Five months after announcing plans to develop a biotechnology business, Hong Kong-based technology banking group e2-Capital is beginning to put its money where its mouth is.
The company, along with six other investors, has chipped in HK$5 million ($640,000) for a 6.5% stake in ChipScreen BioScience, a HK$76 million drug-screening joint venture with Beijing-based Tsing Hua University. The biggest investor, with a nearly 19% stake, is Hong Kong's New World Development real estate group.
e2-Capital also agreed to become ChipScreen's financial advisor and help it raise future capital, which it says it will need in about two years. ChipScreen, which is based in Shenzhen, has developed proprietary biochip technology that can rapidly screen hundreds of potential new drug compounds and identify new disease targets.
e2-Capital is betting that companies such as ChipScreen will help spearhead the development of China's nascent biotech industry. Its aim is to bridge the gap between sceptical investors, cautious venture capitalists and territorial scientists.
"Our aim is to participate in every aspect of these companies' development, from angel funding to pre-IPO funding, to IPO," says Pang Hiu Ming, director of e2-Capital's BioTech Advisory Group. "China has a lot of basic talent and many returnees from abroad are coming back with a lot of drive and commitment. The market is there, the technology is there. What is needed is expertise in the capital markets."
Within the last week e2-Capital also inked deals to provide advisory and fund-raising services to biotech projects developed by Hong Kong-listed Stone Corp, one of the city's biggest information technology companies, and Lifetec, a Hong Kong-listed company that provides medical consultations over the internet and distributes Chinese and western medicines.
Stone, through a subsidiary, is investing HK$20 million to develop a technology that reduces the particle size of drug components, allowing them to be more easily absorbed by the body and reducing the amount of the active ingredient needed to make a drug effective.
Stone's first product, which has been approved in China, is a selenium supplement which the company hopes to market in the west as a food supplement. Unlike drugs, food supplements don't require approval from regulatory bodies such as the US Food and Drug Administration.
One of e2-Capital's tasks is to find a Hong Kong partner for Stone that can distribute its biotech products overseas. It also plans to help the company raise an unspecified amount of new funds to build production facilities for its biotech products and for marketing expenses.
Lifetec is investing HK$15 million to develop a new drug designed to treat hepatitis. e2-Capital's job is to advise the company and help it raise more funds within the next three months through a private placement of shares.
"Most of our income from these projects will initially come from advisory fees," says S.J. Wong, e2-Capital's chief executive. "The real fees will come when their fund-raising needs become more mature and at this stage we can't predict exactly when that will be."