Chinese Healthcare Investment Guru Dr. Zhi Yang Warns: Biopharma Is the Riskiest Investment Field

He is the founding founder of Incyte, the world’s second-largest gene sequencing company (with a Nasdaq market capitalization of $14 billion); together with Stanford professor Irving Weissman, known as the “father of stem cells,” he established SyStemix, the first and most successful stem cell therapy company in human history; he was the first Harvard biomedical Ph.D. from China after the founding of the People’s Republic, studying under Nobel laureate Professor Walter Gilbert; he is a highly respected healthcare investor on Wall Street, who provided $20 million in funding to Bob Horvitz’s hepatitis C drug company when it was on the verge of a cash-flow crisis, and in that same year, Horvitz won the Nobel Prize in Physiology or Medicine for this drug; he serves as Chairman and lead investor of CITIC Pharmaceutical, a classic case study in Chinese healthcare investment; he is Dr. Yang Zhi, Founding Partner of BVCF and a godfather figure in Chinese healthcare investment, stem cell research, and precision medicine.



The Berkshire Hathaway Annual Shareholders Meeting is an annual global feast for investors, often referred to as the “Woodstock of Capitalism.” The 51st annual shareholders meeting was held in Omaha on April 30. Dr. Yang Zhi, as an invited speaker, delivered a keynote address on trends in healthcare investment at the China-US Investment Forum. VCBeat conducted an exclusive on-site interview with Dr. Yang Zhi. Below is the transcript of the interview:

VCBeat: What was your original motivation for returning to China? Given your remarkable success in scientific research, why did you choose to transition into investment after your research career?

Dr. Yang Zhi:After graduating from Harvard, I engaged in pure scientific research for only three years, serving as an Assistant Professor at Rockefeller University. Subsequently, introduced by David Baltimore, President of Rockefeller University and a Nobel Laureate, I co-founded SyStemix—the world’s first and, to date, most successful stem cell therapy company—alongside Stanford University Professor Irving Weissman, known as the “father of stem cells,” and other scientists. SyStemix was later acquired by Novartis Pharmaceuticals for $1 billion and became one of its key research divisions.
In the mid-1990s, as a founding scientist, I established Incyte (Note by VCBeat: a Nasdaq-listed company with a market capitalization of $14 billion), which became a unicorn in the U.S. pharmaceutical industry and the world’s second-largest human genomics company.

After consecutively founding four companies and selling them, my close friend, the then-outgoing CEO of BioGen, the world’s largest biopharmaceutical company at the time, invited me to join him in replicating BioGen’s model by entering the Chinese market and establishing SinoGen. It was through the fundraising for this project that I began frequent interactions with investment firms and gradually ventured into the investment sector. In 2000, I formally founded BioVeda Fund in Silicon Valley, focusing on venture capital in the healthcare and life sciences sectors. After entering the investment field, I discovered that in the pastA company’s technological and managerial expertise can be seamlessly transmitted to multiple companies through capital channels.For example, we provided critical financial support to a company founded by Bob Horvitz and restructured the incentive model for its R&D team, enabling the successful development of a hepatitis C drug based on the mechanism of apoptosis. In the same year, he was awarded the Nobel Prize. As a result, the BioVeda Fund earned acclaim from Wall Street, becoming the most active and best-performing life sciences venture capital fund on Wall Street at that time. In 2005, I returned to Shanghai to establish the BioVeda China Fund (BVCF), the world’s first U.S. dollar-denominated fund dedicated exclusively to investing in China’s pharmaceutical and healthcare sector. To date, we have been focusing on healthcare investments in Asia for nearly two decades. Over the past ten-plus years, we have received continuous capital support from some of the world’s most prestigious medical research institutions and leading financial organizations, including Novartis, Eli Lilly, Johnson & Johnson, the Mayo Clinic, and NEA.

VCBeat: What do you think is lacking in China's domestic healthcare industry? What challenges does it still face?

Dr. Yang Zhi: Authentic, high-quality source innovation is the scarcest resource in China’s entire healthcare entrepreneurship ecosystem., this scarcity is fundamentally rooted in the pursuit of immediate value—such as short-term profits and corporate market capitalization—by Chinese investors and capital markets. Currently, source innovation in medical technology remains concentrated in the United States, particularly in California and the Boston area, with Stanford and Harvard serving as key hubs. We observe that many young American entrepreneurs possess the fortitude to endure isolation; they are diligently and persistently conducting research in artificial intelligence, stem cell therapy, cloud computing, and genomic big data. In contrast, the majority of Chinese medical startups still rely on incremental innovation, hype-driven concepts, and platform-building, hoping to exploit opportunities and identify profit breakthroughs amidst commercial chaos.

Much like the disparity in vision between Google and Baidu, many Chinese startups remain stuck in two-dimensional internet business model innovations. However, we are witnessing genuine medical innovation evolving into three-dimensional innovation centered on big data. Americans refer to medical data as the oil of the future. This technological convergence of biotechnology, big data, and artificial intelligence will launch a devastating “dimensionality-reduction” attack against companies reliant on two-dimensional internet model innovations. The direction pursued by healthcare startups reflects the nation’s developmental trajectory and future. The bottlenecks faced by healthcare startups are also the critical developmental constraints that China’s broader economic landscape urgently needs to resolve.

Artery Network: The precision medicine industry is booming both domestically and internationally. How do you evaluate this market?

Dr. Yang Zhi:Regardless of whether in the East or the West, misdiagnosis rates within modern healthcare systems remain exceedingly high. In China, this figure is estimated to exceed 40%. Misdiagnoses result in significant resource waste for both patients and insurance payers, as well as delays in disease treatment. High misdiagnosis rates are not unique to China’s healthcare system; rather, they stem primarily from the imperfections of the diagnostic tools and data relied upon by mainstream contemporary diagnostic and therapeutic frameworks, which provide limited information for making accurate diagnoses. The mission of precision medicine is to eliminate these high misdiagnosis rates, ultimately realizing the ideal future of a “pay-for-performance” healthcare system.
We are now in a great era of tremendous transformation in medical technology. With the development of large-scale biological sample databases (such as human genome sequences), other powerful medical technologies (proteomics, metabolomics, genomics, cell testing, and mobile healthcare wearable devices), computational tools, and big data, the era of precision medicine is rapidly approaching us at an exponential rate of development.

However, precision medicine faces a challenge: its personalized nature creates high barriers to commercialization. Nevertheless, we believe that the era of precision medicine has arrived, with the relevant technologies ready for deployment. At present, precision medicine remains a privilege for the wealthy, marking an era of growing inequality in the face of death. Affluent individuals who can afford the costs may save their lives from terminal illnesses through novel therapies, and as the technological singularity eventually approaches, humanity may even achieve immortality. Of course, the high cost of precision medicine does not prevent innovative companies in this field from generating substantial profits, which aligns with the laws of economic value. However, I am confident that, propelled by rapid technological advancements, the door to precision medicine will open exponentially wider to ordinary consumers, ultimately becoming an integral part of inclusive healthcare.
Of course, the widespread adoption of precision medicine still needs to address the challenge of talent. Even in the United States, genetics remains a relatively new field; physicians who graduated more than a decade ago may have had limited exposure to it. For clinicians, integrating genetics into medical practice represents a new learning curve. Given the complexity of genetics and the vast volume of data involved, doctors are required to continuously update their knowledge of advancements in the field—a task that is difficult to achieve. However, we have recently observed a promising trend: the concurrent emergence of breakthrough biotechnologies, the big data era, and the age of artificial intelligence is highly likely to fundamentally alleviate the talent bottleneck.

Artery Network: Have you invested in any projects in the field of precision medicine?

Dr. Yang Zhi:We established an early presence in the field of precision medicine. Currently, the startup landscape in this sector in China resembles an antiques market, where one can easily misjudge and purchase counterfeits. Ninety-nine percent of these companies are leveraging outdated foreign patented technologies, repackaging them through technical integration or even mere conceptual aggregation into new companies and platforms.We are extremely cautious and rigorous in selecting companies; portfolio companies must possess genuine, high-quality technological barriers.Of course, this is attributable to our investor team’s strong scientific backgrounds and extensive professional networks.

We have strategically positioned ourselves in cutting-edge fields such as molecular diagnostics, CAR-T therapy, PDX-based molecular immunotherapy, medical big data, and genetic big data. Some of these projects originate from the United States, while others are from China. We maintain exceptionally high standards for evaluating the quality of technologies and teams. We are confident that the precision medicine companies in our investment portfolio will soon emerge as highly sought-after industry leaders.

VCBeat: The biopharmaceutical sector requires substantial capital investment, a high level of professional expertise, and involves long development cycles, thereby inevitably entailing significant risks. How do you view this?

Dr. Yang Zhi:As a sunrise industry with a strong reputation, the biopharmaceutical sector has attracted numerous professional and semi-professional investment firms amid an economic downturn. However, I must offer a reality check. This sector is rife with pitfalls and plagued by impostors more than any other segment of healthcare investment.There is a "black box" and significant uncertainty between investment input and output in biopharmaceutical companies.

The same applies to innovative medical devices. Although the time-to-market cycle is short, competition becomes intense once they enter the market. Moreover, given the relatively narrow and limited market segments for medical devices compared to pharmaceuticals, it is difficult to achieve high profit margins, and the total addressable market is not as large. This explains why investors typically prioritize biopharmaceutical investments, followed by medical devices. Compared with pharmaceutical investment, the barrier to entry in the healthcare services sector is lower; as soon as a business model proves profitable, it quickly attracts a cluster of companies and capital. The result of such intense competition is that profitability becomes challenging for all players. Consequently, identifying healthcare service targets with reasonable valuations for investment has become increasingly difficult.

We have a clear view of the current landscape of medical investment. After nearly two decades of refinement in China’s healthcare investment sector, we have experienced the full investment cycle within this field. The lessons learned from failed cases—and indeed, the scars we bear—have taught us even more: specifically, how to navigate the pitfalls across various stages of pharmaceutical investment, including R&D, manufacturing, distribution, and policy compliance.Biopharmaceutical investment ultimately relies on a team of experts with industrial, medical, and biological science backgrounds, as well as experience in corporate operations within China’s policy environment. It is not a field where one or two PhDs in biology or medicine can quickly assume key roles.

We have observed that investment in this field has been highly active over the past one to two years; however, it is important to bear in mind a fundamental truth.: Projects are not in short supply, but truly good, profitable projects remain a scarce resource.Few are willing to discuss failures or recount their “defeat at Maicheng.” However, we believe that most investors in this field are currently in a phase of accumulating experience and learning costly lessons. In three to five years, after weathering the current wave of intense competition, the biopharmaceutical investors who remain will have become truly rational and will recognize the critical importance of scientific and industrial expertise in such investment decisions.

VCBeat: Currently, many investment firms are also focusing their attention on the biomedical sector. Compared to them, what are our advantages? What is our position in the industry?

Dr. Yang Zhi: Our greatest advantage lies in nearly two decades of hands-on experience in China’s investment sector, with the lessons learned from failures being particularly invaluable.I not only participated in the founding of several core biotechnology companies during the previous wave of the biotech boom in the United States, but also witnessed the trajectory of SinoGen from its peak to decline after returning to China. Subsequently, I served as Chairman of CITIC Pharmaceutical, where I facilitated the restructuring and reform of this state-owned pharmaceutical enterprise, ultimately leading it to profitability. These experiences are inaccessible to investors who have not navigated such industry cycles.

Our fund fromDNAAt its core, it is a team of entrepreneurs with scientific backgrounds., rather than generalist funds with a banking background. This is why, over the past decade-plus, our fund has been the only healthcare fund in China to receive investment from multiple specialized pharmaceutical companies, medical research institutions, and top-tier international financial institutions.



About the Berkshire Hathaway Annual Meeting

Warren Buffett Annual MeetingSince its inception in 1956, when only a few dozen shareholders attended, the event has evolved. Rather than a mere corporate annual meeting, it is more accurately described as a grand celebration for America’s investment elite. According to an article by Ms. Schroeder, Warren Buffett’s biographer, shareholder attendance remained in the low thousands through the 1980s. By the mid-to-late 1990s, particularly fueled by the 30-year bull market in U.S. stocks, a surge of new shareholders began attending, with participation exceeding 40,000 in the past decade. In recent years, driven by globalization and the development of equity markets, a significant number of overseas investors have attended Berkshire Hathaway’s annual meeting, including several thousand Chinese attendees each year.