 Home > Active Ingredient News > Drugs Articles > Yuan Jianwei: In the next journey of innovative drug investment, we must first be clear about "whose money you want to make"

Yuan Jianwei: In the next journey of innovative drug investment, we must first be clear about "whose money you want to make"

 Last Update: 2023-01-05
 Source: Internet
 Author: User

Tags

american metal market

what toxins food

Search more information of high quality chemicals, good prices and reliable suppliers, visit www.echemi.com

In 2022, the capital winter swept the innovative drug industry, and the most intuitive embodiment is that the amount of financing of Biotech companies is smaller and the amount is
smaller.
In such a large environment, the industry as a whole is no longer the overwhelming atmosphere of last year, and the "innovative drug people" who have calmed down have entered the most profound reflection period
since 2015.
Biotech began to reflect on what it really means to make innovative drugs.
Investors began to reflect, how to invest rationally and effectively investing?

So, looking ahead, what kind of innovative drug projects are worth investing in? How exactly should unmet clinical needs be captured? Which technologies are the hot ones to follow? How can China's innovative drug R&D investment ecosystem be healthier and more efficient? Recently, Pharma Cube Pro had the honor to discuss these issues
in depth with Jianwei Yuan, partner of Vertex Investments.

Looking ahead, what kind of innovative drug projects are worth investing in? How exactly should unmet clinical needs be captured? Which technologies are the hot ones to follow? How can China's innovative drug R&D investment ecosystem be healthier and more efficient?

Jianwei Yuan, currently a medical partner at Vertex Investments, previously worked at Tonghe Yucheng, Fosun Pharma, and GlaxoSmithKline China R&D Center
.
Focus on the investment of innovative medical companies, mainly in the areas of drug development, medical devices, precision medicine and digital medicine
.
Representative cases: Puling Biotechnology, Yuanjian Youke, Ruigen Medical, Puji Biotechnology, Binhui Biotechnology, Orange Sail Pharmaceutical, Huaxia Yingtai, Xingqiyuan, CStone Pharmaceutical, Grail, Viela, EXO Therapeutics, Winged Creatures, etc
.
Yuan Jianwei received a master's degree in immunology from the Chinese Academy of Sciences and an MBA from
Fudan University.
Jianwei Yuan, who joined Vertex in 2020, has been investing in innovative drugs for many years, and before becoming an investor, he was a "new drug developer" and participated in target validation, drug evaluation and development
of many neurological diseases at GSK China R&D Center.
As a witness of the earth-shaking changes in China's innovative drug R&D and investment industry from little interest before 2013, to the heating up in 2015, and then to the "boiling" in 2021, Yuan Jianwei shared his unique insights
on some issues in the interview.

He said: "In 2022, the tightening of the pace of industry investment is not entirely caused by the capital winter, but also inseparable
from the long-term law of the development of innovative drug projects.
In 2021, the overall valuation of medical innovation companies was high
.
This year, companies need to use some key data to support valuations, and innovative R&D itself is a trial and error process of continuous polishing and exploration, and it takes time to obtain key data and achieve milestones, so it is reasonable
for investors to slow down in combination with the external environment.
”

In 2022, the tightening of the pace of industry investment is not entirely caused by the cold winter of capital, but also inseparable
from the long-term cycle law of the development of innovative drug projects.

For how to invest in innovative drugs in China next, Yuan Jianwei raised a very enlightening question: whose money do you want to make by investing in innovative drugs? "When we invest in innovative drugs today, is the goal to make people's money or to make God's money? In fact, this is a question
to think about.
The answer to this question affects the mindset and strategy of investors, which in turn affects the way and means
shape the industry.
He said
.

Who do you want to make by investing in innovative drugs?

This year's cold winter is only a relative concept

Medic Cube Pro: Why is this capital winter coming at such a point in 2022? When did the whole investment boom take a sharp turn?

Yuan Jianwei: I would like to answer
this question from three dimensions.
The first is the upstream
of the funds.
Not long ago, Vertex Capital's fifth dollar fund closed for the first round of $500 million, and although the news was announced last month, the fundraising began in the second half of
last year.
At that time, we already vaguely sensed some doubts
about the Chinese market in US dollars.
Although at that time, you could see the financing news of innovative medical enterprises almost every day, and even some companies raised funds two or three times in a year, but in fact, there was already a little "cold outside and hot inside"
.
GP uses it after all LP's money is invested, so when LP's confidence in the Chinese market changes, it indicates that some changes
may occur in the next year or two purely from the perspective of capital supply.

Yuan Jianwei: I would like to answer
this question from three dimensions.
The first is the upstream
of the funds.

Then there is the secondary market
.
Whether it is US stocks, science and technology innovation boards or Hong Kong stocks, everyone pays more attention to the profitability
of enterprises.
Even if some Biotech companies are listed under Rule 18A, when capital pulls back, companies with revenue capacity will still have better liquidity and market value determination
than clinical-stage companies.
Since the fourth quarter of last year, the performance of the secondary market has fully reflected this
.
The secondary market has shown a new attitude
towards the pricing of domestic medical innovation.

Then there is the secondary market
.

Finally, in terms of policy, documents such as the "Guidelines for Clinical R&D of Clinical Value-oriented Antitumor Drugs" (issued in November 2021) reflect that the national definition of innovative drugs has been very clear, more attention is paid to whether the product can provide clinical value increment, and innovative drugs have a more pragmatic definition
.
Therefore, since the second half of last year, whether it is at the capital level or at the policy level, it can be clearly felt that it has begun to "turn from fiction to reality"
.

Finally, on the policy side,

In terms of the primary market, my personal observation is first and foremost the inversion
of valuations.
U.
S.
stocks have seen a significant correction since last year, and in the first half of this year, most of the valuations of U.
S.
stocks Biotech went straight to the "floor", and there was not much room for rebound
.
On the other hand, similar domestic companies, whether it is pipeline progress or cash on the account, may be better than foreign benchmarking companies, and the valuation of domestic Biotech has exceeded that of foreign benchmarking companies
.
In this context, there are also some more obvious changes
in the primary market.

The primary market aspect is first and foremost the inversion of valuations

Therefore, in summary, the signs of the arrival of the winter of innovative drug investment are clear and can be followed
.

Medicine Cube Pro: Do you feel "cold" this winter?

Yuan Jianwei: The so-called capital winter is a relative concept, and today's "cold" is relative to last year's "hot"
.
I have entered the medical investment industry since 2014, to say "cold", in fact, I think that before 2013 was the most "cold", at that time, whether from the demand side (there are very few people and companies who want and have the ability to do innovative drugs) or the supply side (the institutions and systems focusing on innovative drug investment are also extremely scarce), including the exit side (there is no exit channel such as Hong Kong stock 18A and the science and technology innovation board today), there is no such market
as today 。 Therefore, this year's "cold" cold can only be before 2013, but in the past five or six years, the "rules of the game" of China's medical market have undergone great changes, giving people enough confidence and hope
.
So, from my point of view, it is not a "cold winter" at the moment, but a rational pullback to avoid a hard landing
in the confidence and investment environment.
Looking at the overall upward view of the 5-year or longer timeline, everyone is currently confused or disagreed in exploring how to go up, and they are unwilling to give up their path dependence
.

Yuan Jianwei:

Pharma Cube Pro: This year, some investors said that projects with a valuation of more than 1 billion yuan will not be seen
.
Is there such a phenomenon? Why?

Yuan Jianwei: This 1 billion is not really 1 billion, it reflects the change in investors' investment mentality and investment priorities, indicating that investors pay more attention to the company's fundamentals to match
the valuation.
In fact, it is not so easy to invest in projects with a valuation of less than 1 billion, and this kind of investment is easy to start, but the difficulty is in the later development, and the problems encountered are also "First.
" In Class", investors need more participation and empowerment
.

Yuan Jianwei:

Pharma Cube Pro: This year, if you make a move, what dimensions will you evaluate the target company? Some say that now Biotech's cash flow is the gold standard?

Yuan Jianwei: The first two points of my answer to this question may be a bit "old-fashioned", which is what everyone used to say about team and innovation ability
.
From a human point of view, any successful company, looking back and summarizing, will find that there is a very strong soul.

Whether it is a research and development company or a service-oriented company, there needs to be a real soul who can play a leading role in the development of the company, especially when the company is in crisis
.

Yuan Jianwei: From a human point of view

From the perspective of innovation ability, Vertex pays great attention to the underlying logic
of its technology when investing in early-stage innovation companies.
What is special about us is that when possible, we will verify
it by doing experiments in person (the part we can participate in the experimental process).
Through this strategy, we can not only better judge the implementation of these technologies, but also observe how the technical team responds when encountering problems, which is also a kind of due diligence
of the team's ability to solve problems.
Of course, there are many constraints on the future development of innovative companies, but at least from the early stage of investment, we still hope to at least grasp the stability
of the underlying technology.

From the point of view of innovation ability

In addition to people and technology, another important factor that can influence our investment decisions is the core values of a company "Commercialization potential"
.
For example, when we want to incubate a company with scientists with its innovative technology or achievements, we will evaluate the commercialization potential and path together at a very early stage, not just the industrialization (more focused on R&D implementation, clinical translation) potential
.
A company is essentially a vehicle
for business actions.
The positioning of a single-product company or a technology platform company determines that the path of the company's business behavior will be fundamentally different, and the company's development path and product line risk control need to be tailored
to the design of capital and talent allocation.
Founders need to deeply understand the importance of this issue at the beginning of their business, which has a profound impact on the development strategy of the company
.
Entrepreneurs demand that investors be forward-looking, and entrepreneurs need
to be.

A company's core value "Commercialization potential"

The tightening pace of investment is not only a winter effect

Pharma Cube Pro: Compared with 2021, Vertex Investment's investment rhythm in the medical track in 2022 is still significantly tightened
.
What are the reasons behind this? So far this year, we haven't seen Vertex Invest China Fund (Vertex Ventures China) officially announced the new innovative drug investment target in China, is it not selected?

Yuan Jianwei: In the hot market environment last year, it was very difficult
to rationally invest and control valuation.
In such cases, our strategy is: (1) Lead early-stage innovation projects, or even help founders make some deep incubation investments; (2) Layout innovative enterprises based on data and science to form an interface for external cooperation; (3) Pay attention to the upstream and downstream chains and derivative fields
of medical technology.

Yuan Jianwei:

This year, we have an important task of "enterprise empowerment"
.
Since many of the projects we have invested in are very early stage projects, we really want to do our best to help the business grow, so we are involved in a lot of post-investment management, which really adds a lot of extra work, and the pace of investment will be adjusted
appropriately.

From the perspective of the macro environment of the industry, many companies were very successful at the financing level last year, and after financing, enterprises need to use some key data to support valuation, and innovative research and development itself is a trial and error process of continuous polishing and exploration, it takes a certain amount of time to obtain key data and achieve milestones, we need to observe the performance of these companies to cash out, plus the valuation of the peripheral market is declining
.
Therefore, it makes sense for investors to slow down in combination with the external environment, but we have been acting
.

After financing, companies need to use some key data to support valuations

Although there is no official announcement for 2022, in fact, it has been actively deployed this year, and soon an innovative drug research and development company we invested in will surface, please wait and see; In addition, we are also actively exploring and trying
in the research and development of innovative drugs for autoimmune diseases, medical devices and other subdivisions.
I hope that we can bring satisfactory answers to patients and the market
.

Pharma Cube Pro: Overall, has Vertex Investment's investment philosophy in 2022 changed substantially compared to the past few years?

Yuan Jianwei: From the bottom of the investment philosophy, Vertex is basically relatively stable
.
One is based on an understanding of the industry and forward-looking investment in technology-driven commercial companies; The other is to try to think backwards and not follow the trend
.

Yuan Jianwei:

Vertex Ventures China Fund China) In 2008, it began to make China's technology investment, and in 2013, in the era of vigorous Internet e-commerce, Vertex instead laid out a lithium metal battery start-up company SES, when the public was not very clear about the future of lithium metal batteries, Vertex has in-depth research and forward-looking judgment on the development of the new energy industry, and attaches great importance to the founder's deep technical accumulation
in this project.
Today, SES has become an important partner for many international car companies, and in February this year, SES was listed in the United States, and the company entered a new stage
.
In terms of innovative drugs, Vertex Investment invested in Microchip Biotechnology (Vertex Investment is a Series A investor of Microchip Biotechnology before 2015), and as the company made a series of significant progress, Vertex continued to increase its investment in Microchip Bio in 2015, and at that time, the mainstream of the market was still generic drugs
.
Innovative drugs, both in terms of quality and capital exit, were difficult to compare
with today at that time.
Microchip's innovative drugs are now exported to foreign countries and are the first wave of beneficiaries of
innovative drugs.
The company was listed in August 2019 and is the first innovative drug stock on the Science and Technology Innovation Board, and Vertex Investment is still an institution
with a very high proportion of outstanding shares of Microchip.

In terms of innovative drugs, Vertex Investment invested in Microchip Biologics before 2015

Looking back, whether it is SES before, Microchip Biotechnology, and a large number of other investment cases, Vertex Investment's remarkable achievements are to grasp the general trend through reverse thinking, invest in early stage and hold for a long time according to the understanding of technology, and finally the invested companies are building a larger business system
by making products (rather than going public).
We are the beneficiaries of this investment philosophy and will not forget our original intention
.

Vertex Investment's remarkable achievements are to grasp the general trend through reverse thinking, invest in the early stage and hold it for a long time according to the understanding of technology, and finally the invested companies are building a larger business system
by making products.

Medic Cube Pro: Now many people talk about "unmet clinical needs", how does Vertex Capital grasp "unmet clinical needs"?

Yuan Jianwei: Many unmet clinical needs in the medical industry are obvious
.
It's not that you can't see it, you can't think of it, but it's hard
to do.
Taking cell therapy as an example, the bottleneck of solid tumors, high drug prices, these unmet clinical needs are well known; For example, nucleic acid drugs, how to improve delivery is also a recognized challenge in the industry
.
In terms of diseases, including autoimmune diseases, there is a huge unmet clinical need
for many diseases.
Therefore, how to identify the team or company that can solve this type of need is an "unmet need"
in the investment community.

Yuan Jianwei:

Pharma Cube Pro: In the past two years, there have been more and more cases of "investment institutions" and
"scientists" starting businesses.
If you choose a scientist to work with, how?

Yuan Jianwei: From my personal point of view, if I choose a scientist to work with, I may mainly consider
it from two dimensions.
On the one hand, the level of competence of scientists; Another aspect is the attitude of scientists to do things
.

Yuan Jianwei:

The level of competence is a very comprehensive perspective: (1) we first hope that scientists can have many years of deep cultivation in their field and have very deep and unique insights into their own theories and inventions; (2) Despite the insight, it is necessary to pay attention to the fact that the correct insight does not mean that the company's development will be smooth sailing, and it needs sufficient adaptability to gradually improve the ability of
commercial thinking.
The company must not be made into an extension of the scientist laboratory, especially in the early stage of the company's growth, it is very necessary for scientists to adjust their thinking with the rapid development and change of the company, and have enough flexibility in thinking
.

On the other hand, a technology from the laboratory to industrialization, and finally commercialization is a very long road, the future must be professional division of labor
.
Scientists should do a good job in the design of equity and incentives, realize that the distance between technology and clinical practice is often very large, and attract talents with different industrial backgrounds to solve the shortcomings of industrial thinking; It is more important to be able to be compatible and absorb
with these people with different ideas.

Under the investment boom, "disadvantages" are also "advantages"

Pharma Cube Pro: In the past few years, innovative drug investment, involution, capital games and other phenomena have been criticized, so from the opposite direction, what positive changes have the investment boom in the past few years brought to the innovative drug industry?

Yuan Jianwei: Actually, I really want to convey this positive change
to the market.
Overall, the boom in innovative drug investment over the past few years has had the following positive impacts on the industry as a whole:

Yuan Jianwei:

The first is "people who make medicine"
.
Before 2015, making innovative drugs in China can be said to be "neither chickens nor eggs"
.
At that time, although some MNC executives had R&D experience and company management experience, the topic of entrepreneurship was new to everyone; Although our pharmaceutical industry talents have experience in drug research and development, how to do innovative drugs in the environment of a start-up company, it is not enough to rely on the experience of drug development innovation without standard
answers.
At that time, most people understood a lot about traditional medicine, but cell therapy and gene therapy were still very new concepts
.
Today, our innovative drug industry has accumulated a wealth of talents, and innovative ideas are much more mature than before
.
I believe that these people will play a vital role
in the development and value creation of our future innovative drug industry.

The first is "people who make medicine"
.

The second is the "investment environment for innovative drugs"
.
I entered the healthcare investment industry in 2014, and before that, it was very difficult
to find investment-related jobs from a pharmaceutical innovation perspective.
Similarly, before 2015, even if a few people wanted to make innovative drugs, it would be difficult to raise money
.
After the development of the past seven or eight years, the current investment environment for innovative drugs has undergone earth-shaking changes, not only the countless investment institutions doing innovative drugs, but also the investment teams of each institution are becoming more and more professional
.
It is very good to see that the founders can find more and more soulmates in the capital world, help each other, and grow
together.
Taking Vertex as an example, there are many scientists in our team who graduated from well-known domestic and international universities, and such a team configuration was unimaginable before
.

The second is the "investment environment for innovative drugs"
.

Then there is the support
for innovative drugs at the national level.
Before 2015, tens of thousands of generic drug application materials
were pressed on CDE every year.
Nowadays, whether it is policy support or regulation, it is closer to the standards of the global advanced system, and even has good innovations in some places, such as allowing gene and cell therapy to carry out clinical research through IIT means, which has greatly promoted the development of
domestic gene cell therapy.
Driven by the boom in investment in innovative drugs, the understanding and support for innovative drugs at the national level has also reached an unprecedented height
.

Then there is the support
for innovative drugs at the national level.

Finally, there is the transformation
of scientific research.
Before this wave of investment hit, scientists in domestic universities and institutions were far behind the advanced level of their laboratory conditions for the transformation of technology and making companies around technology
.
But today, we see that the foothold of many research teams and the ideas about industrial transformation have undergone deep-rooted changes
.
Compared with previous years, the content of the capital circle industry conference is getting heavier and heavier, and the taste of medicine is getting heavier
.
The state has also introduced corresponding policies to encourage and support researchers to start businesses on the job or after their jobs, and these changes have allowed more scientists to be more bold and confident in making innovative drugs
.

Finally, there is the transformation
of scientific research.

Therefore, overall, although a series of bubbles have been blown in the field of innovative drug investment in the past few years, in fact, driven by this wave of investment, the entire industry has obvious accumulation and change in many aspects
.
These accumulations and changes have actually laid a solid foundation
for the future innovative drug industry to truly embark on the road of "innovation".
A mild bubble is good, and after a storm there will be a rainbow, so I am confident
in the innovation of Chinese medicine.

Medic Cube Pro: After the development of the past seven or eight years, what stage do you think China's innovative drug research and development is currently in? What will China's innovative drug industry look like in 5-10 years?

Yuan Jianwei: I think it is currently in the 1.
5 stage
of pharmaceutical innovation.
The innovative drug industry has moved from the innovative generic stage with a standard answer in 2015 to the innovation follow-up stage without a standard answer, that is, the 1.
5 stage
.
Overall, the gap between us and developed markets is still huge, but the trend is accelerating and narrowing, fast Follow is mixed with innovation, there are fewer and fewer things for certainty, and more and more
things on their own.
On a macro level, it's a sweet painful process
.

Yuan Jianwei:

As for what kind of breakthroughs will be made in the next 5-10 years, it is actually difficult to judge that China's innovative drug industry is developing too fast, and every year changes greatly
.
It is foreseeable that the next few years will be an important time for the industry to rush to the sand, and the entire industry, whether it is early investment, regulation or secondary market, is pursuing to get rid of the virtual and turn to reality
.
The innovation track will no longer have a large block of systemic opportunities, but begin to focus on intensive cultivation and industrial division of labor
in market segments.
The spirit of craftsmanship will be more rewarded by the market, and the cooperation of pharmaceutical companies will become mainstream, and the overall system will become closer and closer to the European and American systems
.

Pharma Cube Pro: In the past few years, some Biotechs have seen going public as a goal and a "success.
"
How do you define a Biotech's success?

Yuan Jianwei: The listing of Biotech is indeed a phased success, but it is only a new starting point for the development of the enterprise, not the end, which is true for enterprises and also applies
to investors.

Yuan Jianwei:

The industrialization of medical technology is essentially a "social behavior"
with a great risk of failure.
The beneficiaries of successful drug development are ultimately the public, so the public should also become the ultimate bearer of
this risk.
The public has a good risk diversification and buffering ability, and the loss of a drug development failure is almost negligible on everyone's head, but success can benefit some patients, what a wonderful system
.
Going public with Biotech is essentially an effective way
for society to take this risk.
The role of capital is to increase efficiency, let those "risks" that are really worth taking go out to be tested, and be the gatekeeper
of the public.
From this point of view, Biotech uses new methods to solve unmet needs, and pushing these projects to the clinical trial stage, especially the late-stage clinical (phase II or III) to be tested by society, is already a "small success"
.
Further attention is paid to whether the project has "real value" and whether it can be a drug
.
The former is a matter of "man" and the latter is a matter
of "heaven".

Going public with Biotech is essentially an effective way
for society to take this risk.
The role of capital is to increase efficiency, let those "risks" that are really worth taking go out to be tested, and be the gatekeeper
of the public.

I used to think that Biotech's
success was to make medicine, but now it seems to be rough and narrow.
IPO is the result of a certain stage of development, and the pain of going public in a hurry to achieve quick results must also leave traces
.

Make human money, or earn God's money?

Pharma Cube Pro: You have changed from drug research and development to being an investor, and in recent years, there have been many
cases of investors starting businesses in the industry.
Will you continue to be an investor in the next 3-5 years? Why?

Yuan Jianwei: In the past few years, investors' choice of entrepreneurship is related to timing
.
The phased opportunities of the past few years exist in the development of products with high certainty (many products have been verified or close to standard answers abroad) and the bubble of the capital market, and it is relatively easy to use the speed and potential energy of capital to make a definite company
.
But now, there are fewer and fewer certainties, so there are fewer opportunities for investors to seize than before, especially when
the whole of Biotech starts to go down the path of excellence.
I think investor entrepreneurship will continue to emerge, but the roles and divisions are very different
.

Yuan Jianwei:

The success of a fund comes from the success of the company, and a good fund just chooses the right company
.
Personally, the more deeply involved I am in the incubation of the company, the more I realize my shortcomings and limitations
.
We are well aware of the complexity of the practical operation and implementation of enterprise operations
.
I hope to help more businesses through investment, and when needed
, I can do it.
After growth, it is great
not to add chaos.

Pharma Cube Pro: The original intention of the "Venture Capital Eye" column is to convey the needs of
entrepreneurs and investors.
From your or Vertex Investments' perspective, what are the most pressing needs right now?

Yuan Jianwei: From the perspective of the fund, I hope that more outstanding entrepreneurs can be inspired by Vertex's platform, "hold hands" with Vertex, and go hand in hand to grow
together.
For me personally, I hope to have a better forward-looking vision, constantly improve my height and endurance, and better serve entrepreneurs
.

Yuan Jianwei:

Medicine Cube Pro: Near the end of the interview, are there any questions you particularly want to share but have not been asked?

Yuan Jianwei: This exchange is mainly focused on the link of innovative drugs, if the same idea is placed in the perspective of general health, it may seem a little narrow, and the applicability is not necessarily strong.

Investing in medicine is actually a very special field, because it is related to human life, and the realization of commercial value is based on
the benefit of patients.
We invest in innovative drugs today, how is our success defined? Is the goal to make human money or to earn God's money? This is something I hope to discuss with fellow investors
.

Yuan Jianwei: We invest in innovative drugs today, how to define our success? Is the goal to make human money or to earn God's money? This is something I hope to discuss with fellow investors
.

This article is an English version of an article which is originally in the Chinese language on echemi.com and is provided for information purposes only. This website makes no representation or warranty of any kind, either expressed or implied, as to the accuracy, completeness ownership or reliability of the article or any translations thereof. If you have any concerns or complaints relating to the article, please send an email, providing a detailed description of the concern or complaint, to service@echemi.com. A staff member will contact you within 5 working days. Once verified, infringing content will be removed immediately.