Biotech Drugmaker Pulls Plug on Ineffective Skin Drug

Zai Lab Ltd. has halted development of a key skin disease treatment after it failed in clinical trials, spotlighting the risks faced by a new generation of Chinese startups as they try to tap their nation’s growing drug market.

Zai made the move after the drug, ZL-3101 or Fugan, showed no difference in effectiveness compared with a placebo in a trial involving 295 Chinese patients with mild to moderate subacute eczema, the company said in a statement.

Zai had obtained worldwide rights to the drug from British giant GlaxoSmithKline PLC (GSK) in 2016. The company is one of a growing number of Chinese startups hoping to capitalize on an expected boom in demand for such treatments from an increasingly affluent local populace that can afford more-expensive medicines.

Zai CEO Samantha Du called the result “disappointing,” but added the company will redirect the resources to other “clinical-stage assets and opportunities.”

Founded in 2013, Zai Lab is a clinical-stage biopharmaceutical firm that focuses on cancer, infectious disease and auto-immune drug development. The discontinued skin disease drug trial was one of the three for which Zai held global rights in a broader pipeline with seven candidates.

In 2016, one of GSK’s China units sold Zai the right to develop and commercialize two products, including the skin disease treatment, for a nonrefundable upfront payment of 4.5 million yuan ($660,000) plus undisclosed milestone payments, according to the contract at that time.

The drug is a botanical formulation that was expected to work as an alternative to the steroids that are currently the main form of treatment and are known to have many side effects associated with long-term use.

The second-stage clinical trial had only involved patients in China and had started in the second quarter of 2017. The setback sent Zai’s New York-listed shares down 1.08% on Friday.

Contact reporter Coco Feng (renkefeng@caixin.com)