Sequoia China setzt auf: Das erste Projekt eines chinesischen NewCo im Bereich innovativer Arzneimittel

“In large pharmaceutical companies, some drugs are discontinued due to strategic adjustments or bureaucracy. Small pharmaceutical companies have to concentrate all their resources on one or two drugs and can't even think about other promising drugs.” Ten years ago, a 30 - year - old Indian - American assessed the situation of pharmaceutical companies in Europe and the United States in this way.

The young man named Vivek Ramaswamy wanted to create value from these neglected drugs. He bought these drugs under development at low prices, founded new companies for further research and development, and sold the drug or the company to large pharmaceutical companies after good test results to achieve high returns.

As a result, Ramaswamy became a billionaire. His money - making method is largely referred to as “NewCo” in China, which is the abbreviation for New Company. Since 2024, there have already been 14 similar transactions in China's innovative drug industry during the capital winter.

In these NewCo transactions, the sellers are both large companies like Hengrui Medicine (600276.SH/01276.HK) and small innovative pharmaceutical companies like Quanxin Biotech (02509.HK). Initially, the buyers were mainly American funds, but now the industry is gradually changing.

In early August, Lepu Biotech (02157.HK) completed a deal with an upfront payment of $10 million, and its stock prices rose for three consecutive days. However, few noticed that this was the first NewCo transaction in which Chinese investment companies like Sequoia China were the buyers.

Gu Cuiping, the managing director of Sequoia China, said in an interview with the Economic Observer that the value of this transaction was not only aimed at going global but also utilized China's clinical efficiency and cost advantages to increase the value of the target drug in the global market.

What impact will the entry of Chinese funds into NewCo transactions have on the market?

The first NewCo led by Chinese funds

Before August 2025, the buyers in NewCo transactions of Chinese innovative pharmaceutical companies were all foreign funds, including well - known funds like Atlas Venture, Orbimed, and RA Capital.

A partner of Atlas Venture named “China” the second most important keyword in the global biopharmaceutical industry in 2024 and publicly stated: For Western companies, it is crucial to obtain innovations from China.

Sequoia China created a new model in early August and became the buyer in a NewCo transaction for the first time, jointly with six other Chinese funds.

The negotiations between Sequoia China and Lepu Biotech began in 2024. At that time, Sequoia China was very interested in the popular TCE (T - cell connectors) field. After an investigation, two TCE pipelines of Lepu Biotech for solid tumors caught Sequoia China's attention, as most TCE pipelines in the market still targeted blood cancer and there were actually not many projects in the clinical phase for solid tumors.

The investment leader of this transaction was Gu Cuiping, who joined Sequoia China in 2012 and focuses more on investing in cutting - edge medical fields such as gene editing and cell therapy. Before joining Sequoia China, she was the Asia - Pacific investment manager at Orbimed and the project manager in the global research and development department of the multinational pharmaceutical company Eli Lilly. Gu Cuiping said that her team's investment preferences were not aimed at following trends but at finding differentiated assets. They believed that Lepu Biotech's pipelines had technological innovations and breakthroughs.

2024 was a year that people in Lepu Biotech and the entire pharmaceutical industry would not forget quickly. Innovative pharmaceutical companies jointly experienced the capital winter, and confidence in the industry hit rock bottom.

Lepu Biotech was also under financial pressure. On the one hand, it had to invest money in the marketing of the already - marketed PD - 1 drug; on the other hand, it also needed more capital to advance the ADC drug in the late clinical phase. Spinning off early - stage assets like TCE was a realistic choice and also the common choice of innovative pharmaceutical companies.

The transaction model of both sides was as follows: Lepu Biotech received an upfront payment of $10 million and at the same time held 10% of the shares in the new company Excalipoint. In the future, there is a possibility of receiving a total of $848 million in research and business milestone payments and sales shares, which offers potential for growth.

The selection of assets is only the first step in a NewCo transaction. A successful NewCo also needs two elements: sufficient capital and professional operators. In terms of capital, Sequoia China, Yuansheng Venture Capital, and Xingze Capital, together with four other institutional investors, will make a Series A investment of $41 million in Excalipoint.

So far, two executives are known in the founding team: Fang Lei and Zhu Jielun.

Fang Lei, 42 years old, was the former research and development leader of the two TCE pipelines of Lepu Biotech. Gu Cuiping already knew him. Gu Cuiping evaluated that Fang Lei had shown remarkable innovation ability as the research and development leader at Tianjing Biotech and was very motivated at work. In addition, having the original researcher lead the new company would ensure the seamless connection of core technology and research strategy.

Zhu Jielun focuses on financing and business development (BD).

Gu Cuiping explained the complexity of this transaction: “In traditional equity financing, there is already an existing company, and one only needs to find investors and complete the negotiations. In this transaction, however, it involves the interests of three parties: the founders of the new company (like Fang Lei), the new investors (like Sequoia China), and the listed company (Lepu Biotech). If any of these parties is not well - coordinated, the transaction may fail.”

Zhu Jielun has long worked in investment banking. His professional knowledge in financing and complex transaction structures was the key to bringing the three parties together and enabling the transaction. Moreover, he was formerly the CFO at Tianjing Biotech and worked with Fang Lei.

Gu Cuiping announced that Sequoia China would continue to search for executives for Excalipoint. “We will provide a lot of support in building the early - stage team. Also, we have been interested in TCE for a long time, and our own team also has a lot of experience regarding targets. We can give Fang Lei valuable advice.”

The local evolution of NewCo

In the past, NewCo was often associated with going global, but the quality of this transaction by Sequoia China is significantly different – “Chinese innovative drug assets + Chinese capital + Chinese professional managers”.

“In many previous cases, the goal was to develop the drug overseas and build a team there. More emphasis was placed on overseas clinical trials, and the exit was through selling to multinational pharmaceutical companies,” said Gu Cuiping. “We place more emphasis on the overall value of the assets, not just the value in the overseas market. This asset can create value more quickly by utilizing China's clinical efficiency, cost advantages, PI resources, and patient resources.”

In contrast to the previous practices of American funds that bought Chinese assets and immediately conducted clinical trials in the United States, Excalipoint will conduct Phase I clinical trials for two TCE drug molecules in China after this transaction.

“The plan after the Phase I clinical trials is not entirely clear yet. Previously, people thought that multinational pharmaceutical companies (MNCs) would always need some American (clinical) data when buying a Chinese asset. But now it seems that this is not necessarily the case. In many recently completed overseas transactions, there are only Chinese clinical data, and the MNCs accept it,” said Gu Cuiping. Whether Excalipoint will conduct clinical trials in the United States in the future depends on whether there are suitable indications at that time.

Zhu Jielun also appreciates NewCo transactions led by Chinese investment companies and local founding teams. He publicly explained that in the early stage of a NewCo, having a Chinese team lead and conducting pre - clinical and Phase I studies in China only requires an initial investment of two to three million US dollars, while in the United States, at least $100 million would be needed for a NewCo.

According to his knowledge, the total cost per subject in Phase I clinical trials in China is about 300,000 to 400,000 yuan, while in the United States, it would be 200,000 to 300,000 US dollars. The difference is five to seven times, and the progress speed is also five times slower.

What a successful NewCo needs

In contrast to traditional BD (Business Development) transactions, the goal of NewCo is to sell the value - increased innovative drug assets under development to another buyer instead of bringing the drug to the market.

Therefore, finding a next - stage buyer is the key to the success or failure of NewCo.

An executive of a well - known American NewCo investment media told the Economic Observer that NewCo assets ultimately flowed to large companies. It was crucial that the organizers had close personal contacts with multinational pharmaceutical companies and knew the pipeline requirements of potential buyers.

Sheng Da, the founder of Yinhang Capital, searches for high - quality Chinese innovative drug assets for several foreign funds and professional managers. In his opinion, a successful NewCo must have a more experienced team of professional managers. In Europe and the United States, there are many professional managers who have already had several successful company founding experiences behind them. He gave an example that the multinational pharmaceutical company AbbVie wrote off a NewCo it had acquired at the beginning of 2025 for $3.5 billion because the Phase II clinical trials of the key drug of this NewCo had failed. However, from the perspective of the professional managers who had sold the NewCo, this was also a certain success – the asset was sold at a suitable time and an ideal price.

The professional manager who completed the transaction with AbbVie is named Tony Coles. In 2013, Onyx Pharmaceuticals, led by him, was acquired by Amgen for $10.4 billion. He was also an executive at multinational pharmaceutical companies such as Merck and Bristol - Myers Squibb.

In the past two years, both the executive of the well - known American NewCo investment media and Sheng Da have got to know many Chinese innovative pharmaceutical companies. Their common experience was that many innovative pharmaceutical companies were most interested in the upfront payment in the transaction. Compared with traditional BD, where the company is directly sold to a large pharmaceutical company, the upfront payment in NewCo is generally lower.

In the opinion of some executives of innovative pharmaceutical companies, the safely - received upfront payment best shows the seriousness of the buyer. Therefore, some also believe that NewCo is foreign capital “picking young plants”. Some executives of innovative pharmaceutical companies have also publicly stated that they don't want anyone to mention NewCo near them because it would annoy them.

But for innovative pharmaceutical companies under financial pressure, NewCo is still an important way to obtain capital. Several primary - market investors told the Economic Observer that the recovery of the stock prices of innovative drugs since the beginning of the year has only improved the financial situation of listed companies. Many non - listed pharmaceutical companies are still facing difficulties in raising capital. They expect that there will be many more NewCo transactions in the future.

Sheng Da believes that many Chinese innovative pharmaceutical companies currently still understand NewCo transactions relatively one - sidedly. “NewCo does not dilute the value of the company's (seller's) other pipelines, does not require further capital and personnel investment from the company (seller), and the seller can share in the capital gains from the pipeline acquisition. It is an option with long - term value.”

Different keywords between China and abroad: Going global and risk separation

The word NewCo is not new to many investors and executives of pharmaceutical companies. In fact, this word has only been known in China's innovative drug industry for a little over a year.

In May 2024, Hengrui Medicine licensed three drugs under development to a new American company jointly founded by four American investment companies. In addition to the cash payment, Hengrui Medicine also received 19.9% of the shares in the new company.

In Hengrui Medicine's explanation, the keyword of this transaction was going global – expanding the overseas market.

Since then, this cooperation model of “Chinese pharmaceutical company assets + foreign capital + foreign professional managers” has been the popular definition of NewCo in China, which is associated with the beautiful vision of a vast overseas market.

In Sheng Da's opinion, NewCo means that low - cost Chinese assets can achieve maximum benefits overseas. “Conducting clinical trials overseas not only requires a more experienced team but also considerable research and development expenses. Foreign funds and professional managers can make up for the deficiencies of Chinese companies.” Currently, Sheng Da is searching for Chinese assets for American professional manager teams in different segments such as ophthalmology and the small nucleic acid industry to achieve NewCo cooperation.

Compared with the License - Out BD model, the upfront payment in the NewCo transactions completed so far is generally lower. But in the booming phase of innovative drugs on the stock market in 2025, the stock prices of companies that have completed License - Out transactions and NewCo transactions have risen. For example, the stock price of CStone Pharmaceuticals (02162.HK), which has completed several NewCo transactions, has risen from HK$27 per share at the beginning of the year to the current price of HK$71 per share.