AVCJ Awards 2016: Deal of the Year - Early Stage Tech: Zai Lab

Samantha Du, founder of China-based biotech company Zai Lab, began her career in the early 1990s as a member of Pfizer's R&D department. She worked her way up the organizational ladder, participating in the global launch of two new drugs and taking responsibility for licensing deals in new markets.

A decade later, with China's biotech industry yet to take off, Du was approached by Hutchison Whampoa - a holding company in Hong Kong tycoon Li Ka-Shing's business empire - to lead a pharmaceutical start-up in Shanghai. After few months of consideration, Du decided it was worth the risk. She co-founded Hutchison China MediTech and acted as CEO for its R&D subsidiary Hutchison MediPharma, building up a pipeline of oncology and auto-immune treatments.

"I was young and bold," says Du. "What I found in China at that time - in 2001 - was basically there was no concept about innovative drugs. But developing new drugs was my passion. I felt that I could use my knowledge to create a drug development firm based in China but with a global vision."

When China MediTech went public in London in 2006, Du felt ready for a new challenge and took charge of China healthcare investments in Sequoia Capital. She invested in four companies during her two-year tenure, two of which went public. But that ambition to build a global pharmaceutical company remained.

Untapped potential

Despite China's sizeable population, more than 75% of high-quality drugs available globally have not entered the market. This is due to a combination of complicated regulatory approvals processes and foreign companies failing to recognize the potential demand in China or being unable to take advantage of it. At the same time, the local biotech ecosystem is evolving. There is a well-established community of contract research organizations (CRO) that provide outsourced clinical-trial services to foreign companies, while the government is offering economic and policy support for drug development.

These factors were the impetus for Zai Lab, which Du founded in 2013. The company licenses pre-clinical findings from the West and then develop drugs in China, leveraging the comparatively low operating costs. It focuses on oncology, autoimmune and anti-infective treatments. The team has expanded from two to 10; most of the staff have been trained overseas and previously worked for multinationals.

"Attracting global talents to China isn't that difficult if you have a lot of resources. The key problem is it isn't easy for people working in multinationals to transition to a start-up. Transitioning from the US to China is another issue. When you have talented people, you should make sure that the team works closely," Du says.

Nisa Leung, managing partner at Qiming Venture Partners, has known Du for many years. Leung describes Du as an "unusual type of entrepreneur" in that her background at Pfizer, as an investor at Sequoia and now as a founder means she can attract talented people and deliver high-quality work. Qiming led a $30 million Series A round for Zai Lab in August 2014, with KPCB, Sequoia, TF Capital, and domestic CRO TigerMed also participating.

Few VC firms are keen to invest in China's early-stage drug discovery space because the development cycle is long and risky. Taking a new drug from clinical testing to commercialization is a 7-10 year process and the success rate is less than 1%. But Du's strategy of licensing pre-clinical findings with proven concepts from overseas partners offers more visibility.

Shortly before the Series A closed, Zai Lab obtained a license from Sanofi for two novel compounds that could potentially be used to treat chronic respiratory diseases. Over the course of 2015, the company entered into three further licensing agreements: with Bristol-Myers Squibb for exclusive rights in China to commercialize a cancer treatment in phase three development; with UCB to work on a drug targeting autoimmune and other inflammatory diseases set to enter phase one trials this year; and with Korea's Hanmi Pharm to develop a lung cancer treatment.

Building momentum

This momentum has drawn in other investors. Earlier in 2016, Advantech Capital, one of the two new funds launched by executives from Chinese GP New Horizon Capital, led a $100 million Series B round for Zai Lab. OrbiMed also took part, as did Qiming, Sequoia and TF Capital.

"It's a good combination of local and global investors. Looking at all healthcare investments over the last two years, you seldom find investor groups like this," Du says. "Taking VC money is a good thing. Investors can help you, especially those that have industry knowledge. Nisa, Jianming Yu [founder of Advantech], KPCB and OrbiMed are all successful investors and I trust them."

Zai Lab may now be on course to establish itself as a drug developer "in China for China," but that initial ambition remains the same: to go global, selling drugs developed entirely in house or treatments initiated by third parties. To this end, the company recently secured the global rights - including global commercialization - to two anti-inflammatory candidates from GSK, one in phase two trials and the other in pre-clinical development.

"Headquartered in Shanghai, Zai Lab aspires to sell drugs all over the world. It could be direct, or work with partners, and it will own the rights of these drugs in greater China or globally," says Leung. "That's what Zai Lab would like to be - the Genentech of China. It's a big dream, but I think we can do it."

Pictured: J.P. Gan of Qiming Venture Partners

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Technology
• Healthcare
• Early-stage
• China
• Qiming Venture Partners
• New Horizon Capital
• Venture
• Sequoia Capital
• OrbiMed
• AVCJ Awards