Demand drives interest in oncology drug makers

While venture capital funds chase a shrinking number of deals in China, the pharmaceutical sector remains a bright light.

Apollomics, a Sino-US oncology drug company, has raised $100 million in Series B funding from a group of Chinese investors.

CBM International led this round, joined by Guangzhou Yue Min Investment Asset Management, South China Venture Capital, Junson Capital, Pan-Lin Asset Management and K2VC. China Renaissance is the financial consultant for this deal.   

Apollomics is the fifth pharmaceutical company in China to raise money since the start of the year. Others include $120 million for Antengene, $44 million for Tobiopharm, $55 million for Suzhou Connect Biopharmaceuticals, and $80 million for BrightGene.

 

Chinese funds are battling for high-tech pharmaceutical companies as the current environment in China remains tough. In Q4 last year, quarterly venture funding figures dropped to their lowest levels since 2015, according to Bloomberg. 

“Oncology continues to attract keen investor interest given the high unmet needs in China and globally,” said Debra Yu, managing director and head of cross-border healthcare banking at China Renaissance. “Immune-based oncology therapies with an expanding set of applicable technologies are of particular interest, especially those attacking molecular pathways previously resistant to available drugs.”

Li Gang, the partner of CEC Capital, remains optimistic about the ability of pharmaceutical companies to raise money this year, especially those that target oncology. CEC Capital was the financial consultant for Suzhou Connect Biopharmaceuticals’ Series B fundraising which closed last week.  

“Oncology drugs, or anti-cancer drugs, will still be the focus for investors in the next year,” Li said. “Both macromolecular and small molecule drugs will be a hot topic for investment.” Macromolecular drugs use biologics with coded genes or cells to cure diseases, while small molecule drugs are organic compounds with a smaller molecular weight and are usually taken as pills.

Li expects China to have more policy support for macromolecular generic drugs in the next two to three years. There is a stable demand for cancer treatment and this could lower the price of anti-cancer drugs to an affordable level. More to the point, compared to small molecule medicines, macromolecular generic drugs generate more profit for a company.

“The trend of investment into oncology will continue in 2019, but investors will be more rational when making decisions,” Li added.

China wants to keep up with pharmaceutical developments around the world. Last week, Bristol-Myers Squibb announced the $74 billion acquisition of cancer biologics company Celgene. When completed it will create the second largest oncology drug company in the world, ranking after Roche.

The country has already eliminated tariffs on the raw materials for several anti-cancer drugs. It hopes that this will lead to larger discounts on anti-cancer medicines and stimulate research and development in the field.

Both Debra Yu and Li Gang agree that drug companies at a late or clinical stage of their drug development are particularly favoured by investors. But those pharmaceutical companies which own global rights to their products and have an experienced management team can also attract the attention of the capital markets.

 

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