Domain Associates, the life sciences venture firm based in San Diego and Princeton, NJ, says today it has formed a partnership with the Beijing-based firm Elite Consulting to license biomedical products and technologies from the West, and to help commercialize those technologies in China.
The exclusive partnership, called Domain Elite, intends to in-license rights to drugs, medical devices, and diagnostic technologies from life sciences companies in the U.S. and elsewhere. With the rights to a particular biopharmaceutical asset or set of assets secured, Domain Elite plans to start a company in China to move the technology into China’s emerging healthcare market.
Domain is providing seed financing to Domain Elite to search for the kind of products that fit healthcare needs in China. The partnership also plans to recruit executives for each company and would look to Domain and its venture capital network to provide Series A funding as needed for each startup. In this way, Domain Elite could create multiple biomedical startups in China for years to come.
“We’re trying to create our own investment opportunities in China, and fulfill unmet medical needs and improve healthcare in China,” Domain partner Brian Halak told me in a phone call from Beijing earlier this week. He said the concept is comparable in some ways to The Foundry, the Menlo Park, CA-based incubator for medical devices.
“VCs are always looking for the next great technology,” Halak said, “but at Domain, we’re also looking for the next great business model.”
For example, Domain revealed a year ago that it had joined forces with Rusnano, the Moscow-based nanotechnology arm of the Government of the Russian Federation, to invest as much as $760 million in life sciences ventures in both the U.S. and Russia. The deal has provided additional capital for Domain-backed startups like Lithera in San Diego and Regado Biosciences in Basking Ridge, NJ. Rusnano and Domain also agreed to jointly develop a drug and medical device manufacturing facility in Russia that can produce drugs and products that have been licensed from U.S. life sciences startups.
Domain’s initiatives in China and Russia were not part of a grand strategy, Halak said. But both were rooted in something the firm recognized three or four years ago—that emerging markets were becoming increasingly significant to Domain’s portfolio companies. While the firm’s initiatives in China and Russia evolved independently, Halak said “the common thread is that these emerging markets are in dire need of innovation.”
In assessing China’s emerging healthcare market, Halak said he was struck by the country’s enormous need for medical technology of all kinds. “There is not as much innovation as people there would like, whether they are patients, doctors, or other constituencies,” he said. “Another thing we noticed was that the VC industry [in China] was very competitive, and it wasn’t that attractive to us. Things just get bid up very quickly, and we needed to find an alternative way to do things.”
As he thought about the problem, Halak said he recognized that Domain’s ability to access new life sciences technologies through its network of portfolio companies, entrepreneurs, and other venture investors represented a unique resource.
For its part, Elite Consulting has gained extensive knowledge of healthcare in China in the 16 years since the firm was founded. The Beijing firm provides a range of executive management, clinical development, and other services to some 1,200 pharmaceutical and medical product companies throughout China. Halak said he also knew Micah Zimmerman, a partner at Elite Consulting who will be leading the Domain Elite partnership in China, when the worked together in the early 1990s at the Wilkerson Group, a pharmaceutical and medical products consulting firm.
In developing the business model for Domain Elite, Halak acknowledged that U.S. drug developers and biomedical innovators might not see many incentives to license their technologies for an emerging healthcare market like China’s. “One of the big challenges is going to be structuring these deals in a way that these companies are willing to license these assets,” he said.