At the ChinaBio® Investor Forum 2007, which took place in Shanghai on December 4 and 5, Greg B. Scott, Executive Editor of ChinaBio® Today, said investment continues to grow in the health care and biotech sectors, though it remains far behind the investment levels of the US.
"Biotech and health care venture capital investment has grown by 19% to $50 million in China in Q3, and the average deal has nearly doubled to $10 million," Scott said. He added that the ratio of angel investment to venture capital is very small in the China investment world.
"In contrast, the life science industry in the United States receives about $2 billion per year in venture capital investment, a figure that is roughly matched by the amount of angel investment in the industry," he said. Deal size, on the other hand, is almost the same in China as it is in the US, with both countries averaging about $10 million.
Also, Scott pointed out that venture capital for life science constitutes only 6% of all venture capital in China, while it represents 27% of the total in the US. Scott said China’s aging population, much like that in the US, provides opportunity for investors, representing an area of special interest. Molecular diagnostics, biomarkers and vaccines are also popular.
According to Don S. Williams, partner with Wilson Sonsini Goodrich & Rosati, a legal advisory to technology and growth enterprises worldwide, investors remain worried about how to take profits in China-based ventures. He thought that US were probably more willing to invest in companies whose headquarters were located offshore in the US, Cayman Islands and British Virgin Islands, with subsidiary operations in China, because the exit opportunities in offshore companies are superior.
Another difficulty with investing in China life science is management, in the eyes of Moling Chen, senior principal of BioVeda China, a venture capital fund focused on drug discovery and development in China. "Currently, senior managers of many Chinese biotech companies are also company founders, and are not always the best people for the role. Chinese companies are often plagued with decision-making problems and inefficient management of operations as a result," said Chen.
Chen also thinks that China biotech is not well served by following the US model of development, which concentrates on new drug discovery and early-stage R&D. It would be better to take advantage of the subsidies offered by China’s national and provincial governments. "With such aid, domestic biotech companies can stand out by focusing on technological innovation," Chen said. Technical innovation would provide a base, already one step up from the starting level of contract manufacturing, from which China bioscience could grow into drug discovery and basic R&D.
Management is also crucial for David L. Xu, managing partner of Mingly China Growth Fund. In his opinion, low costs and technological innovations are not sufficient by themselves. China life science companies must inspire confidence in investors and clients, showing that they can deliver competitively and on time.
To do this, management must build teams with diverse competencies. This builds a company that can compete with others in the field.
The two-day forum also featured 15 early and middle stage biotech companies who presented their business plans and accomplishments to venture capitalists in attendance. After the presentations, the seven Venture Capital Partners of the event voted to give two companies the “Most Promising” award. These awards went to PanAsia Bio of Shanghai, which won the prize in the Drug Company category, and Chiral Quest of Suzhou, which was the recipient in the Bio Services group.
PanAsia Bio uses pegylation technology to develop PEG-based drugs. The company was represented at the Forum by its President, Michael Xu, PhD. Chiral Quest, Inc. is a contract manufacturer of chiral drug candidates. It was represented by its Chief Technical Officer, Xumu Zhang, PhD.
Greg B. Scott, Executive Editor of ChinaBio® Today, is also the founder of ChinaBio® Accelerator, which organized the ChinaBio® Investor Forum 2007, which was hosted ShanghaiBio Corporation in Zhangjiang Hi-Tech Park in Shanghai.