Well sequenced

Top biotech firm ditches New York for Shenzhen

Li Ge

Li Ge, founder of Wuxi AppTech

In 1979, the author Douglas Adams penned a novel in which a super computer called Deep Thought took 7.5 million years to answer the “ultimate question of life, the universe and everything” (the answer was 42). Adams may not have imagined that only decades after The Hitchhiker’s Guide to the Galaxy was published, scientists would unravel the ‘meaning’ of life by decoding human DNA, and even be able to genetically alter it.

The costs of doing so have also dropped much faster than most anticipated. It took $3 billion to produce the first draft sequence of the human genome in 2001. Today, consumers pay $100 or so to get their genetics tested through companies such as 23andMe.

But while costs have fallen, the data storage space required for genome sequencing is spiralling exponentially. Each human being has roughly three billion DNA base pairs, which take up about 70 to 100 gigabytes of data, equivalent to roughly 400 movies.

Craig Venter, one of the scientists who sequenced the first human genome, is building what he claims will be the world’s largest database, storing the genomes of a million people by 2020. But his Californian-based company, Human Longevity, has a number of Chinese rivals hoping to steal his crown.

Nature magazine says the Chinese government wants to make the country a DNA superpower and is investing an estimated $9.2 billion over the next 15 years to do so. It estimates the country already has about 20% to 30% of global genome sequencing capacity.

One of China’s leading companies in the sector is Wuxi PharmaTech, which was listed on the New York Stock Exchange until December last year. As we wrote in WiC325, it is one of the 50-odd Chinese entities, which have used private equity backing to delist from the US markets in the hope of securing better valuations back home. Wuxi now numbers Hillhouse Capital, Temasek and Ping An Insurance among its backers.

Its founder and chairman, Li Ge, tells CBN the company delisted because he got fed up with the American market’s short-term investment horizon, and not because he hoped for a higher valuation back home.

“I was very disappointed when our stock fell 20% after we released our first quarter earnings report in 2015,” he said. “We want to keep innovating, but that kind of behaviour doesn’t incentivise us.”

It cost $3.4 billion for Wuxi to go private according to S&P Global Market Intelligence data. But company insiders told CBN that Wuxi’s homecoming could see it become the most valuable pharmaceutical firm in the A-share market. That title currently belongs to the Shanghai-listed Jiangsu Hengrui Medicine, which has a market capitalisation that reached Rmb99.5 billion ($15 billion) this week.

It means that Wuxi is hoping its market value could increase five times in less than one year, simply by swapping its listing locale.

That actually involves three different fundraising plans. Wuxi PharmaTech is now splitting itself into three listed divisions. Its small molecule division, Syn-The-All, already went public on the Beijing-based Third Board, an over-the-counter bourse, in late 2015. The unit now carries a valuation of $1.5 billion.

Its fastest growing subsidiary, AppTec Biologics, is being primed for a Hong Kong IPO towards the end of the year on a valuation also around the $1.5 billion mark. It is currently building the world’s largest biologics plant (using animal cells to create large molecules) and is expected to account for about 10% to 15% of its parent’s revenues once it ramps up in 2017.

Finally, Wuxi AppTec is hoping to secure a backdoor listing in Shenzhen. In May, it launched a precision medical cloud (Mingma) to store genome data in a joint venture with Huawei, which is providing the networking expertise. Wuxi AppTec will do the DNA sequencing and another offshoot, Wuxi NextCODE, will be the platform for organising and retrieving the data.

Wuxi NextCODE is also working on the Genomics England project, which is analysing genetic variants that trigger cancer, as well as with the Simons Foundation in New York, which is analysing variants that cause autism.

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