Guest post by Greg B. Scott, Founder and Chairman, ChinaBio® Group
We recently published our annual analysis on the investment climate in China, entitled “China Investment 2015: Raising the Bar – Analysis of VC investment, M&A, IPO and partnering activities in China 2009-2014.” China’s life science industry had a breakthrough year for investments in 2014, particularly for VC, M&A and partnering which set all-time records in the third quarter. IPOs remained steady but were lower than in previous years in part due to China’s restrictive government regulation. But I predict a continued bright future for the China, and here’s why:
- Partnering hit record levels in 2014, with total deal value climbing 55% to USD 1.8 billion, alluding to the value of partnering events such as ChinaBio® Partnering Forum. While the number of deals has grown less quickly, from 84 in 2011 to 142 last year, there was an increase in deal quality and value rather than volume.
- VC investments in 2014 were off the charts as compared to the four years prior. VC investment rose 70% to USD 1.7 billion dollars in total announced deal value, while the number of deals rose 57% to 69 and the average deal size climbed 29% to USD 31 million. The largest VC investment of 2014 was a USD 320 million infusion into Shenzhen’s BGI, the world’s largest sequencing enterprise, which had a trickle-down effect on diagnostics resulting in a 22% share of VC deal value (USD 376 million), even though it claimed only 6% of the number of deals. A rising tide floats all ships, as they say, and I think we will continue to see these major deals bring success to the market as a whole. It also emphasized the continuing trend, since 2012, of decreasing emphasis on pharma and biotech, and an increasing focus on services and medical devices.
- While drugs came in second in VC funding (USD 439 million) with only a 26% share, several notable deals in 2014 (BeiGene’s USD 70 million in series A and a USD 30 million investment in ZAI Labs, to name a couple) saw the bar being raised on in-licensed assets by global pharma for a new wave of drug development companies.
- While the number of IPOs in 2014 that made it to the China Security Regulatory Commission (CSRC) capped around 100, six times that number were planned. Ultimately, 16 Chinese life science companies IPOed in 2014, most on Chinese exchanges. As ChinaBio continues to work with regulators on enabling more initial offerings to go forward, we expect to see more and better IPOs in coming years.
- The number of M&A transactions in China’s life science industry continued its five-year run in 2014. The total value of M&A transactions jumped 66% to USD 8.6 billion, with number of deals rising 36% to 106, and average deal values up 16% to USD 99 million. The number of drug deals was down slightly from 62% to 57% (61 deals) in 2014. But the services sector rose 18% to 25% (27 deals), suggesting that the long-expected consolidation in the sector may finally be taking place.
Overall, the culmination of efforts to bolster education programs in universities and institutes to stimulate budding scientists, the increased financial support for startup companies and expanded government funding programs designed to attract talent, has resulted in a fruitful environment for the growth of the life sciences industry in China.
There is no better time for western companies to come to China. To cultivate cross-border partnerships that can enable you to gain a foothold in China’s vast healthcare market, participate in ChinaBio® Partnering Forum taking place May 18–19, 2016 in Suzhou, China. Register now.