China’s Innovative Drug Mandate: Let MNCs Knock on the Door Initiative
May 09,2026
A single drug has caught the attention of multiple MNCs.
Recently, sources revealed that Merck & Co. plans to in-license two new drug assets from Inhibrx Biosciences, namely INBRX-106 and INBRX-109 (Ozekibart). If clinical trials progress smoothly, the total valuation of these two assets may exceed $9 billion, with INBRX-106 alone valued at over $8 billion.
Reuters further pointed out that Merck is not the only multinational corporation interested in Inhibrx; pharmaceutical giants including Eli Lilly, AstraZeneca, Pfizer, Johnson & Johnson, and Ono Pharmaceutical are all keeping a close eye on the company.
On the day the news broke, Inhibrx’s stock price surged by more than 31%. Stifel analyst Dara Azar raised Inhibrx’s target price from $150 per share to $300 per share.
Insiders disclosed that negotiations are still in the early stage, and any potential deal could take several months to finalize, with valuation contingent on subsequent clinical trial results. At present, both Inhibrx and Merck have declined to comment.
Prior to this news, Inhibrx boasted a market capitalization of only around $1 billion. How exactly has this small-cap biotech stirred deal expectations worth tens of billions of dollars? Inhibrx serves as a worthy case for in-depth analysis.
01、Why Are MNCs Drawn to Inhibrx?
The reason behind Merck’s strong interest in INBRX-106 is straightforward. This pipeline precisely addresses Merck’s most urgent need: to fully fill the upcoming patent cliff of Keytruda.
Keytruda’s core composition patent is set to expire in 2028. In 2025, Keytruda recorded global sales of $316 billion, accounting for nearly half of Merck’s overall global revenue.
INBRX-106, the asset favored by Merck, is an OX40 agonist. OX40 is a co-stimulatory receptor belonging to the tumor necrosis factor (TNF) receptor superfamily that can amplify immune responses. Transiently expressed on activated T cells, OX40 drives T cell proliferation, differentiation, survival, effector function and memory formation. Like other members of the TNF superfamily, higher-order clustering of OX40 is indispensable for optimal signal transduction and stronger pathway activation.
This inherently endows OX40 with combination potential alongside PD-1 inhibitors. Consequently, the industry once witnessed an upsurge in OX40 development, with over 70 related projects advancing into clinical stages. However, major MNCs including Pfizer, BMS and Roche all suffered setbacks in this field.
Unlike previous bivalent OX40 agonists, INBRX-106 adopts a hexavalent structure that can simultaneously activate multiple OX40 receptors and promote hyper-clustering, enhancing activation of the OX40 co-stimulation pathway without the need for Fc cross-linking.
According to Reuters, in the Phase II/III clinical study for patients with locally advanced unresectable or metastatic head and neck squamous cell carcinoma (HNSCC), the objective response rate (ORR) of the INBRX-106 plus Keytruda combination arm reached 45%, compared with only 30% for Keytruda monotherapy.
Inhibrx anticipates that mature data will be available in the second half of 2026 to determine whether the INBRX-106 and Keytruda combination delivers superior efficacy and more durable clinical benefits compared with current standard therapies.
Its other pipeline, INBRX-109, is a DR5 agonist. DR5 is a receptor for tumor necrosis factor-related apoptosis-inducing ligand (TRAIL). Upon activation, DR5 can selectively induce programmed cell death in damaged or tumor cells while exerting minimal impact on normal tissues.
On April 21, Inhibrx released the latest interim analysis results from its Phase I/II study evaluating the efficacy and safety of ozekibart (INBRX-109) in combination with the FOLFIRI regimen in patients with locally advanced, metastatic or unresectable colorectal cancer (CRC).
As of April 10, 2026, approximately 70% of the 45 evaluable patients had received ozekibart as fourth-line treatment. Per RECIST v1.1 criteria, the confirmed ORR stood at 20%, a notable improvement over historical standard therapies; the median progression-free survival (PFS) among the evaluable population was 5.5 months. Notably, 42% of patients remained progression-free at the six-month mark, with nine patients still on ongoing treatment.
Inhibrx plans to communicate with the FDA in the second half of 2026 regarding plans to initiate a registrational Phase III trial of ozekibart in first-line colorectal cancer. It also intends to discuss with the FDA the feasibility of accelerated approval for ozekibart in fourth-line colorectal cancer and refractory Ewing sarcoma. Additionally, Inhibrx submitted a Biologics License Application (BLA) to the FDA in April 2026 for ozekibart in conventional chondrosarcoma.
02、The Logic of "Small but Specialized"
Inhibrx is highly adept at adopting the Spin-Co model. The Spin-Co model refers to a transaction structure in which an acquirer spins off a target company’s non-core pipelines into a new entity operated by the original team. The acquirer precisely obtains core assets, while shareholders of the acquired company retain the future value of the remaining pipelines.
The Spin-Co model is widely believed to have gained traction following Pfizer’s acquisition of Biohaven. In May 2022, Pfizer acquired Biohaven for approximately $11.6 billion, with a clear focus: Nurtec ODT (Rimegepant), a blockbuster marketed migraine drug. Pfizer took over Rimegepant, Zavegepant and five preclinical CGRP assets, while non-CGRP pipelines were divested into an independent new entity named New Biohaven.
This transaction structure was quickly replicated across the industry. The deal between Eli Lilly and Scorpion Therapeutics also adopted a similar framework.
Founded in 2010, Inhibrx is led by Founder and CEO Mark P. Lappe, who boasts over 30 years of experience in corporate management, investment management and executive recruitment. He has built leadership teams for more than 40 early-stage biotech and medical device companies. Prior to founding Inhibrx, Lappe was the Founder and Managing Partner of Efficacy Biotech Fund, which focused on strategic investments in publicly traded biotechnology firms.
In an exclusive interview, Lappe stated that he aims to keep Inhibrx lean and focused. “I have always believed that being small is an advantage. Maintaining a compact, high-efficiency team is far better than overexpansion. From day one, we designed Inhibrx to stay small. In biotechnology, pharmaceuticals and technology, we often see that small, sharply focused companies tend to deliver extraordinary achievements. Yet after initial success, many overexpand and lose their innovative edge.”
In 2020, Inhibrx completed its NASDAQ IPO, raising approximately $119 million. In Lappe’s view, small-cap biotechs like Inhibrx face relatively high financing costs: securing larger funding requires substantial equity dilution and lower offering prices. Hence, he chose a development path better suited to Inhibrx.
In 2024, Sanofi announced a definitive agreement to acquire Inhibrx for up to approximately $2.2 billion, a deal designed to expand Sanofi’s R&D pipeline in rare diseases, immunology and inflammation.
Through the acquisition, Sanofi gained full control of the coveted candidate INBRX-101, while spinning off Inhibrx’s remaining product lines into a standalone new company. Sanofi holds an 8% equity stake in the new Inhibrx entity.
INBRX-101 is an optimized recombinant alpha-1 antitrypsin (AAT) augmentation therapy then in registrational trials for patients with alpha-1 antitrypsin deficiency (AATD). Administered once monthly, it is expected to restore serum AAT levels to normal, alleviate inflammation and prevent further deterioration of lung function. By contrast, the only specific AATD therapy available at the time required weekly administration.
Lappe noted that the Sanofi deal provided Inhibrx with ample capital, enabling the company to fully advance the INBRX-109 program without additional financing.
He emphasized that Inhibrx has consistently adhered to a core philosophy: focus on innovation and clinical translation, operate efficiently, and transact de-risked assets with large pharma firms. The upcoming transaction for INBRX-109 will follow the same principle.
Lappe revealed that he has intentionally controlled team headcount. The departure of Co-Founder and Chief Scientific Officer Brendan Eckelman in 2025, alongside the spin-off of his team to independently advance an ADC program, stemmed from the same strategic consideration.
Lappe believes there is an optimal scale for the team. “We are now in Inhibrx 2.0, and I expect we will transition to version 3.0 in the coming months.”
03、Front-Loaded "Transaction Mindset"
The popularity of the Spin-Co model stems from its perfect alignment with MNCs’ current core capital allocation logic.
The 2018–2019 period saw a wave of mega-mergers exceeding $50 billion. Notable examples include BMS’s unprecedented $74 billion acquisition of Celgene, AbbVie’s $63 billion takeover of Allergan, and Takeda’s $620 billion purchase of Shire.
The core logic behind these deals was to rapidly acquire blockbuster pipelines, expand revenue bases and capture short-term synergies to hedge against looming patent expirations. However, no such large-scale "whale-style" mega-mergers have emerged in the past five years, especially after 2024. The largest transaction since 2024 has been Johnson & Johnson’s $14.6 billion acquisition of Intra-Cellular Therapies.
While MNCs still hold ample cash reserves, their spending logic has undergone a fundamental shift toward prudent capital allocation. They have gradually abandoned full-scale corporate takeovers in favor of targeted single-asset acquisitions — a demand perfectly matched by the Spin-Co model.
Spin-Co allows MNCs to selectively acquire strategically valuable single molecules without taking over entire companies, avoiding integration burdens and financial costs associated with redundant assets.
Nevertheless, this model is difficult to replicate in China for the time being.
Headquartered and listed in the United States, Inhibrx can fully structure its shareholder framework, transaction terms and tax arrangements in line with U.S. capital market rules. Even if Chinese biotechs aim to emulate Inhibrx’s model, they face constraints from domestic capital controls, foreign investment access restrictions and listing regulations, lacking equivalent flexibility in deal structuring.
More critically, China lacks large pharmaceutical enterprises capable of acting as anchor buyers, with few players willing to make multi-billion-dollar cash acquisitions of standalone assets — a missing core counterparty for Spin-Co transactions in China.
Even so, Inhibrx offers profound insights for China’s innovative drug licensing and M&A landscape.
A key driver behind Inhibrx’s growth is its founder’s ultra-clear strategic positioning, with an end-in-mind transaction mindset embedded throughout the entire R&D lifecycle. From inception, the company’s goal was not merely "drug development", but designing assets ready for transaction. The clean, seamless carve-out of INBRX-101 in the Sanofi deal was enabled by independently structured R&D systems, data ownership and intellectual property boundaries established at an early research stage.
Front-loading transaction thinking into early R&D decision-making enhances bargaining power in licensing and M&A negotiations. For pipelines planned for global out-licensing, clinical development should be designed from the outset to fully comply with FDA requirements.
A landmark example is 3SBio. In May 2025, its PD-1/VEGF bispecific SSGJ-707 was out-licensed to Pfizer with a $1.25 billion upfront payment, setting a new record for the highest upfront payment in China’s innovative drug outbound licensing. Prior to the deal, SSGJ-707 had already obtained FDA approval for U.S. clinical trials, saving Pfizer substantial time. Post-transaction, Pfizer rapidly integrated the asset into its global Phase III development program, launching registrational studies in the U.S. with a head-to-head design directly challenging Keytruda.
Inhibrx’s model serves as a valuable benchmark for China’s innovative drug industry. It proves a simple truth: sought-after pipelines do not emerge by chance, but are carefully laid out, planned and designed from the very beginning.
China has no shortage of promising drug molecules. From Kangfang Bio to Bailitianheng and 3SBio, domestic innovative drugs continue to set new upfront payment records in global out-licensing. To draw wider attention to more China-developed pipelines requires not only scientific breakthroughs, but also a keen understanding of buyers’ real strategic needs.
As more Chinese biotechs learn to narrate the value of their molecules in the language of global buyers, the vision of "Great Power New Drugs" will evolve from a slogan into an achievable reality.
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