The major theme in the China biomedical news last week was investment. Zero2IPO released its Q2 review of China venture capital activity, showing sharp increases across-the-board in both funds raised and funds invested. Unfortunately, the Bio/healthcare sector experienced a disconcerting decline in a period of overall prosperity (see story). Overall, the number of venture capital deals in China climbed 31% and the amount of money invested rose 74%. However, just 9 deals (5.7%) and $29 million (2.4%) went into Bio/healthcare in Q2. That was a slight advance in the number of deals (from 8 to 9) over 2007, but on a percentage basis, the number of investments in Bio/healthcare dropped from 8.7% in 2007 to 5.7% this year, and the actual dollars fell both in absolute terms ($43 million to $29 million) and as a percentage of the whole (6.2% to 2.4%).
ChinaBio has pointed out that biomedical venture capital in the US captures 31% of the total available, making it seem likely the sector will gain an increasing percentage of the whole in China. But in 2007’s second quarter at least, it went the other way.
Against that discouraging backdrop, there were announcements of new sources of funding of biomedical enterprises last week, and other reviews of where the money is likely to go. Shanghai, for example, reported that it would offer financing to innovative companies through the Pudong Science & Technology Development Fund Bureau (see story). Once the Shanghai fund invests money, the companies become more attractive to other sources of investment capital. The risk, according to Dr. Yu Ningni, director of the Pudong Fund, who was speaking at the ChinaBio Investor Forum 2008, is that companies will not receive the funds they need to carry them all the way through to full commercialization.
Another Shanghai-based fund, this one combining public and private funds, is also up and running. A loosely organized consortium, the Biotech Science and Technology Venture Alliance brings together 22 partners (see story). Some of these are private companies while others are universities. Each member of the consortium decides whether or not to invest in the individual opportunities that are presented, a methodology that differentiates this initiative from the typical venture capital fund. Members of the fund have already invested $51 million, and they plan to take the total to $145 million in the near term. An example of one investment from the fund is a substantial $20 million financing of GreenBio from DSM China, that will advance GreenBio’s biodegradable material.
In terms of general investment activity, we reported that China’s contract manufacturing organizations are not currently enjoying much success raising money (see story). A number of factors seem to deter investors, including the large amount of capital required to establish a CMO, which is further complicated by the great amount of time necessary to win regulatory approval for the facility. US approval is even more difficult.
Under the rubric of general advice for those seeking investment funds, members of the venture capital community made it clear they consider the quality of management to be just as important as the viability of the product (see story). In fact, according to Kevin Li, Partner at HBM BioMed China, "Whenever we look at a pharmaceutical company, we always pay close attention to the management team first." Some VCs look for the experience of the overall management team, while others make sure that key positions have people they respect. Still others look to see whether, as the product gets closer to commercialization, management has business, rather than scientific, expertise.
After all the talk about venture capital investing, there was one actual VC deal announced and closed last week: Qiming made a $5 million investment into Shanghai-based CRO Tigermed (see story). Founded in 2002, Tigermed said it has been fending off VC offers for years. It made the decision to accept an investment from Qimeng because the VC enterprise would be a valuable partner and because Tigermed wants to expand. Tigermed will use the money to hire experienced personnel, not build new facilities. Qimeng and Tigermed expect continued explosion in CRO activity in China: Qimeng predicts total CRO revenues will reach $1 billion in 2010 or 2011. Tigermed has 12 offices spread across China plus a liaison office in the US.
In an M&A deal last week, Veeda Clinical Research of India bought International Oncology Network [ION], a clinical research company with 50 clinical trial sites across the US (see story). Although this doesn’t affect China biotech directly, it represents another step in the consolidation of a highly fragmented industry. Its significance is magnified because the purchase allows an Asian CRO to increase its claims to global coverage by buying an established CRO in the US. Both companies, Veeda and ION, have expertise in cancer. Terms of the deal were not disclosed.
In a second deal, BMP Sunstone (BJGP) signed a non-binding letter of intent to acquire 75% of Zhangjiakou Shengda Pharmaceutical Co., Ltd, at a price that could be as much as 30.0 million RMB ($4.4 million) (see story). Like BMP Sunstone, Shengda is involved in pediatric drugs and boasts 75 SFDA product licenses. BMP Sunstone said Shengda’s products, which include children’s versions of amoxicillin tablets, will extend BMP’s GoodBaby line of OTC and prescription products. The acquisition continues GMP Sunstone’s move away from a pure distribution play into a business model that includes both production and distribution.
Two companies in China received SFDA approval for new products during the last week. The agency authorized the marketing of a Genesis Pharmaceuticals Enterprises [OTCBB: GTEC] product, Radix Isatidis Dispersible Tablets (see story). Radix Isatidis, which has been available until now only as a powder, is a commonly used traditional Chinese medicine for flu. The Genesis formulation is the first tablet form of Radix Isatidis available. Radix Isatidis is a $1.4 billion market annually, and Genesis forecasts revenues of up to $10 million of its product in the next year.
Abraxis BioScience (ABII) also received an SFDA approval last week. The SFDA gave its OK for ABRAXANE Paclitaxel for Injection (Albumin Bound), a breast cancer treatment (see story). Abraxis has not previously marketed drugs in China. ABRAXANE is a protein-bound chemotherapy, combining paclitaxel and albumin to deliver the drug. Because the delivery mechanism does not require solvents, a 49% higher dose of the active ingredient, paclitaxel, can be given without causing safety issues. The approval was based on trials conducted in the US and in China.