NewCo model gains traction among Chinese biotechs

NewCo, a relatively new business model that involves a joint venture (JV) between a biotech and a group of investors to bring the biotech’s promising assets to the global market, is gaining popularity among Chinese biotechs, who traditionally rely on out-licensing deals to capitalize assets, said speakers at an investment event hosted by Frost & Sullivan in Shanghai.

“The NewCo model has some key advantages compared with traditional out-licensing deals. For starters, It takes much less time and energy,” said Lu Qiwen, director of BFC Group, a Shanghai-based investor. She cited the example of the Chinese pharma Hengrui (SHA: 600276), which recently licensed out global rights (ex-China) for three GLP1 assets to Hercules CM NewCo. The deal immediately netted Hengrui $110 million and 19.9% stake in the NewCo.

Hercules was established in May in Delaware between Hengrui and a group of investors led by Bain Capital Life Sciences Fund. One of the major draws of NewCo model is that it often involves powerful investors who can provide significant resources, including top-tier talent, to speed up drug development, Ms Lu said.