Top Takeaways After Visiting Shanghai for the China Healthcare Investment Conference (CHIC)

Sunday, 1-April-2018

Last week I visited Shanghai for the 9th Annual China Healthcare Investment Conference (CHIC). While it is impossible to put into words even a small fraction everything I experienced and learned there, I wanted to share some key takeaways and photos to

help illustrate what is happening in the region. From the topline, here are the two big thoughts in my head after returning home to Kansas City: 1) what an amazing city Shanghai is today 2) the China biotech boom is real and is going to be big, big, big.

 

Before going into more detail, I wanted to first say a special 'thank you' to the team at BioCentury for helping me on this trip. The years they have spent in the region and their knowledge of biotech in China is amazing. From left to right are Matt Krebs, Josh Berlin, and David Flores. They are great guys and super helpful if you need background info on a company or business here.

Brad Loncar BioCentury

With that, here are my top ten takeaways from the trip (click on any photo to enlarge and see a description):

1. CHIC is a great conference that wants to be China's JPM.  I highly recommend it.

The conference I attended was the China Healthcare Investment Conference, known as CHIC for short. This was the conference's 9th year and my understanding is that it started as a small gathering of just a handful of attendees and has grown every year since. It took place on a Tuesday through Thursday at the Ritz Carlton Pudong (Pudong is Shanghai's modern downtown area) and included everything from an entrepreneur's boot camp to panels with both drug development and medical device tracks. CHIC used the same 1x1 online scheduling system that many conferences in the U.S. use so it was easy to plan ahead and schedule meetings. The organizers also hosted a social event the first night and a nice dinner the second night so introducing yourself to other attendees wasn't a problem if you are new to the area. Both English and Chinese were spoken by panelists at times (I'd say 70/30 English/Chinese) and they had a real-time translation service with headphones that made it easy for everyone to switch back and forth so you never missed any comments.

2. There are 1.4 billion people in the country and only a few big biotech companies...not for long.

On the stage in the photos below are representatives from the four Chinese biotech companies to have reached the Billion Dollar Club - those with a $1B+ market valuation. Or as they apparently say here, "The carp that jumped over the dragon's fence." They are GenScript, WuXi Biologics, BeiGene, and Zai Lab. The panel was moderated by Frank Kung, Managing Partner of Vivo Capital.

3. There is a big focus on cell therapy in China. They are ahead of the curve in this area.

Pictured below is a talk by James Li, CEO of local CAR-T leader JW Therapeutics. The company was given this name because it was formed in a partnership by "J" Juno Therapeutics and "W" WuXi AppTec. U.S. investors might also be familiar with Nanjing Legend Biotech of ASCO17 and JNJ partnership fame, and Gilead's Kite division also has a big cell therapy program here with Fosun Pharma. Overall, there are more CAR-T companies and trials ongoing in China than in the United States currently.  

4. The VC/PE community in China is first class. That is one part of the biotech ecosystem that is already very strong here.

During my time both inside an outside of the conference, I made a point of meeting with local investors to get their perspective on business. Some I had the pleasure of meeting with in person included representatives from Quan Capital, Sailing Capital, Vivo Capital, and Yafo Capital. At least a dozen more participated in the conference. I found them all to be incredibly smart and thoughtful. One slide below from McKinsey & Company shows statistics on private investment in biotech for China over the last few years.   

5. HK Stock Exchange's new biotech rule is a key moment of transformation. It appears that every company here is going to choose HK over Nasdaq.

If you don't already know this news, I would recommend reading up on it quickly because this is going to be the central thing that catalyzes significant investment in the region. Before today, pre-revenue companies were not allowed to list on the Hong Kong Stock Exchange (HKEX). Realizing that innovation drives the global economy now, the exchange rightfully sees that this rule needs to be changed ASAP so they are carving out an exception for biotech companies going forward.This will cause a flood of new biotech listings in Hong Kong. I didn't hear one company at CHIC say they were still considering a Nasdaq listing after this. Maybe some are out there, but I didn't meet any.

 

Because the risk and volatility that comes with pre-revenue biotech companies will be a relatively new concept for Hong Kong, HKEX is taking a cautious approach and companies will have to meet minimum listing requirements unique to biotech. Those requirements are still being worked out - expect to hear final details sometime in late April with the first IPOs to follow over the summer. Below are slides from HKEX's Assistant VP of Market Development, Bosco Hui, with a draft of their current thinking. He stressed a million times that it is subject to change though.