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Startups

Daiwa unit launches $135m fund to support drug discovery

DCI Partners targets Japan and Taiwan biotech startups developing COVID remedies

Investors in DCI Partners's drug discovery fund include government entities in Japan and Taiwan. (Photo courtesy of the company)

TOKYO -- DCI Partners, a venture capital fund manager of Daiwa Securities Group, has launched a 14 billion yen ($135 million) investment fund focused on drug discovery projects.

The fund is one of the largest of its type in Japan, created to pool money from government-affiliated entities in Japan and Taiwan, among others, for investment into startups in Japan and Taiwan. It aims to fund efforts to develop new technologies for producing coronavirus drugs and for genome editing.

Drug discovery projects require massive funding and a long timeline -- from basic research to clinical trials. In Japan, financial support is available from public research budgets and government-led funds, but most are for basic research. In addition, the means for raising funds immediately before commercial introduction, such as clinical trials, are limited.

Clinical trials typically require budgets of 500 million yen to 1.5 billion yen. Hence, many drug discovery startups cannot always find funding.

DCI Partners has raised about 14 billion yen from Japan's Organization for Small and Medium Enterprises and Regional Innovation -- also known as SME Support -- and Taiwan's National Development Fund, as well as investors in Japan and overseas, including regional banks, corporate pension funds and life insurers.

The fund will invest about 1 billion yen per instance in Japanese and Taiwanese companies that develop advanced technologies for coronavirus drugs, regenerative medicine and oligonucleotide therapeutics. The fund is expected to eventually raise 15 billion yen.

In addition to financing clinical trials, the fund will support startups in their development strategies and staffing efforts. When investees confirm that a new drug candidate is viable, they will increase the startup's value by, for example, selling development rights to major pharmaceutical companies. The fund will recover its investment through initial public offerings at a later date.

DCI Partners in 2015 set up a fund investing in unlisted biotech companies, of which three have already had IPOs.

Drug development has been increasing globally amid the spread of COVID-19. DCI Partners aims to limit its focus to startups in Japan and Taiwan, where there is less competition and the companies are well-positioned to enter the Chinese and U.S. markets.

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