Legend Capital, Sequoia, and WuXi AppTec Move Into Southeast Asia — Are Medical VCs Circling for the Hunt?

Expanding into Southeast Asia is undoubtedly the hottest topic in the medical venture capital and investment community this year.

At nearly every medical innovation event, savvy organizers include sessions analyzing investment opportunities in Southeast Asia, sparking enthusiastic discussions. Looking around, participants recognize that these neighboring small countries can indeed offer solutions to many of the current challenges facing medical innovation. Meanwhile, the impressive performance of Southeast Asian tech unicorns in the capital markets has further underscored the vitality of this emerging market.

However, the healthcare industry is inherently unique. What does genuine medical innovation in Southeast Asia truly look like? Have these incremental demands created high-return investment opportunities for healthcare venture capital? We seek answers from practitioners.

VCBeat interviews reveal that although the number of healthcare innovators expanding into Southeast Asia is growing significantly, most are merely testing the waters, with overseas expansion into the region still in a very early stage of business model exploration.

At present, the main forces of medical innovation expanding into Southeast Asia can be broadly categorized into several major groups.

Among them, the team providing services to pharmaceutical companies in Southeast Asia—commonly referred to as cross-border CROs—was the first to sense the change.Under the pressure of the COVID-19 pandemic and the intense competition among innovative pharmaceutical companies to develop drugs targeting popular therapeutic targets, Chinese pharmaceutical firms have increasingly turned to overseas clinical trials as a strategy to achieve rapid advancement. Their primary destinations include Europe and the United States, which have higher regulatory barriers, as well as Southeast Asia, which offers broader market access.

Prior to 2020, Kangantu, a Chinese cross-border healthcare provider, had been offering consumer-facing (C-end) services in Southeast Asia. Starting in 2021, the company increased its investment in business-to-business (B-end) operations. That year, Kangantu assisted SteadyMed, a Chinese innovative pharmaceutical company, in submitting the application for clinical trials of its COVID-19 mRNA vaccine in Laos, thereby opening up new opportunities.

Over the following year, Kangantu successively received requests for CRO services from domestic pharmaceutical companies, primarily to facilitate regulatory approval and implementation for clinical trials in Southeast Asia. “Revenue growth has been rapid over the past year,” Yang Chen, founder of Kangantu, told VCBeat. To accommodate this incremental business, the company has also established GMP, GCP, and GLP-compliant facilities, as well as a non-human primate breeding base, in Laos. “Currently, there are few CRO companies in Southeast Asia with comprehensive qualifications.”

However, for Chinese pharmaceutical companies, expanding into Southeast Asia is merely an urgent experiment rather than a strategic shift; they are largely leveraging local teams to conduct superficial regulatory filings.

After serving Stermune, Kangantu helped another domestic innovative vaccine manufacturer secure ethical approval for clinical trials in Laos. However, the company abandoned its plans in Laos after initiating clinical trials in other Southeast Asian countries ahead of schedule. Later, due to setbacks in those trials, it reconsidered the opportunity in Laos. “Nevertheless, through our assistance, Luye Pharma’s subsidiary Pano obtained approvals for a series of clinical trials on COVID-19 pseudovirus particle vaccines, with Phase I trials nearing completion,” Yang Chen told VCBeat. In addition, companies such as Chongqing Medrad, Kanghua Biological, Sinopharm CNBG, and Ascletis Pharma are collaborating with Kangantu to explore and advance clinical trials for innovative drugs and new indications for existing medications.

“The objective for innovative pharmaceutical companies proactively expanding into Southeast Asia is very clear: to conduct more registration clinical trials,” said Yang Chen. He noted that their technology is highly novel, and product development requires competing with numerous peers on efficiency. If they were to dive headfirst into the domestic R&D “red ocean,” it would be difficult to achieve tangible results in the short term. “The Southeast Asian market offers new possibilities, but everyone is still in the exploratory phase.”

It is understood that, in addition to start-up teams such as Kangantu, Tigermed has also begun to lay out its presence in the Southeast Asian market.

The second category of teams expanding into Southeast Asia are those whose inherent technological DNA includes a demand to serve the global market.In China, providing pharmaceutical companies with clinical services and products based on cutting-edge technologies has once become a hot track for life science venture capital, giving rise to a large number of medical innovation enterprises. These enterprises have high market entry barriers, and it is difficult to support the rapid development of their business solely by relying on domestic market orders. Therefore, they have an endogenous motivation to go global.

In early 2022, Singleron, a leading Chinese single-cell sequencing company, acquired Proteona, a Singapore-based single-cell CRO firm, accelerating its business expansion in Southeast Asia and promoting the application of its independently developed products in projects with international pharmaceutical companies. Prior to this, starting in 2021, Singleron had been expanding overseas by establishing its own teams to conduct business in more than ten European countries, proactively embracing the global market.

Fang Nan, founder of Singleron, told VCBeat that in the process of trying to understand pharmaceutical companies’ needs, she found that Singapore is becoming a hub for multinational pharmaceutical companies’ clinical research and trials.

Typically, multinational pharmaceutical companies developing new drugs for the global market conduct clinical research and registration trials across multiple centers worldwide, generating patient samples from various locations. These samples often need to be consolidated at the central laboratory of a Contract Research Organization (CRO) for processing. In Singapore, relatively flexible regulations governing the import and export of biological specimens, coupled with a mature and efficient logistics system, create favorable conditions for multinational pharmaceutical companies to choose Singapore as the destination for their patient sample submissions.

Fang Nan admitted that the decision to acquire this Singaporean team was somewhat serendipitous. Both companies operate in the field of single-cell sequencing, and their founders are well acquainted with each other. The acquired company primarily provides outsourcing services based on single-cell sequencing technology to pharmaceutical enterprises, which complements Singleron’s single-cell products to a certain extent. Although domestic customers still account for the majority, Singleron has been able to collaborate with global Top 10 multinational pharmaceutical companies through its presence in Singapore. “Our products are intended to serve the global market,” Fang Nan emphasized.

In the process of expanding market boundaries, Fang Nan actually prefers the approach of building her own team. “Singleron will not deliberately pursue growth through acquisitions,” she emphasized. The Singapore team itself also has a global background, with founding members hailing from multiple countries, including Singapore, the United States, and Germany.

Prior to the acquisition, Proteona had not established specialized division of labor; its primary commercial assets consisted of its laboratory and bioinformatics team, along with the founder’s collaborative resources within the pharmaceutical industry. It lacked a mature marketing and sales team. “I have analyzed numerous M&A cases, and acquisitions driven solely by the desire to acquire a marketing and sales team offer limited value.” Each company has its own distinct culture and operational approach. Before finalizing the acquisition of the Singapore-based company, Singleron faced competition from European CRO firms. Singleron’s success in securing the deal was largely attributable to both parties’ shared understanding and vision regarding the role of single-cell sequencing in drug development.

Discussing the demand for single-cell sequencing across the Southeast Asian market, Fang Nan stated that although it is still difficult to estimate the demand for commercial single-cell sequencing services in other Southeast Asian countries at this stage, “we still hope to use Singapore as a foothold to reach the entire Southeast Asian and Australian markets.”

The third category of teams expanding into Southeast Asia consists of cross-border trade agencies that help domestic medical innovation enterprises capitalize on market time lags.

New Energy Way (NEW) is an organization engaged in the overseas expansion of China’s new energy and healthcare sectors. Chen Xinyi, a partner at NEW, told VCBeat that compared to currently hot sectors such as new energy vehicles and lithium batteries, the healthcare industry is more retail-oriented and offers better potential for rapid market entry in Southeast Asia. “Chinese companies such as Airdoc, Hisun Animal Health, and Zhengli are entering the Southeast Asian market through distributor channels,” Chen stated. NEW serves as the licensed distributor for these brands in Thailand. “There are various agency models, including exclusive or non-exclusive distribution rights and OEM partnerships.”

Currently, medical products entering Southeast Asia through agency channels mainly fall into two categories: those filling clinical gaps in the region, such as vaccines, and innovative products meeting the rising demand for upgraded healthcare consumption among Southeast Asian patients, such as AI-based fundus imaging and clear aligner orthodontics.

Chen Xinyi told VCBeat that the former approach easily garners support from local resources during implementation, but domestic products often lack competitive advantages in the market. Previously, Chen Xinyi’s team devoted significant effort to establishing an animal vaccine manufacturing facility in Southeast Asia. The rationale at the time was that there were no localized animal vaccine manufacturers in Southeast Asia, and the team intended to leverage resources within the region’s health regulatory systems to capture this market. They spent considerable time screening technical teams in China. However, just before production was set to begin, they discovered that multinational pharmaceutical companies such as Pfizer had driven down the costs of their animal vaccines in Southeast Asia to very low levels, creating substantial market barriers and making short-term cost recovery difficult. This led the team to hesitate and adopt a wait-and-see stance.

The latter faces higher upfront promotional risks. In traditional product selection, Southeast Asian consumers tend to favor Japanese and American brands, while placing greater emphasis on cost-effectiveness for domestic Chinese brands. For emerging products, however, they show a preference for high-value Chinese brands. Nevertheless, not all domestic brands are willing to expand overseas. “It is mainly the second-tier brands that are relatively active,” said Chen Xinyi. “If the founding team has an international mindset, they are more willing to explore the Southeast Asian market at this juncture; otherwise, they may hesitate, as this segment requires personnel familiar with overseas regulations and market operations to manage.”

In Chen Xinyi’s view, the present moment is not the optimal time for financial investors to establish a presence in Southeast Asia. “Competitive medical products from China also require local overseas teams to handle FDA applications abroad and lay the groundwork for localized market channels,” Chen Xinyi pointed out. “Without a team to execute sales implementation, it is difficult to build brand influence and generate market data.”

It is undeniable that the medical innovation ecosystem in Southeast Asia has undergone significant changes.

First, major innovative pharmaceutical companies from both China and abroad are increasingly establishing a presence in Singapore, which is bound to spur a wave of innovation and investment. In fact, as one of the early “Four Asian Tigers,” Singapore has long been the preferred headquarters location for multinational corporations entering the Asian market, although biotechnology firms have been slightly slower to follow compared to traditional manufacturing and the new internet-based economy.

Since last year, global mRNA vaccine giants such as BioNTech and Moderna have successively invested in Singapore. Among them, Moderna has chosen Singapore as its first foothold for entering the Asian market, with subsequent plans to establish subsidiaries in Malaysia, China’s Taiwan region, and China’s Hong Kong Special Administrative Region. BioNTech, meanwhile, has clearly defined the role of its Singapore headquarters as serving global supply needs and responding to epidemics in Southeast Asia. In addition, GenScript launched the construction of an automated protein and gene preparation service facility in Singapore in February, while Sanofi broke ground in April on its first Asian vaccine production center in Singapore, aiming to meet future epidemic-related demands in the Asian market. At present, Singapore has effectively become a hotbed for global healthcare industry investment. This small nation, with a population of only a few million, is evidently serving as a strategic bridgehead for these companies to reach the entire Southeast Asian region.

Next are the most keenly perceptive venture capitalists, who are showing surging enthusiasm for innovation investments in Southeast Asia.

Over the past year, Grab, the Southeast Asian counterpart to Didi, and GoTo, Indonesia’s equivalent of Taobao, have successively completed their initial public offerings (IPOs), with debut market capitalizations reaching $34.5 billion and $28 billion, respectively. Behind these successes, a host of venture capital firms—including Sequoia Capital, Hillhouse Capital, SoftBank, and CDH Investments—have reaped substantial returns from their investments in Southeast Asia, accelerating their search for new investment targets. For instance, Sequoia Capital and SoftBank jointly participated in the $100 million Series C financing round of Biofourmis, a Singapore-based digital therapeutics company. Meanwhile, Temasek Holdings invested in the $80 million Series C funding round of Halodoc, an Indonesian internet healthcare platform. Prior to Temasek’s investment, WuXi AppTec, China’s leading contract research organization (CRO), had also injected capital into the company.

From the perspectives of funding, talent, and the current state of healthcare, many Southeast Asian countries closely resemble China’s situation over a decade ago; the influx of assets and capital is ultimately driven by the hope of replicating that past success.

Even so, few domestic investment institutions have actually invested in innovative healthcare projects in Southeast Asia. According to incomplete statistics from VCBeat, since 2019, there have been no more than 10 deals involving Chinese investors in healthcare financing and investment activities in Southeast Asia, with the majority concentrated in Singapore, a country with a highly developed economy. One exception is Legend Capital’s joint investment with Innovent Biologics in Etana, an Indonesian pharmaceutical company, which marked the first time that Chinese monoclonal antibody drugs were brought to European and American markets.

The underlying reason is that, at the current stage, the Southeast Asian market is primarily characterized by Chinese medical product suppliers and brand manufacturers racing to capture market share, while venture capital opportunities lie in the business model transformations driven by the localization of products and technologies.

“For domestic medical brands, relying solely on investment makes it difficult to capture key Southeast Asian markets such as Thailand and the Philippines,” an investor analyzed in an interview with VCBeat. “This process inevitably involves secondary product development.” In his view, directly establishing overseas product development teams entails long investment cycles and high risks; therefore, most companies choose to complete early-stage product commercialization by bringing in angel investors and localized technical teams outside their domestic entities.

For Chinese projects expanding overseas, the most critical factors are local support teams and distribution channels. Building these from scratch may lead to poor adaptation due to cultural barriers; therefore, investing in existing platforms is preferable. To incentivize the founding team to drive progress, equity incentives can be employed. Furthermore, if the platform underperforms, it can be rapidly divested.

In this sense, Southeast Asia’s healthcare venture capital sector has yet to encounter the right tailwind. Only when the transfer of China’s domestic medical innovation capabilities to Southeast Asia gradually achieves scale—enabling capital forces, Chinese technologies and products, and local professional teams to interact frequently and jointly establish new platforms for local implementation—can a sufficiently large commercial market and abundant investment opportunities emerge.

“Southeast Asia closely resembles the situation in China 10 to 20 years ago, where foreign investors often established joint-venture manufacturing facilities and then expanded market share through a series of capital operations; the underlying logic is identical,” said the investor. “However, the challenge in the Southeast Asian market lies in the fact that the healthcare innovation market size of any single country is limited. It is essential to develop an innovative business model capable of efficiently covering the entire Southeast Asian region, which requires concerted efforts from many stakeholders.”

Admittedly, the current period is not the optimal window for medical venture capital to target Southeast Asia; however, it represents a critical opportunity for domestic medical innovation enterprises to expand their market boundaries and enhance brand influence. How to convert this opportunity into tangible dividends will undoubtedly require more innovative attempts.