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VC Investment in China Life Science Climbs 300%, Tops $1 Billion

publication date: Feb 4, 2011
 | 
author/source: Richard Daverman, PhD
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In China, life science VC investing climbed an astonishing 319% in 2010 to break $1 billion. By contrast, venture capital investing in the United States’ life science was flat compared to 2009 levels, showing a dramatic switch in the world’s perceptions of where the future lies for biomedical companies.

The largest China VC deal last year was for AutekBio, which received $120 million from SUMA Ventures and the Beijing government’s Beijing E-Town Harvest International Capital Management Corporation (see story). AutekBio will set up a contract manufacturing organization for biologic drugs in Southern Beijing with the funds.

Investments in China life science companies are generally made by VC funds that are backed by LPs based outside the country. Many of the funds are managed by firms with investments worldwide, including KPCB, Fidelity, Vivo, Orbimed, Morningside, Infinity and others. Even funds based in China active in life science, such as Mingly and Qiming, may receive their funding from outside of China and have strong ties to US or European investment firms. This is opposed to the hi-tech and telecommunications industries that receive most of their funding from local China funds, which invest in RMB rather than USD.

During 2008 and 2009, the financial crisis sharply limited venture capital investments around the world. For China, this meant VCs committed $327 million in life science companies in 2008 and a nearly flat $318 million in 2009. Both years were less than the prior high of $409 million invested in China life science companies in 2007.

Nothing in those numbers would suggest the explosion that took place in 2010: VCs invested $1.013 billion into China life science, more than twice the size of the previous record set in 2007. There were 44 deals in 2009 and 56 in 2010. That means the average deal size nearly doubled in 2010, rising from $11 million to a very healthy $21 million. This compares to a fairly consistent $10 million average deal size in the US.

Overall, combining all sectors, VC investment in the US in 2010 was up 19% at $21.8 billion in 3,277 deals. Of that, $6 billion went to life science, a combination of biopharma and medical device, making it the number one industry. Hurt by a poor showing from the medical device sector, the $6 billion was equal to the year-earlier total for a no-gain, no-loss. Given the mediocre results, the combined life science sector fell to a 28% share of overall VC investing in the US, down from 33% during 2009.

In US life science investing, the total dollars committed to biopharma rose a modest 3% to $3.7 billion, while the number of deals climbed 8% to 460. The medical device sector was the bigger culprit for life science’s poor showing. It actually dropped 9% lower on the year to $2.3 billion. The number of deals was flat at 324.

All tabulations for US venture capital results are from The MoneyTreeTM Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

The data for China’s life science sector were compiled by our sister organization, ChinaBio® Consulting.

Disclosure: none.

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