Balancing Science and Capital: Dongfang Lue's Six-Year Journey as an Industry-Investor-Founded Biotech

How Can a Domestic Innovative Pharmaceutical Company Build and Advance Its Drug Pipeline? Previously, There Were Two Common Models.

Five or six years ago, most domestic pharmaceutical companies typically opted for the license-in model., by partnering with European and American pharmaceutical companies, advanced therapies and innovative drugs can be rapidly introduced into the Chinese market. However, companies pursuing license-in strategies typically adopt an aggressive approach, requiring robust cash flow and a well-established core team to swiftly advance products into clinical development and commercialization. Clearly, most early-stage biotech startups lack such strong financial resources and comprehensive teams. On the other hand, in recent years, many companies opted for the license-in model to achieve rapid growth, driving up acquisition costs. For many of these firms, the cost of acquiring licensed drugs has often far exceeded projected future revenues, making this strategy unsustainable for long-term development.

In the past year or two, many domestic pharmaceutical companies have proposed "source innovation."However, genuine source innovation requires scientists to spend decades achieving groundbreaking breakthroughs at the level of basic research (such as discovering entirely new targets or mechanisms) and translating these findings into products. This often demands the efforts of one or even several generations. Furthermore, it is highly challenging to engage research-focused experts in founding companies, making the path of source innovation truly arduous.

The founders of ApolloBio Corporation (hereinafter referred to as “ApolloBio”) have reached a consensus: corporate development is neither a purely scientific issue nor a purely capital-driven one; rather, a balance between the two is essential.

ApolloBio Corporation is an innovative pharmaceutical company founded in 2016, jointly established by pharmaceutical industry investors including Orient High Saint, Morningside Venture Capital, Tigermed, Jincheng Pharmaceutical, and Dezhan Health. At that time, it was still rare for investors to directly engage in entrepreneurship within China’s innovative drug sector. As an innovative pharmaceutical enterprise initiated by industrial investors, how has ApolloBio balanced science and capital over the past six years of development? What unique path has it carved out?

Prior to founding ApolloBio Corporation, Qiu Sinian served as Chairman of Orient High Saint Capital, managing a fund portfolio worth RMB 7 billion, and spearheaded the largest domestic pharmaceutical merger and acquisition transaction in China in 2015. Qiu Sinian is also hailed as one of the most representative post-1980s investors in China’s biopharmaceutical sector.

More than a decade ago, Orient Alpha had established a presence across various industries, participating in mergers, acquisitions, and investments in sectors such as automotive parts, mining, real estate, and TMT. By chance, in 2010, Orient Alpha engaged with its first pharmaceutical client, Guizhou Xinbang Pharmaceutical, assisting it in acquiring a Jiangsu-based pharmaceutical enterprise.

During the acquisition process, Oriental Gaosheng conducted research on the pharmaceutical industry. The research revealed that,Compared with strongly cyclical industries such as automobiles, mining, and real estate, the pharmaceutical industry is a weakly cyclical sunrise industry.

Qiu Sinian believes that “although healthcare reforms have had a significant impact in recent years, the pharmaceutical industry has continued to grow rapidly. Moreover, the pharmaceutical sector is highly fragmented. Ten years ago, China already had more than 5,000 pharmaceutical companies, a number far exceeding that of other industries, with listed and unlisted enterprises each accounting for half of the market, making M&A transactions very active.”

Therefore, Oriental Gaosheng began its transformation in 2012, focusing on investment and M&A restructuring in the pharmaceutical industry. At that time, domestic pharmaceutical companies were primarily engaged in traditional Chinese medicine and generic drugs, with few enterprises involved in the research and development of innovative drugs.

Around 2015, following the issuance of the pivotal “Document No. 44” in the history of China’s innovative drug sector, numerous innovative pharmaceutical companies began to emerge domestically.

In 2016, ApolloBio Corporation was established in response to emerging industry trends. During its early stages, the company observed that most domestic enterprises were engaged in “incremental innovation,” with the primary frontier of pharmaceutical innovation still located in Europe and the United States. Furthermore, innovative drugs listed abroad typically required 8 to 10 years to enter the Chinese market. Therefore, in its initial phase, ApolloBio primarily focused on license-in activities, dedicated to rapidly introducing first-in-class drugs from overseas into China, thereby achieving simultaneous market launches of innovative therapies both domestically and internationally.

Although ApolloBio Corporation initially focused on license-in deals, the widespread adoption of this model by most companies for rapid expansion has inevitably driven up licensing costs.

“At the outset, when we engaged in license-in deals, both the upfront payments and milestone payments were within acceptable ranges,” Qiu Sinian remarked.“However, the cost of introducing innovative drugs for some companies has already exceeded future revenues. This is not a sustainable path for the development of an innovative pharmaceutical enterprise.”

In the wake of homogenization and intensified competition in the license-in model, ApolloBio Corporation promptly opted for a strategic transformation:Retain the early-stage licensed-in projects with proven revenue potential, and rapidly establish an independent R&D platform by leveraging the technical expertise and experience gained from advancing these prior projects.This strategic combination enables ApolloBio Corporation, as a startup pharmaceutical company, to rapidly bring its first-in-class drug to market while gradually establishing its own technological barriers for long-term development.

ApolloBio Corporation has always believed that corporate development is neither a purely scientific issue nor a purely capital-related one; a balance between the two is essential.Trust among team members is crucial in balancing the two.

“In areas where I lack expertise, I can only choose to trust my partners. Likewise, I believe that the cross-pollination of diverse professional and educational backgrounds will lead to more comprehensive corporate development,” Qiu Sinian told VCBeat New Medicine.

Earlier this year, Dr. Li Shu, a long-time friend of Qiu Sinian, joined ApolloBio Corporation as its CEO. As a leading talent in Hainan Province’s healthcare industry, Dr. Li previously served as the principal investigator for multiple major national projects.“Over the past two decades, I have worked at state-owned enterprises, co-founded startups with scientists, and am now embarking on entrepreneurial ventures alongside investors. These three distinct experiences have given me a deeper understanding of establishing a pharmaceutical company,” said Dr. Li Shu.

This is another way in which ApolloBio differs from most pharmaceutical companies. The company was not founded solely by scientists or purely by entrepreneurs, but rather by industrial investors and scientists with comprehensive experience working together. This team background has brought three advantages to the development of ApolloBio.

First,Compared with enterprises directly founded by scientists in the early stages, while scientists may have profound expertise in a specific niche or technology, they are often confined to their specialized research areas and lack holistic oversight of corporate and market operations. Leveraging the founders’ prior experience in mergers and acquisitions and investment within the pharmaceutical sector, ApolloBio Corporation possesses comprehensive insights into both domestic and international pharmaceutical markets, as well as diverse subsectors and technologies.Provides a broad horizon for the development of startups.

Secondly,Leveraging the founding team’s extensive prior experience in mergers and acquisitions and investment, ApolloBio Corporation demonstrates greater precision in its capital management.In the early stages, some enterprises founded by scientists lacked relevant experience in managing capital, and there were certain domain barriers in communication between capital providers and scientists, leading to difficulties in early-stage financing for many start-up pharmaceutical companies. Qiu Sinian revealed, “Since our establishment, we have never experienced any financing constraints, and the company has always maintained close communication with investors.”

Finally, when faced with many tasks that cannot be rapidly advanced due to professional barriers, ApolloBio Corporation can often smoothly drive progress by quickly integrating resources.Since its establishment,During its fundraising process, ApolloBio Corporation has shown a preference for strategic industrial investors over purely financial investors.To date, ApolloBio Corporation has garnered recognition from strategic investors including Orient Fortune Capital, Morningside Venture Capital, Tigermed, Jincheng Pharmaceutical, and Dezhan Health, securing cumulative financing of over RMB 800 million.

“We approach partnerships from the perspective of the entire pharmaceutical industry value chain, seeking collaborators who can address our weaknesses at each stage. For instance, Tigermed, a leading domestic CRO, can provide us with valuable resources during the preclinical and clinical phases; Jincheng Pharmaceutical, with its expertise in API intermediates, can offer us invaluable experience; and Dezhan Health can share its successful commercialization strategies,” introduced Qiu Sinian.

With the perspective of industrial investors, ApolloBio Corporation has chosen to position itself in the field of nucleic acid therapeutics among the many niche sectors of the pharmaceutical industry.

According to Li Shu, in its early years, ApolloBio Corporation leveraged global resources to explore many advanced areas of biomedicine, including cell and gene therapy.

Why Choose to Enter the Nucleic Acid Drug Market?Because nucleic acid drugs are a typical representative of the third generation of pharmaceutical technology. During the COVID-19 pandemic, the performance of nucleic acid drugs was impressive. As nucleic acid drugs themselves serve as a storage medium, designers can incorporate the most advanced immunological or pharmaceutical knowledge into the nucleic acid drug sequences during the development phase. Furthermore, in the production process, nucleic acid drugs exhibit robust manufacturing processes. Once a process platform is established, subsequent sequence changes have minimal impact on the process, enabling rapid large-scale production and ensuring stable and safe supply.

In fact, nucleic acids, as a novel class of therapeutics, have been under development for 30 years. Over these three decades, scientists worldwide have made successive efforts and never abandoned the exploration of DNA-based therapeutics. It was not until 2021 that a COVID-19 vaccine was launched in India, marking the world’s first approved DNA vaccine for human use.

“Why persist in exploration? Because DNA, as the repository of protein sequence information, allows us to freely incorporate numerous desired antigenic elements through genetic engineering techniques. Why have breakthroughs only emerged in the past 30 years? I would argue that this is not so much a breakthrough as a natural explosion,” said Li Shu. “In the past, the primary challenge in developing nucleic acid therapeutics lay not in the nucleic acids themselves, but in the development of delivery systems. The advancement of delivery systems lagged behind that of nucleic acid drugs. In recent years, with breakthroughs in delivery systems, nucleic acid therapeutics have naturally entered their moment in the spotlight.”

With keen insights into the industry, ApolloBio Corporation strategically entered the nucleic acid therapeutics sector several years ago.

Its core product, ABC-3100, is designed to treat cervical precancerous lesions caused by HPV16/18 infection. Currently, all HPV vaccines available on the market are prophylactic; they neither clear persistent HPV infections nor facilitate the regression of established lesions.

For cervical precancerous lesions, there are currently no therapeutic drugs available globally; treatment is generally performed via surgery, which has significant side effects.ABC-3100 is a therapeutic HPV vaccine that functions by inducing E6/E7-targeted, specific antiviral cellular immunity against HPV oncoproteins.Compared with surgical resection, ABC-3100 not only completely eliminates the virus and induces regression of lesional tissue, but also preserves the integrity of the female cervix, holding promise to become the first-line treatment option for women of childbearing age in the future.

ABC-3100 is currently undergoing Phase III clinical trials in China and is expected to receive marketing approval in approximately two years.Once approved, ABC-3100 will be the world’s first therapeutic DNA vaccine and the first drug globally to treat various precancerous lesions caused by human papillomavirus (HPV) infection, including cervical, anal, and vulvar intraepithelial neoplasia.

“Through forward-looking strategic planning, we introduced the ABC-3100 project into China for clinical development. Meanwhile, we are striving to achieve localized production of this nucleic acid drug. This represents a development trajectory opposite to that of most domestic nucleic acid pharmaceutical companies,” explained Li Shu. He noted that while most Chinese pharmaceutical companies start from early-stage drug development, progressively advancing technology and moving toward commercialization, ApolloBio Corporation rapidly introduces and optimizes cutting-edge technologies while simultaneously preparing for localized production.

In addition to nucleic acid therapeutics, ApolloBio Corporation is also simultaneously developing antibody-based drugs.

Li Shu believes that the biggest difference between ApolloBio and other biotech companies is that, after the company was established, investors selected projects rather than building an innovative pipeline based on a scientist’s specific technology platform. “Therefore, we are not constrained by any technology platform; once we identify a promising project, we move quickly to secure it.”

Recently, ApolloBio Corporation launched the antibody drug project ABC-5100 targeting the novel coronavirus.SARS-CoV-2 primarily infects and spreads through the respiratory tract. Establishing antiviral immunity in the respiratory mucosa can not only prevent viral infection but also rapidly reduce viral load and transmission risk after infection. Therefore, inducing rapid, broad-spectrum immunity in the respiratory tract via nasal spray or nebulized inhalation is a widely applicable strategy for ending the COVID-19 pandemic. This approach has become a scientific consensus, although its technical implementation remains challenging.

ABC-5100 is a novel broad-spectrum antibody drug jointly developed by ApolloBio Corporation and the Institute of Microbiology, Chinese Academy of Sciences. Unlike traditional IgG antibody drugs, ABC-5100 adopts an IgM format and is administered via nasal spray or nebulized inhalation, with intended uses for the prevention of SARS-CoV-2 infection and early-stage treatment. Early studies have demonstrated that ABC-5100 exhibits potent antiviral activity against multiple SARS-CoV-2 variants (including various Omicron subvariants) and possesses favorable thermal stability. Currently, ABC-5100 is undergoing preclinical development, which is progressing smoothly.

These two core projects effectively represent the two technological platforms that ApolloBio Corporation is currently prioritizing for development. In the coming years, ApolloBio will implement a dual-strategy layout encompassing both technological platforms and drug pipelines, centered on nucleic acid therapeutics and antibody-based drugs.

Li Shu summarized, “In recent years, China has significantly increased its investment in basic scientific research compared to the past, and we have seen many domestic scientists achieve world-leading results. However, the path to translating these achievements into pharmaceutical products remains long.”“In the advancement of innovative drugs, I believe that it requires not only the efforts of scientists but also the participation of a group of investors with experience and in-depth understanding of the industry to jointly accelerate the translation of innovative drugs.”