How Far Is the Organoid Industry from Maturation Amid the Current Investment Surge?

News of an FDA legislative change before the holiday has thrust the organoid industry into the spotlight.

“We’ve already hosted several groups of investors today.” On a day after the holiday, Dr. Liu Dan, Senior Partner at CDH Investments, told VCBeat. In May 2021, his fund invested in a Chinese organoid company. The startup’s new round of financing experienced some delays amid the recurring COVID-19 outbreaks this year but was ultimately completed successfully. When Dr. Liu informed the investors who had been following up that the company had closed its funding round, they all requested to open another round to secure equity stakes.

However, at an internal investment decision-making meeting held nearly a year and a half ago, he calmly predicted, “I stated internally at the time that investing in organoids now means we are two steps ahead. One step is compliant usage, and the other is regulatory acceptance.” In his view, the entire organoid industry can only experience an explosion after completing these two steps. He was certain that both steps would eventually be completed, estimating that it would take approximately three years to do so. However, the actual pace of progress has clearly exceeded his expectations.

At present, the commercial applications of organoid technology are primarily focused on companion diagnostics for cancer and new drug development, which has improved the efficiency of precision oncology to some extent and filled part of the gap in disease models for drug discovery. However, as a groundbreaking advanced technology, the organoid industry had previously attracted relatively little attention.

In China, the commercialization of organoid technology has a short history.

Most organoid companies currently active in the market were established after 2016. It was not until around 2019 that these emerging enterprises began to attract capital attention and sequentially completed their angel financing rounds. Their intensive acquisition of substantial later-stage financing occurred in 2021, with participating investors including prominent firms such as CDH VGC, SDIC Innovation, Kaifeng Venture Capital, and Delian Capital.

However, during the early growth stage, investment firms and founding teams in China’s organoid industry failed to clearly articulate the commercialization logic of this innovative technology. As a result, most organoid projects in the early stages did not deliver results that satisfied investors. “Some investors, after several years of seeing no hope for stable performance growth from their portfolio companies, have internally written off these investments,” an investor revealed to VCBeat. “Other institutions have spread their bets across multiple organoid projects focusing on different directions to diversify risk.”

Undoubtedly, organoids themselves represent an innovative technology with substantial room for creative exploration. By definition, organoids refer to tissue-like structures with specific spatial organization and functionality, generated in vitro from adult stem cells or pluripotent stem cells through three-dimensional culture techniques. Generally speaking, complete lung organoids should exhibit normal respiratory function, while gastric organoids should be capable of digesting food. By cultivating organoids, researchers can more effectively investigate a range of topics, including the mechanisms underlying disease initiation and progression, as well as drug metabolism pathways. Between 2019 and 2020, the wave of enthusiasm for organoid research, which had already gained significant momentum in Europe and the United States, reached China, propelling the number of basic research studies on organoids in China to second place globally.

However, constrained by technological capabilities, industrialization capacity, and commercial implementation strength, organoid companies often have to feel their way forward when starting out.

Currently, the most dynamic area for organoid technology application in China is precision medicine. Industry practitioners have estimated to VCBeat that over 10,000 samples are collected annually for organoid-based precision medicine in China. With the release of the "Expert Consensus on Clinical Application of Organoid Drug Sensitivity Testing in Guiding Precision Cancer Therapy" in July 2022, the clinical application of organoid technology is rapidly maturing, providing better treatment options for many cancer patients with refractory, late-stage drug-resistant, rare tumors, or those requiring "differentiated treatment for the same disease."

Specifically, in the application of organoids for precision medicine, patient tumor tissues collected by professionals using endoscopy, biopsy, and other tools are stained and cultured. Typical organoid structures form in approximately 4 days, followed by subculturing after about 1 week. After approximately 4 days of subculturing, a 96-hour drug treatment experiment and related cell proliferation activity assays are conducted to predict the patient’s sensitivity to specific drugs.

Previously, similar tumor drug sensitivity tests required implanting human tumor cells into the subcutaneous tissue of mice. After approximately two months of husbandry to allow for normal tumor growth in the mice, different treatment regimens were administered to identify effective therapies. This method of drug sensitivity testing was priced between 100,000 and 200,000 yuan, resulting in poor accessibility. In contrast, ex vivo tumor organoid drug sensitivity testing costs only around 10,000 yuan and has a culture period of just one week, significantly enhancing its accessibility.

VCBeat has learned that, at present, precision medicine using organoids is primarily applied in tumor drug screening. Currently, organoid technology covers more than 20 types of cancer-derived organoids, including those from lung cancer, breast cancer, cholangiocarcinoma, gastric cancer, colorectal cancer, prostate cancer, renal cancer, laryngeal squamous cell carcinoma, hypopharyngeal cancer, clear cell renal cell carcinoma, undifferentiated thyroid cancer, osteosarcoma, giant cell tumor of bone, and Ewing sarcoma. The success rate of in vitro culture for certain tumor organoids is as high as 95%.

Among these, gastrointestinal tumors, predominantly colorectal cancer, represent disease areas where the application of organoid-based precision medicine is relatively concentrated. Clinical trial data have confirmed that rectal cancer organoids can accurately recapitulate the pathophysiological and genetic alterations of the corresponding tumors. The chemoradiation response in patients showed a high degree of concordance with the response observed in rectal cancer organoids, with an accuracy of 84.42%, sensitivity of 78.01%, and specificity of 91.97%.

“Applications of organoid technology in oncology first emerged in colorectal cancer within the digestive system,” Zhou Yu, CEO of Daxiang, told VCBeat. “In reality, there is robust demand for organoid-based drug sensitivity testing in conditions such as small cell lung cancer and triple-negative breast cancer. We are making relentless efforts to provide standardized testing services to more patients with urgent clinical needs.” With a strong foundation in serving pharmaceutical companies, Daxiang has recently expanded into precision medicine and is sequentially establishing laboratories in major core cities.

“Organoid-based precision medicine may be a promising business, but it may not yet be a sound investment,” an investor told VCBeat. At this stage, companies in the organoid-based precision medicine sector face two major dilemmas.

On one hand, the success rate of tumor cell culture is too low. VCBeat has learned that some organoid companies can collect thousands of patient samples annually, but fewer than 100 viable disease models are successfully established. Professor Hua Guoqiang, co-founder of Danwang Medical, also noted that the industrial application of organoid technology involves long-term technical accumulation, thorough clinical validation, and diversified technological innovation. Meanwhile, Zhou Yu from Daxiang stated that although the entry barrier for organoid applications is not high, standardization and automation remain arduous tasks.

On the other hand, the high heterogeneity of tumors poses significant challenges to large-scale application. In organoid-based precision medicine experiments, personalized protocols must be designed for each case based on patient-specific and sample-specific characteristics. Different tumor types, anatomical origins, and cell populations within samples require distinct culture methods and formulations, necessitating researchers to make ad hoc arrangements tailored to each sample’s specific conditions. In other words, in the short term, it is difficult to commercialize organoid-based precision medicine, resulting in slow growth in market size.

Furthermore, even after completing technological and industrial iterations, the proportion of patients with tumors or rare diseases who have a genuine need for and can benefit from organoid-based precision medicine remains relatively limited among both existing and new patient populations. In this sense, the growth potential of the organoid precision medicine industry remains to be explored.

What has ignited investor enthusiasm is the possibility that organoids could replace laboratory mice, and even non-human primates, in new drug development under the FDA’s new regulatory framework. According to the FDA Modernization Act 2.0 (S.5002), animal testing for new drug development has been reclassified as “non-clinical tests and studies,” thereby allowing organoid test data to serve as regulatory-accepted evidence for investigational new drug applications.

“Animal experimentation is a critical component of new drug development and a phase where costs are heavily concentrated. If organoid experiments can provide validation data recognized by regulatory authorities, the market potential will undoubtedly be enormous,” stated Dr. Liu Dan. “Of course, at this stage, the application of organoids in new drug development is primarily auxiliary and requires further validation; it is unlikely to replace animal experimentation on a large scale within the next five years.”

Prior to this, organoid technology had already been widely applied in new drug development. Publicly available data indicate that since 2016, organoid technology has been incorporated into clinical trials; as of September 2020, the U.S. Food and Drug Administration (FDA) had registered 63 clinical trials. Since 2017, approximately 20 organoid-based clinical trials have been registered and approved by ethics committees in China, covering eight types of cancer.

In fact, abroad, the application of organoids in new drug development has become a new technology that major pharmaceutical companies are racing to adopt.

Since 2015, pharmaceutical giants such as Johnson & Johnson, Merck, AstraZeneca (AZ), Pfizer, and Sanofi have successively introduced organoid technology into their new drug R&D pipelines, covering organoids of the intestine, brain, and other tissues. Furthermore, more than 20 top-tier pharmaceutical companies, including AbbVie, Merck, and Novartis, jointly established the non-profit IQ Consortium (Innovation and Quality Consortium) to promote the standardized application of organ-on-a-chip technologies and accelerate the drug development process. A series of industry standards for models of the liver, kidney, lung, and other organs have already been released.

In China, the application of organoids in new drug development started slightly later, but regulatory and industrial support has been increasingly strengthened.

Since 2021, China has systematically advanced the development of organ-on-a-chip technology at both the scientific research and regulatory levels. On January 28, 2021, the Ministry of Science and Technology issued a notice soliciting public comments on the “Guidelines for Project Applications in 2021 for Six Key Special Programs under the 14th Five-Year National Key R&D Program,” which included “organ-based malignant tumor disease models” in the 14th Five-Year National Key R&D Program and launched the first batch of key special program projects. Four months later, the Chinese Center for Drug Evaluation (CDE) explicitly incorporated organoids into non-clinical pharmacological studies for gene therapy products in its “Guidelines for the Validation of Gene Therapy and Cell Therapy Products.”

In the industrial sector, companies such as WuXi AppTec, Hengrui Medicine, and BeiGene have increasingly applied organoid technology to new drug development.

Among them, BeiGene, as the sole Chinese pharmaceutical company, became a member of the aforementioned IQ Consortium. In December 2021, it signed a strategic cooperation agreement with ACCURATE BIOTECHNOLOGY, a leading domestic organoid enterprise, to jointly establish a novel organoid-based drug R&D technology platform. Meanwhile, Hengrui Medicine’s Translational Medicine Department has established an in vitro organoid culture technology platform, enabling drug research within simulated human organ and tumor microenvironments.

Furthermore, multinational pharmaceutical companies have also expanded their China innovation center initiatives into organoid-related fields. For instance, in 2020, the Merck China Innovation Center began exploring an innovative “organoid” platform. One of Roche Pharma’s key projects in China involves applying human model systems (organoids and microphysiological systems) to drug development.

“In fact, many domestic pharmaceutical companies are already using organoid experiments to assist in verifying certain physicochemical properties of new drugs, including drug sensitivity and functional tests for model construction,” Dr. Liu Dan told VCBeat. “However, at present, the purpose of these tests is to help pharmaceutical R&D teams improve the efficiency of internal trials, rather than for non-registration applications in new drug clinical trials.”

VCBeat has learned that since the beginning of 2022, domestic organoid companies have seen significant growth in their pharmaceutical business, with a steady increase in both the number of collaborating pharmaceutical companies and delivered projects. “Pharmaceutical companies are well aware that organoid experiments add value to scientific judgment and research validation,” pointed out Dr. Liu Dan. “In the future, an increasing number of pharmaceutical companies may begin to adopt organoid testing as a supplementary experimental approach.”

Of course, there is still a long way to go before organoid testing can be fully rolled out for pharmaceutical companies. “The proportion of organoid experiments in preclinical research remains very small,” said an industry practitioner. Behind this lies not only technological limitations but also institutional constraints.

First, the maturity of organoid technology itself remains limited. The progression from cells to organs requires first constructing a system composed of multiple cell types, followed by the refinement and validation of single-organ functions, and finally interconnecting multiple organs to simulate complete human physiological processes. This process involves intricate technical details, and most commercial organoid companies are still transitioning from the initial stage of cell lines to the second stage of developing single-organ models. As increasingly diverse innovations are applied to organoid experiments, this technology will mature more rapidly. For instance, the integration of organoids with organ-on-a-chip platforms has given rise to organoid-on-a-chip technology, which can be regarded as an upgraded version of organoid technology. This enables the construction of more complex multi-organ physiological and pathological models while ensuring controllability and reproducibility.

Next is the aspect of sample compliance. In practice, the primary source of cell samples is hospitalized patients. Compliance in the process of doctors collecting patient samples can be achieved through informed consent, whereby patients authorize doctors to use their samples as materials for clinical research. However, if the purpose of clinical research shifts from theoretical investigation to commercialization, it may exceed the scope of the patients’ informed consent. In other words, simply applying the sampling methods used in precision medicine scenarios to the context of pharmaceutical services may result in non-compliant sample sources, thereby limiting the further application of organoid experimental data in new drug development. After all, moving from providing auxiliary research conclusions to supporting new drug development, organoid technology also involves compliance issues related to cell line sourcing and culture; only when these requirements are met can organoids be used for preclinical validation.

VCBeat has learned that, in response to sample compliance issues, some organoid companies have begun seeking cell line sources better suited for pharmaceutical services. For instance, in late 2021, Daxiang established a strategic partnership with the Wuhan National Human Genetic Resources Bank, engaging in deep collaboration on co-building an organoid sample bank, developing organoid models, and pursuing commercial applications for global pharmaceutical companies and research institutions.

Third is the aspect of data compliance. This pertains to the value of organoid experimental results for pharmaceutical companies. Undoubtedly, the FDA Modernization Act 2.0 has formally brought organoid experiments into the regulatory framework, which will also drive Chinese regulators to incorporate organoid experimental data into registration and approval processes. Industry practitioners have revealed to VCBeat that Chinese regulators have already begun collaborating with organoid companies to draft relevant regulatory standards.

Admittedly, the regulatory green light has greatly ignited enthusiasm within the industry and among investors; however, for organoid technology—an innovative approach—to achieve widespread application, there is undoubtedly much substantial work to be done and many unknowns yet to be explored.