Spotting the next bio-tech unicorn

Brian YS Wong April 22, 2022 12:28

Unicorns. Privately held start-up companies valued at over US$1bn. Also the source and subject of desire for many, an engine of growth and thought leadership for the rapidly expanding start-up scenes across the world, and – above all – the recipe for a select few to get rich using very, very little time. Unicorns are hard to spot – especially when it comes to the bio-tech and med-tech sectors, where rigorous research with impeccable precision is of paramount importance, downside costs and risks are substantial, and investors could easily become ensnared in the complex technicalities undergirding the product comparisons.

I was introduced to “Lessons for Investment in Biotech Companies” (available in Chinese) by Liu Da (Managing Director of CR – CP Life Science Fund) through a mutual friend, who had remarked that the book was amongst the best he has read in recent years on financial innovation. As a relative layperson with a fledgling interest in VC and start-ups (I’m involved with a few, yet none is directly to do with bio-tech), I seized upon the opportunity to broaden my, well, constricted horizons. And I was most certainly not disappointed by Liu Da et al.’s exceptional work, which lucidly and comprehensively outlined a polished, incisive introduction to what makes a bio-tech start-up “click”, and what makes it “stick”.

The book makes three broad claims. The first, as substantiated through intensely and thoroughly researched case studies, is that bio-tech companies thrive on the basis of a mixture of market-commercial acumen, innovatively refined research strategies, carefully monitored feedback loops incorporating recipes for success from others. The second, is that bio-tech companies are innately intertwined with developments in the technological and genetic modification (think CRISPR, mRNA etc., for a few examples), to the extent that seeking to decouple bio-tech from the underlying mechanics of pharmaceutical technology and biological sciences would be frankly futile. The third, and perhaps most pertinent to the interests of prospective investors, is how investors could engage in fair and prescient valuation of early-stage start-ups (specifically, in the seed round and Series A stage, maybe Series B) that enables them to maximally optimise their chances at investing in the “right one”. The Chosen One is hard to come by, indeed.

As I perused the work, I could not help but be astounded and impressed, in equal parts, by the voluminous detail and expansive research that have clearly gone into the work. There is an acute sense that evidence is not provided for the sake of evidence, but with the end objective of establishing numerous vital, heavy-hitting, and oft-overlooked points – for instance, the highly pertinent discussion of development of Penicillin and AIDS treatments/HIV-suppressing drugs brought together the intelligence and insights of a market insider, and facts concerning the broader sociological and political contexts in which drug development research was undertaken. The deep dive into the technical aspects of mRNA – whilst at times perhaps a tad inaccessible to the completely scientific illiterate – was both intriguing and relevant in allowing us to understand the contemporary competition over vaccine technology between Beijing and Washington. For a geopolitics analyst and writer as yours truly, the latter was – of course – an item of interest.

Whilst the text does draw rather heavily upon examples from the United States, the authors have made it clear that the sampling approach was deliberate, as opposed to the product of omission. The intent is simple: America has historically been the world’s largest and most developed bio-technological nexus, and it would only be fair that accounts of finance and innovation centered around biological/life sciences begin – and end – with the US. Yet this fact does beg a further question, indeed raised through the astute observations concerning China’s rapid ascent and growing innovative-technological power. Now, some’d say, indeed, that China is due to overtake America within the next decade, on fronts pertaining to science and technology, research and development – though I remain reticent to draw conclusions concerning the future, if only for the fact that it would be premature to do so. Irrespective of how bullish/bearish one is over China’s tech trajectory, however, readers are bound to find the contextual and macro-analysis from Liu Da et al. fascinating to read, and most certainly food for thought at this critical juncture in global history.

Liu Da is a guru. Coming from a dual background of finance and pharmaceutics, Liu is as well-versed in the financial-investment scene as he is in the finer intricacies that make up the mortar and pestle of bio-technology. I can think of no better folk to put together this impressive magnus opus, than Liu. I would candidly and wholeheartedly recommend this read to everyone – and fret not if you don’t read Chinese, the English and Japanese versions are, I’ve been reliably informed, in the pipeline! May the best unicorn(s) win, as they say in The Hunger Games.

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Brian YS Wong

Assistant Professor, HKU