Undervalued Biomedical Sector Poised for Growth Amid Breakthroughs in Basic Research

As technology advances, some ideas once deemed pure fantasy are becoming within reach, including gene-editing technologies capable of altering human genetic traits. Feng Zhang, a leading biologist at MIT, was the first to achieve genome editing in mammalian cells using CRISPR gene-editing technology. He founded Editas Medicine in 2013, and the company went public three years later, with its current market capitalization approaching $2 billion.

“As breakthroughs in basic medical technologies emerge, a wave of companies centered on their applications will gradually arise, all possessing investment potential,” said Shen Jieyong, Co-Founder of Crossover Hub.

This China-US cross-border incubator focuses on the biomedical and environmental sectors, with a scientific advisory team composed of professors from Harvard, UC Berkeley, and Zhejiang University. Through long-term exchanges with these experts who have made outstanding contributions in their respective fields, Shen Jieyong and his partner Chen Jie recognized that significant opportunities exist in the biomedical sector following certain breakthroughs in basic research.

Biomedical healthcare is a high-potential market characterized by a robust compound annual growth rate (CAGR). Statistics indicate that the global market size for this industry is projected to rise from $202 billion in 2016 to approximately $326 billion in 2022, representing a CAGR of 8.3%, while the growth rate in China is expected to reach around 20%.

In 2017, biopharmaceutical companies represented by Hengrui Medicine were repriced by the market, sending a clear signal that this sector is likely to offer the greatest investment opportunities over the next decade. It is inevitable that several companies with market capitalizations in the billions, or even tens of billions, will emerge both domestically and internationally. This is also the primary reason why Crossover Hub focuses on the healthcare sector.

Another aspect is the technological breakthrough.

In addition to the gene-editing technologies mentioned above, new disease treatment modalities that have emerged over the past decade—such as immunotherapies like CAR-T and PD-1 inhibitors, as well as the development of targeted drugs—have further advanced, presenting opportunities for emerging healthcare companies. Companies such as Kite Pharma, Juno Therapeutics, and CARMA Therapeutics are notable newcomers in the CAR-T therapy space. In January of this year, five Chinese companies simultaneously received approval to initiate clinical trials for their CAR-T therapies.

Moreover, Shen Jieyong believes that compared to hot fields such as AI and blockchain, the biomedical sector is undervalued in terms of both industry and companies.

This is largely due to the nature of the investment industry itself. He noted that while most funds typically require a return horizon of around 5–7 years, biopharmaceutical companies need a longer growth period, leading many funds to avoid investing in such projects.

“It can take five to eight years for a novel drug to progress from development to clinical trials, a timeframe that exceeds the typical lifecycle of most investment funds. Moreover, since the drug remains in the clinical stage and has not yet been commercialized, investors are often reluctant to commit capital.”

For example, Conmana, a lung cancer targeted drug independently developed in China, took more than ten years from the start of its research and development to final approval.

More specifically, Shen Jieyong and Crossover Hub are optimistic about fields that demonstrate precision and personalized medicine in diagnosis and treatment.

Shen Jieyong stated that current medical efficiency remains relatively low, as treatment protocols are developed based on statistical analyses of large population samples. Certain therapies may only be effective for a subset of patients; however, due to the current inability to predict individual responses in advance, patients can only determine efficacy after undergoing treatment. This not only consumes additional time and effort but also delays the optimal window for intervention.

“But in the future, with the growth of data and advancements in development, our understanding of individual variability will continue to expand, and diagnosis and treatment will undoubtedly emphasize individual differences.”

When precision medicine is mentioned, many people think of genetic testing. However, genetic testing is only a small component of precision medicine, which is now gradually extending toward the therapeutic end—for example, from tumor genetic testing to biomarker-driven new drug development—thereby progressively forming a comprehensive precision medicine ecosystem. Interest in this field has been rising year by year. In 2016 alone, among nearly 300 healthcare companies in China that received investment, close to 200 were involved in precision medicine, with several securing financing amounts approaching RMB 100 million.

Targeted therapy, a hallmark of precision medicine, is a treatment approach that inhibits tumor growth and spread by using drugs to interfere with specific molecules required for tumor proliferation and differentiation. It represents one of the primary directions in the development of anticancer drugs. Crossover Hub is preparing to invest in Sublime Therapeutics, a company dedicated to developing targeted cancer therapies. Leveraging its proprietary SBL-101—a novel first-in-class monoclonal antibody targeting gastrin—Sublime Therapeutics provides targeted treatment options for gastrointestinal and pancreatic cancers.

In addition to pharmaceuticals, medical materials have also entered the era of personalization. A company that exemplifies this trend is ZSFAB, a 3D bone printing firm invested in by Crossover Hub.

He stated that currently, there are only a few standard sizes available for artificial joint implants, including artificial knee joints. However, some patients may not fit these standard models, necessitating bone resection to accommodate the existing medical solutions rather than providing customized treatment based on individual conditions. In contrast, ZSFAB can 3D-print a titanium alloy knee implant that closely matches the patient’s original bone structure and shape. This approach not only extends the service life of the implant but also enhances patient comfort.

As a co-founder of a cross-border incubator, Shen Jieyong has also conducted in-depth research into the differences and characteristics of the biomedicine sectors in China and the United States.

Shen Jieyong

Regarding the differences between the two, he noted that projects in China are still predominantly focused on medical devices and instruments, as companies in this sector have clear business models and shorter investment return cycles. In contrast, the United States sees a greater number of companies emerging from breakthroughs in basic research; while these companies have longer growth cycles, they are more likely to establish their own competitive moats.

There is no doubt that demand for innovative healthcare solutions, along with the corresponding market capacity, is growing in both China and the United States. Therefore, Shen Jieyong stated that Crossover Hub aims to leverage the strengths of both sides by utilizing China’s cost and market advantages to serve more innovative healthcare companies. Since its establishment, this Silicon Valley-based cross-border incubator has provided entrepreneurs with one-stop services ranging from laboratory access, legal and financial support, dual-currency (RMB and USD) investment, to cross-border implementation, in addition to offering office space and funding. Within just one year, its affiliated fund invested in more than ten projects and helped them establish operations in China or identify partner institutions.

One of Crossover Hub’s limited partners (LPs) is a Chinese publicly listed company, and several Hangzhou-based publicly listed companies in the environmental and healthcare sectors have also become official partners of Crossover Hub.

“GenScript, a domestic biomedical company, is a typical example of Sino-U.S. collaboration; by partnering with the U.S. pharmaceutical giant Janssen, it reduced the cost of CAR-T immunotherapy from $470,000 to RMB 350,000.”

Although this model may not be fully replicable, Sino-U.S. cooperation undoubtedly still holds immense potential, and both Shen Jieyong and Chen Jie remain firmly optimistic about the biomedical sector.

“A company developing new drugs may take a decade from its inception to product commercialization, by which time it has become an ‘old unicorn.’ Yet successful companies can achieve much greater scale; for instance, becoming a company like Hengrui Medicine, with a market capitalization of tens of billions of yuan, is not an unrealistic expectation.”