Innovent's $100M deal signals how biotech is ready to explode in China

Print 26 January 2015
EJ Lane / Feirce Biotech

SINGAPORE--China biotech Innovent's recent success in raising $100 million in venture capital to help it build a pipeline of biosimilars could be a signal of how the industry may be set to explode in a country about to invest $6.45 billion in startups.

The week before Innovent's announcement, the China State Council, its cabinet, decided to shift from government control of investments to a more capitalistic style to draw venture capital investments in healthcare and other industries. The Council approved a plan that would phase in over the next three years, through 2017.

Premier Li Keqiang ordered that the planned investment fund be market-oriented and efficient. The intent is to draw more investment, including foreign, to support technological innovations such as those offered by biotechs and others in the healthcare market.

An economist with the China Center for International Economic Cooperation told the state-run China News Service that China had been laboring under a system of its regions competing with each other for meager local investment funds. China now counts 29 provincial investment funds, but only a handful are worth more than $161 million, with the smallest in less-developed areas.

The council's decision at its mid-January meeting followed up a pledge made last year by its executive committee to establish such a fund to double the amount of government venture capital for emerging industries.

By shifting from direct government funding to providing seed money to attract other VC funding, the new policy is expected to eliminate research duplication and corruption rampant in the current system, Li said. He said the new fund also could lose money, but suggested drawing more investors in the innovation drive would likely create a profit.

Although the government plans to have ultimate control, the intent is to have it run by fund-management companies chosen through public bidding. The managers also would be the sole decision-makers, the council said, with nongovernment investors having priority over the government if and when dividends are distributed.

The council also said investment projects would be approved based on research characteristics in five categories, including those carried out by natural sciences and those that benefit society. The government would oversee the VC effort with a council formed of members of the ministries of Science and Technology and Finance, and the National Development and Reform Commission, all of which now manage separate science research projects, some redundant.

The new rule became effective Jan. 15, but the changes are to take place during a three-year transition period.

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