China’s Kaitai Capital bets big on biomedicine, AI, digital economy

Yonghong Xu, Kaitai Capital Partner and CEO

Even as Hangzhou-headquartered Kaitai Capital is taking a cautious approach towards fresh investments amidst the COVID-19 pandemic, it is prioritizing funding in its portfolio companies.

In the past few months, it has increased its investments in companies such as ABM Therapeutics (drug maker), Exegenesis Bio (gene editing and genome engineering company), Lupeng Pharmaceutical, and Atom Bioscience and Pharmaceutical, among others.

“We have enhanced and concentrated our investments in the healthcare industry, especially in the field of biomedicine,” said Yonghong Xu,  partner and CEO at Kaitai Capital, in an interaction with DealStreetAsia.

The sectors it covers are oncology, metabolic disorders, cardiovascular risk, anti-infection, autoimmunity, neuroscience, skin disease, and respiratory illness. And within the sector, it spots big promise in next-generation reagents, small molecular targeted drugs, macromolecular anti-body treatments, gene and cell therapies, among others.

The 11-year-old Kaitai Capital currently has 50 billion yuan ($7.5 billion) in assets under management.

Edited excerpts of an interview with Xu:

Could you take us through Kaitai’s interest and prominent portfolio in biomedicine? 

Since 2011, Kaitai has made over 70 projects in biomedicine covering sectors such as oncology, metabolic disorders, cardiovascular risks, anti-infection, autoimmunity, neuroscience, skin disease, and respiratory illness.

Some of our successful investments in innovative drug-makers include Lupeng Pharmaceutical, OncoImmune, F&S Pharmatech, Atom Bioscience and Pharmaceutical, Asieris Pharmaceuticals, and Lynk Pharmaceuticals.

Which niche markets in biomedicine is Kaitai considering investing in? 

We take priority in next-generation reagents, small molecular targeted drugs, macromolecular anti-body treatments, gene and cell therapies, and antibody-drug conjugates.

How has China’s biomedicine industry changed over the past few years? 

The changes we have seen include the increasing consciousness of intellectual property, the dramatic shift from generic drug to innovative medicine, the profound innovation of the medical system, and the allotment of global resources to China market.

What’s the trend for biomedicine investment over the next 1-2 years in China? And what are Kaitai’s business plans? 

Four key trends drive biomedicine moving forward. Firstly, the massive use of novel technologies such as bioinformatics, big data, algorithm and AI. Secondly, genetic and cell engineering will facilitate precision medicine. Thirdly, the integration of innovative drugs and generic medicines. Fourthly, the huge unmet medical needs will be discovered with the help of technology.

We will further help solve unmet requests by technology innovation.

What’s your prediction for the targeted industries over the next 15 months? 

Undoubtedly, [the] new generation technology can’t stop leveling up innovations across industries including new consumption, digital economy, and precision medicine. Thus, more capital will flow into the tech-driven markets, in which we will also see more investments.

Apart from biomedicine, which businesses will Kaitai bet big on in the coming 1-2 years? Why? What are the opportunities there? 

We will ramp up efforts in AI & digitalization, community innovation & consumption upgrade. Not only can they transform industries globally, but they can also be the engines for the Chinese economy transition and upgrade. Specifically, new technologies like AI, smart internet, cloud computing, and big data will lead to an emerging economy consisting of communication innovation, super factory, and hyper network.

Could you share more insights about community innovation and consumption?

AI economy has come, with technology innovation at the core. Consequently, we are in need of quick responses to the most advanced technology. Recently in July this year, we have invested in Beijing-headquartered software-as-a-service (SaaS) startup Worktile.

In addition, we believe that a consumption-based economy will have a significant contribution to the industries. We have to understand that the consumers will expect beyond well functional products, more importantly, emotional satisfaction. Therefore, we invest in those in synergy with consumer groups such as oatmeal brand Wangbaobao and community goods e-commerce platform Xituan.

Kaitai participated in a $56m funding in the US-based Oncolmmune in September. What are Kaitai’s plans for the overseas market? 

We haven’t set limits in regions – albeit, the China market is our base. We have made some investments in the US and Europe – including small-molecule RNA-targeting medicine developer Rgenta Therapeutics (US),  hematologic malignancies designed antibody therapy Amphivena Therapeutics (US), Forkhead BioTherapeutics (US), and Oxford BioTherapeutics (UK).

Has the COVID-19 pandemic coupled with the deterioration in the Sino-US relationship influenced Kaitai? What’s your investment strategy? 

Our investment in the China market is stable, while we have slowed down in foreign countries. We do hope we will nurture a highly competitive capacity to enter into other markets.

First and foremost, we have further enhanced and concentrated our investment in the healthcare industry, especially in the field of biomedicine. We re-upped in some of our invested projects, which are drug maker ABM Therapeutics (Shanghai), gene editing and genome engineering company Exegenesis Bio (Hangzhou), Lupeng Pharmaceutical (Guangzhou), Atom Bioscience and Pharmaceutical (Suzhou), among others.

Could you throw some light on your LPs? How many RMB funds have Kaitai closed? And will Kaitai launch a new fund soon? 

Mostly, our LPs are from insurance groups, listed entities, private-owned organizations and individual investors. Over the years, Kaitai has had initiated two or three funds annually. As of October 2020, Kaitai has secured [capital] for 17 funds. We will ramp up efforts to increase the number between three to five in the coming years.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.