WuXi AppTec to Invest $3 Million in Overseas Health Investment Fund to Advance Global Strategy

Yiou Health, January 25 news,WuXi AppTecAnnouncement issued today stated that on January 23, 2019, WuXi Fund I, a wholly-owned subsidiary of WuXi AppTec, entered into a subscription agreement with Longwood Fund V, L.P., pursuant to which WuXi Fund I agreed to subscribe for investment fund shares amounting to USD 3 million, representing 7.7% of the total investment fund shares.

Longwood Fund V, L.P. was established on January 9, 2019. The investment fund is expected to raise a total of USD 80 million (with Wu Xi Fund I’s current commitment of USD 3 million constituting the first closing of the fund). The fund will focus on investing in private innovative enterprises in the pharmaceutical, healthcare, and related sectors in North America and the United Kingdom.

The announcement stated that this investment would help WuXi AppTec generate venture capital returns while leveraging U.S.-based healthcare venture capital firms to deeply tap into high-quality biotechnology and healthcare investment opportunities in North America and the United Kingdom, thereby securing more industry consolidation and M&A opportunities and further strengthening and expanding WuXi AppTec’s integrated pharmaceutical R&D platform capabilities.

Since 2015, WuXi AppTec has provided overseas medical device testing services to meet the strategic development requirements of its business, overseasPrecision Medicinea wide range of R&D, testing, and manufacturing services, and plans to further expand its existing business and develop new businesses through overseas holding subsidiaries in the future. Currently, WuXi AppTec operates 26 R&D bases and branches worldwide, including those in Philadelphia, São Paulo, Atlanta, San Diego (United States), and Munich (Germany). By leveraging technological expertise, business models, and cross-industry collaboration, WuXi AppTec has gradually established an integrated full-industry-chain model encompassing R&D, manufacturing, and commercialization services.

WuXi AppTec’s prospectus reveals that the company has generated nearly RMB 1 billion in goodwill through investments and mergers and acquisitions in recent years. However, as a pharmaceutical research and development platform, WuXi AppTec has experienced sluggish year-round growth in net profit from its core business, with an increasing proportion attributed to non-core activities. On June 5 last year, WuXi AppTec issued an announcement regarding the use of idle raised funds for cash management, stating that “as of the date of this announcement, the cumulative amount used by the company and its subsidiaries to purchase wealth management products with idle raised funds totaled RMB 1.4999 billion.” Throughout 2018, WuXi AppTec demonstrated a greater preference for industry-related investment activities rather than pharmaceutical R&D operations.

Warren Buffett’s “Snowball” investment philosophy states: “Life is like a snowball; all you need is wet snow and a really long hill.” The pharmaceutical industry is highly competitive, but new drug development is even more challenging, characterized by long cycles and high risks. A new drug project, from initiation, research and development, and clinical trials to certification and market approval, can take anywhere from several years to several decades. In other words, for entrepreneurs in the pharmaceutical sector, it is quite difficult to build a substantial “snowball” without carefully considering differentiation from competitors and designing a scalable business model in advance.

Following WuXi AppTec’s subscription activity, the subsequent investment activities of Longwood Fund V, L.P. may, to some extent, indicate whether WuXi AppTec is an investment and wealth management company disguised as a pharmaceutical R&D firm.

Editor: Yu Jing

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