Liu Wenyi of Xingze Capital: Contrarian Investment Approach and Long-Term Confidence in the Spiral Growth of Biopharma

“Now is when money is most ‘expensive,’ and assets are relatively ‘cheap.’” This is how Liu Wenyi, founder of Apricot Capital, summarized the current state of medical investment in China.

In 2022, “anxiety” once again became a keyword in China’s healthcare investment sector. In April, the *Briefing on Data of China’s Equity Investment Market in Q1 2022*, released by Zero2IPO Research Center, already revealed a downturn in the industry. The briefing indicated that in the first quarter of 2022, influenced by the international situation, the pace of IPOs for Chinese enterprises both domestically and overseas slowed down. Exit-related anxiety further transmitted to the investment and fundraising ends, with the number of equity investment deals and the total investment amount in China’s equity investment market decreasing by 27.5% and 47.1%, respectively, year-on-year.

However, VCBeat noted that Apricot Capital continued to invest in multiple companies consecutively, despite the lockdown in Shanghai due to the pandemic and the downturn in healthcare investments. Xuanyu Medical completed a RMB 100 million Series A financing round; Gewu Zhihe secured nearly RMB 100 million in its Series A round; and Weiguang Gene closed a near-RMB 100 million angel round... Apricot Capital was involved in all these financing announcements made in June.

Apricot Capital’s current portfolio comprises over 50 companies, with total assets under management nearing RMB 5 billion. How does Apricot Capital navigate market cycles to capture investment opportunities during challenging times? What criteria does it use to select biomedical targets? Recently, VCBeat held a dialogue with Liu Wenyi, Founder of Apricot Capital.

“There is a Jewish proverb: Difficult tasks are easy to accomplish, because the road is not congested.”

During periods of market exuberance, a “sprinkling pepper” investment style—characterized by scattered, small-scale allocations—may still be viable, with herd behavior in deal sourcing becoming particularly pronounced.

Since the first half of 2021, the industry has experienced significant volatility and entered a downturn cycle, with many listed biopharmaceutical companies seeing their stock prices fall by more than 70%. The decline in the secondary market spilled over into the primary market, leading to the so-called investment slump from 2021 to the first half of 2022.

Moreover, factors such as the withdrawal of foreign investment, pressure from centralized procurement policies, and the recurring waves of the pandemic have all exacerbated investment uncertainty. In particular, since March 2022, Shanghai’s pandemic-related lockdowns left the city in a closed-off state for more than two months. “The pharmaceutical industry indeed felt attacked from both front and rear,” said Liu Wenyi.

Since 2022, investment institutions have been extremely cautious, with most adopting a wait-and-see approach. Every “bullet” in their arsenal is now cherished, and capital deployment decisions are made with greater prudence. “During the lockdown period, investors in Shanghai generally focused on conducting thorough research and exercising caution in their investments. Even for star projects whose allocation quotas were once fiercely contested, investors now carefully assess their remaining financial resources before committing.”

The difference is,Apricot Capital’s investment pace has not been significantly disrupted by external adverse factors, making it one of the few institutions that continue to maintain robust investment activity in the market. This resilience is underpinned by the investment rationality that Apricot Capital has consistently upheld.

Liu Wenyi completed his undergraduate and graduate studies in economics. Driven by a strong conviction in the healthcare sector, he chose to pursue a Ph.D. in Public Health at Johns Hopkins University. This interdisciplinary background in economics and healthcare has endowed Liu with keen insights into medical investments, leading him to embark on a career in secondary market investments focused on the broader health industry.

Liu Wenyi believes, “From the perspective of socioeconomic development, more people need to devote themselves to frontline endeavors to create value. Meanwhile, with favorable policies for the biopharmaceutical industry frequently introduced in 2014, the founding team held a highly optimistic view of the development opportunities in this sector.” Therefore, by combining his own capabilities with the opportunities of the times, Liu Wenyi shifted from secondary market investments to primary market equity investment and founded Apricot Capital, aiming to support the growth of early-stage life science entrepreneurs.

Since its inception, Apricot Capital has been ingrained with a unique philosophy: uphold integrity in character and pursue excellence in practice. Apricot places great emphasis on two forms of “specialization”—professional expertise and focused dedication. As the saying goes, “Guarding few things ensures stability; concentrating effort yields strength.” With this clear conviction flowing through its veins, the Apricot team has accompanied numerous enterprises at the forefront of China’s life sciences innovation through many seasons of hardship and triumph. The road ahead is long, but they remain steadfast on their journey.

China’s biopharmaceutical industry has been in existence for only about a decade. The sector began to gain significant momentum following the introduction of Chapter 18A of the Hong Kong Stock Exchange’s listing rules in 2018, meaning just four years have passed since then. As such, innovative biopharmaceuticals remain a very young track. “From the perspective of healthy industry development, it is not necessarily a bad thing for a nascent sector to experience a downturn,” said Liu Wenyi.

“Industry downturns can be viewed as periods of differentiation, which actually facilitate the elimination of bubbles and the separation of falsehood from truth. High-potential sectors, resilient teams, and valuable enterprises will further emerge to the forefront."Investors can also approach certain projects with greater composure, advancing steadily in accordance with their own investment frameworks."

During the lockdown, Liu Wenyi and the Shanghai team relied primarily on online communication, with their days filled with conference calls. “This period allowed us to address many tasks that we had previously lacked the time to handle. It also gave us more opportunity to listen carefully during meetings and to reflect deeply on Apricot Capital’s past successes and shortcomings, as well as its future strategy and layout.”

From 2022 to the present, Apricot Capital has invested in a total of five projects, including Qihe Life Sciences, MicroLight Genomics, Gewu Zhihe, Xuanyu Medical, and Angtuo Biotech.Most are typical projects incubated in the early stages by Apricot Capital,Incubation-style investment is a hallmark of Apricot Capital.

Among them, Qihe Biotech and MicroLight Genomics are scientist-incubated ventures, with their founders being top-tier scientists in their respective fields. Apricot Capital has provided them with industrial teams as key operational support. In contrast, Angtuo Bio is an industry-incubated company; its founding team possesses extensive experience and resources in the industry, while Apricot Capital provides ecosystem empowerment in capital operations. Additionally, Gewu Zhihe and Xuanyu Medical are portfolio companies invested by Apricot Capital.

Furthermore, during the lockdown period, Apricot Capital systematically assisted multiple portfolio companies in preparing for their next rounds of financing and delivering post-investment services. Being the optimal partner for entrepreneurs has always been the mission of Apricot Capital.

“In general, Apricot Capital is not swayed by short-term fluctuations. As long as a project aligns with the direction of long-term development, we will invest regardless of whether the current market conditions are favorable or unfavorable,” summarized Liu Wenyi. Underlying this approach is a restrained yet strong desire not to miss out on promising opportunities. The firm has selectively forgone numerous temptations, recognizing that in an economic winter, it is especially crucial to cherish available resources and eliminate any obsessive greed.

Amidst an industry downturn and pandemic-related lockdowns, Apricot Capital’s confidence in making frequent investments stems from its unique investment logic.

Reviewing Apricot Capital’s investment history reveals that contrarian thinking is one of its core investment principles. In 2018, when the healthcare investment market was booming, Apricot Capital made virtually no new investments throughout the year. In 2019, as the market cooled down, the firm instead invested in 11 projects.

Liu Wenyi summarizes Apricot Capital’s investment logic as“Upholding Value Investment”。

First, focus on core directions rather than chasing trends,Apricot Capital focuses on investing in early- to mid-stage technology-driven enterprises. Such companies are relatively insulated from macroeconomic fluctuations, and the investment rationale does not shift abruptly in response to short-term changes in the broader environment. Apricot Capital remains committed to its selected sectors and portfolio companies, maintaining continuous monitoring and engagement.Next, closely monitor industry trends and changes.All members of the Apricot Capital team are professionally trained, enabling them to conduct in-depth, long-term research into industry sub-sectors and emerging technologies. Their comprehensive understanding of the entire industry chain allows them to identify high-quality investment targets.

In selecting investment targets, Liu Wenyi summarizes his approach using three criteria:Large Addressable Market, Hard Tech, Strong Team.

The scale of a sector depends on whether it offers sufficient room for imagination and can truly address significant unmet clinical needs. From 2011 to 2018, Apricot CapitalThe investment thesis for innovative drugs is the localization of major overseas products (targets).“When analyzing the prospects of a company’s core products or a specific therapeutic target, we consider not only the competitiveness of the target itself but also that of other targets addressing the same indications, thereby assessing its market potential. Therefore, major therapeutic areas are either dominated by broad-spectrum, high-profile targets or by superior targets that significantly outperform alternatives.” Focusing on the development of targets such as PD-1, BTK, and EGFR, Apricot Capital has invested in companies including Junshi Biosciences and Akeso.

From 2019, expected to continue until 2024. The investment logic of Apricot Capital during this phase isLocalization of Overseas-Validated Technology Platforms in China.These include next-generation ADC technology, small nucleic acids, gene therapy, gene editing, and enzyme degradation platforms. Apricot Capital has accordingly invested in Yilian Biologics (ADC); Bowang Pharma and Sanrise (small nucleic acids); Tianze Yuntai and NikeGen (gene therapy); Qihe Bioscience and Weiguang Gene (gene editing), among others.

The development of the medical device sector typically lags behind that of innovative drugs by 5 to 10 years.Apricot Capital believes that the first wave of investment opportunities in China’s medical device industry began in 2016 and ended in 2021, primarily focusing on high-value consumables for cardiovascular and neurointerventional procedures. Apricot Capital was the first institutional investor in MicroPort CardioFlow and MicroPort EP MedTech, as well as an early-stage investor in companies such as Shenqi Medical and Jiushi Shenkang. However, the early-stage investment opportunities in the first wave of passive high-value consumables have come to an end.

Furthermore, while markets are cyclical, hard technology is not. Apricot Capital is committed to identifying hard-tech innovations capable of transcending market cycles two to three years ahead of the curve, particularly as economic growth slows and projects characterized by weak or pseudo-innovation are eliminated first.

Finally, when it comes to investment targets, a strong team is rare and hard to come by. “The composition of early-stage project teams cannot be comprehensive in every aspect; we place greater emphasis on the team’s resilience and sense of conviction. For instance, during the Shanghai lockdown, the founder of Ucardi remained stationed at the company throughout the period, and recently announced the Phase I clinical trial data for their immune cell therapy.”

Driven by the philosophy of value investing,Apricot Capital has invested in more than 50 high-growth companies,Including Junshi Biosciences, Akeso, China Antibody, RemeGen, and HeartTone Medical, Apricot Capital continuously received updates on new progress from its portfolio companies even during the pandemic lockdowns, further underscoring the power of value investing.

Liu Wenyi believes that the biopharmaceutical industry is technology-driven and counter-cyclical. Its future development will inevitably follow a spiral upward trajectory, with all difficulties being merely transitional; every trough signals the approach of the next peak. The current challenges are temporary. Only by focusing on the long-term value created for society can one remain true to the original aspiration and adhere to the principles of value investment.

Recently, Shanghai has been gradually resuming work and production, emerging from the shadow of the pandemic. Although it has not yet returned to the fully fluid state seen before the lockdowns, conditions are warming up. Meanwhile, valuations of companies in the secondary market are also rebounding. While the number of transactions in the primary market remains relatively low, activity is rising rapidly. Liu Wenyi and his team have become increasingly busy, meeting frequently with founders.

“Attempting to time the ‘bottom’ and ‘top’ is the most irrational approach; what matters most is returning to fundamentals and assessing whether a company holds intrinsic value.”"We are not considering how to survive the winter, but how to bloom in the next spring."

Next, the watershed moment for the biopharmaceutical industry will arrive more rapidly, with leading enterprises accelerating their growth and reaching new heights, while laggards will be gradually phased out. As outstanding companies continue to emerge, a major wave of resource consolidation in China’s biopharmaceutical industry will unfold within the next 5–10 years. Meanwhile, investors’ professionalism will further improve, making herd-following investment strategies obsolete.

Looking ahead, Apricot Capital will focus on every high-quality project in its portfolio, striving to be the optimal startup partner. By leveraging capital to integrate industrial resources within the life sciences sector, the firm aims to promote industry development. Liu Wenyi revealed that key areas of focus will include innovative target platform technologies, high-end life science instruments, autoimmune diseases, and degenerative diseases. In the field of oncology, attention will be directed toward more cutting-edge technological trends such as epigenetics, gene editing, and DNA damage response.

The development of the life sciences industry is a long and arduous journey. The path less traveled is never crowded. Capital, like a living spring from its source, nourishes the fertile ground of scientific research. Apricot Capital has accompanied, is accompanying, and will continue to accompany scientists and this industry as we move forward together...