Legend Capital enjoys 4 MedTech IPOs in 1H2021, focusing on long-term and innovation investment

Recently, Berry Oncology, a company focusing on genomic testing of cancers in China, announced the completion of a US$99.15 million Series B1 financing round, with Legend Capital’s continuous support. This B1 financing round was led by China Merchants Capital Management Co., Ltd. Existing investors Qiming Venture Partners, along with new investors, including Zhongjin Qichen Industry Equity Investment Fund, E Fund, Fujian Venture Investment Management Co., Ltd., Xiamen C&D Emerging Industry Equity Investment Co., Ltd. and other prominent investors also participated in the funding round.

CVSource investment data shows that, the number of financing projects for medical devices in China reached 248, with a financing scale of approximately RMB26 billion in 2020, reaching five-year highest. According to iiMedia Research’s data, the market size of China’s medical devices industry reached RMB765.5 billion in 2020. However, Legend Capital has started investing in the medical device sector as early as 2010, exploring global investment opportunities for innovation continuously.

In the first half of 2021, Legend Capital’s four portfolio companies in the field of medical devices and diagnostics went public successfully; including New Horizon Health (06606.HK), the first public listed cancer screening company in China, Singular Genomics (NASDAQ: OMIC), an innovative sequencing technology research and development company, Chemclin Diagnostics Corporation (688468.SH), the clinical immunology diagnostic product company, and CareRay Digital Medical (688607.SH), a leading company in flat panel detector industry.

In addition, Legend Capital has also invested in projects including Axonics (AXNX), KingMed Diagnostics (603882.SH), Berry Genomics (000710.SZ), EasyDiagnosis (002932.SZ), Aohua Endoscopy, Bioheart, StarSportMed, ET Healthcare, Gkht Medical, Best Brain Health, Puyi Biological, and Reliable Med.

At present, Legend Capital’s investment in the medical and healthcare field mainly involves innovative drugs and biotechnology; medical device and diagnostic; professional services and digital healthcare. In 2021, seven of Legend Capital’s portfolio companies in medical and healthcare industry were successfully listed, while four more are currently in process. Half of them is in the medical device and diagnostic industry.

Legend Capital adheres to three investment principles: early, long-term and innovative investment. For example, as an early investor in Berry Genomics, Legend Capital supported the company’s development all the way to the capital market, and participated in each round of financing of Berry Oncology. ZHOU Jun, the CEO of Berry Oncology, expressed that Berry Oncology took fancy to Legend Capital’s reliable reputation and post-investment value add. Legend Capital has provided a lot of assistance on the business side as well as management and operation.

Legend Capital also invested in New Horizon Health, the first public listed cancer screening company in China, at a very early stage. In 2015, Legend Capital participated in New Horizon Health’s A1 financing round as a lead investor. Furthermore, CHEN Yiyou, the Chairman of New Horizon Health, recalled that when financing difficulties occurred in 2018, Legend Capital, as a shareholder, mobilized multiple resources to help New Horizon Health connect with follow-up lead investors, and over-proportionately participated in the investment, becoming the largest institutional investor of New Horizon Health. “At that time, the increased holdings of Legend Capital also gave new shareholders a lot of confidence,” he mentioned.

Legend Capital divides innovation into two categories, namely continuous improved innovation and disruptive innovation. Among them, Legend Capital attaches particular importance to disruptive innovation. This type of innovation not only requires technology, but also emphasizes more on demand-side scenario innovation. When judging innovation, Legend Capital starts from the demand side of the product, including three types: clinical unmet needs, new user groups, and temporary marginal but long-term promising non-mainstream markets.

In early 2012, the investment in ET Healthcare, as a typical project, examplifies Legend Capital’s foresight in identifying a star innovative company in the field of in vitro diagnostics. ET Healthcare’s underlying technology is world leading, with its headquarter in Silicon Valley. The company’s Pylon3D is a small-scale fully automated immunoassay system, and its sensitivity exceeds the level of the world’s most advanced large-scale immunoassay equipment, redefining POCT.

Jafar Wang, the Co-Chief Investment Officer of Legend Capital, said that, Legend Capital will consider to invest fast-follow or first-in-class companies and believes that Chinese first-in-class companies will definitely appear in batches in the next 5-10 years. Legend Capital is working hard to stay ahead of the curve in this trend. According to Jafar, Legend Capital’s investment pace has accelerated in the first half of 2021, and will continue to maintain the intensity.

Legend Capital makes systematic and detailed research to achieve a head start in research and investment. Joe Zhou, the Managing Director of Legend Capital, expressed that the team puts 80% of its energy on identification and selection before making the decision.

Over 80% of Legend Capital’s medical projects are selected based on its in-house investigation or ecosystem resources. The logic behind Legend Capital’s investment ecosystem lies in the establishment of several sub-industry clusters on the strength of the agglomeration effect of its portfolio companies. Starting from these niche clusters, the investment roadmap is extended outwards to build a larger and unique ecosystem. Besides attracting companies with better quality, Legend Capital leverages the ecosystem to incubate innovative projects, realizing a virtuous circle of multiple wins for all parties involved.