Vazyme Biotech IPO Valued at $5.3B: A 'Pick-and-Shovel' Play in China’s $100B+ Life Science Market Delivers Nearly 700x Return for Early Investor Danen Capital

“China’s life sciences industry should have its own arsenal, and Vazyme will certainly secure a place in this sector.”

In 2013, Dr. Cao Lin, a graduate of Nanjing University, made the following statement to Vazyme’s first institutional investor, Danen Capital, during the company’s external fundraising round.

At that time, the upstream life sciences market was monopolized by multinational corporations such as Thermo Fisher Scientific, Qiagen, and Takara Bio. All biological reagents in China had to be imported, costing tens of billions of yuan annually, while total expenditures on consumables, instruments, and reagents amounted to hundreds of billions of yuan.

In 2011, Dr. Cao Lin decided to found Vazyme, with the goal, as previously mentioned, of building an “arsenal” for China’s life sciences industry and securing a place for Vazyme within the sector.

A decade later, Vazyme has become one of the few domestic companies with independent and controllable upstream technology development capabilities, with some of its products reaching internationally advanced levels in performance. On November 15, 2021, Vazyme was listed on the STAR Market, with a market capitalization exceeding RMB 34 billion; its closing price on the first day of trading85.35yuan, surging 55.18% on the first day.

As early as 2013, Danen Capital invested in Vazyme, achieving a return of nearly 700-fold on this project.At that time, China’s life sciences industry was still in its infancy, with little capital flowing into the healthcare sector. How was Dan’en Capital able to make accurate early-stage investments in this undeveloped market and remain a partner for a decade through to IPO?

Nanjing Vazyme Biotech Co., Ltd. operates in the biological reagents sector, which plays a “picks-and-shovels” role. Biological reagents primarily consist of upstream basic consumables such as enzymes, recombinant proteins, and antibodies, characterized by high entry barriers, high value-added, and high gross margins.

The functional proteins, including enzymes, antigens, and antibodies, independently developed by Vazyme are among the most fundamental and widely applied products in the biotechnology sector. Their performance directly determines the quality of end-products, serving as the “core” of the life sciences industry.

Based on differences in materials and applications, biological reagents can be categorized into protein-based reagents (recombinant proteins, antibodies, etc.), molecular reagents (nucleic acids, vectors, enzymes, etc.), and cell-based reagents (cell lines, transfection reagents, culture media, etc.). Vazyme’s core products are molecular reagents.

Molecular reagents (considering only biological reagents with enzymes as the main component) are expected to have a market size exceeding RMB 10 billion in 2020. Vazyme’s molecular biological reagents ranked first among domestic manufacturers in terms of market share (4%).

After nearly a decade of technological iteration, Vazyme has established four core underlying technology platforms centered on functional proteins. Leveraging its profound R&D expertise, the company has independently developed more than 200 enzymes and over 1,000 high-performance antibodies, launched more than 500 end products, and introduced over 50 new varieties annually. Its extensive enzyme library meets customers’ personalized and diverse application needs.

After a decade of dedicated cultivation, Vazyme has emerged as a leading player in its niche within China’s life sciences sector. Danen Capital, which initially supported Dr. Cao Lin’s vision, has reaped substantial returns from this investment through its strategy of early-stage investing coupled with long-term partnership.

Ten years ago, Vazyme’s value proposition was not prominent within the industry.

China’s life sciences industry has experienced rapid growth over the past decade. However, an inescapable reality remains: the upstream supply chain of the domestic life sciences industry is heavily reliant on foreign sources, with core products depending on imports. As China’s biopharmaceutical market gradually matures, the explosive growth in demand from downstream application scenarios will inevitably drive robust development in the upstream sector.

The expanding market for domestically produced biologics, coupled with the demand for domestic substitution in the upstream supply chain, has made the upstream biopharmaceutical industry a hot sector in the past two years.

However, this industrial landscape was virtually nonexistent a decade ago. It was against this backdrop that Nanjing Vazyme Biotech Co., Ltd. was founded. At that time, few institutions in China recognized the value of the upstream raw materials sector, and many were hesitant to invest due to the high risks and long cycles characteristic of the life sciences industry.

Dan Capital’s encounter with Vazyme was partly a matter of serendipity, but also benefited from Dan Capital’s early establishment of a cognitive framework for the healthcare industry under a global perspective.

Xin Jifu, Managing Partner at Danen Capital, graduated from Columbia University and joined Danen Capital in 2012. He told VCBeat, “During our industry research, we observed that top-tier U.S. venture capital firms and secondary market investors have placed substantial bets on the life sciences sector, which has also given rise to a significant number of industry leaders. We believe the life sciences field represents a vast blue ocean, and we conducted a systematic review of this track in its early stages. This area aligns with our search for disruptive innovations within a broad market landscape, where we aim to identify born-scientist entrepreneurs.”

Secondly, Danen Capital’s unique investment philosophy—seeking “born scientific entrepreneurs” and investing in disruptive innovations amidst a vast ocean of opportunities—enables it to keenly identify differentiated opportunities.

At that time, although few people understood Vazyme, it closely aligned with Danen Capital’s investment criteria. The company represented disruptive innovation in a vast market, and its founding team consisted of natural-born scientific entrepreneurs.

From the perspective of the track's value, Danen Capital discovered that the upstream life sciences industry is a larger sector than they had imagined, and Nanjing Vazyme Biotech Co., Ltd. has secured a critical position in the industrial chain.

The global life sciences market has given rise to giants such as Thermo Fisher Scientific, Qiagen, and Takara Bio. With Thermo Fisher Scientific’s 2020 revenue reaching $32.218 billion, Danen Capital believes that China’s market will inevitably produce similar industry leaders.

Initially, the Vazyme team, with its roots in scientific research, targeted the life sciences reagent research market. Dr. Cao Lin, who came from a research background, aimed to foster the flourishing of domestic scientific endeavors and empower researchers in China to stand at the forefront of global science.

From a talent-assessment perspective, Dr. Cao Lin’s entrepreneurial traits align well with Danen Capital’s philosophy of seeking “born scientific entrepreneurs.”

What first impressed VCBeat Capital about the founder of Vazyme was his idealism. Xin Jifu, Managing Partner at VCBeat Capital, stated: “Ten years ago, China’s life sciences industry relied almost entirely on imports for reagents, consumables, and instruments—even items as small as Petri dishes were imported. At that time, Dr. Cao Lin recognized that upstream life science consumables were critical to industrial security, and that China must build its own arsenal of life science capabilities.”

Among Vazyme’s founding team, the majority hold PhDs from Nanjing University. After engaging in discussions with Vazyme’s founders, Dan’en Capital’s initial impression was that the entrepreneurs possessed a simple yet steadfast belief in their mission. This idealistic spirit quickly resonated with the Dan’en Capital team.

Beyond his lofty ambitions, Dan Capital saw in Dr. Cao Lin the potential of a scientific entrepreneur. Dan Capital champions the power of scientific management and adheres to a single criterion for investing in entrepreneurs: backing born scientific entrepreneurs. Dan Capital believes that while most scientists cannot become entrepreneurs, excelling as an entrepreneur requires scientific literacy and thinking.

Ling Daihong explained, “First, scientific entrepreneurs need to have a keen sense of social development trends; second, they must have an understanding of people and the ability to attract talent; third, they need to be aware of management and organizational evolution. The fundamental essence of running a business is to treat every task as an opportunity—to train talent, strengthen the organization, optimize processes, and embed culture through these opportunities. Only by achieving these four aspects can it truly be called a business.”

DanEn Capital has identified these qualities in Dr. Cao Lin.

When we first met Dr. Cao Lin, the founding team of Vazyme consisted entirely of Ph.D. holders, each with distinct characteristics. Ling Daihong stated, “The fact that he was able to unite these individuals demonstrates his initial organizational capabilities. Many of these Ph.D. founders still serve as Vice Presidents at Vazyme and are shareholders, reflecting a powerful cohesive force.”

Dr. Cao Lin also possesses a keen sense for business opportunities. Upon deeper investigation, Danen Capital discovered that Dr. Cao came from a family of entrepreneurs; having been immersed in this environment since childhood, his eyes literally lit up when discussing business models.

Dane Capital also acknowledged that, by 2013, there were already highly professional healthcare investors in China who recognized the industrial value of Vazyme. However, given the long development cycles and high risks inherent in the life sciences sector, coupled with the absence at that time of exit channels such as the STAR Market and Chapter 18A of the Hong Kong Stock Exchange, the high barriers to entry and elevated risk profile of the life sciences industry made most institutional investors hesitant to invest or prone to making inaccurate investment decisions.

Danen Capital’s willingness to make bold investments is underpinned by the unique nature of its capital.

Dan En Capital sources 95% of its funds from managing partners and 5% from industrial partners. As the capital is entirely self-owned, Dan En Capital is not required to justify its investments in life sciences enterprises to limited partners (LPs). The combination of self-owned capital and the entrepreneurial DNA of its investment team enables Dan En Capital to provide long-term support and navigate the "valley of death."

Ling Daihong, Founding Partner of Danen Capital, comes from an entrepreneurial background. Prior to establishing Danen Capital, he had already achieved success as an entrepreneur, giving him a deeper understanding of business operations. This entrepreneurial foundation shapes Danen Capital’s approach: it possesses a more nuanced understanding of enterprises, adopts a long-term perspective on business development cycles, and demonstrates greater patience in supporting corporate growth.

Beyond the nature of its capital, Dan En Capital’s DNA enables it to better understand the laws of corporate development and entrepreneurs, and gives it a stronger willingness to accompany companies through the “valley of death.”

DanEn Capital’s summary of industry patterns reveals that, throughout the history of technological development, entrepreneurship has been a process of gradual accumulation. The explosive growth phase of internet technology applications typically lasts only three to five years, creating the impression that unicorns can emerge within such a short timeframe.

Ling Daihong stated, “In fact, companies that succeed after a decade of painstaking effort are extremely fortunate. Most IPO candidates on the A-share market have been established for around 10 to 20 years, with many even older. The STAR Market has accelerated the listing timeline, allowing more companies founded in 2010 to go public.”

The entrepreneurial journey often begins with identifying opportunities, followed by a rapid entry into the “valley of death.” Exiting this valley may take seven to eight years, whereas venture capital funds often reach their exit phase before this period ends, thereby missing the company’s high-growth stage. If capital remains invested for only a short duration, it is highly unlikely to witness the company’s inflection point toward growth. Entrepreneurship is sometimes a highly random process, and we must not underestimate the role of randomness. The only way to overcome luck and randomness is through time; only by continuously exploring within the right strategic direction can the probability of success be increased.

Amid the spiral ascent of corporate development, Dan En Capital believes in the power of continuous evolution.

In DanEn Capital’s investment strategy, the firm has never entered into valuation adjustment mechanism (VAM) agreements. In its investment cases, even when portfolio companies faced operational crises, DanEn Capital did not opt for share repurchases but instead chose to stand by them through their downturns.

The growth of Vazyme also validates the power of evolution that Dan En Capital believes in.

Compared with foreign countries, China's biological research reagent industry started later, but has maintained rapid growth in recent years. The market size grew from 7.2 billion yuan in 2015 to 13.6 billion yuan in 2019, with a compound annual growth rate of 17.1%, which is much higher than that of the global biological research reagent market during the same period. It is expected to reach 26 billion yuan in 2024, with a compound annual growth rate of 13.8% from 2019 to 2024.

Amid this rapidly growing market, Nanjing Vazyme Biotech Co., Ltd., an early entrant, is well-positioned and has begun to enter a phase of rapid growth.

The preparation of biological research reagents is extremely challenging. Since most biological enzymes are proteins synthesized under genetic control, they typically require modification and screening via genetic engineering techniques (with genetic engineering products including plasmids). Consequently, the development of high-end enzymes with superior catalytic efficiency and stability presents even greater difficulties.

In this high-barrier field, Vazyme has broken the foreign monopoly. In the molecular biological reagent market, Vazyme holds a 4.0% market share, ranking fifth overall and first among domestic manufacturers.

In 2020, amid the COVID-19 pandemic, global supply chains underwent restructuring, significantly reducing Chinese enterprises’ reliance on imported raw materials. Nanjing Vazyme Biotech Co., Ltd. became one of the primary domestic suppliers of key raw materials for COVID-19 nucleic acid testing reagents in China.

After seizing the industrial transformation opportunities brought by the COVID-19 pandemic, Vazyme experienced a surge in performance. In 2020, Nanjing Vazyme Biotech Co., Ltd. reported operating revenue of RMB 1.564 billion, with biological reagent revenue growing by 318%, and net profit reaching RMB 820 million.

The entrepreneurial DNA of Danen Capital’s founding team has shaped its investment style, distinguishing it from typical value-extracting investment firms. Danen Capital prioritizes value creation over merely acting as a conduit for capital.

For institutions, the process of value creation begins with value discovery, within which the most challenging aspect is value assessment. What best reflects an institution’s differentiation is how capital participates in the process of corporate value creation.

Xin Jifu stated, “Dawn Capital focuses on how to help entrepreneurs and how to support businesses. Therefore, we have built a large team of mentors and advisors dedicated to post-investment value creation.”

Danen Capital established its post-investment value-add team at an early stage. The firm’s management team includes two entrepreneurs who understand that companies encounter distinct challenges and difficulties at every stage of development, and that entrepreneurial growth requires external expertise and advisory support. Upon identifying issues, capital providers must assist entrepreneurs in resolving these challenges to create value.

In post-investment management, Danen Capital believes that it should not be about "blood transfusion," but rather about empowering entrepreneurs with the ability to generate their own "blood."

There are three post-investment management models in the market. The first is resource-driven, where an investor, such as Company A, brings clients and upstream/downstream resources after making an investment. The second focuses on functional support, such as recruiting senior executives, providing HR services, liaising with headhunters, and assisting with marketing. The third involves capital market assistance, such as facilitating fundraising.

Dan En Capital believes that these three models offer limited assistance to a company’s evolutionary capabilities.

Xin Jifu pointed out: “If an entrepreneur needs your help to find customers and upstream and downstream partners, they lack investment value and the ability to survive independently. Secondly, if an entrepreneur is incapable of building a functional team, they are certainly not a successful entrepreneur. Lastly, there are many professional teams available to assist companies with fundraising; it does not necessarily have to be you who handles it.”

“We believe the real value lies in helping entrepreneurs elevate their cognitive awareness, thereby generating demand, and then providing them with tools—such as consulting projects—for implementation. Examples include assisting portfolio companies in building operational processes, human resources systems, and marketing systems. When strong entrepreneurial DNA is combined with our post-investment support system, the results are reflected in rapid performance growth.”

This post-investment management model has also been validated in the Nanjing Vazyme Biotech Co., Ltd. project.

Dr. Cao Lin told us, “The greatest help Danone provided was to tell us what the most important thing we should do was at that specific time. In 2013 and 2014, when our strategic direction was unclear, Danone guided us on how to formulate strategy and how to focus.”

During the second phase, as the company expanded from dozens to hundreds of employees, we encountered management challenges. At that time, Dan En advised us that it was necessary to bring in professional managers—individuals with clear strategic insight and operational expertise. We made this decision at the appropriate juncture, ensuring that both our sales and R&D departments were led by such competent professionals, thereby establishing a structured and orderly management system.

After we emerged from the “Valley of Death,” Dan provided us with a third directive: to broaden our horizons and expand our strategic perspective. Consequently, he recommended that I attend CEIBS (China Europe International Business School), where I systematically studied business operation methodologies and put them into practice. In particular, through more than two years of guidance and training from experts and professors, I addressed my weaknesses in organizational behavior and finance—areas in which I had previously lacked proficiency.

“After reaching a new level and achieving annual sales exceeding RMB 100 million, we urgently needed to learn from the world’s most outstanding companies. Mr. Ling Daihong recommended that we engage with Huawei’s top experts. We participated extensively in training and practical applications of Huawei’s methodologies, which elevated our management capabilities to yet another level.”

Vazyme’s own evolutionary capabilities have also exceeded DanEn Capital’s expectations.

Vazyme initially built its business by serving scientific research clients. Today, its customer base extends beyond academic and research institutions to include over 700 high-throughput sequencing service providers such as BGI Genomics, Novogene, and Berry Genomics; more than 700 molecular diagnostic reagent manufacturers including Sansure Biotech, AmoyDx, and Hybribio; as well as over 200 pharmaceutical companies and contract research organizations (CROs) such as WuXi AppTec, Jiangsu Hengrui Medicine, and BeiGene.

Ji Xinfu of Danen Capital stated that he still recalls Vazyme’s rapid growth when it first entered the pharmaceutical enterprise market. The life sciences industry imposes stringent requirements on scientific research reagents, necessitating substantial time and cost to validate the reliability of raw materials during supplier selection. Once a partnership is established, it tends to generate high brand stickiness.

As a new player in the market, it is not easy for Vazyme to gain share in the pharmaceutical company market. However, Vazyme has achieved rapid growth. In addition to technical advantages, Vazyme has established a solutions-oriented mindset, which has enabled it to gain recognition from multiple companies within the life sciences industry.

In the life sciences sector, giants such as Thermo Fisher Scientific and Takara Bio operate on a business model that focuses solely on selling standardized products, whereas Vazyme has pioneered service innovations to help downstream customers address their challenges.

Vazyme’s R&D system is also designed and developed with a customer-needs orientation. In its subsequent development, Vazyme has leveraged its core technologies to establish comprehensive technology platforms, including core platforms such as the protein directed evolution and engineering platform, the high-performance antibody discovery platform based on single B cells, and the large-scale multi-system recombinant protein production platform.

Leveraging its technology platform, Vazyme can efficiently, rapidly, and scalably develop products in accordance with customer requirements. Currently, Vazyme possesses over 200 types of genetically engineered recombinant enzymes and more than 1,000 types of key raw materials, including high-performance antigens and monoclonal antibodies, along with a portfolio of over 500 end-user products.

Leveraging its independently established platform for key generic technologies, the company has successively entered the fields of biological reagents and in vitro diagnostics, and is currently engaged in the research and development of antibody drugs.

From the perspective of Danen Capital, going public is far from the peak for Vazyme. The company still possesses significant growth potential, and this is just the beginning.

In the biological reagents sector, multinational corporations continue to dominate the majority of the Chinese market. Nanjing Vazyme Biotech Co., Ltd. is steadily expanding its market share, with substantial room for further growth.

From the perspective of overall solutions, although Nanjing Vazyme Biotech Co., Ltd. (Vazyme) has developed thousands of products, its product portfolio in biological reagents still has significant room for expansion compared to Thermo Fisher Scientific’s 450,000 products and Danaher’s over 300,000 products. Meanwhile, there are also substantial market opportunities awaiting exploration in areas such as consumables and instruments.

The international market is also a key potential market for Vazyme’s strategic expansion. The company has already established an international marketing network, and it is believed that Vazyme will secure a competitive position in the future global marketplace.

There are also tools such as synthetic biology, technology platforms, and a series of downstream applications in regenerative medicine, industry, food, agriculture, environmental engineering, etc., which are potential markets with great room for imagination.

Accompanying Vazyme on its journey to IPO, Dan En Capital participated in several of the company’s key strategic decisions. Throughout the enterprise’s development, Dan En Capital has consistently assumed the role of co-pilot, with the entrepreneur always remaining the primary driver. The firm’s function is to alert entrepreneurs to the most significant potential pitfalls at the most critical junctures.

Dr. Cao Lin of Vazyme stated, “Dannen is not only our investor but, more importantly, our friend. They have consistently assisted us in making critical decisions at the moments we needed it most, helped us seize the most important opportunities when it mattered most, and provided us with tailored support precisely when we needed it most!”

Healthcare has been a core investment theme for Danen Capital, although the landscape of medical investments today has changed dramatically compared to a decade ago. Danen Capital remains confident in the vitality of China’s domestic healthcare industry and believes that future growth in the Chinese healthcare market will be driven by three key areas.

Xin Jifu stated, “The first opportunity lies in globally original innovation, moving beyond the logic of import substitution, which I believe is the direction for the future. The second opportunity is globalization. Given the limited payment capacity of China’s national medical insurance fund, the market will always remain a zero-sum game focused on existing stock. If companies focus solely on the Chinese market, they can easily become trapped in a cycle of product innovation, volume ramp-up, and subsequent inclusion in centralized procurement. The only viable path is internationalization to tap into global markets. The third point is to fill the gaps; there are still structural opportunities in niche segments where China’s healthcare system has shortcomings. Meanwhile, the development and understanding of the entire healthcare industry are becoming more rational, and mergers and acquisitions in the future healthcare sector will become more frequent.”