From lab to global impact: biotech start-ups harness the strengths of the US and China

How can biotech start-ups achieve global competitiveness and scale by leveraging US-China synergies？

Biotech start-ups, particularly those in the US, leverage American innovation for cutting-edge research while tapping into China’s robust value chain for cost-effective development and scalability, enabling the creation of globally competitive, high-impact solutions. According to McKinsey, leading Chinese biotech firms can accelerate their timelines by 30–50% from target validation to pre-clinical candidate and enroll patients in clinical trials 2–5x faster. Biotech start-ups with operations in both the US and China can typically achieve over 50% higher efficiency in terms of both time and cost.

Why are big pharmas targeting biotech firms with operations in both the US and China? How do these start-ups achieve greater efficiency and attract acquisition interest?

We have examined new trends in mergers and acquisitions (M&A) in 2024. It is evident that big pharmas are increasingly interested in acquiring biotech firms that operate in both the US and China.

Fig. 1: Notable M&A in biotechnology in 2024
Big pharmas are increasingly interested in biotech firms that operate in the US and China

^{Source: MyBio Capital Research, K2VC summary. Only company acquisitions included (not asset transactions).}

These firms are frequently founded by scientists based in the US who have extensive networks in China and can speak the language. As an example, in 2020, K2VC led the angel investment in ProfoundBio, a biotech company specializing in next-generation antibody drug conjugates (ADCs) development, with teams based in Seattle, US, and Suzhou, China. This investment generated a cash return of over tenfold for our fund in just four years.

An increasing number of observers are taking notice of these ‘hidden gems’ in the biotech industry. Nature Biotechnology has described this trend as a ‘reservoir of opportunities’ in its news feature, Biotech financing: darkest before the dawn.

One major factor driving this is the ability of biotech companies with operations in China to efficiently utilize the country’s talent pool and supply-chain resources.

For example, according to Glassdoor, the annual salary for an entry-level PhD in San Diego is about $110,000, whereas the same requirement in Suzhou, China is about RMB 300,000, less than 50% of that in the US.

These biotech companies are also highly efficient. Dr Zhenhua Wu, founder of Exegenesis Bio, shared how, when his company was expanding into a new lab space in Hangzhou in August 2021, numerous pieces of equipment were frequently moved, yet the entire relocation process was seamless. There was no delay or interruption to experimental plans, nor any loss of progress. Moreover, China’s population of 1.4 billion means that even for clinical trials on rare diseases, it is easier to recruit a sufficient number of participants.

What are the key challenges in biotech start-ups operating in both the US and China? How does K2VC support founders in overcoming these hurdles and achieving global success?

The biggest challenge is having a deep understanding of both the Chinese and US biotech markets. Initially, we relied heavily on extensive searches and cold outreach, but now over 60% of projects come to us through portfolio networks and recommendations from the industry connections we’ve built over the years.

Over the past six years, K2VC has invested in 15 biotech projects, 13 of which have established entities in both the US and China. This structure allows companies to take advantage of China’s talents and facilities, while maintaining a US-based entity that appeals to multinational pharmaceutical companies as an acquisition target or to go public in the US – an attractive proposition for LPs seeking assets in competitive markets. However, identifying and nurturing these projects at an early stage is no simple task.

On average, we spend about a year working closely with founders, providing personalized support and assisting them in setting up their operations. Most of these scientists previously worked for major pharmaceutical companies as research scientists or leaders, spending most of their time in laboratories. When they venture into starting their own companies, particularly when setting up operations in China, they require extensive support.

For example, Dr Zhenhua Wu arrived in Hangzhou from the US in 2019 with no knowledge of how to register a company or open a bank account in China. On the day we signed the investment agreement, we began recruiting employees for his team, which grew to 50 members within eight months.

In another case, we assisted a scientist’s three-year-old daughter in enrolling in a bilingual kindergarten in China and collaborated with headhunters to find employment for her German husband.

What are the key factors behind K2VC’s success in biotech investments? How does K2VC identify high-potential technologies, build strong teams, and create differentiated products that compete globally?

We believe that it involves three crucial aspects: investing in technologies or therapies with substantial market potential; identifying top talent with significant experience and networks in key areas; and building an attractive pipeline portfolio that holds up under comprehensive global competition analysis, allowing for the creation of sufficiently differentiated, competitive products.

K2VC has made notable investments in several high-potential biotech start-ups, such as ProfoundBio and SanegeneBio, each developing innovative technologies with strong teams and impressive growth trajectories. Examples of technologies include ADCs, bispecific/multi-specific antibodies, small interfering RNA (siRNA), and targeted protein degradation by small molecules. We focus on emerging modalities with a certain extent of validation and support them with seed through series A funding.

We also look at specialized therapeutic areas. The therapies we seek address significant, well-defined unmet medical needs which have been overlooked or underinvested in by big pharma in the past. However, we can observe that an accumulated improvement in the understanding of these diseases/or mechanisms should yield more systematic progress. Examples include neuroscience (neurodegeneration and neuropsychiatry), as well as immunology and inflammation.

Additionally, we source talent with significant experience and networks in key areas of research. A major part of K2VC’s role is to uncover these ‘hidden gems’, and we also assist founders in finding suitable co-founders, formulating strategies, completing core teams, discussing pipelines, and setting short- and long-term goals to launch the start-ups.

For instance, before ProfoundBio’s acquisition by Genmab in May 2024, the team consisted of veterans from US-based biotechnology company Seagen, including Chairman and CEO Dr Baiteng Zhao, Co-Founder, Board Member and Chief Strategy Officer Dr Tae Han, and Co-Founder Dr Xiao Shang, each bringing over a decade of ADC development experience.

SanegeneBio’s team is led by Dr Weimin Wang, an experienced chemist in the siRNA field, while LTZ Therapeutics is led by prominent scientists like Dr Robert Li, who were previously from San Francisco-based biotechnology company Genentech.

Lastly, K2VC ensures the construction of a well-designed and attractive pipeline that holds up under comprehensive global competition analysis, allowing for the creation of sufficiently differentiated, competitive products that are best in class or first in class.

One such example is our investment in ProfoundBio. It was acquired by Genmab for $1.8bn, delivering a return of approximately 20x on the initial investment and 11x overall. ProfoundBio exemplified the ‘best-in-class’ standard we seek – it could target a population three times larger than the benchmark drug that was developed by US-based biotechnology company ImmunoGen (which was acquired for $10bn in November 2023).

Another example is SanegeneBio, which focuses on siRNA technology to target gene expression in diseases like obesity and metabolic disorders. Many existing glucagon-like peptide-1 (GLP-1) drugs lead to weight loss, but a significant portion of this is muscle mass. GLP-1 drugs help to regulate blood sugar and appetite. A downside is that when patients discontinue these drugs, they regain weight, primarily in fat.

In contrast, SanegeneBio’s drug candidates are expected to enable sustained weight loss while maintaining muscle mass. The company’s valuation has risen over sixfold since K2VC’s seed investment in 2021.

We also invested in LTZ Therapeutics, which develops multi-specific antibodies for immune-cell engagement, targeting both oncology and autoimmune diseases. Data shows these investments have achieved outstanding results. Of the projects we have invested in for over one year, more than 90% have secured further funding, and 70% have gained endorsements from top-tier investors.

Moving ahead, as a new cycle of US monetary easing begins, biotech and venture assets face potential revaluation. In an era filled with uncertainty, positioning ahead of market consensus could be the best opportunity for outsized returns.

About K2VC
Founded in 2010, K2VC is a leading venture capital firm specializing in early-stage investments. With headquarters in Beijing and an office in Singapore, the firm manages approximately $1.3bn in assets, supporting innovative start-ups across various industries.

Since 2016, K2VC's Healthcare team has expanded into the healthcare and life sciences sectors, now managing two funds focused on fostering pioneering biotech ventures through a unique incubation approach.

K2VC Biotech Fund III is dedicated to supporting biotech start-ups founded by world-class Chinese-American scientists in the US. The fund helps these companies leverage resources and networks from both the US and China to accelerate their growth and impact.

Keyi Chen founded K2VC in 2010. He has many years of successful fund management and early-stage investment experience. He also serves as a member of the Angel Investment Professional Committee of the Asset Management Association of China.

Before founding K2VC, Keyi was a Principal at Ce Yuan Ventures.

Yunhai Wang joined K2VC in early 2018, overseeing the healthcare investment and fund management. He has over 10 years of experience in healthcare investment and has led the investments of ProfoundBio, Exegenesis Bio, and Eyebright.

Before joining K2VC, Yunhai served as Vice President at Lapam Capital.

^{The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin and K2VC accept no liability for any decisions taken in relation to the above.}