Sany Innovation Investment: The VC Behind Over $6 Billion in Oligonucleotide Drug Deals Files for IPO

Following the antibody-drug conjugates (ADC) that have been highly popular over the past year, two recent global technology deals in the small nucleic acid drug field have drawn significant attention from the industry.

On January 3, Ribo Life Science announced a collaboration with Germany's Boehringer Ingelheim (BI) related to innovative small nucleic acid therapies for non-alcoholic steatohepatitis (NASH), with the total value of this deal exceeding 2 billion US dollars.

The second is that, on January 7, Novartis introduced several small nucleic acid drugs targeting cardiovascular diseases from Argo, with an upfront payment as high as $185 million, and the total transaction amount reaching a record-breaking $4.165 billion.

In the first week of 2024, the completion of two major overseas licensing deals in China brought small nucleic acid drugs to the forefront of the industry. These two deals actually reflect that Chinese companies are already at the forefront of global innovation in the emerging field of small nucleic acid drugs. Generally speaking, the small nucleic acid drugs developed by Chinese enterprises have reached the standards recognized by multinational corporations in terms of innovation, R&D progress, and quality.

Among them, Argo Biopharma, founded less than three years ago, has secured the largest overseas licensing collaboration for a Chinese biotech company in the small nucleic acid field, showcasing the highly efficient execution of a team with international technical expertise. Meanwhile, Ribo Life Science, as the pioneer and leader of China's domestic small nucleic acid drug development starting from scratch, has entered its harvest period after 17 years of steady progress.

Behind the noisy cheers, there are the opportunities of the times and the policy environment, the innovative creativity and hardworking spirit of scientists, and also the far-sighted and determined pharmaceutical investors.

The "Huangpu Military Academy" of Small Nucleic Acids in China and the Pioneer Force of Overseas Returnees' Entrepreneurship

Looking Back,It is necessary to introduce in detail the protagonist of one of the transactions, Ribo Life Science, which, as a pioneer in the industry, can also be called the "Huangpu Military Academy" of China's small nucleic acid industry.It is estimated that more than half of China's existing small nucleic acid drug development companies have technical personnel trained by Ribo Life Science on their teams. Even core founders of many companies, including industry newcomers such as Argo, D&R, Shian, and Ouli, also hail from Ribo.

Ribo Life Science was founded in 2007 by Dr. Zicai Liang, a professor and doctoral supervisor at Peking University's Institute of Molecular Medicine, as well as the director of the Nucleic Acid Technology Research Laboratory. It is reported that the term "small nucleic acid" in China was coined by Professor Zicai Liang. In 2006, Professor Zicai Liang was invited back to China to take up a position at Peking University as a research expert in the field of small nucleic acids. He worked with academician Lihe Zhang from Peking University School of Pharmaceutical Sciences, Professor Zhen Xi from Nankai University, and others to advocate for and promote the research and development of China’s small interfering RNA (siRNA) sector.

He founded the first small nucleic acid new drug company in China, and for a long time, he was almost alone in moving forward. It was not until recent years, with the maturation of the overseas small nucleic acid industry, that a large number of small nucleic acid new drug companies emerged in China.The establishment, development, and breakthrough of Ribo Life Science also represent a history of the development of China's small nucleic acid industry.

In 2008, Ribo Life Science established China's first small nucleic acid industrial base in Kunshan with the support of the Kunshan government. It gradually built a pilot production platform for small nucleic acid drugs in Kunshan that meets international standards through talent recruitment and project cooperation with internationally leading companies. After 2017, with the development of the small nucleic acid industry and increasing attention, regions such as Shanghai, Jiading, Beijing, and Tianjin also drew on the experience of Ribo Life Science and Kunshan, successively establishing small nucleic acid industrial parks.

Since most of the previous drug developments in the small nucleic acid field were in the rare disease area, the market potential was limited. That changed when The Medicine Co. disclosed positive Phase III clinical data for Inclisiran, a PCSK9-targeting drug for the chronic disease market of lipid-lowering, in 2019. This suddenly raised the industry ceiling and quickly boosted investment enthusiasm in China’s small nucleic acid sector. Over the past few years, the number of companies engaged in small nucleic acids in China has grown from just a handful to dozens. The government, entrepreneurs, industry, and investors have collectively formed networks and initiatives, rapidly creating a relatively complete and mature technical support platform and industrial environment within a short period.

Argo Biopharma has capitalized on this industrial environment, relying on its own efforts, to secure a leading position among the new generation of small nucleic acid companies in China. The company's main founders, Dongxu Shu and Dr. Pengcheng Shao, both hail from Arrowhead, a global leader in small nucleic acid drug development, bringing years of industry and project experience. Their deep expertise in foundational technology development drives the team’s efficient execution and international perspective, setting them apart from other companies. Argo and Ribo Life Science have both developed world-leading platforms for small nucleic acid drug modification and delivery technologies, advancing together towards becoming globally influential small nucleic acid drug discovery companies.

Why is the small nucleic acid delivery technology platform so crucial?

Traditionally, small-molecule chemical drugs and biological antibody drugs have formed the main framework of modern medical therapies. These two categories of drugs mostly target proteins, such as kinases, receptors, and antigens. However, unfortunately, over 80% of disease-causing proteins have remained "undruggable."

Scientists have taken a different approach, proposing a new concept for "small nucleic acid" drugs. Since protein synthesis must go through the two major processes of transcription and translation, involving nucleic acid substances such as DNA, mRNA, and tRNA, theoretically, by mastering the mRNA sequence encoding the disease-causing protein and silencing this RNA sequence, it is possible to prevent the formation of the disease-causing protein, thereby addressing many difficult and complicated diseases. The core logic is: moving from the protein level to the deeper nucleic acid level, directly solving the more fundamental underlying coding problem.

Therefore, small nucleic acids are regarded as innovative drugs 3.0 following small molecule chemical drugs and biological antibody drugs. In the future, they might disrupt the entire pharmaceutical industry and give rise to blockbuster products at the level of "drug kings." This is also why "small nucleic acids" are dubbed "the next gold mine waiting to be tapped."

But the challenge of slow progress in product development lies in the poor stability of nucleotide molecular chains, short half-life, and susceptibility to degradation. Additionally, the selectivity of target action may lead to off-target issues. To address these problems, the industry has proposed two major solutions: chemical modification of RNA and RNA delivery systems. With the maturation of corresponding technologies, small nucleic acids have also seen development, with 13 drugs reaching the market from 2013 to the present.

Today, Chinese scientists represented by the Ribo team have identified some drug delivery systems with promising performance in drug development, enabling the research and development of drugs for chronic diseases that currently lack standard treatments. It can be said that the key challenges restricting the development of small nucleic acids have been largely resolved.

Ribo, Argo and Their Fellow Travelers

Large International Technology Licensing Deals for Small Nucleic Acid Drugs Serve as a Strong Boost Amid the Current Capital Winter in the New Drug Field. This Represents a Significant Milestone for Both Companies and Their Investors.

With the boost of capital,Ribo Life Science has undergone seven rounds of financing since its establishment, with dozens of institutions behind it.Not short of star capitals such as SDIC Innovation, China Venture Capital, Legend Capital, Sanyi Innovation Investment, Panlin, Hillhouse, CICC, as well as local state-owned assets and powerful industrial capitals.

The same is true for Argo, which was established in 2021. Within three years, it underwent three rounds of financing: Apricot Capital invested in the angel round, while Zhenxin Capital, Sanyi Innovation Investment,金沙江 (GSR Ventures), CPE Yuanfeng, and Daoyuan Capital participated in the Series A round. Subsequently, Sanyi Innovation Investment also joined the Series A+ round.

It is not difficult to find that behind these two star projects, there is a common investor: Sanyi Innovation Investment. This makes me curious: why is Sanyi Innovation Investment able to capture the two industry leaders in the small nucleic acid field?

According to the official website, Sanyi Innovation Investment was established in 2018 as a venture capital firm focused on biopharmaceuticals, with core competencies in value discovery and project incubation.Currently, 3E Bioventures Capital has initiated and is managing several venture capital funds, led by industry veterans, and has invested in dozens of biotechnology companies.

The development of small nucleic acid drugs has not been smooth sailing. Wang Xukun, a partner at 3E Bioventures Capital, recalled that in mid-2019, when 3E Bioventures Capital led Ribo Life Science's Series C1 funding round, there were not many investors in China who were confident enough to make forward-looking investments due to the industry’s incomplete understanding at that time. Based on their long-term accumulated knowledge and judgment of industry trends in the small nucleic acid field, 3E Bioventures Capital conducted thorough due diligence on Ribo Life Science, gaining a comprehensive understanding of the company’s proprietary technology platform. They were optimistic about Ribo’s technical approach and pipeline development strategy, and firmly invested in the company. Just half a year later, during Ribo’s Series C2 funding stage, the investment enthusiasm for small nucleic acids changed dramatically, with major funds such as Hillhouse Capital and CICC beginning to vie for shares. The shift from lukewarm interest to a heated investment environment took only a few months.

Liang Zicai frankly stated that the entry of Sanyi Innovation Investment had a significant impact on Ribo. "At that time, Ribo was undergoing two transformations: one was the transition from a biotechnology company to an innovative drug company, and the other was the development of products and technologies for the global market, becoming an international R&D enterprise. These two phases happened to be in 2018 and 2022, two relatively low points for investment, and Sanyi Innovation Investment appeared just in time."

"In the process of Ribo's transformation and development, 3E Investment has provided tremendous support and assistance to Ribo in many aspects." Liang Zicai also stated, "If we were to choose the most knowledgeable institution about innovative drugs and small nucleic acids from everyone, it would be 3E Investment."

In terms of business development, 3E Capital also leverages its resources and network to support Ribo's growth, including pioneering an innovative model by investing in a small nucleic acid drug substance production base in Tianjin that serves the commercial production of Ribo’s products. 3E Capital actively connects Ribo's technology platforms and product pipelines with potential domestic and international partners. It is fair to say that 3E Capital has been behind some of the critical steps taken by Ribo Life Science after its Series C financing. As a deep cultivator in the small nucleic acid field, 3E Capital is not only a shareholder and investor in the company but also a fellow traveler on this challenging journey.

Another thing that piqued my curiosity is why 3E Bioventures, which had already invested in Ribo Life Science in 2021, went on to invest consecutively in Argo? The context here is that within a year, 3E Bioventures participated twice in Argo’s Series A1 and A2 financing rounds and, a year later, joined Argo’s Series A+ round. What are the reasons for 3E Bioventures placing three consecutive bets?

ThreeThe answer given to me by Innovation Investment has three points.First, small nucleic acid drugs are a major track with a large market capacity, capable of supporting more than one outstanding small nucleic acid company. Although Argo entered the field slightly later, it has a deep understanding of small nucleic acid technology and industry development. Second, the value of innovation depends on the exclusivity brought by the protection of independent intellectual property rights. The independent intellectual property rights of Argo's small nucleic acid drug R&D platform have global competitiveness; the developed targets and initiated projects hold significant global market value. Third, and most importantly, the founding team led by Dr. Shu Dongxu of Argo demonstrates strong execution ability, enabling them to firmly and swiftly advance projects.

Dr. Shu Dongxu's acquaintance with 3E Capital also evokes the sense of a wise mentor recognizing a promising talent. "We hope that the investment institutions we collaborate with possess three key qualities: First, they have insight, meaning they can truly understand you. Second, they can accompany you for the long term. Third, they can provide empowerment," said Dr. Shu Dongxu. "3E Capital is exactly that kind of institution. They bring a lot of industry and industrial resources. For example, the cooperation with Asymchem Group was established through the relationship with 3E Capital."

In the innovative drug industry, the advancement of a drug is actually the result of joint efforts by the government, entrepreneurs, and the industrial community.

"I have recently seen tremendous improvements in the clinical trials of innovative drugs, and their global ranking has also risen to the forefront, which is truly remarkable. Especially considering that the development of innovative drugs is such a long-term endeavor, you can actually see the patience of the capital behind it," said Professor Liang Zicai. He noted that Ribo Life Science has been established for almost 17 years, reflecting the perseverance of investors and the support of national policies encouraging innovation, which have enabled China's innovative drug industry to finally reach its current status.

Unearth the Next "Blockbuster Drug"

Why Did China's Innovative Pharmaceutical Companies Reach a Peak of Large-Scale Outward Licensing to Foreign Enterprises in 2023?

On the one hand, the research and development of innovative drugs has indeed reached the global forefront."Many people may not necessarily know how dedicated the management teams of this generation of innovative drug companies are. They might be the hardest-working group of people globally. This is also why, in a relatively short period of time, China's innovative drug industry has become so competitive," said Liang Zicai.

On the other hand, this wave of enthusiasm for small nucleic acids is also a reflection of the past "spring sowing and autumn harvest" by industry investors."Before and after 2020, a lot of capital was invested, and there will always be some good projects emerging," said Dr. Dongxu Shu. One of the ways these investments pay off is the phenomenon we are currently seeing of product technology going overseas.

Since local investors have accompanied innovative drug companies for a long journey, both sides are learning and growing together. For investment institutions, to discover the next "blockbuster drug," it is essential to respect the essence of new drug R&D and become patient capital.

"The innovative drug industry is a strictly regulated sector, with Phase I, II, and III clinical trials that must be completed in sequence—there’s no skipping steps. Small nucleic acids have unprecedented advantages in ultra-long efficacy, which is one of the key reasons they are considered an important part of the third wave of innovative drugs. However, during the R&D phase, this can actually slow down the development of specific products because a single dose lasts for half a year, and with three doses, a year and a half goes by." Liang Zicai believes that this makes the foresight and determination of entrepreneurs and investors particularly crucial.

Although domestic capital is also in the process of growth, overall, there are not many such visionary and steadfast capitals. It is by no means accidental that 31 Ventech was able to bring the main players of these two collaborations under its wing. This is not only a manifestation of having sufficient judgment but also an understanding of industry rules.

Tracing back to the layout of 3E Innovation Investment in the small nucleic acid field, in addition to investing in Ribo Life Science and Argo Biopharma, 3E Innovation has also incubated and invested in Xuanjing, Chaoju, and Tianjin Youji Pharmaceutical, which provides specialized evaluation services for small nucleic acid drugs. The layout of 3E Innovation Investment in the small nucleic acid sector has consistently followed a two-step strategy:

The first step is to solve China's capability from scratch, requiring a group of enterprises to gain international recognition, secure cooperation and authorization, generate revenue, and form a closed loop.Whoever takes the lead in this field will become the leader of the first wave of industry development. Ribo Life Science and Argo Biopharma are among the representatives.

The second step is to incubate and invest in original innovative enterprises with the potential to lead the global industry's technological development.These companies build technology platforms based on original innovations, with the ultimate goal of achieving technological and product innovations that play a leading role on a global scale. Xuanjing and Chaoju are biotechnology companies incubated under such strategies by 3E Innovation Investment and outstanding scientists in China. Xuanjing focuses on the development of small nucleic acid drugs through new targets, new delivery methods, and new nucleoside modifications; Chaoju is an innovative technology platform company that provides novel solutions and approaches to key scientific and technical issues in the field of nucleic acid drugs, based on its scientific founder's long-term research and deep understanding of nucleic acid chemistry and assembly. Youji Pharma is a CRO specializing in preclinical and clinical bioanalytical testing, with one core business segment providing foundational drugability evaluation services for the ecosystem of small nucleic acid drug development.

Sanyi Innovation Investment adheres to the simple and universal investment philosophy of "investing early, investing in innovation, and investing accurately." Through an understanding of the industry, it organically integrates scientists, investors, and professional managers into a "trinity" to support the growth and development of China's own international pharmaceutical enterprises.

The investment in innovative drugs has a long way to go. Although the small nucleic acid industry has witnessed an outbreak, it is only the beginning of China's efforts to seize the next wave. Looking at the industry as a whole, Ionis, a giant in the small nucleic acid field, has a valuation of 6-7.5 billion US dollars, while another company, Alnylam, is valued at approximately 22-24 billion US dollars. Alnylam started its endeavors in 2002, whereas China only entered the field in 2007, leaving a five-year gap that needs to be bridged with great effort.

Fundamentally, these externally licensed projects only capture a small portion of a drug's value, marking the starting point for China's biopharmaceutical industry to build its long-term competitiveness and true global outreach capability. "The global pharmaceutical market is vast. Currently, the technology export and product export achieved by China represent one level, but commercial export is ultimately the key to forming the industry's global competitiveness and achieving significant growth," said Liang Zicai.