Chinese CRO dMed’s $100m Investor Round bets on All Roads to China?

Chinese CRO dMed’s $100m Investor Round bets on All Roads to China

The Chinese life sciences market is on the move, and that means growth opportunities for contract research organizations (CROS), the organizations that handle much of the nuts and bolts of running studies. Founded just in 2016 in Shanghai, dMed is rapidly transforming into a global CRO player to compete with the tier-1 players in China such as WuXi or even the U.S. players such as IQVIA, Parexel or LabCorp. With 600 employees and growing, dMed just in Dec. raised $100 million Series C financing led by Fidelity Management & Research Company LLC, and with a syndicate of new investors, including Sequoia Capital China, Kaiser Foundation Hospitals and E Fund. The new investors join existing investors leading the angel—A and B rounds including Qiming Venture Partners, Lilly Asia Ventures, and Vivo Capital. Their founder is a heavy hitter out of the pharma world having spent nearly two decades at Pfizer. Dr. Lingshi Tan, who also serves as Chairman and CEO, and was drawn to entrepreneurialism by a vision to build the next generation global clinical development partner—one that helps the biopharma company accelerate delivery of innovative solutions to patients worldwide.  Dr. Tan’s clout cannot be underestimated having, for example, established Pfizer’s China Research and Development Center (CRDC) across China. In actuality, investors are drawn in this deal by the decline of American pharma hegemony and the rise of China. Is this truly the case?

Attracting Investors

dMed’s investors are strongly attracted to the company’s pre-eminent position serving innovative Chinese biotech at home and abroad –the firm also specializes in helping Chinese biotech enter the U.S. market. Dr. Tan summarizes the value, stating, “dMed is perfectly positioned to work with biopharma clients in accelerating clinical timelines while reducing developing costs, helping them to gain entry to the world’s fastest growing market for innovative drugs. Our ability to work in true partnership with Western and Chinese innovators globally, using a holistic and collaborative model, has been widely endorsed as the right formula for future success.” During founder’s Tan’s tenure at Pfizer he certainly crossed the country establishing a value-added network, one critical for business in China. 

Why are Investors so Intrigued: What’s dMed’s Premise for the Future?

In the past couple years, moves by the Chinese government serve to shake up the global pharma industry by liberalizing its regulatory regime, joining the International Conference for Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) as a full regulatory member by June 2017. Now China focuses its regulatory processes on rapid approval of innovative therapies and devices, with non-Chinese biopharma as major beneficiaries.

According to dMed’s point of view, The American pharma sector led the world up, based on what dMed classifies as the “previous 20th Century Drug Innovation Model,” including A) strong public sector funding of U.S. academic research, B) U.S. FDA’s role as the global gold standard for regulatory approval, C) Availability of capital from both public markets and venture capitalists, and D) High U.S. drug prices that incentivized companies and investors to focus on U.S.-centric drug development.

However, due to a confluence of factors and forces these drivers of American superiority are, according to dMed’s point of view, steadily on the wane. Why? First, investment in the public sector has undergone a period of relative stagnation. Second, the globalization of development and regulatory guidelines now affords other nation’s opportunities to not only enter but offer greater incentives. Third, an ongoing diversification of global capital sources leads to new funding opportunities elsewhere. Finally, growing U.S. domestic political pressure to end US price subsidy for global drug innovation rings a familiar theme.

But perhaps the biggest driver of all lies in the extraordinarily high costs associated with drug development—representing 60% to 70% of the total for drug development representing what dMed refers to as the “nail in the coffin of the old model.” That is the competition for trial subjects in America.

Despite continuous technology innovation, streamlined regulations and the deployment of more efficiency outsourcing models. The “fundamental math of clinical development “ in this era leads to the painful reality that there are too many U.S trials chasing too few subjects. This challenge will only grow, bets dMed, as precision medicine necessitates even more specific and exclusive inclusion criteria. What follows: slower recruitment processes, longer trials and this inevitably leads to higher direct and indirect costs. This leads to higher prices that increasingly must be borne by the American consumer.

All of the roads, suggest the dMed model, lead to China. The investors apparently are buying as the company has raised over $134 million in just five years.

Company’s Value Ad

The company’s effort to bring the best from China and America into a collaborative approach that pounces on the opportunity raised by China’s new regulatory framework, advances in drug development, and technology change to help their clients expand globally by tapping into the world’s second largest pharmaceutical market (China). The company touts “creative” and flexible” models raising the bar significantly for China’s biotech and pharma companies, leading to more efficiency in R&D, compressed research lifecycle  and overall improved success rates. 

The company helps biopharma companies in all major areas from regulatory affairs and strategy to early clinical development, clinical science and medical affairs, clinical operations, biostatistics and programming, data management, drug safety and pharmacovigilance, quality assurance and technology solutions.

The company has set up offices in Shanghai, Beijing, Wuhan, New York, Washington DC, San Francisco, and Brussels.

Call to Action: Of course, the world doesn’t follow neat, and clean investment thesis linear predictions rarely turn out. The reality is that China’s social-political challenges lead to a number of uncertainties as well that may not lead presupposed outcomes. The proof will be in the form of actual approved, value-added therapies. Where are they coming from? What do they do to help humanity?