VCs are capitalizing on a higher demand for pharmaceutical cosmetics and skincare products, driven by an expanding and increasingly affluent middle class
VCs are capitalizing on a higher demand for pharmaceutical cosmetics and skincare products, driven by an expanding and increasingly affluent middle class
Venture capital deals in the biotechnology sector skyrocketed in both number and value when the pandemic started spreading globally during 2020. Globally, an average of near 1,531 biotech VC deals were completed between 2020 and 2022, averaging at a total of $43.7bn per year. The aggregate value more than doubled compared to 2019’s $19.4bn. In APAC, 587 deals were completed with a total value of $10.0bn in 2022, accounting for 26% of global deal value, up from just 13% in 2019 (Fig. 1).
Since then, biotech deals have ventured beyond COVID-19 vaccines and medications, into fields such as beauty and wellness, cancer treatments, and novel gene therapies. Notably, there has been an increase in deals in the currently booming beauty sector in the APAC region, as venture capitalists spot potential in growing consumer demand from the region’s expanding and increasingly affluent middle class.
This is especially true in China, where a record seven biotech beauty deals were completed in 2022, accounting for over half of the global total of 13 deals (Fig. 2). During the pandemic, skincare users in China started to pay more attention to the ingredients in their beauty products, with an increase in the search volume for “streamlined skincare” and “sensitive skincare”, found China-based online market research firm Daxue Consulting. The consulting firm also said that pharmaceutical skincare brands backed by biotechnology research and development (R&D) have become increasingly popular.
China’s skincare market reached $37.9bn in 2021, and is expected to reach $67.5bn by 2027, growing by a CAGR of 10.2% from 2022 to 2027, according to management strategy and market research advisory firm IMARC Group. In recent years, local brands have been leveraging a plethora of hyperlocal social media platforms and strategies such as influencer livestreaming to demonstrate the efficacy of products, successfully educating the audience and generating new revenue simultaneously.
Capitalizing on beauty
Beauty and wellness companies raised two of the largest biotechnology VC deals to date between 2022 and 2023. Xi’an-headquartered Giant Biogene raised $1.15bn in a pre-IPO round including Chinese investment firms such as Legend Capital and CDH Investments. The company specializes in skin treatments and recombinant collagen production, an alternative to animal-based collagen. It owns eight brands spanning skincare, beauty facial masks, medical dressings, and supplements, which are sold on e-commerce platforms like JD.com. Giant Biogene debuted on Hong Kong’s stock exchange after raising $70mn in its initial public offering (IPO) in October 2022.
The $600mn unspecified round raised by South Korea-based Seanol was the second largest biotech VC deal in the same period. It was backed by a sole investor: the German asset management company DWS Group. The company’s main products are bio-drugs, skincare, body care, hair care, and rapid cell generation materials based on kelp extract.
While South Korea’s beauty industry has arguably been a leader in Asia, in terms of the most popular trends and products, China’s burgeoning middle class is seeking out for beauty products backed by biotechnology research and development. The demand for sophisticated skincare and beauty products will likely continue in China, leading to more crossover opportunities between biotechnology and beauty.
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