The Dawn of China's Biotech Investment 2.0 Era: How MSA Capital Is Committed to Two Decades of Original Innovation in Biopharmaceuticals

According to previous statistics from VCBeat’s Orange Fruit Bureau, a total of 121 early-stage investment and financing transactions occurred in China’s healthcare sector in the first half of 2022, with the total financing amount nearing RMB 10 billion. Both the number of financing deals and the total financing amount far exceeded the figures for the entire previous year.

The underlying reason is that, in recent years, continuous advancements in basic research and clinical translation capabilities within China’s life sciences sector, coupled with the rapid integration of AI and information technology with life sciences, have spurred an accelerating pace of innovation in biotechnology. As a result, a growing number of early-stage projects featuring original innovations are transitioning from the laboratory to industrial application, naturally attracting significant interest and strategic investments from venture capital firms.

Zeng Yu, Founder and Managing Partner of Magic Stone CapitalMagic Stone Alternative Investment believes that it has heavily invested in China's healthcare sector, particularly in early-stage projects focused on original medical innovation. The core rationale is that the era of follow-on innovation in the healthcare industry over the past decade has reached its limit, and original innovation will be the key focus for China in the next ten to twenty years.

“We firmly believe that China’s biotechnology sector has entered the 2.0 era. Over the next two decades, a cohort of internationally leading biopharmaceutical companies with market capitalizations exceeding $100 billion will emerge in China, and China’s contribution to the global innovative drug industry will steadily rise from single-digit percentages to nearly half of the total,” said Zeng Yu.

How does Magic Stone Alternative Investment view the current innovative shifts in the healthcare sector? How is it strategizing its early-stage medical investments? VCBeat’s Orange Fruit Bureau will provide a comprehensive review and analysis through interviews.

On September 27, not long ago,Academician of the Chinese Academy of Sciences, Deputy Director of the National Institute of Biological Sciences, Beijing, and Co-founder of Yanming Biopharma, a portfolio company of Magic Stone CapitalShao FengFor his/her original discoveries in the field of pyroptosis, he/she was awarded by the Cancer Research Institute (New York, USA)2022 William B. Coley Award

It is reported that in 2015, Shao Feng’s laboratory was the first in the world to elucidate the molecular mechanism by which GSDMD serves as a substrate for inflammatory caspases to execute pyroptosis. Over the past decade, the mechanisms of other proteins in this family, namely GSDME and GSDMB, have been successively clarified. Leveraging the immune-activating properties of pyroptosis, the team has also pioneered a conceptual framework for enhancing anti-tumor immune activity through pyroptosis.These studies have not only redefined the biological concept of pyroptosis but also profoundly altered the conventional understanding of programmed cell death.

Based on the groundbreaking original discoveries made by Professor Shao Feng’s laboratory in the fields of pyroptosis and tumor immunity,Yanming Biotech has leveraged small molecules and biological genes to regulate pyroptosis, launching a series of new drug development programs targeting inflammatory diseases and cancer. Several of these programs have already achieved breakthrough progress.

As early as the first three months after Yanming Biotech’s establishment, Magic Stone Alternative Investment led its angel round of financing. This investment further solidified Magic Stone Alternative Investment’s convictionStrategies for Investing in Early-Stage Healthcare Projects.

“Our investment in Innovent Bio has shown us that Chinese biologists are already capable of producing world-leading innovations in the life sciences with significant clinical application and commercial value. We believe that the next 10 to 20 years will witness an explosive growth phase during which China’s domestic biotechnology sector will gradually achieve global leadership. Along this strategic thread, we have subsequently invested in innovative biotech companies such as Diying Bio, Muhua Bio, Monroe Bio, Zhuokai Bio, Vitaron, and Sihe Genomics,” said Zeng Yu.

When it comes to identifying early-stage projects with original innovation,Zeng Yu stated, “Pursuing original innovation has always been the hallmark of Magic Stone. Many years ago, we established close ties through various channels with China’s top scientific community, including research institutes and university laboratories. This enables us to regularly scan and conduct in-depth research on innovative technologies and business ideas worldwide. After identifying niche markets of interest, we leverage our extensive ecosystem to proactively seek out investment targets within the industry. This approach gives our investments a strong forward-looking perspective.”

In the process of seeking early-stage projects, Magic Stone Alternative Investment has always adhered to a core logic, focusing on three major disease areas that are expected to become mainstream in the field of human health in the future: first,Psychiatry and Neurology; secondly,Innovative Therapies for Chronic Diseases and Aging/Longevity; Third,Oncology and Immunology。

"China currently has a large elderly population, and the degree of population aging is continuously deepening. Over the next decade or so, the country will enter a period of very rapid aging. 'Population aging will be accompanied by various clinical needs, particularly for chronic diseases and neurodegenerative disorders. We have strong conviction and awareness in this area,' stated Zeng Yu."

It is worth mentioning that, in addition to continuously focusing on and supporting outstanding scientific research "pioneers" with "originality," Magic Stone Capital has a particular preference for ""Top Scientists + Industry Entrepreneurs: The Golden Combination"For example, Magic Stone Capital led the angel round of Yanming Bio, a first-in-class original innovative drug company that boasts a perfect combination of scientists and entrepreneurs. Founder Academician Shao Feng is one of the most leading and contributing international scientific leaders in the fields of innate immunity and pyroptosis. CEO Dr. Deng Tianjing previously served as the China CEO of BioDuro and the Global R&D President of BioDuro-Sundia, with many years of industry experience.

In addition, Magic Stone Alternative Investment will also conduct in-depth assessments of other aspects, such as the level of scientific innovation and future commercialization pathways of the projects.

Zeng Yu believes that allowing research findings with application potential to remain confined to academic papers or laboratories constitutes a significant waste of social resources. Although the current macroeconomic environment is less than optimistic, Magic Stone Alternative Investment still regards original innovation as the core driver of long-term human societal progress and economic development, and supporting such innovation remains its enduring theme.

For sectors with exceptional potential and strong innovation, Magic Stone Alternative Investment dares to be a pioneer, actively pursuing projects that offer ultra-high returns. Naturally, the more innovative an early-stage project is, the greater the accompanying risks; thus, Magic Stone Alternative Investment has been consistently striving to strike a balance between high risk and high reward.

On the one hand, for early-stage medical projects, especially innovative drug projects,Long R&D Cyclehas led to investment uncertainty. Some projects, at their inceptionDifficulty in Recruiting a Suitable Core Executive Team, and even personnel for process quality control and regulatory submissions have not yet been secured, requiring continuous team expansion and refinement in line with R&D progress.

Moreover, early-stage projects typically raise relatively small amounts of capital at the outset.Future Financing CapacityandOrganizational Management CapabilityIt is also an important factor in ensuring the smooth progress of the project.

In this regard, Magic Stone Alternative Investment will provide valuable post-investment value-added services by offering targeted assistance to the founding team in areas such as the early recruitment of subsequent R&D talent, establishment of organizational management structures, optimization of fundraising pacing, and overseas expansion.

On the other hand, it is equally crucial to strengthen post-investment management of early-stage projects and help entrepreneurs achieve rapid growth.

AtFeng Jiawu, Partner at Magic Stone CapitalIt appears that the first priority is to strive for productive technical interactions with scientists, which requires the team to have a deep understanding of the technology.

To invest in the most leading early-stage projects, Magic Stone has established a fullyA medical investment team comprising several PhDs and master’s degree holders with backgrounds in biology and clinical medicine“We aim to develop a systematic and profound understanding of our focused disease areas, spanning from pathogenesis and target selection to animal studies, clinical pathways, and even commercialization strategies, thereby enabling more accurate assessment of project value and risks,” said Feng Jiawu.

Secondly, based on past experience, scientists often encounter two major challenges in the process of translating research findings into practical applications: one is a lack of deep understanding of clinical practice, and the other is unfamiliarity with regulatory pathways such as pharmaceutical process quality control and registration submissions. This is precisely where investment institutions can provide crucial behind-the-scenes support.

Leveraging the team’s extensive experience in the healthcare sector, deep expertise in specific disease areas, thorough understanding of innovative technology platforms, and solid foundation in biological sciences and clinical practice, we can comprehensively empower innovative projects by providingSupport for early-stage R&D, pipeline planning, pathway selection, and connection with key resources.

Magic Stone Alternative Investment is also striving to buildAI-Driven Early-Stage Project Support Platform, such as Adwin Bioscience, a translational medicine support platform centered on clinical pharmacology, bioanalysis, and biological modeling, and Yidu Tech, a clinical resource support platform focused on clinical medical decision-making services. Building on this foundation, Magic Stone Alternative Investment can provide comprehensive support to innovative startups throughout the entire development pipeline, from early-stage target identification and mechanistic studies to clinical translation.

In terms of project advancement, Magic Stone Alternative Investment will focus onFacilitating the formation of teams comprising scientists, professors, and professionals with enterprise management experience, with the hope that both parties can establish a proper benefit-sharing mechanism, play distinct yet complementary roles in the business management and R&D management of the scientific-to-practical translation process.

In addition, Magic Stone Alternative Investment'sInternationalization-enabled advantages can also provide differentiated services to portfolio companies.At Magic Stone Capital, a primary focus for many of its partners is to help portfolio companies discover and create value, while assisting Chinese firms in expanding into international markets such as emerging economies. Currently, Magic Stone Capital has launched regional investments in countries and regions across the Middle East, Africa, South America, and Europe, implementing China’s investment practices and experience in these markets.

Magic Stone Alternative Investment has a dedicated overseas empowerment division that assists its portfolio companies in undertaking high-value initiatives abroad, including introductions to key international clients, establishment of overseas branches, liaison with local government authorities, and setup of overseas laboratories, among other activities. “The empowerment provided by Magic Stone Alternative Investment to its portfolio companies for their overseas development has already generated over $1 billion in commercial value growth,” said Zeng Yu.

Through long-term support for scientists in translating their research into commercial outcomes, Magic Stone Capital has gradually developed its unique early-stage investment philosophy: trust, understanding, and empowerment.

Trust means having confidence in outstanding Chinese scientists and believing that their exceptional scientific achievements hold the potential to change the world. Understanding involves gaining a profound grasp of a project’s technical characteristics, application scenarios, and existing challenges through in-depth study and research; this forms the foundation for earning scientists’ trust and recognition. Empowerment entails providing targeted, comprehensive support to entrepreneurial ventures—based on trust in the scientists and a thorough understanding of their startups—including assistance with follow-on financing, international expansion, partner matchmaking, and strategic development consulting.

And all of this is rooted in a passion for source innovation.

Only by harboring genuine passion for technological innovations capable of changing the world can one continuously engage in critical thinking, exploration, and validation throughout project advancement, maintain a dialectical mindset, and repeatedly weigh the risks against the returns of investment projects to maximize efficiency.

Guided by such passion, trust, and professionalism, Magic Stone Capital’s early-stage investments will primarily focus on two sectors: biotechnology and core technologies. The biotechnology sector encompasses healthcare, synthetic biology, and agricultural biotechnology, while core technologies include semiconductors, artificial intelligence (AI), new energy, and advanced materials.

“Technological advancement drives the progress of human society and fosters the creation of commercial value. China’s biotechnology sector is entering a new 2.0 era, marking the end of follow-on innovation and the dawn of original innovation,” summarized Zeng Yu.