Bioe News

Published online: 05 January 2006, doi:10.1038/bioent898

China's entrepreneurial side

*Hepeng Jia is a freelancer based in Beijing

China's biotech ambitions rest squarely upon the shoulders of Taiwan. Thus far, the tiny island is proving that it is up to the task.

Casting a wide net: Tai-Sen Soong, president of CDIB BioScience Venture CDIB BioScience Venture Management Co Ltd

Late last year, Taiwan and the island's leading government-backed venture capital group quietly celebrated an impressive milestone in their quest to become global biotech investors. In just over three and a half years, the Chinese Development Industrial Bank (CDIB) has invested in 24 biotechs around the world through its offshoot, CDIB BioScience Venture Management (CBVM). Of these 24, eight have already either floated shares on the Nasdaq or Swiss Exchange, or been acquired by companies like Johnson & Johnson.

Not surprisingly, perhaps, the CDIB and CBVM, both based in Taipei, have thus far chosen to put the bulk of their venture money into US biotechs. In fact, 17 of 24 investments were made in US biotech startups; the remaining seven were European and Taiwanese biotechs. All of this bodes well for Taiwan, which invested NT52.4 ($1.59 million) billion in the biotech sector between 2000 and 2005. But, Taiwan's early progress provides further evidence that when it comes to biotech, there are most certainly two Chinas: the mainland, which is still trying to figure out biotech, and the island of Taiwan, which is moving forward.

"The lack of capital, foreign investment restriction, rigid management of the State sector and lower quality of the private [venture capitalists] all impede the mainland Chinese players to invest in overseas biotech market," says Luyang Zhang, director of the Center of Venture Capital studies at Shanghai-based Fudan University.

In Taiwan, in the late 1990s when VCs decided to get serious about investing in biotech, they realized early on that US startups and the US market for biotech products would be key to their success. Few Chinese investment groups were more ambitious than the CDIB.

		"All of this bodes well for Taiwan, which invested NT52.4 ($1.59 million) billion in the biotech sector between 2000 and 2005."

"In 1998, when I first joined CDIB to head the biotech investment department, I had insisted on going out of Taiwan to open an office in the United States," says Tai-Sen Soong, president of CBVM, which was spun off from CDIB in 2001.

According to Soong, the government gave the CBVM the freedom to invest anywhere in the world so long as it benefited Taiwan and helped boost the island's local biotech industry. This remit was easier said than done.

"I was aware that local biotech sector was far from mature for investment," Soong said. "There were few seasoned management teams in place [in 2001], and investors were very concerned that those that were in existence would use their money to learn [how to manage biotechs]. We knew that investing in biotech could be a very expensive lesson if we focused entirely on Taiwanese startups."

Soong says this, and the fact that most of the pharma and medtech companies that acquire biotech startups are located in the US, was sufficient cause to put the bulk of their investments in US biotechs. Investments in US startups have also helped CBVM gain insights that can be applied to local startups.

"We hope to incubate our own companies in Taiwan with the experience learned in the US market and with technologies in-licensed from [CBVM] portfolio firms," Soong says.

		"'We hope to incubate our own companies in Taiwan with the experience learned in the US market and with technologies in-licensed from [CBVM] portfolio firms,' says Tai-Sen Soong, president of CBVM."

Weichen Tien, the retired founding director of the Taipei-based, government-backed Development Center for Biotechnology, says that Taiwan will likely stick with this model for the foreseeable future.

In the past two years, CBVM has incubated three local biotech firms, including Taipei-based HenKan Pharmaceuticals, which develops oncology drugs for the Asian market, Taipei-based Medtech Tronics, which is a medical device distribution company, and Taipei-based Panlabs Biologics, a microbial strain improvement and fermentation technology provider CBVM acquired from Ontario-based MDS Pharma Services.

Soong says that in the coming year, CBVM will double its total capital to NT4.8 ($150 million) billion to raise its second fund and accelerate collaborations and cross licensing between its overseas portfolio companies and its local portfolio firms.

Oliver Yoa-Pu Hu, a professor of pharmacology at Taipei-based National Defense Medical Center, says that CBVM's strategy is on target but questions whether local portfolio firms in Taiwan are ready to do business with US and European biotechs. He says at a minimum, these local firms need some understanding of global biotech collaborations and intellectual property licensing. "We do not have many firms with this capability," Hu says.

Huaizheng Peng, portfolio manager of London-based biotech VC group Reabourne Tech Investment Management says that the only way Chinese biotech startups and Chinese VCs are ever going to be competitive is to gain global experience abroad. "Experience in highly established and regulated markets abroad is vital if [Chinese VCs and biotech startups] are to become competitive," Peng says. "With Taiwan's VCs and their US portfolio companies, biotech development in China has a chance to mature."