4 Aspects of The Biotech Investment in China (2)

4 Aspects of The Biotech Investment in China (2)

How To Choose The Right Project?

Riding on the wave of healthcare innovation, an increasing number of VCs and PEs begin to join the rank of investment firms backing life science ventures, in an attempt to find the next AbbVie.

How to select the right project? A number of factors come into play.

Undoubtedly, the most important one is if a product comes with significant innovative advantages, which largely decides if the company is primed to succeed or fail.

“Almost every investor will tell you that they are looking for the real innovation with substantial business potentials and values. They hope their investments would impact people’s lives profoundly and refuse to settle down on a repeated technology.” Commented by Neil Shen from Sequoia Capital China.
The innovativeness of a product acts like a barrier, which could fend off potential competitions and secure market exclusivity for a few coming years until newer and better technologies come to the scene.

3. The Healthcare Segmentation Is Accelerating

The increasing segmentation of life science field in the past few years — biologics and cell therapies dominate the theme, followed by medical services, in vitro diagnosis, genetic testing, etc. — has made deciding the right healthcare sector to invest become a difficult question, especially when it comes to choose between large and small molecules.

At present, small molecule accounts for the majority of the pharmaceutical market, representing 90% of all therapeutics out there. However, it is undoubted that the future lies within large molecules, as it is predicted to bring the highest growth potential in the next decade, and we have already begun to experience this steady upward trend.

On the flip side, they have their own disadvantages. Compared to small molecules, the development of biologics has always been considered to be a long and costly path; it is estimated that it costs roughly 1 billion and 10 years to successfully bring an antibody drug to patients. Although, the current view has changed; according to several industry watchers, the timeline and the cost to develop a big molecule have been dramatically reduced — the average R&D cost is around $140 million. It is still higher than small molecules.

Thus, for most investors, it would be wiser to not make their decisions based on whether to choose large or small molecules. Instead, they should zero in their emphasis on assessing the risk of return, evaluating investment strategies, and forecasting the future market value.

4. For Investment Evaluation, Time Is the Key

How quickly can a product be brought to the market? This is the most important factor to consider when measuring the potential of a project. Undoubtedly, being the initiator gives significant advantages over the late comers— easier to reach patients, better brand recognition, and higher market penetration. This is especially true in the current pharmaceutical environment, where the competition has become increasingly fierce, and commonly, multiple companies are in the race to become the pioneer. The faster a product can enter the market, the higher the value and the investment return it will bring.

For example, when multiple leads are in the pipeline, entrepreneurs should think carefully about how to balance the development of each candidate to avoid any potential delays or setbacks. To solve this problem, the majority of start-ups and biopharmas seek out contract research organizations, to either outsource parts of their discoveries or find a more flexible clinical trial design, which in turn rack up the process and maximize the value of investments. Nowadays, finding the right partners to complement each other and bringing the product to the market together is the right way to go.

On another note, it is also very crucial to take the expiration date into consideration, as the value of a drug declines dramatically once the patent is expired.

Another important factor to consider is how easily a drug can be translated into large scale production and its stability during this process, and this is particularly true for large molecules. Investors should not only rely on their own team, but also invite a professional third party to conduct a thorough review of the key quality attributes and its data integrity.

Last but not the least, how good the team is can greatly impact the investments as well, as an experienced team is often easier to obtain success. This also puts a lot of pressures on the leader of the project. He or she does not only need to have strong technical expertise but also be visionary and can right the ship through difficulties and turmoils.

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