Key Insights of 2022 SAPA Healthcare Investment Forum & Roadshow

SAPA 5th Healthcare Investment Forum was held in hybrid format in East New Brunswick, NJ

Agenda of the Healthcare Investment Forum & Roadshows

From June 18^th to June 28^th, SAPA held the 5^th Healthcare Investment Forum and Roadshow, one of the organization’s flagship events centered around helping young businesses grow & develop in the US biopharma industry. The event covered hot topics in the healthcare innovation space top of mind to investor and founder stakeholders. Activities not only included panel discussions & presentations, but also two digital roadshows showcasing over 20 start-up companies.

We are proud to provide highlights below:

The results of the two roadshows

Digital Roadshows (June 18^th & June 24^th)

28 start-up ventures participated in our two-day digital roadshows, representing companies from medtech, biopharma, and contract research organization (CRO) industries. Founders presented in front of a panel of potential investors, followed by a detailed question & answer session where panelists provided feedback & impressions on each new start-up. At the end of each day, panelists selected the start-ups as first, second and third places based on the quality of the presentation, clarity of the venture’s business plan & strategic focus, and answers to panelist questions. The audience also voted for their favorite start-ups based on the presentation of the entrepreneurs.

A list of all the start-ups participating in our digital roadshows can be found in the Appendix link

Healthcare Investment Forum (June 25^th)

Dr. Xiaodong Chen, SAPA President, giving a warm opening remark

The SAPA Investment Forum kicked off with a keynote speech by SAPA President Dr. Xiaodong Chen. Dr. Chen provided an overview of the SAPA organization, highlighted recent organizational achievements, and provided SAPA’s optimistic perspective on the future of the life science industry despite current challenges. Event co-chairs Stephen Xue, Jack Wu and Pan Pan also made remarks welcoming participants.

Event co-chair, Stephen Xue, Jack Wu, and Pan Pan giving welcoming remarks and introducing the keynote speakers (Yanhong Lin, Bob Ai)

The morning session of the forum features three keynote speeches from successful entrepreneurs and investors and two fireside chat sessions in panel discussion formats.

Keynote Speech Highlights & Insights

First Keynote:

Topic: “Has the Biotech Market Hit Bottom Yet?”

Speaker: Bob Ai, PhD, MBA, Founder & Managing Partner, Goby Global LLC

Ai is optimistic about the near-term funding environment for life sciences
Dr. Ai talking about the healthcare investment trend
Factors contributing to current conditions are easing (e.g., fear of drug price control, low quality and high valuation of Biotech IPO’s)
Discounted valuations of start-up companies will likely spur mergers & acquisitions (M&A) activity from established life science companies (i.e. large pharma)
Potential short-term disruptors include potential economic recession and US midterm elections
Ai emphasizes flexibility, noting that public companies should look to extend cash runway while private companies maintain strong relationships with investors to ensure consistent access to capital if needed

Second Keynote:

Topic: “Cross-Border Fund Raising & Business Development: Opportunities and Challenges”

Speaker: Yanhong Lin, MBA, Founder and Managing Partner at CTIC Capital

There are some positive signs in China healthcare VC investment where the quarterly deal number of seed + A rounds increased markedly in 1Q22 (from 18 deals in 4Q2021 to 45 in 1Q2022).
The 2022 deal value will still likely be much higher than the pre-pandemic level though less than 2020 and 2021.
Ms. Lin discussing the cross-border fundraising & business development
Deal value in the US private investors focusing on early financing rounds (Series A+B) is decreasing though still doubles Chinese deal value in 1Q22.
With increasing geopolitical tension between the US and China, a key question for fundraising is, “Which side do you choose?”, which will affect the following rounds of capital raising.
The speed to market is also a key consideration for cross-border fundraising.

Third Keynote:

Topic: “Story of an IPO journey”

Speaker: Chun-Lin Chen, PhD, EMBA, CEO of Medicilon

Medicilon is a successful CRO in China that performs one-stop integrated R&D services, including drug discovery, preclinical research, CMC development, and IND enabling package, which is listed in November 2019 in Shanghai Stock Exchange.
Dr. Chen sharing his IPO journey of Medicilon
The biotech industry is booming in China in recent years leading to more collaboration models including milestone payments, licensing clinical-stage drugs in China, re-developing clinically failed drugs, and co-development of First-in-class (FIC) or Best-in-class (BIC).
Several key differences between listing standards in Hong Kong Exchange and Shanghai Stock Exchange Sci-Tech Innovation Board (STAR Market) were discussed, including requirements of estimated market value, R&D investment, invention patent number and operating expense, P/E value, difficulty.

Fireside Chat I Highlights & Insights

Panel of Fireside Chat I “Globalization through cross-border partnerships”. From left to right: Lihua Zheng, Patricia Keegan, David Shen, and Wendy Pan

Topic: “Globalization through cross-border partnerships”

Session leads:

Jack Wu, PhD, MBA, Head, Global Business Development, Search & Evaluation, Antengene

Joshua Berlin, Head of Business Development, BioCentury Inc.

Speaker:

Lihua Zheng: JD, PhD, Co-founder & Chief Business Officer, AnHeart Therapeutics

Patricia Keegan: MD, CMO, TopAlliance Biosciences Inc.

David Shen: JD, PhD, Senior Counsel, Johnson & Johnson

Wendy Pan: JD, PhD, Partner, Goodwin Procter LLP

The panelists had inspiring discussion on how the new drivers of U.S.-China collaborations affect partnering strategy and the ways forward, and how both sides can mutually benefit. The key highlights include:

Earlier this year, FDA rejected the application of China-developed Sintilimab (PD-1 mAb) by Innovent. Some of the issues in the Innovent case were not specific to Chinese companies. Having a more robust corporate communication function can allow companies to provide more clarity to health authorities & the public at large.
It is important for biotech and pharma companies to have a close relationship with the FDA and remain agile in times of market disruption, which previously helped AnHeart Therapeuticas respond to the COVID-19 pandemic.
There are still a lot of opportunities for quality assets in the form of licensing partnerships and M&A transactions, and that some strategic players such as Sinopharma have recently taken actions in new acquisitions, showing signs of good bargains.
To some extent, one of the results from the downfall of the capital markets is that biotech companies are motivated to seek partnerships and gain access to global markets for commercialization.
Audience participated actively in Fireside Chats
The value of a company’s intellectual property (IP) is an important factor to be considered for cross-border transactions.
Pricing of assets involves dynamics of bidding process and price negotiations which could be very different in U.S. and China.
In general, the opportunity for innovative medicines in China would likely increase given the population base and wealth growth rate in China.
Conducting clinical trials in China could bring certain benefits. For example, it was possible to continue to progress clinical studies in China even during the pandemic. However, one challenge cited is that entering the Chinese market may not be easy for some companies, with careful attention paid to the differences between China and ex-China markets.

Fireside Chat Session I

Fireside Chat II Highlights & Insights

Panel of Fireside Chat II “The current trends in public and private biotech markets features”. From left to right: Les Funtleyder, James Early, Paul Edelberg, Kelly Shi

Topic: “The current trends in public and private biotech markets features”

Session Leads:

Wansheng Jerry Liu: PhD, JD, Partner and Chair of China Practice, Fox Rothschild LLP

Chenchao Gao: PhD, Senior Manager, Daiichi Sankyo

Speaker:

Les Funtleyder: Chief Investment Officer, Technik Health

James Early: Managing Partner, Tamarack Advisory

Paul Edelberg: Partner, Fox Rothschild LLP.

Kelly Shi: Senior Vice President, Biotechnology Equity Research, Jefferies LLC.

The conversation between the four experienced biotech investors provided us with more valuable insights into the current market trends and suggestions for investors and biotech entrepreneurs to successfully navigate through the current market environment. Key highlights include:

Despite recent optimism, the road ahead for innovator companies seeking funding can still be bumpy due to potential further interest rate increases.
Yongmei Li, SAPA President-Elect, giving a closing remark of the morning session
The positive pipeline progress and M&A activities will catalyze the recovery of the biotech market.
While investors commonly viewed pipeline failure and the aggressive policies adopted by FTC as key factors causing the market downturn, the high-risk nature of biotech assets also played a critical role in the recent volatility of the market.
The recent setback in the biotech market resembled events that occurred during the early 2000s.
The key factors to consider when investing in biotech companies include management teams, product portfolio, and target markets.

The morning session was closed by Pan Pan and Yongmei Li, SAPA President-Elect. They introduced the SAPA Investment and Entrepreneurship Community and thanked the speakers and sponsors of this event for their support.

The afternoon session of the forum was composed of the well-known Entrepreneurship Crash Courses and social interactive networking.

The afternoon session was kicked off by SAPA DC President Charles Li. He introduced that the investment forum is a joint event held by SAPA-Headquarter and SAPA-DC, focusing on connecting advisors possessing successful entrepreneur ventures with entrepreneurs to offer advice on how start-ups can prepare themselves for a successful business journey.

Entrepreneurship Crash Courses:

Session leads:

Eric Rong: Chief Executive Officer, InnoMaitra Therapeutics Inc.

May Huang: Controller, King & Wood Mallesons,

First talk: “Transition from successful pharmaceutical scientist to successful entrepreneur in the pharmaceutical world”

Dr. Cai discussing how to transition from scientist to entrepreneur

Speaker: Xiao-Yan Cai, PhD, CEO and Co-founder, Accurant Biotech, Inc.

Dr.Cai told us her story of founding Accurant Biotech and discussed the three key factors to build a successful business as a scientist and entrepreneur in the pharma world:

Cai introduced three key factors to building a successful business: “tian shi (天时)” , “di li (地利)”, and “ren he (人和)”
“Tian shi (天时)” means the market opportunity, i.e., taking the future of medicine into consideration. Timing of “cash flow” and raising capital is important for the success of the start-up ventures
“Di li (地利)” refers to the locations: North America and Asia Pacific held 1^st and 2^nd market share in 2020
“Ren he (人和)” means the people including co-founders and teams.
Cai’s experience demonstrated the importance of learning shareholder structure, establishing “a common goal” shared by co-founders, managing employee attrition, and continuously innovating for the start-up ventures

Second talk: “How to raise capital for healthcare startup”

Speaker: Junchen Diao, PhD, VP of Octagon Capital Advisors

Dr. Diao’s presentation gave a comprehensive picture about various capital sources for the entrepreneur, and demonstrated how to successfully get their first investment:

There are two major types of capital – non-dilutive capital and dilutive capital.
Junchen Diao giving a talk on how to raise capital for healthcare startups
Non-dilutive capital includes federal government founding (e.g. SBA, SBIR, STTR), state funding, innovation parks (e.g. Zhang Jiang Hi-Tech Park), and local government funding in China.
Non-dilutive funding does not require giving up equity within the company, but often has restrictions and a long application period.
Dilutive capital includes self-funding (e.g. personal savings or friends and family), investments from angel investors (e.g. high network individuals, angel groups, and crowd funding), and investment rounds by venture capitalists (e.g. healthcare specialists and tech specialists).
Diao discussed how the ability to raise capital moves in cycles, with periods of easier fundraising due to a low cost of capital versus challenges in raising capital in an economic downturn with a high cost of capital.

Third talk: “Sponsored research agreements with non-profit research institutions”

Speaker: Peter J. Butch III, JD, Partner and patent attorney of Fox Rothschild LLP

Dr. Butch shared his advice on how to get most out of sponsored research agreements (SRAs) and potential pitfalls to avoid.

Peter Butch talking about SRAs

To initiate SRAs, both identifying interested principal investigators and working out an agreement though universities are important
Investors should consider the stewards of research (e.g., research integrity; the right to publish) when they pursue new partnerships.
Investors are also advised to look for well-defined projects where the budget matches the scope of the work, and are compliant with the institutional policies.

Fourth talk: “What to know about start up fundraising”

Speaker: Mark Young, MBA, CPA, CFA, Founding Partner, Bridge Point Capital

Mark shared his knowledge to help start-ups jumpstart fundraising.

Mark Young giving a talk on fundraising

Key aspects of fundraising include portfolio diversification to increase return and minimize risks, portfolio optimization via asset allocation, asset protection, tax planning, and insurance.
There are 5 key elements of a successful pitch for fundraising: opportunity, product, people, purpose and information source.
Opportunity is the key market your company is looking to address or serve with your product or service.
Product includes intellectual property patents, key product characteristics (like safety & efficacy for a new pharmaceutical agent), and the business plan on how to develop & commercialize your asset.
To attract and retain talents, i.e., people in your company, the entrepreneur should smartly and selectively distribute equity to employees.
Purpose means that you should addressing the benefit of your start-up venture to patients or to other healthcare stakeholders.
Pitchbook or Crunchbase databases are good information sources for comparable company analysis.

Fifth talk: “How proper entity structuring helps maximize flexibility for partnering, M&A, or IPO”

Speaker: Lillian Li, Managing Director, International Tax, Deloitte Tax LLP.

Lynn Yang, Managing Director, Transfer Pricing, Deloitte Tax LLP.

Lynn Yang, managing partner from Deloitte introducing Deloitte service

Lilian and Lynn shared some tax considerations for investors.

Proper entity structuring helps maximize flexibility for partnering.
Several common company structures include Cayman holding structure, Parallel structure, US holding structure, China holding structure, Offshore/China mirror structure. The associated pros and cons were also discussed.
Also discussed are transfer pricing and some common pitfalls on cost split for international partnerships.
Lilian Li, managing partner from Deloitte, discussing the proper entity structuring of companies
Lillian and Lynn also touched on environment, social and governance (ESG) considerations to comply with the new governmental regulations.

Roundtable Clinics Q&A session

After the crash course talks, in the Roundtable Clinics Q&A session, speakers from the Entrepreneurship Crash Courses had a lively and in-depth discussion with the audience online and offline over various common issues faced by biopharma startups. The topics of discussion included financing strategies under the current situation of capital market, obtaining IP ownership in a sponsored research project with academic partners, dealing with potential conflicts of interest between founders and partners, and IP strategies at the early stage of a startup company.

Round table clinic panel discussion

Yang Wang, Director of U.S. Business Development at Medicilon, introducing Medicilon

Afterwards, Dr. Yang Wang, Director of U.S. Business Development at Medicilon, met with the speakers and audience to introduce Medicilon’s history, capacity, IP security policy, and management team.

John Sun, the Immediate-Past President of SAPA, giving closing remarks

The closing remarks were given by Dr. John Sun, the Immediate-Past President of SAPA. He thanked the organizers, speakers, roadshow participants, and volunteers who had made great contributions to the success of the forum. Dr. John Sun also noted that this closing was not an end, but marked a new start for SAPA to serve as a platform of cooperation.

A reception was held next to the conference room. Many participants were excited to reunite and reconnect with each other after over two years of suspension of SAPA-HQ’s in-person forums due to the COVID-19 pandemic.

Group photo of speakers, organizing committee members and volunteers

Event Sponsors, SAPA Corporate Sponsors and collaborators

Appendix:

SAPA 2022 HIRnF Appendix.pptx

Lists of the participating companies and advisors in the roadshows and group photos.