Mingkang Pharma's Yuan Zhengyu: China's Innovative Drug Industry to Emerge from Capital Winter in About Two Years

This August, Micurx Pharmaceuticals listed on the STAR Market, marking 15 years since its founder and CEO, Dr. Yuan Zhengyu, returned to China in 2007 to start his business.

Listed in the dead of winter, Micurx was widely predicted by the capital market to trade below its IPO price upon listing. However, Micurx not only avoided breaking its issue price but closed 33.33% above it on the first day of trading.

On the day of its IPO, Yuan Zhengyu was in the United States and participated in the company’s internal celebration online. “After all, we’ve worked hard for so long, and everyone’s spirits were still very high.”

Micurx’s IPO occurred much later than Yuan Zhengyu had anticipated.

For a long time, the field of antibiotics for drug-resistant bacteria, which Micurx has focused on, was a “niche track” in new drug development. “The biggest frustration I faced in running this company was having to spend a significant amount of time on fundraising,” Yuan Zhengyu admitted. Before 2017, he spent roughly half his time securing financing.

In 2020, after 13 years of returning to China to start a business, Yuan Zhengyu could finally say that Micurx had “seen the light at the end of the tunnel.” That year, the company completed its Series D and E financing rounds, raising a total amount in the range of RMB 1 billion. At the time of the Series D round, Micurx’s first R&D project, MRX-I (contezolid tablets), had already submitted a new drug application, while its second project, MRX-4, was about to initiate international multi-center Phase III clinical trials. The company’s IPO preparations were also underway in earnest.

However, since the second half of 2021, a capital winter has returned.

This is merely Yuan Zhengyu’s experience within China.Since the 1990s, Yuan Zhengyu has experienced the full up-and-down cycle of the U.S. biopharmaceutical industry.In 1993, it was widely believed that the golden decade of U.S. biotech stocks had come to an end. The BTK Index fell from its phase high of 176 points in late 1992 to a low of 77 points in mid-1995, representing a 56% decline in less than two years.

In 1993, Yuan Zhengyu moved to Silicon Valley and joined Affymax Research, an emerging biochemistry company. In 1996, he co-founded Vicuron Pharmaceuticals, a company dedicated to the development of novel antibacterial drugs. In the United States, he witnessed both the “biotech winter” and the overheated capital markets. In 2000, the Nasdaq Composite Index surged past 5,000 points, creating the famous “dot-com bubble.” That same year, Vicuron went public on the Nasdaq. Five years later, Pfizer acquired Vicuron for $1.9 billion, a record amount in the field of antibacterial drug development.

What Yuan Zhengyu fondly recalls is that Vicuron spent a total of $250 million—approximately one-tenth of the cost typically required for other new drugs—to advance two novel anti-infective agents to the stage of submitting New Drug Applications (NDAs) for market approval. “We were too successful back then,” he recalled.

Yuan Zhengyu attributes some of his successes to “being relatively lucky,” a humble remark. In reality,With over two decades of entrepreneurial experience in the United States and China, Yuan Zhengyu possesses sound judgment, steadfast resolve, and the resilience to withstand external distractions and temptations. He also has a long-term vision—qualities that have proven particularly valuable over the past 15 years, as China’s innovative drug sector cycled from excessive coldness to overheating, and then into a winter period.

Having witnessed both the upswings and downswings of the innovative drug industry in China and the United States—seeing “tall buildings rise” and “tall buildings fall,” and experiencing both darkness and dawn—Yuan Zhengyu has become more resolute and composed. In the interview, Yuan stated that he does not monitor his company’s stock price on a daily basis, repeatedly emphasizing the company’s long-term “fundamentals.”

Over the 15 years since he returned to China to start his business, his understanding of the term “fundamentals” has never changed—regardless of whether the market is performing well or poorly, and whether before or after an IPO, he believes thatLeaders of new drug companies should all recognize that in the long-cycle field of innovative medicines, the most critical focus for enterprises is on their own fundamentals.

Certainly, he also has his own profound understanding of how to be a CEO and the cycles of the innovative drug industry.

The following is a dialogue between VCBeat and Yuan Zhengyu:

VCBeat: Micurx has been established for 15 years and went public this year. Did the listing timeline align with initial expectations?

Yuan Zhengyu:It is already quite late. When I initially returned to China to start a business, I recognized that building a BioPharma company was a low-probability event; the more likely outcome was developing a drug and, at a certain stage, being acquired, similar to most companies in the United States. Acquisitions occur for various reasons, typically driven by market forces rather than management preferences. However, due to the development stage and characteristics of China’s capital markets, the likelihood of Micurx being acquired in China is actually lower.

VBInsight: When Was the Decision Made to Go Public?

Yuan Zhengyu:In 2018, we initially intended to list on the Hong Kong stock market. However, after the launch of the STAR Market, we compared the two markets and decided to withdraw our plans in favor of listing on the STAR Market.

The decision to return to the A-share market was made in the first quarter of 2019. Later, many individuals, including some securities firms, advised us to relist on the Hong Kong stock exchange during periods of volatility in the A-share market, as the Hong Kong market did indeed show signs of recovery at certain times. However, after comprehensive assessment, we remained committed to our strategy of staying in the A-share market.

In response, the company needed to undergo structural restructuring for its A-share listing, obtain unanimous consent from all investors, and secure Pre-IPO financing, a process that took some time. In December 2020, Micurx successfully completed its joint-stock reform and entered the substantive stage of its A-share IPO.

VCBeat: What are the main reasons for returning to the A-share market?

Yuan Zhengyu:I believe the two primary reasons are entirely driven by considerations for the capital markets. First, overall liquidity in the Hong Kong stock market remains relatively poor for companies of Micurx’s scale. Second, I do not anticipate that the biopharmaceutical sector in the Hong Kong market will reach a substantial size, making follow-on financing more challenging in such an environment.

Micurx, as a biotech company,The ability to refinance before achieving full profitability is a critical factor; therefore, careful consideration must be given to the choice of capital market.. The greatest advantage of being listed on the Nasdaq is strong refinancing capability. Although A-share markets are subject to stricter regulation, their relatively ample liquidity makes corporate refinancing comparatively easier.

Looking back, listing on the A-share market was a very correct decision. Many people have asked us why we made that choice at the time. In fact, after careful consideration, we decided to evaluate the pros and cons for the company’s long-term development and its fundamentals. At least for a company like Micurx, the A-share market is a better option.

VBInsight: How often do you check the stock price?

Yuan Zhengyu:I checked the stock price when the company first went public, but I haven’t looked at it since. I don’t monitor the stock price on a daily basis anymore. There are two reasons for this: I understand that short-term fluctuations in a company’s stock price are often driven by broader market trends or investor sentiment rather than the company’s underlying performance, and paying too much attention to these movements can negatively affect my own emotional well-being.

Our primary market investors at the time were all long-term oriented, focusing more on the development of the company’s fundamentals. After the company went public, we did not engage in any deliberate “maintenance” to manage short-term stock price fluctuations. All our actions have been based on the company’s long-term interests, and we hope that secondary market investors will also recognize the company’s long-term growth potential and value.

VBInsight: This isn’t your first time taking a company public; Vicuron listed on the Nasdaq in 2000. How do these two experiences differ?

Yuan Zhengyu:Vicuron had a separate CEO, so my pressure was actually not that great. At Micurx, I am the founder and CEO, the person who makes the decisions. Even when information is incomplete, as the primary leader of the company, I still have to make a decision. For example, in 2019 we decided to list on the A-share market, but in the first half of 2021, many people still advised us to go for an IPO in Hong Kong instead. At such moments, everyone is watching you, and the pressure is immense.

VBInsight: What entrepreneurial project did you plan to pursue upon returning to China in 2007, and how long did it take you to make this decision?

Yuan Zhengyu:At the time of the company’s founding, we were able to pursue four different projects. We spent a year reviewing the literature and engaging in repeated discussions. By the time we reached Phase III clinical trials, however, the company had to focus on just one project.This trade-off is the most challenging aspect of being a CEO.. Amid a still relatively unclear outlook, you must make a definitive decision.

It is common for a new compound to yield unsatisfactory results after a period of development, making it relatively easy to abandon. The real challenge lies in deciding between two projects that both appear promising.

VBInsight: How to Choose? What Kind of CEO Makes Decisions That Prove Correct in Hindsight?

Yuan Zhengyu:Sometimes, you need to have a “sixth sense.” In reality, there is no true “sixth sense”; it is actually the accumulation of experience, only without the ability to articulate the underlying patterns.If the CEO’s decision is driven by the capital market, then he does not have a “sixth sense.”

In 2017, we took a gamble. At that time, MRX-I was entering Phase III clinical trials, and preparations for commercialization were underway. We faced a critical decision: should we build our own manufacturing facility or outsource to a contract manufacturer? With regulatory policies still unclear, we carefully analyzed all options after considerable deliberation and decided to take the risk by opting for contract manufacturing. We believed that if China were to follow the development path of biotech companies abroad, it would inevitably introduce the Marketing Authorization Holder (MAH) system. As expected, the MAH system was formally established in 2019.

Looking back, it was fortunate that we did not build a manufacturing plant at the time. The heavy-asset investment required for plant construction could easily have ruptured the company’s cash flow chain, leaving us in a precarious position when seeking further financing.

VBInsight: From 1993 to 2005, you experienced a full cycle of boom and bust in the U.S. innovative drug industry. What did this entrepreneurial journey teach you?

Yuan Zhengyu:Resist all temptations; do not spend money too quickly.Don’t assume that securing funding gives you license to spend recklessly,Because even if the broader environment is not in a downturn, the company itself will face its own periods of hardship.Furthermore, it is essential to focus on building fundamental capabilities and enhancing core competitiveness, rather than pursuing overly flashy initiatives. The development cycle for innovative drugs is too long to rely on merely two- to three-year plans; a ten-year strategic roadmap is required. From a ten-year perspective, any narrative that fails to introduce new content by the third year will inevitably lose its viability.

VBInsight: What Temptations Must Be Faced?

Yuan Zhengyu:For instance, each new round of financing typically brings pressure to inflate the valuation, thereby pleasing earlier investors. However, we generally reject irrational valuation increases, especially during favorable market conditions, when it is crucial to resist such temptations and refrain from doing so.

Another major temptation is to overexpand after raising funds, which is the most alarming.Micurx was founded 15 years ago. The company experienced rapid headcount expansion to support product launches and commercialization efforts, which required significant hiring. Our current commercial team comprises nearly 100 employees, handling direct product sales; this size represents approximately the minimum scale needed for such operations. For a considerable period in the past, Micurx’s total workforce never exceeded 50 employees.

Over the past 15 years, Micurx has relocated its Shanghai office only three times. From its initial incubation site at Morningside Venture Capital’s building on Halei Road in Shanghai, it moved to Rooms 401–402, Building 2, Lane 720, Cailun Road, Zhangjiang, occupying more than 700 square meters, where it remained for a full decade from 2008 to 2018. In 2018, we relocated to Henggu, with an office space of 2,200 square meters. In 2021, we moved to our current location at No. 53 Edison Road, covering more than 6,000 square meters.

In the secondary market, one is again confronted with new temptations; you can alter many things to cater to capital’s short-term demands. This is precisely why, in many cases, I prefer not to monitor stock prices too frequently, as some of the fluctuations are unjustified.

Minor temptations lie in the details of daily work, such as whether to purchase an additional instrument that may not be used frequently.

When the company was first established, even a minor issue had to be carefully managed by the CEO.In the early days, it was standard practice for many domestic biotech companies to use their first round of financing to purchase a car for the CEO. However, this had nothing to do with R&D. Additionally, some companies would purchase large quantities of laboratory equipment without proper planning or justification. I personally witnessed one such company go bankrupt within 11 months. We later acquired much of its equipment at a low cost, and I still cannot fathom why they purchased so many instruments in the first place.

VCBeat New Medicine: How to Resist These Temptations?

Yuan Zhengyu:Remember your fundamentals, and hone your basic skills.If you are developing a new drug, your funding should ideally last until the next reflection point (inflection point of growth).For instance, during Phase II clinical trials, if there is no new progress within 16 months, it becomes very difficult to secure financing. If funds are raised but spent heavily, and the company cannot sustain operations for the full 16 months, its future prospects will become severely challenging.

Even with a constant focus on fundamentals, difficult periods are inevitable. There was a time when Micurx faced the imminent risk of a broken capital chain. At times, investors from different stages have divergent interests, and their views on the company’s strategic direction may not always align. Failure to promptly resolve such discrepancies could hinder new financing rounds. With new capital unable to flow in while operational expenses continue, the company’s cash reserves would steadily dwindle.

Smooth sailing is the exception; setbacks are the norm. This must serve as a constant wake-up call.

VBInsight: After years of entrepreneurship, has your understanding of the term “fundamentals” changed?

Yuan Zhengyu:No. We have consistently stated that we should allocate our capital and efforts to strengthening the company’s fundamentals, ensuring they are solid and robust. First, the drug candidate you select must be differentiated and capable of addressing unmet clinical needs; second,In the process of developing new drugs, you need to pay attention to the development of the company's fundamentals,Is the drug you are developing moving closer to commercialization along this path, or is it stagnating? If it remains stagnant, why would investors provide you with funding?

We have already commercialized our products, and the company is listed on the capital market; however, what remains to be scrutinized are still the fundamentals. The commercialization of innovative drugs, especially in the field of high-end antibiotics, has a high R&D threshold and limited competition. We believe this is a stable growth model with a long sustainability period, rather than short-term explosive volume growth. The message we convey to investors is that for companies like Micurx, more attention should be paid to our stable and predictable growth, rather than focusing on short-term but potentially unsustainable volume increases.

VBInsight: In your opinion, how much of a bubble has existed in China’s innovative drug industry over the past few years?

Yuan Zhengyu:In fact, bubbles are difficult to define. I often joke that whether a bubble exists or will burst largely depends on the environment. With external pressures properly adjusted, a soap bubble can last quite a while; however, under high-pressure or vacuum conditions, it will burst. For instance, in the early days, developing first-to-market generic drugs was not considered a bubble given the regulatory environment and capital market conditions at that time. After the implementation of volume-based procurement, however, the generic drug sector began to exhibit bubble characteristics. In the initial stages of new drug development, any novel structure with patent protection had a market and could be priced independently, so it was not regarded as a bubble. Yet, if the ultimate orientation is clinical need, then a simple me-too or even me-worse new molecular structure becomes a bubble.

VCBeat: How can we predict whether what we are doing now will become a bubble in the future?

Yuan Zhengyu:In the short term, there is no need to look too far ahead.，One can refer to the evolution of the U.S. FDA’s regulatory orientation over the past two decades, examine how the U.S. biotech market assesses value, and identify the remaining differences with China. In all likelihood, their current practices will become our future approach.Biotech companies that are unlikely to survive in the U.S. market in the long run but are currently thriving may well become the next “bubble” in China’s domestic market.

For at least eight years, from 2015 to the present, the overall trend has remained consistent. I have consistently emphasized thatMany of the initiatives and approaches currently undertaken by the U.S. FDA are not being implemented by our regulatory authorities today, but this does not preclude their adoption in the future.

VBInsight: The U.S. innovative drug market has also experienced cycles of bubble formation and burst. What are the similarities and differences between China and the U.S. in terms of the underlying causes? What are the cyclical patterns of such bubbles?

Yuan Zhengyu:There are similarities as well as differences. The U.S. market moves in cycles, primarily driven by whether there is any major positive news in the overall new drug sector.news-driven (major event-driven). A few pieces of good news emerge, and the market enters an uptrend; during severe downturns, there is typically a prolonged absence of positive developments, compounded by one or two major failures.

Of course, major events follow certain patterns, as significant breakthroughs originate from basic research. There is typically a major cycle every six to eight years, with such cycles occurring more frequently in recent years. Following a major breakthrough, substantial capital inflows drive market valuations higher. However, the total amount of capital available for the biotech sector is limited; once this capital is fully deployed, valuations can no longer rise, prompting these investors to withdraw. In the absence of new positive catalysts and visible significant growth, the market begins to decline. This cyclical nature of the capital market serves to eliminate companies with weak fundamentals during downturns, thereby compelling all companies to focus on strengthening their fundamental performance.

Looking at the most recent major bubbles, the driving force has been the belief that a new technology can create infinite value. Expectations were set too high; after everyone rushed in, they realized it was not the case.. Of course, there were some correct bets along the way, such as monoclonal antibodies. In the years following the emergence of PD-1 inhibitors, the industry rushed into another field, which is likely an unsuccessful bubble. While it may succeed in specific niches, it lacks broad applicability.

China’s pharmaceutical industry has experienced successive waves of hype. In the early years, substantial profits could be made from generic drugs; later, developing novel molecular structures was considered viable; now, there is an imperative to address unmet clinical needs.

I believe that the previous waves of bubbles in China were caused by a unique macroeconomic environment. Economic activities within China’s entire capital market are largely influenced by changes in top-level government policies. Different policy regimes at various stages can exert significant upward or downward pressure on specific companies or sectors.In fact, the many cyclical rises and falls in our biotech sector are ultimately driven by policy changes.

VBInsight: One final question that everyone is eager to have answered: When will this winter downturn finally come to an end?

Yuan Zhengyu:Based on overseas patterns, approximately two years.

First, a fundamental judgment is thatI believe the current winter is, in fact, the adverse consequence of the previous disorderly boom. During this process, those with weak fundamentals have suffered the sharpest declines.

Thus, there are two major factors driving the emergence from the winter: capital markets and policy.

Whether it is a “winter” or not essentially depends on whether capital flows in. This is due to the previous period’s rampant inversion between primary and secondary markets,It takes the capital market as long as two years to clear out market capitalization bubbles or investors' unreasonable expectations.I believe that the cleanup will be largely complete within two to three years. After capital has circulated extensively, it will ultimately flow back in, as the funds remain available and investors will continue to deploy capital.

From a policy perspective, the biopharmaceutical industry is one of the five pillar industries. From a national strategic standpoint, the decline of this sector is certainly not what the government wishes to see.Once the capital market has largely completed its cleanup, and with the combined force of policy support, we will weather the winter; in the long run, spring will still arrive.