Venture capital boost made to bolster R&D
BEIJING - Multinational drugmaker Eli Lilly and Co said on Tuesday it will continue its venture capital investment in China's biopharmaceutical industry. The move will to strengthen its research and development (R&D) strength and expand its presence in China.
Lilly is the first international pharmaceutical company operating such a fund in China. Since being established in 2007 with an initial investment of $100 million, the fund - Lilly Asian Ventures - has completed seven projects with a total investment exceeding 300 million yuan ($45.8 million) in China.
"We will continue it in China," said John C. Lechleiter, chairman, president and chief executive officer of the US-based company.
Lechleiter said that there are two broad criteria in choosing candidates. First, the company should have potential to be in the top ranking in its category in China, whether it's a drugmaker or pharmaceutical service provider. Second, it should have the potential to conduct business outside China.
"The challenge for us is to sort out companies with the best abilities and opportunities," he said. "We are selective."
Over the past four years, Lilly has invested in seven Chinese companies, at a pace similar to that of its venture capital fund in the United States, which was established a decade ago.
Lechleiter said Lilly's investment in these emerging Chinese companies is in cooperation with mature and well-established funds, which helps to guarantee capital safety.
Lilly also has at least one person on the boards of each of these Chinese companies, so it has a say in their corporate governance, a measure to ensure the fund's efficiency.
The company's latest venture-capital investment is in Zhejiang-based Beta Pharma Co Ltd, a biopharmaceutical company specializing in treating cancer and cardiovascular disease. The investments in the last four years are a long-term strategy for Lilly, Lechleiter said.
In addition to capital, the international company can provide mentorship and advice to these emerging companies and perhaps see them become partners in technology, products and services in the future.
Lilly is a research-based company that has been focusing on taking R&D strength to support business growth, said Li Yu, a researcher at the Samsung Economic Research Institute China.
The company has established a three-pronged R&D strategy in China: the venture capital fund, outsourcing to support its global portfolio, and co-developing with partners by sharing both interests and risks.
So far, partners in China have contributed to the development of more than 70 percent of Lilly's overall early-phase portfolio, the company said.
Eli Lilly (China) R&D Co Ltd was officially launched in Shanghai on March 14 to develop medications for diabetes patients in China and Asia. Lilly has invested more than 2 billion yuan in China - including an R&D center in Zhangjiang Hi-Tech Park in Shanghai - and built strategic partnerships with more than 10 local companies and academic institutions since the late 1990s.
"Lilly is maintaining strong momentum in China, which is well-evidenced by the incorporation of Eli Lilly (China) R&D Co Ltd in Shanghai," Lechleiter said. "China is now the world's second-largest economy and is expected to soon become the world's third-largest pharmaceutical market. Addressing this, we need to gain more insights into the market and incorporate them into our innovation road map and daily management."
In the 2010 fiscal year, the company's global sales exceeded $23 billion, 10 percent of which was from emerging markets, including less than 2 percent from China. Last year was also the ninth consecutive year that Lilly maintained year-on-year growth of more than 20 percent in China.
Li said that foreign pharmaceutical companies, such as Bayer Healthcare and Novartis, are competing to establish their R&D facilities in China, not only to develop medications tailored to local patients but also to provide support to their global networks.
