Sequoia Capital China completed almost $15 million Series B investment in Beijing-based Deep Intelligent Pharma (DIP), a Chinese startup that provides artificial intelligence (AI) technology for drug development, on September 28, though it was not announced until October 9.
DIP develops AI technologies throughout the whole drug R&D process and most recently released an AI system that monitors adverse reactions to drugs; a fresh application for AI use in the medical field. It means that the drug development process can be fully monitored from its early status to after-sales.
This is a new area for Chinese AI companies that has much scope for growth. What gives the founding team distinct first-mover advantage is that the members have a strong background in both pharmaceuticals and the AI industry - another feature that attracted investors
It is the second round of funding this year for DIP. In May it completed a $5 million Series A investment from ZhenFund, an institution co-founded by celebrated angel investor Bob Xu, as well as Sequoia Capital China. ZhenFund separated the Series A investment into two tranches (the first happened in December 2017) just two months after the company was founded.
It is a good time for medical-related AI companies and DIP is riding this momentum. In 2015, the Chinese government's three-year plan for AI development wanted to inspire more AI innovations by 2018 and boost the industry to Rmb150 billion ($21.7 billion) by 2020.
As if this were not enough, a government notice in August encouraged the medical industry to develop companies in this field and intends to list them as a national project of the year. DIP falls perfectly into both categories, something that explains both the fast development and smooth financing of the company.
Founded in October 2017, Deep Intelligent Pharma provides integrated AI systems for drug discovery, development, registration and other medical affairs for more than 50 pharmaceutical companies.
Its self-developed AI drug monitor system, also known as AI pharmacovigilance, passed a test to connect to China’s Center for Drug Evaluation last month. Furthermore, the startup said that it will start to sell its AI-featured drug synthesis system in November this year.
The first quarter of this year saw $1.5 billion investment in 132 medical and health companies in China, according to a report from research firm Vcbeat.net. Financing was up 10% from Q1 last year, mainly because of increasing investment in biotech and medical information. And the amounts that individual companies have been able to raise has been increasing steadily since 2010 too.
Although investors are still piling into the sector, they tend to be more rational than they perhaps used to be. The research shows a decreasing amount of investment for simple medical-inquiry startups and a focus on biotech and pharmaceutical companies. The message is clear. If startups in AI and the health sector want to grow, they will need to provide something solid in the future.
This article has been corrected to show that Deep Intelligent Pharma's AI drug monitor system, also known as AI pharmacovigilance, passed a test to connect to China’s Center for Drug Evaluation last month; not that the firm had passed a clinical trial as mentioned in the company's press release and an earlier version of this article