Venture Capital's Big Adventure
As mature CROs and the nascent life-sciences industry churn out research talent and skilled management, VCs from the US and
Europe are looking for a piece of the action. CROs, in particular, are attracting US investors whose traditional business
is outside of the life sciences. IDG Ventures, an IT-focused publisher/VC was among the first non-healthcare VCs to invest
in a Chinese life-sciences startup. In 2005, IDG put money into Sundia MediTech Company, in a series A round less than a year
after the CRO was founded by Xiaochuan Wang. Unlike a traditional life-sciences VC, for which the quality of the science and
technology are the most important part of the due diligence, IDG's interest originated in the high quality of Sundia's management
team. Says IDG Ventures general partner Suyang Zhang: "Xiaochuan Wang struck us as sincere and truly dedicated to building
a successful long term CRO service company in China. She and her management team respect one another's opinion and have complementary
skill sets. They also seem to have a good grasp on future trends in the industry."
Xiaochuan was one of the first sea turtles to land at Shanghai Zhangjiang Hi-Tech Park. She left her job at Neurocrine Biosciences
in San Diego in 2003 to set up Sundia, and has convinced more than 20 other sea turtles with deep industry experience to join
her there. "I am grateful to my partners who share the same vision and passion that I have about building a world class CRO
company," she says. "Professional management, excellence in R&D, and good communication are the big factors to win customers."
Sundia now has some 300 scientists toiling in over 150,000 square feet of lab space and in such high tech areas of drug discovery
and development as custom synthesis, library production, medicinal and process chemistry, API manufacturing, bioassay, pharmacology,
and PK studies.
Another IT-focused VC fund interested in healthcare deals is Shanghai-based Qiming Venture Partners, which closed its second
fund, Qiming Venture Partners II, at $320 million in May 2008. Qiming is a joint venture established in 2006 by the Seattle-based
VC firm Ignition Partners, former director of Intel Capital China, Duane Kuang, and founder and former managing director of
Mobius Venture Capital, Gary Rieschel. This fund will continue the firm's early-stage investments in healthcare, among many
other sectors. Recent investments included preclinical research company Crown Bioscience, founded by sea turtles Alex Yue
Wu and Yiyou Chen and headquarted in Silicon Valley, with its main operations in Beijing.
Eli Lilly was the first and remains the only large-cap to launch a corporate venture fund in China, opening an office in Shanghai
in November 2007. Says Darren Carroll, senior managing director: "Establishing Lilly Asian Ventures is consistent with Lilly's
overall strategic move from a fully integrated company to a fully integrated network model. The new opportunities in China—and
later on in other parts of Asia—will allow us to expand our network."
Lilly Asian Ventures, which typically initially invests $3 to $8 million per company, does deals in three areas: CROs that
offer preclinical, clinical, and other services; companies that are developing innovative drug molecules or platforms; and
China-centric opportunities that aim at the domestic Chinese market. "Since the China VC market in life sciences is only developing
now, we believe it is very innovative for a major pharmaceutical company to stake out this kind of position," Carroll says.
HBM BioMed China, a $100 million China-focused fund affiliated with the Swiss HBM Bioventure (the largest European life-sciences
VC fund), invests up to $15 million per company from startup to pre-IPO stage. The fund, with management based in Shanghai,
has made three investments since its inception in April 2007, and has a number of additional investments in the pipeline.
Says Kevin Li, a partner: "This is a natural evolution of the nascent life-sciences business in China."