China Investment Roundup: Active Deal-Making In Precision Medicine

Winter is coming, yet China’s financial market is still hot for healthcare companies looking at a prosperous period of investment before the year ends. Capital investments from Chinese investors dramatically increased in November, particularly in the precision medicines segment. Although Chinese Creat Group’s expected record-breaking outbound pharmaceutical acquisition deal worth $1.5bn failed to gain US approval, cross-border M&A remained active.

China’s healthcare industry has seen an increased level of financing activity in November, with a total of 24 deals in mostly early stage fundraisings for precision medicine and cell therapy. Among those deals, Frontline BioVentures committed to five investments alone, leading the domestic venture capitalists.

China set precision medicine derived from next-generation genomic sequencing (NGS) technology as one of the nation’s foremost science and technology projects under the 13th Five-Year Plan for 2016-20. Since then, deals and investments have been coming thick and fast amid the national push into this sector. (Also see "China Precision Medicine Push Boosting Genomic Business Forays" - Scrip, 19 Oct, 2016.)

The biggest deal of November was a $101m funding raised by 3D Medicine, a Beijing-based precision medicine company focusing on oncology. This round was led by China State-Owned Assets Venture Investment Fund and ChinaEquity Group.

3D Medicine provides next-generation sequencing for early-stage cancer detection, precision medicine diagnosis and innovative drug development. The company also established a biomarker-driven drug development pipeline for immunotherapy. Currently, its leading drug candidate, the first subcutaneous injection PD-1/PD-L1 antibody in the world co-developed with Suzhou Alpharmab, is undergoing clinical trials simultaneously in China, Japan and America.

The company’s CEO Zhaolong Gong said that relying on the integration of its cancer diagnosis and treatment platform, 3D will continue to develop more combined products for cancer immunotherapy.

Another $100m Series C financing was raised by Annoroad, a Beijing genetics services company also engaged in precision medicine. The funding round was led by SAIF Partners, jointly with SBCVC, Shenzhen GTJA Investment Group and Ping An Ventures.

The company provides solutions for both clinical testing and life science research, with a series of NGS diagnostic applications in the field of human reproduction, cancer, and rare diseases. It has also form partnerships with Illumina Inc. for sequencing, with Intel for precision medicine and with AliCloud for a cloud-based bioinformatics program.

It said that the proceeds would be used to expand its business and improve its R&D capabilities and infrastructure, as well as to invest in new genomics technologies with a focus on growing overseas business to improve the current product portfolio.

Additionally, three more precision medicine companies received funding to develop products based on NGS. Guangzhou AnchorDx raised $28m in a Series B round led by WuXi Healthcare Ventures and Frontline BioVentures to develop precision oncology products, which applies NGS to methylated circulating tumor DNA (ctDNA) to diagnose early stage cancer.

GenomiCare Biotechnology, a Shanghai-based cancer-focused precision medicine company, completed an undisclosed Series A financing co-launched by Morningside Venture Capital, Apricot Tree Capital and Carebridge Holdings. And Cygnus Biosciences, a Beijing company developing a novel sequencing technology, raised $19.6m in a B round from Zhonguancun Development Group and Shanghai Creation Investment Management.

Investment In Cell Therapy

If investors have warmed to precision medicine this winter, cell therapy has also got their attention.

Zensun (Shanghai) Science & Technology Co. Ltd. raised $76m from a group of investors led by SDIC Venture Capital Management. Zensun’s current pipeline covers cardiovascular disease treatment, anticancer drugs, and treatments for energy metabolism disorders.

Zensun's lead drug Neucardin is a first-in-class injectable recombinant human Neuregulin-1, which can build heart muscle to treat chronic heart failure. The company initiated Phase III trials of Neucardin on Dec. 1. Zensun is also developing ZS-07, a drug to improve cell metabolism with potential for treating Alzheimer’s disease.

Beijing Immunochina Medical Science and Technology raised $7.5m to support clinical trials of its CAR-T product for lymphoma from Legend Capital and Thiel Capital. CEO Ting He said the company would further consolidate its technology leadership in CAR-T manufacturing platform through the financing, and would also promote R&D for more advanced blood cancer treatments.

Immunochina has started Phase II trials of its CAR-T candidate in acute lymphocytic lymphoma patients and a Phase I study in diffuse large B-cell lymphoma.

Finally, EOC Pharma, a spin-out from Eddingpharm International Holdings Ltd., closed a $32m series B funding round to back novel oncology drug development. The company has in-licensed a pipeline of six candidates.

Outbound Investment

Chinese institutional and strategic investors were seeking opportunities overseas as well, inking five deals in one month for various products and services.

A Bay Area biotech, Arcus Biosciences Inc., announced a $107m Series C financing from GV and some Chinese investors, including Decheng Capital, BVF Partners and Hillhouse. The proceeds will be used to advance two clinical projects: AB928, a first-in-class dual adenosine receptor antagonist, and AB122, a PD-1 antibody in-licensed from WuXi Biologics and Harbin Gloria Pharmaceuticals Co. Ltd. in a $816m deal in August.

Exicure Inc., a Chicago developer of nucleic acid drugs, closed a $11.2m funding led by Luye Pharma Group Ltd.. It has completed Phase I trial of a topical psoriasis treatment. Canada's Acasti Pharma Inc. signed a $133m non-binding term sheet with an unnamed China pharma for China/Asia rights to its hypertriglyceridemia drug candidate, CaPre, a highly concentrated omega-3 phospholipid derived from krill. China VC firm SBCVC invested $30m in a series B round of 12 Sigma Technologies, a San Diego medical imaging firm. Fullerton Healthcare, a Singapore-based private healthcare provider, raised $121m in a funding led by Ping An Insurance to expand its healthcare clinic offerings to mainland China companies.

Reconstructing M&As

November was busy with several high-profile M&As, mostly cross-border deals, but witnessed the setback of Creat Group’s planned acquisition of Biotest AG deal because of US scrutiny; a deal was expected to set a record high value of €1.3bn ($1.51bn) for an overseas acquisition.

Creat Group announced the all-cash takeover plan to acquire US-listed German blood plasma product company Biotest in April this year. The German target could be a good fit for Creat, as it owns Shanghai RAAS Blood Products that competes with international groups such as CSL Behring, Grifols SA and Baxalta Inc. in China. (Also see "China Investment Roundup: Active Deal-Making And A Record Overseas Acquisition" - Scrip, 8 May, 2017.)

But the Committee on Foreign Investment in the United States (CFIUS) had national security concerns about the transaction that Biotest said could not be mitigated under the planned deal structure, according to a statement.

Creat and Biotest therefore have withdrawn the application and plan to file a new one for an expedited review, but without any guarantee for a successful second attempt.

Another billion dollar buy was the acquisition of Cardinal Health China’s drug distribution operations made by Shanghai Pharmaceuticals Holding Co. Ltd..

Shanghai Pharma paid $1.2bn to win the bidding over Sinopharm Group Co. Ltd. and China Resources Pharmaceutical Group, and could potentially surpass its competitor and move up to second place in China with the integration of the Cardinal China business.

Shanghai Fosun Pharmaceutical Group Co. Ltd. made two equity investments of $171m in total in one month as the group continued its dual strategy driven by internationalization.

Fosun planned to pay up to $98m to buy 69% of Henlix Biotech for biosimilars and $73m to acquire French Tridem Pharma for African market expansion.

Walgreens Boots Alliance Inc., a global retail pharmacy chain, said it would pay $420m to acquire a 40% stake in Sinopharm Holding GuoDa Drug Store Co., the largest retail pharmacy chain in China. GuoDa is a subsidiary of state-owned Sinopharm, the largest pharmaceutical company in China.

Nanjing Hicin Pharmaceutical joined several Chinese institutional investors to acquire a 90% stake in Italian Nerviano Medical Sciences SRL for $91m, as it aims to go global and to develop innovative drugs. Yifan Pharmaceuticals also spent $20.6m to buy NovoTek Pharmaceuticals Ltd from Merrylake International to enter the global pharmaceutical preparations market.

From the seller side, Valeant Pharmaceuticals International Inc. closed its $190m sale of Obagi Medical Products Inc. to Haitong International Zhonghua Finance Acquisition Fund I, L.P. and its affiliate Obagi Cosmeceuticals, LLC. Haitong fund has one Chinese partner, China Regenerative Medicine International Limited, which might be interested in marketing Obagi products in the domestic market.

Pfizer Inc. also sold its 49% stake in the China generic drug joint venture it formed five years ago with Zhejiang Hisun Pharmaceutical Co. Ltd.. Without disclosing the price, Pfizer sold the stake to Sapphire I Holdings at an undisclosed price, but will continue to work with Hisun as commercial partners under a new framework.

From the editors of PharmAsia News