Pivotal Liu Dan: Valuing China's medical innovation achievements and exiting has become a breakthrough point in the development of the industry

Pivotal bioVenture Management Joint 伙人 Dr. Tan Yanagi

Enterprises with new quality productivity must have more cutting-edge technology research and development capabilities, which can bring qualitative changes to their fields.

In May this year, Dr. Liu Dan, who has 20 years of experience in the healthcare industry, joined Pivotal bioVenture (now known Chinese as Pivotal Capital or Pivotal Biotech Capital), an international US dollar fund, as the managing partner of China. The market is looking forward to what changes this investment institution focusing on life science and technology will usher in after Liu Dan joins.

Pivotal bioVenture was initiated by Nan Fung Life Sciences Group Limited (Nan Fung Biotech), a subsidiary of Nan Fung Group in Hong Kong, which focuses on global life sciences investments.

Since the establishment of the United States business in 2017 and the establishment of the China business in 2018, Pivotal has developed a broad international perspective and global resource coordination capabilities. It is understood that Pivotal is committed to finding innovative products and technologies around the world, and has established or invested in a number of leading life science companies in the Greater China region to meet the medical needs of the growing global market, especially the Chinese market.

Currently, Pivotal's main investment areas include biopharmaceuticals, medical devices, and medical services.

In recent years, driven by new quality productivity, the medical industry has also ushered in a lot of changes. In Liu Dan's view, enterprises with real new quality productivity must have more cutting-edge technology research and development capabilities, which can bring qualitative changes to their fields.

Referring to the current investment in the medical field, Liu Dan bluntly said that due to the obstruction of investment exit, market-oriented institutions in the primary market are generally in a state of stagnation and wait-and-see this year. He called for facing up to the scientific and technological value and economic value brought by innovative drugs to society, and it is China's independent innovation in the medical field in the past decade that has provided high-quality and affordable medical products for China, and China has also moved to the forefront of the world in this field. The continuous innovation and development of the industry requires the support of smooth exit channels.

"The breaking point of the current market is the exit, and the exit is blocked, which makes it difficult for upstream institutions to circulate after 'water injection' and 'water storage'. Only when the exit channels of the capital market are unimpeded and the factors of production are truly allowed to circulate, can the vitality of innovation be remobilized. Liu Dan said.

The following interview content is compiled by Rongzhong Finance.

Rongzhong Finance: How do you understand the impact of new quality productivity on the investment strategy of our institutions?

Liu Dan: My understanding of the new quality productivity is that technology must be at the forefront, and compared with the original, it must not only be innovative, but also valuable to achieve qualitative change. In the tide of entrepreneurship some time ago, "volume" has become a norm, or sometimes in order to highlight innovation, deliberately make some meaningless changes, known as innovation. In the current investment strategy of institutions, these pseudo-innovations and virtual innovations have been eliminated, and we will only focus on innovations with real value.

Rongzhong Finance: What is the development status of investment in the medical and health industry at this stage? What are the more obvious characteristics and changes of the domestic primary market this year?

Liu Dan: The medical and health industry as a whole is still relatively sluggish, and it is difficult for a smart woman to cook without rice, reducing production capacity and digesting some negative effects of excessive valuation growth in the past. Due to the obstacles in the investment exit link, the market-oriented institutions in the primary market are generally in a state of stagnation and wait-and-see this year. To quote one of our previous founders, he said of the current financing dilemma: "Everyone is not investing, instead of choosing the best." ”

Rongzhong Finance: In the first half of the year, "high-end devices", "domestic substitution", "globalization", and "meeting unmet clinical needs" are the keywords that almost all institutions are still willing to sell. In your opinion, what causes this? Will it trigger another investment bubble in some industries?

Liu Dan: Due to the opportunity of fund survival, a small number of institutions will invest in a very small number of preferred directions and styles, such as domestic substitution, unmet demand, etc., but considering that the current investor dominates the market and has strong bargaining power, it is basically still relatively close to the flat round state, and cherishes the shot, it should be said that the investment bubble is very small.

Rongzhong Finance: In the past two years, many invested companies have been experiencing dire straits, as an investment institution, what have you done to empower medical companies this year? What are the typical difficulties faced by enterprises?

Liu Dan: Post-investment management has always been the focus of our attention, in this situation, we will take some measures to simplify the management of the company, in the rapid development stage of the company, often feel that every step of expansion is necessary. However, in the current tightening situation, reflecting on past expansion, we can see that many resources can be contracted and concentrated to improve the efficiency of use. It should be said that the invested companies that have taken measures to streamline the administration have basically not experienced a decline in efficiency, which has alleviated the company's cash flow tension to a certain extent.

Rongzhong Finance: For medical devices, new drug research and development, etc., what subdivisions do we focus on this year? What are the phases of the project? Which projects have been launched and what factors are mainly considered, you can share 1-2 investment stories.

Dan Liu: As one of the few international dollar funds in the market that still has new funds for market-oriented investment, we focus on some therapeutic areas and innovative pipeline opportunities at the same frequency abroad, or some large varieties with China's unique market characteristics and usage habits. In these areas, we have more linkage with foreign US dollar VCs, and often form groups (funds, teams and solutions) to lead investments, and we will also focus more on exploring the intrinsic value of domestic assets from a global strategic perspective. Therefore, this year, everyone in the industry generally feels that the flowers are blooming inside the wall and fragrant outside the wall, and the good seedlings have been "bought abroad".

Rongzhong Finance: China's entrepreneurship and innovation are inseparable from capital support, for the future, investment institutions and Chinese enterprises through the economic cycle, what do you want to call for or suggest?

Liu Dan: I think we should face up to the real value that innovative drugs bring to society, and the reason why the medical insurance and people's medical burden for serious illnesses have increased from hundreds of thousands of yuan a year ten years ago to thousands to tens of thousands of yuan now is largely due to China's independent R&D and innovation, which provides high-quality and affordable similar products. If the exit of the capital market is still difficult to operate, resulting in the stagnation of China's science and technology innovation ecosystem, it will be a pity that the medical industry has been innovating for so many years of hard-won results. We expect state-owned assets to take the lead in participating in market investment and construction on behalf of RMB patient capital, but we should also understand that the real breaking point is in the exit, which is hindered by the withdrawal, which makes it difficult for upstream institutions to circulate after "water injection" and "water storage". Only when the exit channels of the capital market are unimpeded and the factors of production are truly allowed to circulate, can the vitality of innovation be remobilized.

In addition, regarding the investment terms that some industries are concerned about, such as repurchase, many peers have also spoken out recently, and we must truly understand the evolution logic of their terms from US dollars to domestic RMB, and truly understand and practice from the healthy and sustainable development of the industry's ecosystem, so as to avoid being unable to get its shape and lose its spirit.