Over the past few years, an increasing number of European biotechs have been signing deals with Chinese investors. The Chinese are increasingly interested in European, particularly Belgian, biotech. But it’s not just for money: strategic investments with potential deals seem to be at the forefront of these agreements. How do European venture capitalists feel about this trend? We spoke with Chris Buyse from Fund+ to find out.
By Amy LeBlanc
Fund+ is a Belgian venture capital firm investing in European life sciences companies. Founded five years ago, Fund+ has seen a rise in the number of European biotechs being funded by Chinese investors. Chris Buyse, Managing Partner of Fund+, shares his thoughts on the potential benefits of this trend, and why he thinks greater connections between Europe and China are not to be feared.
Rising interest for long-term links
Five years ago, there was almost no presence of Chinese investors in the Fund+ portfolio companies. Since then, deals with Chinese investors and partners have become increasingly common. Buyse tells us:
“Over the past few years, we’ve started to see a very visible interest from Chinese investors in quite a number of our portfolio companies. We’ve closed multiple deals with several Chinese funds in just a few years. The first one, indeed the first significant Chinese investment in a Belgian biotech, was Promethera, which attracted Chinese investors about three years ago. This year we had another important file at the heart of our portfolio, when eTheRNA signed a two-part deal involving both equity from old and new Chinese investors, as well as a joint venture creation with a Chinese partner.”
Read this previous BioVox article for more on Belgian biotech deals with China.
Buyse believes the increased interest in European biotech is driven by the rising reputation of our local life sciences ecosystem. Where there used to be only one or two larger Chinese funds investing in Belgian companies, there are now over a dozen looking towards Europe. The success of early investors has convinced their colleagues of the value of European biotech and inspired an enthusiasm for Belgian biotech in particular. However, Chinese investors aren’t just after a simple financial arrangement with a quick exit, in Buyse’s experience:
They’re not typical financial investors hoping to realize an exit within x number of years with a certain return on investment. A longer-term, strategic business partnership seems to be equally important to them.
“Chinese investors are looking for two things: they are, of course, looking to invest in innovative companies. But in addition to the financial investment, they are often also wanting the possibility of setting up a business deal between the company and a Chinese partner. This could be a regional in-licensing deal for the Chinese market, or a production and manufacturing agreement, or even a joint venture creation. But the main point is that they’re not typical financial investors hoping to realize an exit within x number of years with a certain return on investment. A longer-term, strategic business partnership seems to be equally important to them.”
Through thick and thin
There are several benefits to bringing a Chinese investor onboard. Not only do Chinese investment funds have very deep pockets, similar to US multi-billion-dollar funds, but they also can provide access to a large and interesting healthcare market. Buyse acknowledges that there are some concerns to bear in mind, however:
“There was a time when there was a perception (and in certain areas, a reality) that IP protection was an issue in China. European biotechs couldn’t be confident that their IP would be treated correctly. This seems to be a thing of the past. The Chinese have started treating IP according to the standard international practices, where it is no longer something to infringe upon but rather something to respect. That shift has been reassuring, but as with any investment, it’s still important to choose the right fund for you and make sure you’re choosing experienced, trustworthy partners. Do your own due diligence and seek the opinions of others in the ecosystem. This is the same for China as for anywhere in the world.”
Read this previous BioVox article on things to take into consideration when partnering with China.
Based on the positive experiences of Fund+ companies, Buyse feels that other European investors and biotechs would be doing themselves a disservice by discounting Chinese investors. He believes the links between Chinese and European biotech are only going to grow stronger, and that companies may have much to gain by bringing Chinese investors onboard:
I really recommend that companies open their minds towards potential Chinese investors. So far, they have proved to be very loyal, in good times and in bad.
“There is still a bit of prejudice remaining against doing business in China. Outdated perceptions of language barriers, IP theft and poor regulatory framework. In my experience, none of this holds true today. I really recommend that companies open their minds towards potential Chinese investors. So far, they have proved to be very loyal, in good times and in bad. In companies where we have had to recapitalize and do follow-on investments, the Chinese funds have continued to lend their support. Biotech is always a bit rock ‘n’ roll: fortunes can rise and fall very quickly, and these Chinese investors understand that. They’re not afraid of a bit of risk and don’t run away at the first sign difficulty. Once they have committed, then they will stick with you loyally.”
This article was sponsored by Agio Capital & Business Solutions.
