Trump wants to cut off China's "financial path" for new drugs to enter the global market. Industry insiders comment: He who tries to injure others will end up hurting himself.
Text by | Hu Xiangyun
Edited by | Hai Ruojing
The Trump administration has set its sights on Chinese innovative drugs that are "massively" going global through BD.
On September 10, foreign media reported that the Trump administration is preparing a new draft executive order targeting China's pharmaceutical industry, mainly focusing on the "key links in Sino-US pharmaceutical cooperation" centered on BD licensing of innovative drugs, such as restricting US pharmaceutical companies from introducing new drugs from China, mandating reviews of drug licensing transactions, and strengthening the review of Chinese clinical data.
Affected by the news, on September 11, the concept stocks of innovative drugs in the A-share and H-share markets declined collectively. Many stocks, such as BeiGene and Rongchang Biologics, weakened; several pharmaceutical companies in the Hong Kong stock market fell by more than 10%. With further interpretation of the news, at noon yesterday, the innovative drug sector partially recovered, and the decline narrowed. In the morning of the 12th, the innovative drug sector oscillated and strengthened, and the Hang Seng Biotechnology Index soared during the session.
BD transactions are currently the core form of cooperation between Chinese and US pharmaceutical companies. In the first half of this year alone, the total amount of License-out of Chinese innovative drugs reached 60.8 billion US dollars, with a down payment of 2.6 billion US dollars. The reason why Trump introduced this draft is that in the past two years, multinational pharmaceutical companies have been buying a large number of Chinese innovative drug pipelines, "turning a blind eye to US biotech companies developing similar drugs," which has aroused the dissatisfaction of some US investors.
However, due to the overly complex interest groups involved in the draft, the mainstream view in the industry is skeptical about whether the draft can be implemented. A person from a pharmaceutical company that has disclosed large-scale BD transactions said: "Currently, the main highlight of Chinese innovative drugs going global is BD." If the draft is really implemented, "it won't be a good thing." However, restricting Chinese pharmaceutical companies from doing BD will, in essence, also limit the development of large US pharmaceutical companies, which is like "killing one thousand enemies while losing eight hundred of your own."
Guo Xiaoxing, a partner in the investment and mergers and acquisitions department of Zhide Law Firm, believes that some of the restricted areas mentioned in the news are "surprising." However, considering the game of interests among all parties, even if the bill is finally implemented, it may only cover the most sensitive areas, such as cell therapy and the utilization of human genetic resources, and other transactions are still expected to proceed normally.
The draft proposes to restrict BD of new drugs and requires "mandatory review"
According to foreign media reports, this draft mainly includes four points, including restricting US pharmaceutical companies from introducing in - development drugs from China, such as in the fields of cancer, obesity, and heart disease; similar licensing transactions need to be included in the mandatory review of the Committee on Foreign Investment in the United States (CFIUS); strengthening the review of projects submitted by the US FDA using Chinese clinical data and increasing relevant fees; and supporting the production of domestic drugs in the United States, especially products like antibiotics and paracetamol that have large production capacities in China.
In fact, the industry is not unfamiliar with the latter two points. Especially after the "tariff war" at the beginning of the year, the return of manufacturing to the United States has been an old - fashioned topic. What really caused a stir are the first two points, which directly target the currently popular BD transactions of innovative drugs.
First of all, the draft hopes to limit the number of transactions because for a long time, the US pharmaceutical R & D circle has maintained a "harmonious" ecosystem: multinational pharmaceutical companies continuously introduce products from small and medium - sized biotech companies through mergers, acquisitions, or technology licensing to maintain their own innovation vitality. The latter and their behind - the - scenes investment institutions then complete their commercial exits.
However, in recent years, as Chinese innovative drugs have been emerging on the international stage, the R & D speed of First in Class drugs has been "significantly faster than that of European, American, and Japanese companies," and in all aspects of new drug R & D, such as the talent team, clinical trials, and supply chain, they can provide "faster process progress and lower costs." As a result, the acquisition targets of multinational pharmaceutical companies have gradually shifted from the United States to China.
In July, the US pharmaceutical industry media Fierce Pharma also cited data from a Jefferies research report, stating that in the first quarter of this year, 32% of biotech BD transactions occurred in China, while this figure was only around 21% in 2023 and 2024.
This was originally just a matter of normal business choice, but some investment institutions that have invested in US domestic biotech startups and are now facing exit difficulties believe that this is encroaching on their "cake." They hope to build a barrier through an executive order to force multinational pharmaceutical companies to choose "American products" again.
It is reported that the supporters include Silicon Valley billionaire Peter Thiel, Google co - founder Sergey Brin, and even the investment company under Jared Kushner, Trump's son - in - law. Among them, Thiel Capital, an investment company under Thiel, has invested in many pharmaceutical companies, such as Atai Life Science, which develops depression products.
Another point worthy of attention in the bill is the issue of mandatory CFIUS review. In this regard, Guo Xiaoxing explained that initially, CFIUS only targeted foreign investors' investments in the United States, and a similar system also exists in China. Affected by political factors, the CFIUS review has been "intensified" in recent years (collectively referred to as the reverse CFIUS rules). For example, US funds are prohibited from investing in sensitive industries in China, but this is mainly in the field of equity investment and is limited to a narrow range, such as semiconductors, AI, and military industries, and will not restrict ordinary industries.
"This time, the news also revealed that the biopharmaceutical industry, which is generally regarded as a non - sensitive industry, will be included in the supervision, and it is the more daily - operation - oriented model of asset purchase, which is quite surprising. I think even if the bill is implemented, it will be the result of compromise among all parties. For example, it will only restrict the most sensitive areas, such as cell therapy and the utilization of human genetic resources, and other transactions will still proceed normally." Guo Xiaoxing said.
Currently, even the official stance of the White House on this draft is quite contradictory. Some say that they have communicated with investors for several months, while others say that they are "not actively considering it." The industry also did not expect the government to directly make a decision to restrict BD of Sino - US innovative drugs. For example, a Jefferies research report believes that the US government is unlikely to restrict transactions between biopharmaceutical companies in the two countries because the "national security risks involved are very low."
The game among interest groups is not over, and the feasibility of the draft is in doubt
It should be noted that although the draft represents the interest demands of a part of investors, it is still unclear what proportion these demands can account for in the overall picture of the US pharmaceutical industry.
Overall, the analysis by Chinese and US securities firms believes that the entities involved in the draft are very complex, involving multinational pharmaceutical companies and small and medium - sized technology companies from different countries. Therefore, the game situation will also be very complex, but it is expected that the lobbying ability of large US pharmaceutical companies is stronger than that of Biotech and its behind - the - scenes interest groups.
In BD transactions, these multinational companies also occupy the dominant position and "occupy most of the economic benefits." Some foreign media have bluntly stated that compared with those almost unprofitable generic drugs, the scale of funds involved in innovative drug BD transactions is obviously much larger.
The aforementioned person from the pharmaceutical company also believes that although it seems that Chinese pharmaceutical companies receive the down payment and milestones first, the potential future earnings of the buyers may not be smaller. On the one hand, "cutting off" the early pipeline transactions with Chinese companies does not mean that the R & D and product competitiveness of US domestic biotech companies can be directly improved. The long - standing problems of R & D costs and efficiency have led to the fact that some companies are unable to catch up with the "rapid development pace of Chinese pharmaceutical companies," which is an indisputable fact.
On the other hand, multinational pharmaceutical companies have more abundant R & D and commercialization resources and are in an absolutely advantageous position in negotiations, enabling them to strive for more favorable terms for themselves. From the most intuitive perspective of economic benefits, they can also quickly achieve substantial returns in BD transactions by virtue of their strong resource integration and capital operation capabilities.
For example, in November 2024, BioNTech acquired Chinese innovative drug company Primis Bio for a consideration of 800 million US dollars and obtained its core bispecific antibody drug PM8002 (PD - L1/VEGF). In less than half a year, BioNTech sold the drug to multinational pharmaceutical company BMS for a down payment of 1.5 billion US dollars and a total milestone payment of 9 billion US dollars, earning huge profits.
For this reason, multinational pharmaceutical companies such as Pfizer, Merck, AbbVie, and AstraZeneca have become the main opponents of the draft. Albert Bourla, the CEO of Pfizer, previously said that cooperation with China is not only "beneficial to his own company" but also benefits US patients. He even warned that "China's progress in the field of cancer treatment should not be hindered."
In the first half of this year, Pfizer just reached a cooperation with 3SBio on the PD - 1/VEGF bispecific antibody drug SSGJ - 707, and the down payment of 1.25 billion US dollars set a new record for the down payment of BD transactions this year.
"If it is implemented, it will have a fatal blow to the enthusiasm of enterprises in both China and the United States for exchanges and cooperation. Currently, although with the improvement of the domestic stock market, US dollars are flowing back, some US dollar funds have clearly stated that they will not invest in Chinese projects because people don't know when the US government will intensify and expand the scope, which will affect the projects that have already been invested." Guo Xiaoxing mentioned.
However, it should be noted that from the previous "Biosecurity Act" to the so - called "tariff sanctions," many of Trump's "proposals" are quite gimmicky and are often used to exchange for other interests through radical attitudes. In other words, it is still very uncertain whether this draft can really be implemented.
"Policies are needed, and postures are needed, but most of the business still needs to be done." Some practitioners believe.