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New Economy blog: Investing in Hong Kong’s biotech ecosystem

Investing in Hong Kong’s biotech ecosystem

KPMG China in dialogue with world-renowned industry leaders Dr. Robert Langer and Amy Schulman

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Irene Chu, Amy Schulman and Robert Langer

KPMG China’s Irene Chu, Head of New Economy and Life Sciences for Hong Kong, recently spoke with two world-renowned leaders of the biotech industry – MIT Institute Professor Dr. Robert Langer and Polaris Partners managing partner Amy Schulman – about Hong Kong as a capital markets hub. This is the second in a two-part series featuring their insights.

Chu: Is having a professional CEO and a team that can actually take the science forward a key element for commercialising technology?

Amy Schulman: If by professional CEOs what you mean are people who have experience and have done it again and again because they’ve seen something that really captures them in the science and they’re really determined to build a great company and they understand how to attract talent, how to protect intellectual property, how to do a deal with big pharma and how to talk to these brilliant scientists, then I’m all for those professional CEOs. If what you mean is people who are getting in to have a liquidity event and quickly turn over a company I think that’s a hard way to build value. The best way to build a durable company and one that has value is to anchor it in meaning and scientific purpose.

Amy Schulman

Bob, when you do your research, how do you know whether what you’re developing will become a platform technology that could have a huge impact on the industry?

Robert Langer: The question I always ask myself is ‘what can we do with our skillsets at our lab that can have the greatest impact on the world?’ Most of the time it’s going be a platform because you don't necessarily go out and say, ‘I'm going to invent this tomorrow.’ You try to work in what you feel are important areas and ask important questions.

AS: A platform is only valuable if it actually has an application. But when you start with an application that is very modest that proves the benefit of the platform, you run the risk of never having anybody understand the full value of the platform because all they see is that first very modest effort. On the other hand, if you’re trying to be too ambitious in the first one, you run the risk that the whole platform is imperilled because you haven’t taken a kind of relatively safe bet on your first application.

Robert Langer

What should a company or investor bear in mind when making decisions about building ventures, especially in life sciences?

AS: What is going to be critical are the people. People is in part a combination of can we work with these people, which means do we want to work with them and do they want to work with us. In other words, do we think they’ll learn from us, will we be adding value, and do we like them? It’s incredibly intimate, you have to feel like you want to spend a lot of time with these people, like really rolling up your sleeves and working together.

And then it’s market size and opportunity. It’s really hard to raise venture capital for incremental improvements. One of the things that frustrates scientists sometimes is that they’ll say, ‘well this is a better version of this’, and it will be a better version. But by the time you get regulatory approval and then you have to break into a market, in the end the price of the original treatment is generic. It doesn’t matter if it’s an incremental improvement. It has to be a game changer. One of the things that always amuses me is when people say, ‘well, the size of this market is huge’. If it’s a generic market and the price point is low, the size of the market is completely irrelevant because you have to price it against the generic. So thinking about the payor reimbursement and the market that way is really important.

What do you think Hong Kong can offer in terms of a healthy or robust ecosystem?

AS: You will see people who have either been touched in their family by an illness or something, or just the generations that have grown up with the wealth of their parents or grandparents wanting to have this type of engagement. If we tap into some of that and understand the role that biotech plays in value-based investing, the value that you can get from investing in a company has the potential to change people's lives. I think that's something that Hong Kong seems to have: the excellent academics, the capital, the socially meaningful orientation, and an organised orderly market. The predictability is really important, with Hong Kong as a bridge to greater China. Understanding how those dynamics can be helpful could be important too, because of the need, the size of the market, the patient population in China. Over time, the importance of China as a market will continue to grow.

To find out more about KPMG’s offerings for development-stage life sciences companies, please click here.

© 2020 KPMG Huazhen LLP, a People's Republic of China partnership, KPMG Advisory (China) Limited, a limited liability company in China, KPMG, a Macau partnership and KPMG, a Hong Kong partnership, are member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited  ("KPMG International"), a private English company limited by guarantee. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.

 

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