A Pill's Journey from Lab to Industry | BlueRun Ventures Biotech Salon Series

蓝驰创投·June 14, 2023·0·0

The investment logic in biotech has quietly shifted.

Nearly everyone can feel this trend — after weathering a storm, the secondary market has bottomed out, while the primary market is slowly recovering from heavy damage. Will things get better or worse?

Recently, BlueRun Ventures' biotech team held several internal and external discussions, and we've distilled the key insights to share with you today. At a biotech salon series, Rong Jing, Managing Director at BlueRun Ventures, explained BlueRun's assessment of and investment logic for biotech companies, combining macro context with specific corporate paths.

The event also invited guests including Shen Yuelei of Biocytogen, Ni Feng of LeadXpro, Zhang Yuanyuan of QLT Biotherapeutics, Zhong Mengyang of Sandstone Therapeutics, Hu Zeping of Tsinghua University School of Pharmacy, and He Tieqiang of CMBI Healthcare, who focused on "innovative drug R&D" from academic and industry perspectives, exploring the tumultuous journey of a pill from lab to market. We've condensed this to the maximum degree — the full text is under 3,000 words. Scroll down for quick insights —

01

BlueRun View: Signs of Life in a Bottomed Market

👉 The current state of the biotech industry is relatively uniformly assessed, and this is clearly visible from the secondary market's reaction:

From the trends of the Hong Kong-listed biotech index, the NASDAQ biotech index, and innovative drug ETFs, all three peaked around July-August 2021, then declined continuously, reaching their lowest point at the end of last year.
The trend is very clear: the secondary market has bottomed out, and the likelihood of further decline is low, but a short-term rebound to previous values is also unrealistic, because stock markets typically take ten years to rise and six months to fall back. This is the fundamental reality of the entire industry, and it affects investor confidence and perspectives.

👉 Facing a complex external environment, what kind of biotech companies can withstand pressure and thrive? We of course have our own thinking on this:

First, differentiation that reaches the end user. Many companies in the market emphasize differentiation in their product design, but the key consideration should be whether design-stage differentiation can actually create change for clinical practice and end markets — technical differentiation alone is meaningless;
Second, core products aimed at "large market" opportunities that solve real clinical problems. Products should ideally target, or have potential to expand into, large clinical medicine or consumer healthcare markets. The emphasis here is that in pharmaceuticals, blockbuster products typically solve major clinical problems, but in future markets, products generating more sales revenue may not necessarily correspond to major unsolved scientific clinical challenges. Both companies and investors need to take a more open view of external market changes and various technological iterations;
Third, spend more time thinking about business planning and capital market path selection. Biopharma companies need to be more sensitive to external political and economic environments. In the foreseeable future, different capital attributes and capital markets' requirements and tastes for startups are changing dramatically. Compared to starting a company ten years ago, founders may need relatively deep thinking on equity structure, business design, financing, and capital market planning from the company's earliest days. More importantly, founders need to examine whether their management team's capabilities better match which capital attributes, and which secondary market their business can satisfy in the future;
Fourth, experience + execution. For biotech companies, while innovation matters, execution matters more;
Fifth, the "professor and veteran" combination. A management team pairing an academic star with cutting-edge technology and an industry veteran with rich experience is our favorite;
Finally, greater emphasis on cash budgeting. Biotech is a cash-burning industry, and in the current economic environment, fundraising is far harder than before. The era of starting big, hiring expensively, and rapidly expanding pipelines may be gone for good.

02

Industry View: The Truth of the Second Half

The Inevitable Union: Industry and Academia

Ni Feng: After leaving academia, I wanted to prove one thing: that China's existing talent, industry, and social capital foundations can produce excellent companies. I hope more scholars can become good enablers of innovative enterprises.

Zhong Mengyang: China's pharmaceutical industry has gradually entered a relatively mature development phase. Arbitrage opportunities existed in the past, but after entering the original R&D stage, a clear division of labor is gradually emerging: scientists focus on comprehensive technology exploration; industrialization teams professionally and rapidly build systems, doing process development, clinical trials, and every step solidly and compliantly. Many leading scientists also agree with the model where they only provide technology and professional teams push forward and manage — some scientists even directly sell their products and platforms to established companies.

A major current problem in industry-academia collaboration is the valuation of state-owned assets, where a market-based system hasn't been established. Technology transfer offices or universities worry about asset loss or interest transfer. But if pricing is too high, once a third-party intermediary sets the price, commercial value decreases — effectively killing the asset.

He Tieqiang: Beyond this situation, there's also the case where technology is merely a阶段性成果 and needs the scientist to continue developing it. Challenges abound in this process, so whether someone has understanding of each link — including technology, product, and market — matters greatly.

Zhang Yuanyuan: Much basic research离不开学术界, but when companies encounter technical problems and hope schools can solve them, schools may refuse because this research won't produce publications. So a more mature system is needed to enable gradual cooperation between industry and academia.

How to Discern True from False Demand

He Tieqiang: Clinical demand contains both real and false propositions. Sometimes things that seem unimportant during clinical practice may actually represent huge market demand. So clinical demand requires insight into people to find solutions.

For example, breast cancer surgery evolved from radical mastectomy to breast-conserving and comprehensive treatment because some people couldn't accept removal. Some doctors saw this as a problem and researched limited surgery. But more doctors felt not removing the breast violated standards.

Zhang Yuanyuan: Everyone defines clinical demand differently. For example in metabolic disease, people use the 20%-30% weight loss from bariatric surgery as the benchmark for weight loss drugs, but many people are satisfied with 10% weight loss. Or take monthly injections versus daily oral pills — which is better? Some elderly patients fear needles at sight, while others feel freer not carrying medication. The future may tend more toward customizing clinical demand for different patients.

People and Mission: Building the Startup Team

Ni Feng: In early-stage entrepreneurship, the ceiling of a technology-driven company is its CTO or CEO; employees just need to cooperate and execute. At a certain point, complementary people need to appear.

Zhong Mengyang: A collaborative team first needs division of labor. If everyone is the same type, when difficulties arise, no one can solve them. When driving, looking far ahead keeps the road straight; looking only at your feet, it's easy to veer.

Zhang Yuanyuan: Different stages require hiring for different needs. If a product is preparing for IND filing, you must hire experienced people for clinical applications, not fresh PhDs. Beyond this, whether a candidate's project philosophy aligns with the company is also crucial — better to lack than to compromise.

He Tieqiang: The match between how a team functions together and what they want to accomplish determines whether they can move things forward — in short, the right people for the right things.

Originating in Silicon Valley, BlueRun Ventures was established in 2005 as a venture capital firm focused on early-stage startups.

Currently, BlueRun Ventures manages multiple USD and RMB dual-currency funds in China, with assets under management exceeding RMB 15 billion, making it one of the largest early-stage funds domestically. It focuses on Pre-A and Series A investments across hard tech and innovative interaction, enterprise technology, new consumption, healthcare, and other sectors, having cumulatively invested in over 150 startups including Li Auto, Waterdrop, QingCloud, Guazi.com, Qudian, Songguo, Ganji.com, Energy Monster, YTMicro, Machenike, CloudSino, AnchNet, BioMap, and others.

BlueRun Ventures has been ranked #1 on Zero2IPO's "China Top 30 Early-Stage Investment Institutions" and ChinaVenture's "China Best Early-Stage Venture Capital Institutions TOP30," and was named to Preqin's Top 10 global venture capital fund managers for sustained high returns.

Additionally, BlueRun Ventures has consecutively received honors from Forbes China, 36Kr, Cyzone, Caixin Media, CBNweekly, Jiemian, and other media institutions, including "China Early-Stage Firm of the Year," "China Top Venture Capital Firm," "Most Entrepreneur-Friendly Early-Stage Firm of the Year," and "Most Influential Early-Stage Firm of the Year."