Venture Capital and China’s Life Sciences: New Territories

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Cash has always ruled the start-up world and when it comes to the healthcare and life sciences sphere, the heavy investment required for R&D and the long timelines make it even more so. Luckily, China is now the second-largest VC market in the world, and a recent Preqin report highlighted that USD 65 billion of venture capital investments were made in Greater China last year, a 35 percent increase year on year and an all-time high, second only to North America with $77 billion.

 

There is an obvious huge gap between the Chinese and the US life sciences industries – which means a huge opportunity for investment and returns on that investment

Tang Dajie, Triwise Capital

For investors in the region, the sheer potential of the industry is irresistible. For Tang Dajie of Triwise Capital, an industry veteran that spent a few decades at China’s largest VC fund, Shenzhen Capital Group, before deciding to strike out on his own, the choice of biotech was obvious. He shares, “What is interesting about China is that when you look at our largest tech companies – Huawei, Tencent, and so on – their market value is around USD 500 – 600 billion – essentially comparable to top American tech companies like Facebook, and relatively close to Apple and Amazon. Within the digital space, there is no longer a significant gap between leading Chinese companies and leading American companies. However, looking at the life sciences arena, the largest Chinese company here is Jiangsu Hengrui, with a market capitalization of around USD 37 billion. This is only 10 percent of Johnson and Johnson’s USD 367 billion! There is therefore an obvious huge gap between the Chinese and the US life sciences industries – which means a huge opportunity for investment and returns on that investment.”

 

He supplements, “I also wanted the opportunity to be able to contribute to society and improve people’s quality of life. Given all these external and internal factors – and when you consider the CFDA (Chinese FDA) reforms being conducted – I firmly believe that the Chinese healthcare and life sciences industry is poised on the brink of explosive growth. Shenzhen offers the best development opportunities for both companies and investors in this space.”

 

Hong Kong, one of the top finance hubs in the world, has traditionally focused on the reliable real estate sector. However, for founder and CEO of Aptorum Group, a leading Hong Kong biotech company, Ian Huen, himself an investor, Hong Kong is the ideal location to establish a biotech hub. “Drawing upon the examples of Cambridge Massachusetts and San Francisco in the US, it is clear that you need to have three pillars: strong academic research, robust financing options, and mature pharma development expertise – very different skill sets, but all critical to the process.”

 

He breaks each of them down systematically. “Looking at the top 50 medical schools globally, for instance, only around half are in the US and the rest are in these non-US English-speaking countries. If Hong Kong positions itself correctly, it can leverage not only on its own research excellence but also the work of these other countries.” In terms of the financial pillar, and in particular relating to capital mobility, “Hong Kong is part of China and so has access to the Chinese capital markets. At the same time, Hong Kong has a freely floating currency and open capital accounts, which is critical for biotech development because it is such a global industry.” Finally, commercial acumen is key, which is why, despite Hong Kong’s lack of a strong domestic pharma sector, Aptorum, found Dr. Thomas Lee, who has over ten years of industry experience with giants like Novartis and Celgene, and was also the Professor of Pharmacology at The Chinese University of Hong Kong (CUHK) to head the group’s therapeutic arm.

 

Huen sums up pithily: “I like to draw this analogy. Hong Kong had a great biomedical success story last year with Professor Dennis Lo’s Cirina, and he is an amazing scientist – like Superman, he managed to develop his liquid biopsy technology single-handedly. However, pharmaceutical drug development needs the Avengers: a multidisciplinary team of many talents from microbiology, chemistry, pharmacology, clinical trials and so on – and of course, finance and investment! Superman alone cannot do it.”

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