for Investors

While Kelun-Biotech's prospects are bright, challenges persist. Domestic pricing pressures from the NRDL and Volume-Based Procurement (VBP) programs could limit near-term profitability. The company reported a $267 million net loss in 2024, though this narrowed by 53.5% year-on-year. Additionally, competition in oncology is intense, with giants like Bristol Myers Squibb and Roche dominating key markets.

The success of sac-TMT's global trials will be pivotal. If approved in markets like the U.S., it could generate revenue streams insulated from China's price controls. Regulatory scrutiny of ADCs—particularly their safety profiles—also poses a risk, as seen in recent FDA holds on similar therapies.

Investment Thesis: A Long-Term Play on Innovation and Global Reach

Kelun-Biotech's $250 million placement is more than a capital raise—it's a strategic bet on China's biopharma renaissance and the global oncology boom. With a pipeline rooted in ADC innovation, strong partnerships, and a focus on unmet medical needs, the company is well-positioned to thrive in a sector where R&D intensity and global reach are key differentiators.

For investors, Kelun-Biotech offers exposure to two high-growth themes: China's push for biotech self-reliance and the global ADC market's expansion. While risks exist, the company's progress in clinical trials and its ability to secure international collaborations suggest a compelling risk-reward profile.

Final Take: Buy with a Long-Term Horizon

Kelun-Biotech's valuation remains reasonable given its pipeline's potential and the premium it commands in global investor sentiment. Investors should monitor sac-TMT's global trial outcomes and NMPA decisions on its fourth indication. In a sector where innovation and global partnerships define winners, Kelun-Biotech is a name to watch—and a buy for those willing to ride China's biopharma wave.

Risks to Monitor:
- Regulatory delays for sac-TMT's global approvals.
- Pricing pressures from China's NRDL and VBP programs.
- Competition from established oncology players like Roche and Merck.

Key Catalysts:
- Positive data from MSD-led global trials (2025–2026).
- FDA or EMA approval of sac-TMT (projected 2026–2027).
- Expansion of the OptiDC™ platform into non-oncology indications.

In conclusion, Kelun-Biotech's placement is a milestone in its journey to become a global oncology leader. For investors with a long-term perspective, this is a strategic entry point into a company poised to benefit from China's biopharma innovation boom and the ADC revolution reshaping cancer treatment.