Deal focus: WuXi NextCode eyes mass-market genomics

WuXi NextCode originated from one of the earliest large-scale global genomics initiatives, DeCode Genetics. Launched in Iceland in 1996, it created a population-based biobank containing blood and DNA samples from around 120,000 people. These samples formed the basis of studies on how certain genes function and their relationship to a broad array of diseases, and this information was used by pharmaceutical companies to develop precision medicines.

Despite this breakthrough, DeCode struggled financially and it was bought by US-based biopharma company Amgen in 2012. The following year, Amgen spun off DeCode’s genome dataset – which by that point held data on 400,000 people – and IT systems to form NextCode Health. China’s WuXi Pharmatech bought NextCode in 2015 in a deal worth $65 million, and merged the business with its own gene sequencing solutions provider.

“We have the downstream capability and WuXi Pharma has the upstream capability. They have solid sequencing infrastructures so they can do data generation, but they didn’t have the database, the information technology and the analytical skills that we have. It was a really good match,” says Hannes Smarason, CEO of WuXi NextCode. 

A Series A round of funding was raised when the company was established, with WuXi Pharma contributing most of the capital, alongside Amgen Ventures, US-based Arch Venture Partners and Polaris Partners. The firm recently closed a $75 million Series B round led by Temasek Holdings and Yunfeng Capital – both are existing investors at WuXi Pharmatech – with participation from Amgen and Greater China-focused 3W Partners. A larger round from international investors is expected to follow.

There are two strands to WuXi NextCode’s business: it licenses intellectual property rights to global drug developers (B2B); and it provides testing services to individual Chinese patients, using next-generation genomics to screen unborn children during pregnancy and to provide personalized wellness profiles that can help identify generic risks early on (B2C). The company expects to conduct 10,000-15,000 rare disease tests in the next few years through partnerships with hospitals in Shanghai and Beijing.

“We decided to focus on China because it is such a large market. We think there is tremendous growth potential following the end of the one-child policy, and we want to have first-mover advantage,” says Smarason. “Down the line we will expand these B2C products into other parts of Asia and possibly the US as well.”

Smarason estimates the B2B and B2C markets will be worth $13 billion and more than $10 billion, respectively, by 2020. About 80% of WuXi NextCode’s revenue currently comes from the B2B channel, so there is considerable room for growth. “We anticipate that by 2020, our business will be 40% B2B and 60% B2C. The way we generate revenue is going to change dramatically in the next few years,” he adds. 

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• Topics
• Greater China
• Healthcare
• Technology
• Expansion
• China
• Yunfeng Capital
• Temasek Holdings
• Growth capital