New consortium promises a richer future for China's biotech industry
Hepeng Jia/Beijing, China
China has launched its first biotech investment consortium. The biotech science and technology (S&T) venture alliance has 22 partners from academe and industry - including Shijiazhuang Pharmaceutical Group, DSM China (a branch of the Dutch chemical giant DSM), and the Chinese Academy of Sciences (CAS).
The alliance has so far raised 348 million yuan (US$51 million), with a short-term target to reach 1 billion yuan, according to Zhang Zhibin, director of the CAS life science bureau and a founder of the venture alliance. Public partners have yet to make a financial contribution to the alliance but CAS and the National Development and Reform Commission (NDRC) are likely to provide commercialisation funding, says Zhang. In addition, public partners will be able to supplement individual investments within the consortium by up to 30 per cent. So if DSM invests, say, $10 million in a technology provided by CAS it could get up to $3 million of public funding.
Unlike a typical venture fund where money is managed by professional fund managers, the alliance does not collect money from investors. Rather, each partner decides how to invest its money. Investment targets include biopharmaceuticals, biomaterials, industrial enzymes, biofuels, and organic acids.
’Although we do not control the decisions of member enterprises, their investments are now different to their previous individual actions, because they can enjoy the platform of CAS to find investment targets and control risks,’ Zhang told Chemistry World.
Chinese biotech start-ups, often spin-outs from research institutes, have long complained about a lack of private capital to support their development. A study by the McLaughlin-Rotman Centre for Global Health at the University of Toronto in Canada found that all of the 22 innovative Chinese health biotechnology firms that it investigated had received government funding.1 But Zhang Qian, vice-general manager of Tianjin-based GreenBio, says that this funding is often insufficient and does not bring with it the business expertise that industry investors can offer. ’The public-private venture partnership could offset the shortcomings of the government’s investments,’ says Zhang.
Earlier this year Qian secured a US$20 million investment from DSM China’s venture capital branch for its biodegradable material project. Chinese venture capitalists need to understand the industry better if they are to correctly judge which biotech investments to make, he says
Ren Keyong, president of Beijing-based biotech consulting firm Accelovance, agrees that the venture alliance could shrink the gap between academe-derived start-ups and industry. ’But without a clear binding mechanism, enterprise partners within the consortium can easily break their investment promises,’ warns Ren. ’If this happens, the venture alliance will not achieve its goal.’
1 S E Frew et al, Nature Biotechnology, 2008, 26, 37 (DOI:10.1038/nbt0108-37)