Core Viewpoint - The article emphasizes the need to shift the focus in innovative drug investment from "people" to "assets," highlighting the importance of molecules, technologies, and pipelines with significant therapeutic potential and commercial value in the biopharmaceutical sector [5][6]. Group 1: Investment Strategy - Vivo Capital has adopted a new approach called the "accelerator" model, which involves selecting high-quality drug assets globally and establishing new companies (NewCo) to introduce them to China, leveraging China's integrated advantages in clinical trials and resource allocation [6][12]. - The firm has raised $740 million for its public market strategy and currently manages over $7.5 billion in assets, indicating a robust investment capacity [6][8]. - The traditional VC model in biopharmaceuticals is deemed ineffective, as it has led to resource misallocation and excessive reliance on capital markets, which can jeopardize drug development when IPO opportunities diminish [8][9]. Group 2: Market Dynamics - In the first half of 2025, China saw a total upfront payment of approximately $2.64 billion for innovative drug license-out transactions, surpassing the primary market financing total of about $1.62 billion [8]. - The article notes a significant gap between the investment in innovative drugs (approximately $200 billion over the past decade) and the projected annual sales of domestic innovative drugs in 2024 (around 60 billion RMB, or less than $10 billion) [9]. - The article highlights that the investment returns in sectors like food, pharmaceuticals, and aviation are often marginally negative due to their substantial social value, advising investors from non-biopharmaceutical sectors to be cautious [9]. Group 3: Asset Development and Evaluation - The asset development process involves a five-tier evaluation system, including assessments from the original technology company, Vivo Capital, the NewCo board, development partners, and potential buyers [13]. - The decision to advance or halt a project is influenced by both scientific data and dynamic market competition, ensuring efficient resource allocation [13]. - Vivo Capital's investment strategy has evolved through three iterations, culminating in the establishment of the "accelerator" model, which focuses on resource allocation around promising assets [13][19]. Group 4: Leadership and Team Dynamics - The selection of leadership for new ventures is critical, with a focus on finding "drivers" who possess international perspectives and resource integration capabilities rather than traditional founders [18]. - The article emphasizes the need for a collaborative approach among various talent types, including those who identify market needs, researchers, and business development professionals [15][16]. - The challenge lies in accurately assessing individuals' capabilities in a complex and high-barrier industry, where misalignment can lead to resource misallocation [16]. Group 5: Market Outlook - The article expresses optimism about the long-term prospects of the Hong Kong stock market for innovative drugs, despite a recent correction, citing improved asset quality compared to three years ago [20][21]. - Factors contributing to the positive outlook include regulatory alignment with international standards, the return of overseas experts, the rise of specialized service platforms, and substantial capital inflows [21][22]. - The article notes that global pharmaceutical companies currently have approximately $1.2 trillion in available funds, creating opportunities for domestic innovative drug companies to engage in business development transactions [23].

Core Insights - The investment philosophy in the innovative drug sector is shifting from "investing in people" to "investing in assets," emphasizing the importance of molecules, technologies, and pipelines with significant commercial potential [1][4][7] - Traditional VC models in the biopharmaceutical industry are becoming ineffective, necessitating new organizational approaches to reduce trial and error costs [4][5][6] - Vivo Capital's new strategy, the "Vivo Accelerator," aims to identify high-quality drug assets globally and introduce them to China, leveraging the country's integrated advantages in clinical trials and resource allocation [1][8][10] Investment Strategy - Vivo Capital has raised $740 million for its public market strategy and currently manages over $7.5 billion in assets [1] - The "Vivo Accelerator" focuses on a broader range of assets, including mid-stage concept validation and clinical development, rather than just early-stage drug discovery [7][8] - The company employs a five-tier evaluation process for pipeline assets, considering scientific data and market competition to make informed decisions on resource allocation [9] Market Dynamics - The Chinese innovative drug market is experiencing a significant shift, with license-out transaction upfront payments in the first half of 2025 reaching approximately $2.64 billion, surpassing primary market financing [4][17] - The past decade saw around $200 billion invested in China's innovative drug sector, yet the annual sales of domestic innovative drugs are projected to be around 60 billion RMB (approximately $8.5 billion) in 2024, highlighting a substantial gap between investment and returns [5][6] Future Outlook - Vivo Capital anticipates that by the end of 2026, the Vivo Accelerator will yield industry-recognized results and potentially produce star projects [3] - The long-term outlook for the Hong Kong stock market is positive, with expectations of a sustained upward trend over the next three to four years, driven by improved asset quality and regulatory alignment [15][16] - The global pharmaceutical companies currently have approximately $1.2 trillion in available funds, creating opportunities for domestic innovative drug companies to engage in business development transactions [18][19] Operational Challenges - The complexity of drug development necessitates collaboration among various talent types, including those who identify market needs, researchers, and business development professionals [12] - The challenge lies in finding the right individuals who can effectively lead and integrate diverse expertise within the drug development process [12][13] - Vivo Capital emphasizes the importance of strategic mergers and acquisitions as a means of market integration and efficiency enhancement, rather than opportunistic transactions [19][20]