You've likely heard quite a bit about the massive opportunity for immuno-oncology (IO) in the U.S. and in Europe.

These are the drugs that train the body's immune system to seek and destroy cancerous cells and tumors. We globally spent $133 billion on the fight against cancer last year, and oncologists really like the idea of using personalized treatments as a replacement for chemotherapy or radiation. We've seen nearly all of big pharma -- including Roche, Bristol-Myers Squibb, and AbbVie (NYSE:ABBV) -- dedicating billions of dollars to develop the next wave of IO drugs.

A picture of a stethoscope on top of $100 bills

Image source: Getty Images.

However, the excitement surrounding this new pharmaceutical trend hasn't yet reached China, the world's most populous country with nearly 1.5 billion people. China's poor intellectual property protections, lack of regulatory clarity, and still-developing insurance networks have caused most biotech companies to keep their distance and focus elsewhere.

It's hard to blame them. China has historically been a pretty difficult place to do business. One of their legacy rules required that clinical trials would need to be run within the country's borders before they'd be accepted on China's mainland. That involves a lot of work, and most U.S. drug developers weren't willing to commit the time and effort required. As a result, it's estimated that two-thirds of the drugs already approved by the U.S. Food and Drug Administration (FDA) between 2001 and 2016 are still not available in China. If that statistic doesn't shock you, it should.

But the times, they are a changin'. China's version of the FDA has finally recognized that it needs to modernize its regulations if it wants to attract innovation. It made a bold decision last year to overhaul several of its long-standing policies. As part of those changes, China will now recognize and accept clinical trial data completed in other countries and will allow drugs developed by one company to be sold or manufactured by others (licensing like this is a common practice in the U.S. and Europe). 

This new era of biotechnology in China is upon us, and I believe a company named BeiGene (NASDAQ:BGNE) is perfectly positioned to benefit from it.

Founded on the premise of becoming "the Genentech of China," BeiGene is developing personalized cancer treatments. It is exactly the type of innovative company -- built on science by an American and with connections to the developed world -- that China has been waiting for.

There are three key reasons that I believe BeiGene deserves your investor attention: its efficient R&D process, its partnerships with big pharma, and its exclusive rights to sell Celgene's (NASDAQ:CELG) products. Here is a more detailed look at all three:  

1. Access to patients

It has been recently documented that it costs an average of $1.4 billion to successfully develop and market a new drug. That's a lot, and cash burn is one of the key reasons that early stage biotechs fail. 

But that incredibly expensive figure is also based upon the rules of the Western world. New drugs need sufficient data from patients to obtain FDA approval, and it can be difficult and time-consuming to find and enroll the right patients. And that's not to mention the costs related to paying the research and development staff to design and actually run the trials. R&D expenses are the most expensive line item of the vast majority of biotech companies.

It's much easier to develop drugs in China's command economy. There's a large population of patients who have never before been given the opportunity to participate in a trial that very well might save their lives. And the country's hospitals are huge: China largest hospital has 4,300 beds; America's has 2,200.

BeiGene has access to more than twice the number of cancer patients in China than there are available in both the U.S. and Europe combined. That's a significant advantage for the company's biopsy-driven drug development platform, which requires analyzing human tissue in order to find correlations between cancerous cells and the immune system.

China's labor costs are also much lower: A well-paid master chemist at BeiGene earns about $25,000 per year. Those lower costs per employee add up when you consider that the company has 850 China-based employees. 

Time is money. And both are important when you're competing in the fast-paced biotech market.

2. Big pharma's blessing

Even with access to more patients and with lower R&D costs, BeiGene knows it needs to team up with larger players to gain traction. Big pharma spends billions of dollars each year on marketing, which is instrumental in driving the adoption of IO drugs at hospitals.

BeiGene has partnered with both Merck (NYSE:MRK) and Celgene to build out their pipeline.

Merck is helping BeiGene develop a PARP inhibitor called pamiparib. Poly ADP-ribose polymerases (PARP) repair cancerous cells that are damaged but not killed, so PARP inhibitors are used to ensure that drugs actually kill cancerous cells (especially in solid tumors). Merck is contributing milestone payments for the development of pamiparib that could reach $500 million, and would have the rights to commercialize the drug in all countries but China and Germany.

BeiGene is also working with Celgene to develop its PD-1 antibody tislelizumab. "Tisle" dosed its first Phase 2 patient with advanced hepatocellular carcinoma (liver cancer) earlier this year and is also being evaluated in Phase 3 in comparison to the chemotherapy treatment sorafenib. Just like Merck, Celgene is contributing milestone payments in exchange for the rights to commercialize tisle outside of China. Celgene took the partnership a step further last year when it invested in a 5.9% equity position in the company. 

The cash provided by the milestone payments certainly helps to relieve some of the fund-raising stresses that BeiGene would have otherwise had to endure. But these big-name partnerships also bring credibility to the company's brand. Successful trials could serve as a blueprint that attracts other suitors in the future.

3. The rights to Celgene's arsenal

In addition to the milestone payments and the equity position, Celgene also brought something else very important to their partnership. It granted BeiGene the exclusive rights to sell three of its cancer treatments -- Revlimid, Abraxane, and Vidaza -- in China for the next 10 years. 

This could prove to be very lucrative. Celgene generates around $10 billion of sales from those three products around the globe each year. China's previous regulatory regime had blocked access to them for patients or hospitals. But BeiGene will now serve as their foot in the door.

To be fair, ramping sales in China is going to take a lot of work. BeiGene only generated $23 million from Celgene's products in the first quarter, which could provide a less-than-sexy $100 million in 2018 if it sticks to its current run rate.

But BeiGene is also doing whatever it takes to grow that number as aggressively as possible. It just obtained reimbursement approval for Abraxane in several provinces, and got China's FDA approval to use Revlimid in other indications.

BeiGene's modest sales figures keep it flying below Wall Street's radar, which is exactly what we want as forward-thinking individual investors. As the company checks the boxes and gains regulatory approvals, the revenue obtained from Celgene's products should grow at an accelerated pace. 

An illustration of biotechnology antibodies

IMAGE SOURCE: GETTY IMAGES

The Foolish bottom line

Often misconstrued as just another biotech with a goofy name, BeiGene is actually packing a serious punch. It's the right company (novel science and pedigree) in the right place (a huge market) at the right time (changing regulations) and with the right partners.

The stock has cooled off a bit in 2018 after recently hitting all-time highs of $200 per share. But even with a market cap of $8 billion, I believe today's valuation doesn't give enough credit to BeiGene's future opportunity as the world's most populous country goes all-in on biotechnology innovation.

Simon Erickson owns shares of AbbVie, BeiGene, and Celgene. The Motley Fool owns shares of and recommends Celgene. The Motley Fool has a disclosure policy.