When Dr Yang Dajun who is working on curing diseases related to aging, chose to return to China in 2005 to launch his own biopharmaceutical start-up after almost two decades in the US, he said the decision wasn’t easy.
“It was a bit difficult as at that time [China’s biotech industry] was at a very early stage. A lot of things were not available, especially the financial environment. But I’m not regretting the decision,” Yang, co-founder and chief executive of Ascentage Pharma, told FinanceAsia in an interview.
Yang went to the US in 1986 to study oncology – broadly, the prevention, diagnosis and treatment of cancer. In 2009 Yang co-founded Ascentage, a clinical-stage biopharma firm that looks for and develops targeted small-molecule cancer therapeutics, in Shanghai with $3 million out of his own pocket and from his friends Dr Wang Shaomeng and Dr Guo Ming.
The trio are among a number of Chinese-born, Western-educated biotech scientists who left China for further studies overseas in the late 1970s and 1980s and later worked their way up to senior roles at some of the world’s leading pharmaceutical firms and academic institutions.
Beijing has for years tried to lure successful expatriates home. In 2008, the central government implemented the so-called “Thousand Talents” programme, offering plum jobs, research grants and even offering allowances of up to Rmb1 million ($150,000), in an attempt to woo Chinese scientists and other professionals back to China.
As of the end of 2015 the programme repatriated 5,208 expats, according to state broadcaster China Central Television. The three co-founders of Ascentage are all members of the programme.
Their long-awaited return also comes at a time when the country’s pharmaceutical industry is trying to up its game by developing innovative new products rather than mass-producing cheap copycat drugs, in keeping with Beijing’s drive for a more sustainable economy.
“The development of a big healthcare sector in China and globally mainly relies on innovation as generic drugs production has lost its shine,” Kevin Xie, co-founder of China Renaissance and the head of the investment bank’s healthcare team, said.
In that respect, China’s biopharma industry has already undergone significant change, Vikram Kapur, a partner at consulting firm Bain & Company, told FinanceAsia.
“The sector historically used to focus more on generics and there were low-cost contract research organisations,” he said. “Today you are seeing teams that focus on much more sophisticated research. They have a global view and a track record.”
What’s more, the sector has a lot more support and understanding from the government and financial community, Kapur added.
China has in recent years invested heavily in biotech. The health minister Chen Zhu pledged the country would spend an additional Rmb75 billion ($11.4 billion) to spur biotech innovation under the latest 13th five-year policy blueprint (2015-2020), according to the official China Securities Journal. The government also named the sector as one of the nation’s seven pillar industries in its 13th five-year policy.
GAINING TRACTION
In the meantime, with the 85-year-old Chinese chemist Tu Youyou winning the Nobel prize in medicine last year, a new generation of Chinese biotech scientists, like Yang, are more keen to develop innovative “made-in-China” medicine.
Unlike other, bigger players, Ascentage has barely hit the headlines since forging a strategic alliance in 2010 with 3SBio, a better-known Chinese biotech name. 3SBio invested $3 million in the start-up in its pre-A round of funding before Ascentage raised a further $15 million from its main round in August 2015. The company is about to close its Series B round of financing, Yang said.
That doesn’t mean Ascentage hasn’t kept busy. The start-up has quickly developed into a team of more than 70 in-house staff, running offices in Shanghai and Taizhou, while conducting clinical trials in China, the US, and Australia. Currently it has four molecules that could potentially be developed into drugs or treatments in phase I-II trials in the US, Australia and China, with another four molecules at investigative new drug applications reviewing or enabling stages in these three countries.”
The firm’s proven track record in small-molecule drugs has also spawned an international partnership. In late April, it teamed up with San Francisco-based UNITY Biotechnology to develop senolytic treatments for age-related diseases and eventually expand the lifespan.
Although the exact tie-up terms remain undisclosed, Ascentage will acquire an equity interest in UNITY and UNITY will make an investment in Ascentage, according to the statement.
UNITY, backed by venture capital firms ARCH Venture Partners, Venrock and Wuxi Healthcare Ventures, has been working for four years to study aging and age-related diseases and demonstrated in animal models that “clearing senescent cells could reverse or prevent age-related pathologies, including osteoarthritis, atherosclerosis, and glaucoma,” the statement said.
“Basically you have to remove the aged cells from the body and then allow the key organs to function [properly]. If we can slow down or reverse the diseases related to the aging process, then we can really improve the quality of life and then eventually the lifespan of human beings,” said Yang, the former associate professor of internal medicine and member of the comprehensive cancer centre at the University of Michigan. “We cannot reverse our age but we can live longer and healthily.”
The Ascentage-UNITY tie-up is the latest in a number of Sino-foreign partnership deals to have taken place in recent years as China’s healthcare sector has boomed.
For instance Hua Medicine, a leading innovative drug development company co-founded by Chen Li, another so-called sea turtle who returned home after studying and working abroad, has won a licensing agreement to develop new drugs including a diabetes treatment with Swiss drugs maker Roche. Meanwhile, Shanghai-based Zai Lab, funded by former Pfizer executive Samantha Du, has in-licensed cancer treatment drugs from the American biopharmaceutical giant.
“With the combination of capable, smart Chinese innovation and Western development and clinical methodology, China can create a new [healthcare] system, rather than just a copy of US system. It has to have some unique Chinese attributes but also some clinical learning from the US system. The quality would be the same,” Robert Nelsen, co-founder and managing director of ARCH Venture Partners, which co-founded Hua Medicine as well as backed UNITY, told FinanceAsia.
Such promising drug developers are actively tapping capital markets to raise fresh capital for expansion in China and beyond. 3SBio raised $818 million through its initial public offering in Hong Kong last June, the largest listing by a Chinese pharmaceutical company since 2015, according to Dealogic, while BeiGene, a Beijing-based cancer drug developer, raised $182 million from its IPO on Nasdaq in February. Ascentage also plans to go public on China's new third board later this year, according to Yang.
In addition, China has so far this year completed 30 biotech-related domestic and outbound acquisitions worth a combined $1.88 billion, almost double the deal value of $991 million in the same period of last year, although most acquisitions remain small with only one purchase exceeding $500 million, according to Dealogic data.
“China’s biotech firms are still at the growth stage. It’s a bit like the TMT industry which took a while to see big acquisitions,” China Renaissance’s Xie said. “But thanks to entrepreneurs and their technologies, confidence from investors and support from the government, the industry is developing on the right track and gaining momentum.”
Early indications are that these efforts are starting to pay off. The output of the country’s bio-related industry rose more than 20% to Rmb3.16 trillion ($480 billion) in 2014, according to the Xinhua News Agency.
The bioindustry was also expected to have reached Rmb4 trillion by the end of 2015 under the previous 12th five-year plan, with 90% of the output value – Rmb3.6 trillion coming from the biopharmaceutical sector.
With the help of Yang, Chen, and China’s other returning sea turtles, there could be much more to come.
“For us, you can call it the dream or responsibility to bring the advanced biopharma technologies back to China and then make an impact on the healthcare industry in China and eventually help the country’s patients,” said Yang.
