Canbridge takes it to next level with $10M series A from local VC backers
By Shannon Ellis
Staff Writer
Wednesday, December 10, 2014
SHANGHAI – Canbridge Life Sciences Inc., a Beijing-based biopharma company started in 2012 with angel and private capital, has received $10 million in a series A investment from leading local health care venture capital funds Qiming Ventures and TF Capital. The investment will be used to further Canbridge’s two existing in-licensed programs and put cash in its pocket to bring in more assets.
The funding comes at a crucial time for the company’s pipeline. Its development-stage candidate, ATI-1123, licensed from nanotech specialist Azaya Therapeutics Inc., of San Antonio, is ready to progress to the next stage in the clinic. It is a liposomal formulation of docetaxel to treat non-small-cell lung cancer and is expected to start phase II testing in the U.S. in 2015. (See BioWorld Asia, Sept. 25, 2013.)
Canbridge will work jointly with Azaya, taking responsibility for the phase II trial in China at the same time.
The company also has taken on board an oral rinse for the treatment of mucositis resulting from cancer treatments. Classified as a medical device, those products typically can get on the market quickly with an expedited registration process, which James Xue, founder and CEO of Canbridge, said the firm is ready to start soon.
China presents unique challenges to R&D companies with no source of revenue. The development phase is long and uncertain, and while there are some cost savings, it is increasingly expensive to do trials here. Financiers that understand how to assess the risks of biotechnology are few and far between, and with Chinese venture capitalists (VCs) having shorter life cycles than their Western counterparts, it is typically difficult for start-up biotechs to find a good match with VCs.
It does not help that only companies with a three-year track record of profits are able to go public on Chinese exchanges, complicating exits for investors.
The Canbridge announcement highlights how several of those obstacles have been overcome.
From the outset, Xue has adopted a thoughtful strategy for Canbridge, focusing on innovation to meet China’s unmet medical needs but managing the inherent risks with a “portfolio” approach – looking for assets that are in development and then balancing those with products that are approved in other markets and/or devices that are easier to get on the market. Taking on discovery is not part of the plan.
That approach helped to make Canbridge appealing to TF Capital.
“Their products have high potential here. Xue has thoroughly considered the issue of time to market to reduce our investment risk,” Kevin Chiang, partner at TF Capital, told BioWorld Asia.
TF Capital is a relatively new VC fund, started as a spin-off of well-known local contract research organization Tigermed. With only six months under its belt, TF Capital has participated in roughly eight deals, said Chiang.
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Because the limited partners in TF Capital come from the health care industry, Chiang explained, the fund has a longer life cycle than many other funds, with a horizon of eight years plus a three-year extension.
Chinese VCs typically have five years plus two, making it difficult for many to invest in early stage biotech companies.
It also helps that the Canbridge investment comes at the beginning of TF Capital’s life cycle, which allows the venture firm to stay for the “long haul,” according to Chiang.
With so many industry contacts, “we believe that we have more information and connection to understand the risk better than most of the investment companies in the industry,” Chiang said. But he added, “the investment cycle is long so it is better [to] work with friends who have the appetite for risk.”
CHANGING REGULATORY LANDSCAPE
One of the risks is the quickly changing regulatory landscape. Xue intends to file the phase II trial for ATI-1123 as a multiregional clinical trial, or MRCT, the rules for which are going through a process of clarification. (See BioWorld Asia, Dec. 5, 2014.)
But Xue said he welcomes the government reforms as a way to help get more differentiated products on the market that offer greater value to patients. He said he has made a close read of the MRCT discussion document and is not expecting delays.
“People believe [the MRCT rules] will slow down regulatory approval. I don’t anticipate it will slow us down very much for the Azaya or Canbridge program – our MRCT is a true MRCT – vs. some other companies who may put the program under the cover of the MRCT,” he said. “We are going to file CFDA guidance as a MRCT phase II using the same protocol as our partners.”
As for T.F. Capital’s Chiang, he said he is happy to be working with Xue, who has both the scientific background and proven business experience, having set up the Genzyme China office.
He said the past year, with China’s enormous success in the internet and high-tech sectors, such as the listing of Jack Ma’s Alibaba Group for $24 billion, the biggest initial public offering (IPO) listing in history, has emboldened many of China’s best and brightest to become entrepreneurs. They are leaving cushy corporate jobs in droves to take a chance on China’s reforming economy that is growing the buying power of its middle class.
“The passion and the ego to be an entrepreneur in China is at an all-time high,” Chiang said. “You see all these success stories from the internet world now influencing pharma.”
“It is a different story now,” he added. “Everyone used to want to work for a company like McKinsey; now people are going out on their own, if they don’t, they feel they will regret it.”
That does not make finding an exit any more reliable, but it does help to find new investments.
The hope is that the IPO rules will change in the time frame of TF Capital’s investment, and Chiang added that “the challenge is finding the good people among ourselves and investors who have been in the industry for a long time, that we have a comfort level with. The exit is still challenging, but it is more friendly [amongst VCs]; so far, we feel comfortable, and there is the possibility of more exits opening up in the future.”