VCs back Zai Lab drug development model

Within few months since its inception, the Shanghai-based company closed a $30 million Series A round of funding led by Qiming Venture Partners, which put $15 million on its own. KPCB, Sequoia Capital, TF Funds and TigerMed - a leading domestic contract research organization (CRO) and a Qiming portfolio company - contributed the rest.

Several other VC firms wanted in but they were squeezed out. Nisa Leung, managing partner at Qiming, attributes Zai Lab's popularity to its strong management team and a business model that makes sense.

Samantha Du, Zai Lab's founder, severed as CEO of Hutchison Whampoa Group's drug R&D subsidiary Hutchinson MediPharma for more than 10 years before joining Sequoia as a healthcare venture partner. "We have been very careful about investing in early-stage drug development firms in China," Leung says. "But we have confidence in the Zai Lab team under Samantha's leadership. She is very reputable in the industry."

In recent years, many Chinese returnees have tried to develop new drugs. Although no one is close to producing the next blockbuster treatment, the biotech ecosystem is evolving, which has driven the CRO industry. These agencies provide outsourced clinical-trial services, enabling drug sponsors to save on costs, and they are getting more business from US players. With the National Institutes of Health (NIH) trimming R&D subsidies, it is increasingly difficult for US-based drug discovery firms to raising funding.

In this context, Zai Lab has a great opportunity. Du is leveraging her network to license pre-clinical findings from the West but then develops the drugs in China. Last month, the firm obtained a license from Sanofi for two novel compounds that could potentially be used to treat chronic respiratory diseases, including chronic obstructive pulmonary disease (COPD) and asthma. The compounds were discovered by Sanofi and are currently in pre-clinical stage.

"Firstly, it isn't easy to license valuable assets from a multinational firm," says Leung, explaining Zai Lab's competitive advantage. "Second, the local team must have strong capabilities to evaluate whether those assets could develop in the China market. Apparently COPD is a common disease in China caused by the worsening air pollution."

CRO TigerMed is likely to become a partner, offering clinical-trial services for Zai Lab.. Du's government relationships are also expected to make it easier for the company to obtain product licenses within China.

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• Topics
• Healthcare
• Greater China
• Early-stage
• Venture
• healthcare
• Venture
• Qiming Venture Partners
• Sequoia Capital