Lilly Asia Ventures' Biopharma Investment Perspective: Insights from 40 Portfolio Companies
Editor’s Note: This article is republished from IT Juzi, authored by Hilda. VCBeat has been authorized to republish it.
Just as with numerous technology-driven companies, innovation is paramount for leading multinational pharmaceutical enterprises.
Therefore, multinational pharmaceutical companies often invest heavily in drug R&D. As the efficiency of drug discovery declines and return on investment diminishes, these large pharmaceutical firms are increasingly prioritizing external investments as a more asset-light strategy to enhance their competitiveness. Companies such as Pfizer and Eli Lilly have established corporate venture capital arms to invest in promising biopharmaceutical and healthcare technology innovation firms.
Pharmaceutical giant Eli Lilly established Lilly Asia Ventures (LAV) in 2007 to invest in life sciences companies in Asia, particularly in China, with the aim of enhancing its influence in this strategically vital market.
Over the past decade, the rapid development of emerging markets has heightened public demand for healthcare. Emerging markets, represented by China, have increasingly become a key revenue driver for pharmaceutical companies. Alongside growing economic strength, scientific research capabilities have also improved, giving rise to a cohort of competitive life sciences enterprises in China.
Chen Fei, Managing Partner at Lilly Asia Ventures, once noted in a presentation that biopharmaceutical innovation has become a major development strategy in China, garnering increasing attention. Meanwhile, applications for Class 1.1 innovative drugs in China have been growing rapidly, presenting significant opportunities for Eli Lilly in the Chinese market.
According to statistics from the IT Juzi database, Lilly Asia Ventures has made 40 investments in domestic startups since its establishment. Due to the nature of its parent company, Eli Lilly and Company, Lilly Asia Ventures’ investments in China are concentrated in the biotechnology and pharmaceutical sectors, which account for approximately 92% of its total investments.
Eli Lilly Asia Fund’s Domestic Investment Projects
These projects are 83% concentrated in Series A to C rounds, with Series A and B accounting for a very high proportion at 41% and 33%, respectively. According to the official statement from Lilly Asia Ventures (LAV), LAV primarily invests in companies in the R&D and growth stages.
As is well known, drug development is characterized by high risks and substantial capital requirements, with early-stage investment risks far exceeding those in other sectors. Consequently, although angel investing and early-stage investments are gaining momentum in China, accompanied by the emergence of many reputable investment firms, there remain relatively few investors willing to commit capital to early-stage pharmaceutical companies.
Lilly Asia Ventures has demonstrated the boldness to make substantial investments in early- and early-stage biotechnology and pharmaceutical companies. This confidence stems, on one hand, from its strong management team, whose members all hold degrees in medicine, pharmacy, or economics from top-tier universities both in China and abroad, with dual degrees being quite common. Furthermore, these professionals bring years of experience from leading international consulting firms, investment banks, and major pharmaceutical companies, establishing them as true industry experts.
On the other hand, LAV has its own investment logic for pharmaceutical projects:
Threshold:Disruptive with high technical barriers.
Target:Target validation has provided sufficient evidence of efficacy against a specific disease; drugs with similar targets have entered late-stage clinical trials or been marketed abroad, demonstrating the target’s validity; and there are clear patent boundaries relative to overseas counterparts.
Data:The drug’s structure, preclinical studies, and clinical trial data meet the standards of comparable foreign pharmaceuticals.
Team:The team has conducted similar drug development work.
Team composition is a key focus in biopharmaceutical investment. Today, having founders with backgrounds from multinational pharmaceutical companies has become standard for portfolio companies, and LAV’s investments are no exception. Another interesting phenomenon is that investors at LAV, many of whom come from the pharmaceutical industry, often possess a strong commitment to healing patients and saving lives. As a result, these investors also establish biotechnology and pharmaceutical enterprises, which receive substantial support from LAV in terms of capital and resources.
Two individuals are particularly representative. The first is Dr. Ji Xiaohui, Venture Partner at Lilly Asia Ventures, who, together with co-founder and Chief Scientific Officer Dr. Lu Hongtao, jointly founded Ascentage Pharma in 2017 with renowned global antibody researcher Dr. Shen Wenyan.
Dr. Ji Xiaohui (Source: LAV Official Website)
KeWang Medicine primarily focuses on the field of tumor immunology, differing from other companies that concentrate on innate immunity, by directing its attention to "cold tumors," which currently exhibit very low response rates and remain difficult to treat.
Because the efficacy of current cancer immunotherapies depends on a responsive tumor microenvironment. For instance, the effectiveness of PD-1/PD-L1 inhibitors relies on high expression of PD-L1 by tumor cells and the presence of abundant PD-1-expressing tumor-infiltrating lymphocytes within the tumor microenvironment. However, only a subset of patients exhibits both characteristics, meaning that many other patients may not benefit from this type of immunotherapy.
Dr. Ji Xiaohui hopes to help more patients through this company. Kewang Medicine was internally incubated by Eli Lilly, and the Lilly Asia Ventures followed up with an A+ round investment in December 2018.
Additionally, Dr. Zhao Yining, an investment partner at Lilly Asia Ventures, is also someone who “can’t stay idle.”
Dr. Zhao Yining (Source: EZBiotech Official Website)
Yizhen Bio is a genetic testing service company founded in Boston, USA, in 2014 by Dr. Zhao Yining, Professor George Church (a pioneer in gene technology), American entrepreneur Mirza Cifric, and key members of the Harvard Personal Genome Project. The company has obtained certifications as a third-party medical laboratory in China, as well as CAP and CLIA accreditations in the United States, establishing itself as a benchmark enterprise in the field of clinical- and research-grade genetic testing.
In addition to providing genetic testing services to both consumers (C-end) and businesses (B-end), Yizhen Biotech has integrated its operations with YiAn JiShi, a pharmaceutical company co-founded by Dr. Zhao Yining in 2014, to support new drug development and strategically position itself in the field of companion diagnostics.
LAV led a $100 million investment in E-True Biotech during its Series A round and followed up with additional investments in its Series B. Moreover, LAV has supported all four financing rounds completed by Yi An Ji Shi since its inception.
In January 2019, Yi’an Jishi and Mabwell Biosciences announced their merger to establish Transcenta Holding (Transcenta). Founded in 2013, Mabwell Biosciences focused on the research and development of antibody-based therapeutics for cancer and other diseases. Prior to the merger, Mabwell Biosciences had built a robust product pipeline comprising innovative first-to-market biosimilars or rapidly improved antibody candidates, with more than ten drug candidates under investigation in the fields of oncology, ophthalmology, and nephrology.
Mabwell Bioscience also has the backing of LAV, which served as the Series A and Series B investor for Mabwell. Given the complementarity between YiAn JiShi and Mabwell in their R&D pipelines and operational locations, it is believed that LAV, as a common shareholder, played a significant role in this merger.
In addition, BeiGene and Yifang Biopharma, both portfolio companies of LAV, also initiated in-depth collaboration on innovative drug R&D at the end of 2018. Under this arrangement, BeiGene acquired the Chinese rights (including mainland China, Hong Kong, and Taiwan) to the D-0316 project and holds exclusive rights to develop and commercialize the D-0316 product within the agreed territory.
Beyond integration, the parent company, Eli Lilly and Company, also provided substantial support to its portfolio companies. Innovent Biologics, which won the 2018 “Asia-Pacific IPO of the Year” and the annual “Best Equity Offering in Hong Kong” awards, formed a strategic alliance with Eli Lilly and Company for the joint development of potential oncology therapeutics, while LAV participated in its Series B, C, and E financing rounds.
As an investment arm under the pharmaceutical giant Eli Lilly, LAV holds a distinct advantage in post-investment services compared to other investment firms.
Research and Development:Leverage the R&D capabilities of its parent company, Eli Lilly and Company, to assist portfolio companies in upgrading their R&D capabilities and product pipelines.
Quality Control:Leveraging Eli Lilly’s years of R&D experience to enhance the production quality and regulatory approval efficiency of portfolio companies.
Marketization:Lilly boasts a mature sales system and distribution channels, which can help portfolio companies rapidly penetrate the market.
Collaboration:Portfolio companies will become partners of Eli Lilly and Company, which can help them rapidly increase in value.
In fact, Eli Lilly and Company, the parent company of LAV, has not had an especially smooth ride in recent years.
In recent years, two major negative developments involving Eli Lilly have dominated discussions within the pharmaceutical community. First, the Phase III clinical trial of solanezumab, a drug for mild Alzheimer’s disease, failed. Second, as part of corporate strategy and organizational restructuring, Eli Lilly’s China R&D Center in Zhangjiang, Shanghai, was shut down.
However, for Eli Lilly, innovation is an urgent priority. Once ranked among the top 10 global pharmaceutical companies, Eli Lilly has fallen out of the top ten after missing the initial wave of tumor immunotherapy. Therefore, although its R&D center was shut down, other innovative collaborations are thriving. In March 2018, the Eli Lilly China Innovation Partnership (LCIP) was established in Shanghai, with tumor immunology and diabetes serving as Eli Lilly’s key focus areas in China.
From the perspective of the core businesses of LAV’s portfolio companies, nearly all pharmaceutical firms are involved in oncology immunotherapy. In January 2019, Eli Lilly announced it would acquire Loxo Oncology, a NASDAQ-listed biopharmaceutical company, for approximately $8 billion in cash. This transaction marked Eli Lilly’s largest deal to date in its efforts to expand its cancer treatment portfolio. It is evident that after missing the first wave of the oncology immunotherapy boom, Eli Lilly is actively expanding its product pipeline through an asset-light investment model.
Chimeric Antigen Receptor T-cell Immunotherapy (CAR-T), which has recently gained significant attention, is also a key focus for Eli Lilly.
In February 2019, LAV invested in Gracell Biotechnologies, a CAR-T developer. Given the current limitations of CAR-T therapies—including high costs, lengthy manufacturing cycles, limited indications, and high relapse rates—there is significant potential for future advancements in areas such as co-stimulatory domain engineering, solid tumor treatment, and universal CAR-T (UCAR-T) technologies.
Therefore, we believe that LAV and Eli Lilly will intensify their search for projects related to tumor immunity and cellular immunity.