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China Biotech Dealmakers Borrow Page From Trump

“Most people think small, because most people are afraid of success, afraid of making decisions, afraid of winning,” noted US President Donald Trump in his best-selling book,The Art of the Deal.

That certainly resonates with investors who are involved with recent biotech financing and deal-making in China.

There were times when bioventures in the country found it hard to even get noticed by established investors, let alone get any deals done. This time around, however, such companies find themselves being chased by both overseas and domestic investors armed with readily available cash.

The environment is changing rapidly, driven by multiple factors, including the Hong Kong Stock Exchange's drastic changes to venture listing rules, opening its arms to pre-revenue biotechs from the Mainland (and elsewhere), and the fact that Chinese emerging biotechs are leaping into promising new arenas of research such as immuno-oncology and CAR-T therapies.

 

 

Money Flowing In

With the increased optimism over the sector in general, so have come the financing deals; investment flowing into biotech in China has significantly cranked up in 2018 so far. Entering June, several investment deals have been announced, including WuXi Biologics investing $60m in a manufacturing facility in the US.

WuXi Apptec, recently-listed on the Shanghai Stock Exchange, also led a venture investment round inInsilico Medicine, a US company using artificial intelligence to discover and develop new drugs. Based in Maryland, Insilico also gained new funding from Pavilion Capital and Bold Capital, and AI company Juvenesence Ltd, and is expected to use the money to improve its machine learning tools.

In the past, WuXi's venture capital investments had chosen to follow the lead of established VC funds such as Arch Capital, but the Chinese firm is becoming increasingly assertive and independent when choosing where to put its money.

“Compared to the US, China has its own advantages when innovation reaches a certain degree. It takes a relatively faster time to conduct clinical trials [in China],” noted Adam Zhao, founding partner of Anlong Fund, speaking at a WuXi forum in April. 

Rising Investment Tide

WuXi Apptec aside, other recent financing deals have also added weight to an unusually active Chinese biotech financing scene.  (Also see "Venture Funding Deals: Two Companies With China Ties Raise $260m Each" - Scrip, 5 Jun, 2018.).

Oncologie Inc., a US-based biotech, announced a $16.5m round from Chinese investors including Pivotal Bioventure Partners, Nan Fung Life Sciences, and China Merchant Bank Investment. The fund will be used to develop cancer assets in China and the US, said the company.

Maryland and Suzhou-based RNAi drug developer,Sirnaomics Inc. raised $25m in a Series C1 round led by Yuexiu New Industrial Investment. Fellow new investors Sangel Biomedical Venture Capital, HuaKong Equity Investment and Qianhai Shenghui Investment also participated. Sirnaomics' main asset is STP705, a preclinical anti-fibrosis agent for hypertrophic skin scars.

To succeed, Chinese deal-makers must put sufficient money on the line, hire top-notch talent and teams, and ensure quick response, noted veteran investors who spoke at the WuXi forum.

“You need to hire insiders to navigate the market in the US, not someone fresh from school,” advised Alvin Yao, managing partner of Buchang Capital, the venture capital wing of domestic company Buchang Pharma.

Taking a professional and systematic approach also contributes to large deals between the US and China, investors said. “Not only regulatory considerations, but also accounting practices” should be considered, noted Li Ankang, an executive director of Goldman Sachs' healthcare investment division. That requires a clear self-assessment and putting the right team in place before negotiating a deal, he added.

Believe In Emerging Trends

Having a forward view is also vital, Buchang's Yao stressed, noting that “you have to keep one step ahead of the market, period.” This means that investors can’t wait for polices to form, but should instead invest from an early stage.

As Chinese biotechs are eager to embrace the latest technologies, investors must also have a clear understanding of emerging research trends such as I/O, CAR-T, and artificial intelligence.

One of Yao's investment portfolio companies is Wuhan-based JHL Biotech Inc., which has grown to become Asia’s largest contract biologics manufacturing firm, andNanjing Legend, a CAR-T developer that signed a multi-million dollar global licensing agreement with Johnson & Johnson late last year for a candidate for multiple myeloma.

Healthcare as a whole remains attractive to investors, due to increasing demand for new treatments and the possibility of in-licensing from the US, where the most innovative compounds are often originated, said the investor.

From the editors of PharmAsia News.

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