AstraZeneca (NYSE: AZN) announced plans to raise up to $1 billion to fund China life science startups. The company will partner with China International Capital Corporation (CICC) to raise the capital, with reports that Sequoia China may also join. The fund plans to raise between $200 million and $300 million this year, and up to the full $1 billion over four years, according to the Wall Street Journal (see story). AstraZeneca is already building a new China research center and an artificial intelligence lab, both in Shanghai, which it will expand to include the new biopharmas. The company will share its expertise with the startups and may choose to invest further in them.

“It’s a substantial investment on our side, but also for our financial partners,” Pascal Soriot, CEO of AstraZeneca told Reuters. “We can help choose some of those investments but we can also help the startup companies to develop products and find their way around the world.” He described the $1 billion fund as AstraZeneca's largest industrial fund.

In May of this year, AstraZeneca opened an accelerator for young biopharmas at the Wuxi International Life Science Innovation Park. Companies who located their businesses there may be eligible for support from the AZN-CICC fund.

Johnson & Johnson (NYSE: JNJ) and Novartis (NYSE: NVS) both have similar incubator opportunities for young biopharmas in China, but neither one has as much capital to offer as AstraZeneca plans to raise.

China is "hot" at the moment, both as a place to develop novel drugs and as a market for the latest western drugs. Although the country is working very hard to lower its generic drug costs via auctions, that doesn't deter entrepreneurs. Paradoxically, the pressure to lower prices is encouraging innovation, said Soriot, because novel drugs don't have to compete with other company's products on price.

China has set biopharma as a pillar industry for the future. Not surprisingly, investment in discovering and developing novel drugs is on the rise. A Wall Street Journal article about the AstraZeneca fund used data from ChinaBio to point out that VC/PE investment in the sector has climbed from $1 billion in 2013 to $17 billion last year.

“I think that every multinational I know” is eyeing China, Mr. Soriot told the Wall Street Journal. Last week, Amgen agreed to invest $2.7 billion into Beijing's BeiGene, acquiring a 20% stake in the company, but it also acquiring a partner that will oversee clinical development of 23 cancer candidates for China's market.

For multinationals, China revenues are rising quickly. In the first quarter of 2019, AstraZeneca earned more revenue in China than Europe, making China its second-largest market after the US, according to Mr. Soriot. Even though the fourth quarter may be lower, Mr. Soriot expects China to remain the company’s second-largest market. “What the China team is wondering is, when can they be number one?” he said.

See our other articles on AstraZeneca.

Disclosure: none.