A Professional Journey Shaped by Transformative Growth
Dan Liu
Dr. Dan Liu a seasoned life sciences professional with a PhD in biomedical sciences from Yale University, brings over a decade of experience in the healthcare and biotechnology sectors. From industry roles to consulting and investment, Liu's career has coincided with rapid growth in China’s healthcare industry. As the Senior and Managing Partner responsible for healthcare investments at CDH Investments, one of Asia’s largest alternative investment firms, Liu witnessed and contributed to the sector’s transformation, achieving significant milestones.
Recognizing the shifting landscape of China’s healthcare industry and capital markets, Liu joined Pivotal Bioventure, a renowned international USD fund, to lead investments in the Greater China region. With over a decade of experience in life sciences investment, Pivotal Bioventure and its affiliate, Nan Fung Life Sciences, remain committed to advancing healthcare innovation globally.
Emerging Trends in China’s Biotech Startup Ecosystem
In the past decade, China's medical innovation ecosystem has undergone a remarkable transformation. Initially characterized by imitation, establishment, and refinement—what we can describe as the "Innovation 1.0" era—the ecosystem has evolved into what we now recognize as the "Innovation 2.0" era. This period is marked by significant advancements and the emergence of innovative approaches that set the stage for an upcoming "Innovation 3.0" era.
During the "Innovation 1.0" phase, many Chinese startups focused on following existing global trends, adopting a "follower" approach to innovation. However, between 2017 and 2019, a new wave of startups emerged, leveraging lessons learned to accelerate their progress. These companies adopted validated or clinical-stage targets, enabling them to develop and advance their pipelines more effectively. Over the past five to seven years, they have achieved substantial milestones, moving numerous pipelines to Phase II and III clinical trials and gaining market approvals.
This shift represents a transition from quantitative to qualitative progress. These startups are no longer simply increasing the volume of their pipelines; they are achieving higher levels of sophistication and success. Today, we see the results of this transformation as the ecosystem enters a "period of harvest," where the efforts of previous years are yielding tangible benefits in innovation and market impact.
Notable statistics highlight this progress:
1. In 2023, China approved 32 innovative drugs, ranking second globally.
2. Investigational drug pipelines in China account for 36 percent of the global total.
3. Clinical trials originating in China continue to rise, leading the world in head-to-head clinical trials.
4. Out-licensing deals with upfront payments exceeding $50 million have reached a record high of 12 deals.
Unique characteristics of the Chinese market drive these advancements. With an aging population and a shift toward improving quality of life, biotech startups are increasingly focused on developing original, innovative drugs tailored to domestic healthcare demands. Shortened timelines for inclusion in China’s National Reimbursement Drug List (NRDL) and intensified competition among me-too drugs further drive innovation.
“Combining innovation, strategic partnerships, and flexible funding models position Chinese biotech firms to achieve sustainable growth and global recognition”
The Role of Technology and Innovation
Innovation in China’s biotech sector occurs across multiple levels, from incremental improvements to foundational breakthroughs. Cross-border licensing deals have surged, with the number of license-out deals surpassing license-in deals for the first time in 2023 (58 vs. 45). Key trends include:
● Diversification of Therapeutic Areas: Non-oncology assets in fields like immunology and infectious diseases are gaining traction alongside oncology.
● Advanced Modalities: Antibody-drug conjugates (ADC), multi-specifics, targeted RNAi molecules, and polypeptides are reshaping the focus of transactions.
● Earlier Clinical Stages: Deals involving preclinical assets now represent a significant portion of transactions, highlighting global recognition of China’s innovation capabilities. Preliminary statistics suggest that early-stage assets could account for half of the deals in 2024, compared to only one-third in 2022.
These developments underscore the increasing importance of deep innovation and cutting-edge technologies in driving global competitiveness.
Securing Funding in a Competitive Market
In a challenging capital environment, Chinese biotech startups are diversifying their funding strategies. Traditional licensing, commercial partnerships, and mergers and acquisitions (M&A) remain vital pathways. However, a new model called “NewCo” has emerged as a flexible alternative.
This model involves setting up venture-backed entities in ex-China territories to license Chinese-originated assets. The originating company retains around 20% ownership but operates as a financial investor, with the NewCo managed independently by an international team. This structure aligns financial interests while ensuring operational independence, offering startups expanded financing options and greater risk diversification.
Moreover, collaborations with multinational corporations (MNCs) enable Chinese companies to secure funding and access international markets. Since late 2023, MNC acquisitions of Chinese biotech firms have risen, reflecting global recognition of the sector’s R&D capabilities. Notably, three acquisitions—including SanReno and Gracell—involve Pivotal BioVenture’s portfolio, with disclosed acquisition amounts increasing by over 29.15 percent in H1 2024 compared to 2023.
Navigating the Global Biotech Landscape
As China’s biotech ecosystem evolves, startups actively explore globalization strategies to enhance competitiveness. Combining innovation, strategic partnerships, and flexible funding models position Chinese biotech firms to achieve sustainable growth and global recognition. By embracing cutting-edge technologies, fostering cross-border collaborations, and aligning with global market needs, China’s biotech industry is poised to deliver transformative solutions for patients worldwide.
