Guosheng Capital: A Rising Local State-Owned Healthcare Investor with 13 Deals and Nearly RMB 2 Billion Invested in 2023

For healthcare professionals, if you didn’t interact with state-owned capital in 2023, your year was essentially wasted.

While this may be somewhat exaggerated, it is not entirely without merit. According to incomplete statistics from the VCBeat Orange Database,In 2023, there were 388 investment deals in China’s healthcare sector with direct participation from state-owned capital, doubling the figure from 2022 and accounting for 26% of the total annual financing volume, a record high.。

Behind this lies the “fierce rat race” among local governments across China to drive economic growth and secure positions in frontier sectors. It is reported that since early 2023, hundreds of billions- and trillions-yuan-sized fund-of-funds have emerged one after another, andAs early as last August, the total scale of government guidance funds established across multiple regions had already exceeded RMB 1 trillion.。

It is precisely under this trend that many “new faces” have emerged within the state-owned healthcare ecosystem, yet among them, those from ChengduGuosheng CapitalParticularly striking. According to incomplete statistics from the VCBeat Orange Database,In 2023, Guosheng Capital made a total of 13 investments in the healthcare sector, with a total investment amounting to nearly RMB 2 billion.，Jidian Bio, Useno Bio, Jiayue Pharma, Qitan TechStar projects such as these were all targets for bidding, with Base Biologics drawing significant attention from investors. The company has rapidly completed five rounds of financing over the past three years and is currently at its Series D round.

But beyond the hype, it is not difficult to observe that the entire healthcare sector was actually in a downturn in 2023. Taking the primary market as an example, although state-owned capital participation was high, the overall number of financing deals declined significantly, with a total of 1,494 financing rounds completed in 2023.-15.11% YoY. The secondary market, by contrast, has been even more “dismal,” constrained by factors such as the tightening of IPOs and other considerations.Number of Healthcare IPOs in 2023 Shrinks by Nearly 40%, and in the final month of 2023, nearly 10 healthcare companies failed in their IPO attempts.

So, amid the “cooling” and “heating” shifts in the healthcare industry, how has Guosheng Capital—a new force among state-owned assets—managed to stand out, and what has it done right? Furthermore, using Guosheng Capital as a reference, what role is state-owned capital currently playing within the broader healthcare ecosystem, and what implications does this hold for the industry’s future development? To uncover key answers, VCBeat andZheng Yubo, Guosheng CapitalA Deep Conversation on the Eve of the Lunar New Year.

 VCBeat: In 2023, state-owned capital is undoubtedly a key term for the entire healthcare industry and capital markets. As a leading player in this space, how does Guosheng view this trend?

Zheng Yubo, Guosheng Capital: In our view, the rise of state-owned capital is driven by several factors.

First, many subsectors within the healthcare industry are designated as national strategic emerging industries and future industries. As an investor, state-owned capital inherently bears the mission of leading the development of these frontier sectors. Furthermore, with the continuous deepening of state-owned enterprise (SOE) reforms in recent years,It is now also required that state-owned investment enterprises should not merely participate as limited partners (LPs), but must also possess the willingness and capability to make direct investments.。

Secondly,It has become a basic consensus among local state-owned assets that investment drives the development of local industries.. Specifically, replacing traditional subsidies with investment enables more precise optimization and allocation of limited resources on one hand; on the other hand, it allows for the recycling of these funds. That is, after state-owned capital exits its investments, it can not only recover the principal but also generate returns, thereby helping more enterprises in need to thrive.

The final point is that the capital structure in the investment market has undergone significant changes. In the original investment landscape of the healthcare industry, USD-denominated funds were a major force; however, with shifts in the international economic and political situation,The Proportion of USD-Denominated Fund Investments in China's Healthcare Industry Continues to Decline. Meanwhile, China’s healthcare industry is booming, with a growing demand for capital. In this context, state-owned capital must step forward and take proactive measures to address the sector’s financing needs.

VCBeat: As the capital market and healthcare industry undergo transformation, the expectations and positioning of state-owned capital are also evolving. There is a growing expectation for state-owned capital to align more closely with market-oriented funds while still fulfilling strategic industrial mandates. How does Guosheng Capital view this trend?

Zheng Yubo, Guosheng Capital: First, the alignment of state-owned capital with market-oriented funds is supported by the state and represents an inevitable transformation. The funds managed by state-owned institutions are primarily derived from state-owned capital.Improving capital utilization efficiency and generating greater returns are themselves mandatory tasks for state-owned assets, even as they support industrial development.。

In fact, there is no contradiction between pursuing industrial investment and financial returns. Historical experience shows that high-quality investment targets, as they develop, not only deliver substantial industrial benefits to their local regions but also generate significant financial returns for investors. Therefore, state-owned capital investors, by maintaining long-term planning and sufficient patience, and by providing precise empowerment when enterprises need it most, will inevitably achieve dual returns from both industrial growth and financial gains.

It is precisely based on this understanding thatGuosheng Capital has organically integrated industrial investment with financial investment., carving out a differentiated path. On one hand, Guosheng Capital leverages the “government-guided, market-driven, and commercially logical” model, adhering to the principles of “specialization, market orientation, scalability, and branding.” It has built an extensive “ecosystem of partners” encompassing government entities, enterprises, and sub-fund partners, with Chengdu Tianfu International Bio-town as its focal point, pooling collective strengths to achieve synergistic industrial development.

On the other hand, to strengthen the integrating role of industrial funds across the industry chain and achieve a leverage effect on capital, Guosheng Capital has adopted a dual-drive strategy combining “policy-oriented” and “market-based” approaches. It has explored and implemented various fund composition models, including “listed company+,” “professional investment institution+,” “state-owned capital+,” and “international linkage+,” thereby establishing a cluster of sub-funds focused on different sectors and covering the entire lifecycle.A fund cluster for specialized segments of the bioindustry, with a total scale exceeding RMB 13 billion, has been established., attracting capital accumulation through market opportunities and guiding social investment toward industrial functional zones.

VCBeat: It is understood that Guosheng Capital was established not long ago, yet it has achieved rapid growth in the past one to two years. From its own perspective, what are the key factors that have enabled it to stand out so quickly?

Zheng Yubo, Guosheng Capital：Since establishing its first fund in the second half of 2020, Guosheng Capital has made 45 investments in the healthcare sector, funding 39 projects., includingConnoMed, Qitan Technology, BrainCo...and other well-known enterprises, and completed the acquisition of the leading company in China's blood collection field.Nangercontrolling M&A investment.

From our perspective, the key factors that enable Guosheng Capital to stand out, or the manifestations of its market differentiation, are mainly reflected in four aspects:

First, as a state-owned capital investment platform, Bio-City Equity Company adheres to the principle of promoting regional industrial development, whileAdhere to Market-Oriented Investment Logic, select high-quality targets that align with regional strategic development and possess high growth potential;

Second,Leveraging the resource endowments of the High-Tech Zone, Shuangliu District, and Tianfu International Bio-town, enabling comprehensive empowerment for enterprises in areas such as policy support, public resources, high-end talent acquisition, and industrial synergy, thereby providing them with all-around support.

Third,Highly Specialized, the core members of the investment team are all seasoned professionals with many years of experience in the capital markets, evaluating hundreds of projects annually;

Fourth,Solid and Precise Post-Investment Services, Guosheng Capital, in collaboration with other companies at the Tianfu International Bio-city and sub-fund managers, closely monitors portfolio companies and provides support as needed to foster their growth. For instance, during the early stages of a company’s development, the team identified weaknesses in its internal management; Guosheng Capital promptly dispatched professionals to help establish robust corporate management systems, thereby alleviating the burden on founders. Additionally, Guosheng Capital, together with the Bio-city Administrative Committee and multiple banks, jointly designed and launched the “Bio-Loan” series of credit products. This initiative has enabled dozens of early-stage R&D enterprises to secure bank loans more easily, reducing their financing costs in the early phases.

VCBeat: Compared with other state-owned institutions, what are the typical characteristics and investment models of Guosheng Capital?

Zheng Yubo, Guosheng Capital: In fact,Guosheng Capital has always aspired to be a “Co-Founder” of enterprises., aiming to provide enterprises not only with capital but also with greater empowerment through industrial resources. Thus, from the very moment of investment, Guosheng Capital has been committed to pursuing shared development with its portfolio companies.

It is precisely based on this logic that our investment model primarily consists of four key aspects:First, proactively source projects by closely monitoring project pipelines such as university technology transfers, clinical physicians’ technological innovations, and market-oriented hard-tech initiatives in the pharmaceutical sector. Second, ensure broad project coverage and in-depth research by focusing on various sub-sectors of biomedicine, comprehensively evaluating project value from multiple dimensions to identify high-quality targets. Third, invest across the entire project lifecycle with flexible investment amounts; align closely with the development cycle of the biopharmaceutical industry to strategically invest in high-quality early-, mid-, and late-stage projects, while flexibly allocating capital to enhance investment efficiency. Fourth, actively introduce industrial resources to portfolio companies.。

VCBeat: In 2023, as the market winter intensified, the entire healthcare industry underwent significant changes. For instance, investment strategies began to place greater emphasis on “investing early, investing in small ventures, and investing in innovation.” In this context, what criteria and priorities does Guosheng Capital adopt when selecting investment targets?

Zheng Yubo, Guosheng Capital: 2023 was a year in which we vigorously advanced our initiatives. Throughout this process, we keenly felt the many uncertainties within the industry. Nevertheless, our criteria for project selection remained unequivocal:

First, it is guided by clinical value., focusing on targets with clearly defined diagnostic and therapeutic mechanisms that address critical and major clinical issues;

2. Differentiated Technological Innovation, with a focus on the practical application and development of advanced drug formulations, recombinant antibody technology, small-molecule inhibitor technology, high-throughput sequencing technology, drug conjugate technology, therapeutic gene editing technology, cell therapy technology, novel drug delivery technology, and brain science technology.

3. Domestic Substitution, against the backdrop of supply chain security and industrial transformation driven by demographic shifts, aging populations, consumption upgrading, intelligence, and green development, focusing on niche segments in biopharmaceuticals with potential for domestic substitution;

4. InternationalizationTaking innovative drugs as an example, global expansion is an inevitable path; only by going global can the value of pharmaceuticals be maximized. This requires Chinese enterprises to no longer be content with fast-follow strategies, but instead to pivot toward developing products that are not yet available in European and American markets, thereby filling higher-level clinical and commercial gaps. In fact, the frequent occurrence of large-scale license-out deals over the past year has further validated this point from a business perspective.

VCBeat: What are Guosheng Capital’s market strategy and investment layout in 2024?

Zheng Yubo, Guosheng Capital: In terms of market strategy,We will continue to prioritize early-stage, seed-stage, and innovative investments, while also maintaining a balanced focus on mid- to late-stage projects.. In terms of specific investment layout, based on the current development status of Chengdu's medical industry chain,We still aim to strengthen and fortify the supply chain., address weaknesses in the industrial chain, strengthen competitive advantages, support “chain-owner” enterprises through investment cultivation and investment-driven recruitment, and integrate upstream and downstream segments of the industrial chain.

Furthermore, we will strengthen collaborations with domestically listed companies, leveraging mature teams to accelerate project incubation. Meanwhile, we will gradually establish cooperation mechanisms with multinational corporations (MNCs), enhance connections with leading international research teams and enterprises, introduce high-quality overseas R&D achievements, and pursue business development (BD) opportunities for our invested portfolio pipelines at appropriate times.

VCBeat: As a key player in Chengdu’s local capital market, how will Guosheng Capital further drive the advancement of Chengdu’s biopharmaceutical industry?

Zheng Yubo, Guosheng Capital: Promoting the development of the local pharmaceutical industry has always been a critical task and key performance indicator for us. In this regard, we will explore the establishment of larger-scale direct investment funds in the biopharmaceutical sector in the future. On one hand, this will further improve the industrial fund investment system, provide financial support for key areas such as attracting major industrial projects and talent, and achieve full lifecycle coverage across specialized industry segments. On the other hand, it will empower the International Biocity Industrial Functional Zone to enhance quality and efficiency, facilitate multi-dimensional resource integration, and support strategic development goals, including government initiatives to replace subsidies with investments, combine subsidies with investments, and attract business through investment.

Furthermore, we will further deepen our empowerment of the “early-mid-late” full lifecycle of achievement transformation for biopharmaceutical enterprises, thereby unleashing the economic value of industrial services. For instance, in the early stage of achievement transformation, we will actively collaborate with universities and research institutes to promote the commercialization of original innovation projects; in the mid-stage, we will introduce blockbuster products through cross-regional collaborations; and in the late stage, we will facilitate the landing and commercialization of mature-stage projects through direct equity investment.

VCBeat: 2024 is regarded as a pivotal year for the healthcare industry. In certain niche sectors, it has reached the stage where promises must be delivered. For investors, amid a cooling capital market and tighter IPO regulations, monetization capabilities and exit channels are being put to the test. Keywords such as “global expansion,” “business development (BD),” and “mergers and acquisitions (M&A)” are frequently mentioned within the industry. Therefore, what will be the key focus areas for Guosheng Capital in 2024?

Zheng Yubo, Guosheng Capital: For us,In 2024, efforts will be intensified toward mergers and acquisitions, while explorations will also be conducted around pipeline transactions.。

Specifically, the M&A strategy is being advanced through two key initiatives: Guosheng Capital’s own holding-type project acquisitions and collaborative acquisitions designed to empower its partners. First, Guosheng Capital will continue to pursue M&A activities along the industrial chains of its previously acquired companies, aiming to build an integrated development platform for medical devices and directly engage in empowering the industrial growth of local innovative healthcare enterprises.

Second, in terms of collaborative empowerment: First, Guosheng Capital will prioritize partnerships with local listed companies to advance the “Listed Company + Private Equity” model for strengthening industry leaders. This approach aims to achieve integration of industry and finance, deepen capabilities, and deliver rapid results by leveraging special funds to combine the strengths of industrial partners and Guosheng Capital, thereby swiftly helping industrial partners identify and position M&A targets. Second, it will adopt a model of spinning off and introducing resource-advantaged enterprises, focusing on attracting major strategic industrialization projects. Finally, it will promote a multi-party institutional collaboration model to leverage broader external resources, facilitating further upgrading of local industries through large-scale industrial M&A and investment attraction.

Additionally,We also pay close attention to BD., as the enthusiasm for pipeline business development (BD) has gradually increased in recent years, we believe that investment in this field holds significant promise. We are currently exploring specific models and may exert new efforts in this area in the future.

VCBeat: “The future is bright, but the path is tortuous.” As local state-owned capital across various regions significantly increases its investment in healthcare, homogeneous competition has become inevitable. In light of this, what role does Guosheng Capital believe a mature or competitively viable state-owned enterprise should play within the industry? And what typical characteristics should it possess?

Zheng Yubo, Guosheng Capital: From historical experience, the development of various industries must go through a cycle from wild growth to pursuing high-quality growth. It is difficult to achieve qualitative growth without an increase in quantity.

The current large-scale investments by local state-owned assets in the healthcare sector underscore the industry’s importance, as it is vital to people’s living standards, health, and well-being. With substantial capital flowing into this sector, quantitative accumulation will ultimately lead to qualitative transformation, enabling a cohort of high-quality, mature enterprises to emerge. Therefore,Homogenized competition is, in essence, a process of survival of the fittest.。

Against this backdrop, a seasoned state-owned investor should closely align with national policy directives and proactively position its portfolio. Particularly during industry downturns, it should select high-quality enterprises, increase investment, and coordinate surrounding resources to jointly help these companies navigate the cycle, ultimately fostering the healthy development of the industry.

A mature state-owned capital institution must possess even more characteristics:First, establish an investment strategy aligned with policy guidelines and industrial development trends, ensuring precise control over the pace and direction of investments. Second, possess independent project evaluation capabilities to identify high-potential enterprises capable of standing out within their industries. Third, leverage industrial resources and coordinate government support to jointly empower industrial development and accelerate enterprise incubation and growth. Fourth, implement innovative and efficient mechanisms and systems to comprehensively enhance investment efficiency and management capabilities, achieving operational parity with market-oriented institutions.。

Guosheng Capital is a state-owned industrial investment firm rooted in the Chengdu Tianfu International Bio-town, dedicated to serving the global development of innovative life sciences. It has established a coordinated cluster of 10 parent and subsidiary industry funds, with a total scale exceeding RMB 13 billion. To date, it has completed investments in more than 70 outstanding enterprises in the healthcare sector, covering five major areas: modern biotechnological drugs, innovative chemical drugs, high-performance medical devices, professional outsourcing services, and health services. Guided by the principle of “government guidance + market logic + professional operation,” Guosheng Capital is committed to becoming China’s most influential comprehensive financial service provider in the industry.