Interview with Advent’s Paul Zhang on China investments
Advent is a US-headquartered private equity firm with offices and investments across the globe. HBI spoke to Paul Zhang, Director at Advent’s Shanghai office, about the firm’s investments in China, and the cross-border opportunities between China and Europe.
HBI: How is Advent approaching investment in Asia, and what trends are you seeing in Asia, and in China in particular?
Zhang: We’re doing a lot in Asia. We’ve established teams in India, China, and in the last year Australia and Japan. We see the market maturing across different regions, and we see increasing buyout opportunities. Asia is increasingly central to our global thesis rather than a standalone market.
There are two healthcare trends that really excite us in China today. The first is the ageing population. Ten years from now there will be about 400 million Chinese over 60 years old. That’s bigger than the population of the US. It’s a huge demographic tailwind, creating opportunities across pharmaceuticals, consumer health products, over-the-counter medications (OTCs), and healthcare services.
Paul Zhang, Director, Advent
The second trend is that China is now a global innovation hub. There’s an accelerating trend of global pharma companies licensing in China as they face patent cliffs for existing products, and due to the cost of developing molecules being structurally lower in China than other countries, given the deep talent pool and infrastructure that would take decades to build elsewhere. It is truly exciting to see how these local innovations become a piece of the global puzzle, benefiting the world rather than just sitting in China.
For Asia more broadly, as China moves up the value chain, MNCs are diversifying their supply chains across the region. We don’t think that’s a threat to China; it’s a parallel opportunity set for investors and assets across the region.
We currently have six active investments in China across consumer, healthcare, and business services sectors. In healthcare we are particularly interested in pharma outsourcing as a global theme. We have two Chinese healthcare investments: in 2021 we bought GS Capsule, which is China’s largest empty capsule manufacturer, and in 2019 we bought BioDuro, a discovery CRO leveraging the deep talent pool and infrastructure in China. We also invested in an innovator CDMO in India called Cohance, that leverages India’s legacy in generics manufacturing.
Our pharma services strategy is built on our global track record in the sector. We have previously invested in Syneos Health, which is one of the largest clinical CROs in the US, and are now investing in Simtra BioPharma Solutions, which is a sterile injectables player in the US. Drug products are the strong suit in the US.
We see AI as the next efficiency lever. At GS Capsule, we’ve introduced AI‑enabled production planning for thousands of customised SKUs (stock keeping units), predictive quality, and supply‑chain optimisation, to help achieve greater operational efficiency.
In terms of deal types, Asia’s healthcare market is maturing, with a shift from growth capital deals to buyouts. We see more MNC carve-outs, first-generation founder exits, public-to-private opportunities, and also secondary investments.
HBI: Do you have a sense of what percentage of the new Chinese drugs are genuinely novel, as opposed to ‘copycat’ drugs?
Zhang: The consensus in the market is that over the last 10 years China’s biopharma sector has moved away from being just a “fast follower”; it is now increasingly focusing on first‑in‑class and best‑in‑class molecules. This has been spurred by increasing biotech funding and investment. Many of the world’s new ADCs, peptides, and oligonucleotides are now coming from China.
HBI: What are the cross-border opportunities between Europe and China, and how are you approaching them?
Zhang: Our global platform gives us the ability to help portfolio companies expand across markets. We look for Chinese businesses with products and services that can scale internationally, as well as European companies with growth opportunities in China.
BioDuro and GS Capsule are good case studies. BioDuro has seen tremendous growth from its European business: the revenue contribution from European clients (both biopharma and biotech) has increased from about 5% of revenue at time of acquisition to around 15% today. We believe this demonstrates the increasing penetration of pharma outsourcing in Europe, and how our offerings are competitive in serving that demand.
For GS Capsule, European revenue was around 15–20% at the time of our investment; today it accounts for more than 30%. We helped the company establish a presence locally in Europe with a direct sales force, as well as customer and technical service teams on the ground, to better serve customers.
We also help our portfolio companies expand their presence in China and actively seek China M&A opportunities. For example, we helped our Italian pharma company ICE Pharma explore Chinese opportunities and partnerships. There are also various European companies looking for supply‑chain and sourcing opportunities in Asia, and our local team and portfolio companies support them with that as well.
For our European team, when we’re looking at a European asset — nutraceuticals, for example, because China is a huge market for nutraceuticals — we would join the deal to understand their presence in China today. What are the areas they could do better in terms of go‑to‑market? Are they doing enough in e‑commerce, which is a fast‑growing segment? How are they doing with offline distribution? Do they have a capable team on the ground, and do we have a network of advisors and industry contacts that can really turbocharge the business?
The China team and European team would underwrite the business plan together. If it’s a European business, then the European team would underwrite the China piece with us at the same time, and post‑closing we work with them on China value creation and the portfolio management piece of the work.
HBI: Are there challenges or headwinds that PE firms investing in China have to navigate, and are these impacting investment?
Zhang: Interest from investors is generally there. But the strong interest in the region hasn’t always converted into deployment. That’s because of valuation, discipline, diligence depth, and regulatory uncertainty, not lack of opportunity.
There are some regulatory uncertainties in some areas of healthcare, and we want to stay away from those and focus on areas where we can enable our portfolio companies as well as our global platform. There are regulatory headwinds around volume‑based purchasing, and sensitivities around data. Digital health and medtech are therefore not areas we currently focus on in China.
But in general we think healthcare sits on the right side of the regulatory divide: it’s largely non‑sensitive, and post the recent Trump–Xi meeting, concerns have eased a little bit.
HBI: How do you navigate Chinese capital controls?
Zhang: Capital controls exist in China. You need to do the tax clearance, documentation, compliance, and regulatory filing. It can be bureaucratic, but it’s not prohibitive. Foreign PEs have been investing and exiting in China’s consumer healthcare services sector for years. So the infrastructure is mature, and the practical reality for non-sensitive sectors is far more stable than the headlines suggest.
And the legal system has modernised a lot in terms of commercial law, IP protections, and contract enforcement. China regulates the sectors and industries that foreign investors can invest in with a negative list approach. And the negative list has been shortened consistently. The restrictions on investing in manufacturing were completely eliminated in 2024, so it’s opening up to the world in terms of investment.
HBI: Do you plan to make further investments in China?
Zhang: We have a strong commitment to Asia, and to China, as one of the pillars in the region. The risk perception and bar for deployment is higher post-covid, but Advent has been deploying in China steadily through the cycle. While many of our global peers have paused or retreated, we’ve continued to invest.
We also think valuations support this point. Private deals are transacting at high single‑digit to low‑teens EV/EBITDA, which represents a meaningful discount to Western markets.
For us, it’s really about discipline and diligence. There’s abundant opportunities out there, but we want to find the right one that can achieve good returns for our investors.
We would welcome your thoughts on this story. Email your views to Hemani Vipul Sheth or call 0207 183 3779.
