Mr. Andrew Ng, Managing Director & Head of Healthcare of VMS Group’s Private Equity Division, spoke at the “China’s Biotech & Biopharma Capital Market Reset” webinar organized by Bloomberg Intelligence on 24 February 2022.

The healthcare deal flow in private market has continued to increase steadily in both value and number in recent years. In 2021, the value and number of China and Hong Kong deals rose to a record US$40bn and over 800 respectively across sub-sectors of biotech, medtech and services.

Public listing remains the key exit strategy for global healthcare companies. The number of healthcare IPOs in Hong Kong and China has risen substantially since 2018 after the Hong Kong Stock Exchange introduced Chapter 18A of the “Listing Rules” and Shanghai STAR board allowed pre-revenue biotech companies to go public.

When talking about the development of China’s biotech market, Mr. Ng sees it evolve in three stages.
· Stage 1 (2015-2020): A lot of biotech companies are just “me-too”, “fast-follow” companies.
· Stage 2 (2020-2025): Only the best-in-class companies with new indications or modalities reaching global standard will successfully enter the public market.
· Stage 3 (By 2025): Investors will accept “first-in-class” new targets and MOA (mechanism of action), which are high risk/reward but require strong technical expertise.

As a private equity investor, Mr. Ng commented that one has to invest at least 2 to 3 years ahead of the public market in order to capture the opportunity and maximize the return. According to Bloomberg Intelligence data, oncology has been investors’ main focus in the therapeutic area. Mr. Ng added that there are also compelling investment opportunities in immunology, neuro-science and cardio/nephrology, and expected phenomenal companies to emerge in China setting. When evaluating a portfolio company, the five key aspects VMS analyses are clinical need, product pipeline, platform technology, competitive landscape and market potential.

In terms of valuation, the global biotech market has entered a boom cycle since 2019 and become the strongest in 2021 spurred by COVID-19. In the near term, several risk factors still linger and Mr. Ng stressed the importance of monitoring both policy changes in China as well as global macro factors. On the policy front, the Chinese government will continue with supply-side reform to strengthen clinical trial standards and drug approval process. On the demand side, VBP (volume-based procurement) is a market transformation to watch out for.

VMS has a dedicated investment team focusing on the healthcare sector and invests primarily in global therapeutics, medical devices, diagnostics, CXOs and bio-manufacturing companies with a unique China angle. We have been focusing on scientifically differentiated innovation with going global potential such as portfolio companies I-Mab (NASDAQ: IMAB, immunology-focused biopharmaceutical company), SyMap Medical (device-based therapies for cardiovascular and pulmonary diseases) and Chime Biologics (world-class CDMO).