Chinese Investors Will Continue to Flood U.S. Biopharma Market – But Regulatory Factors May Slow Growth

Jan 03, 2019

By Bob Coughlin, President & CEO of MassBio

As we enter 2019, I can’t help but look back at the incredible growth of the biopharma industry, especially the significant increase of foreign investment dollars. Chinese and other Asian investors made up nearly half of all the deal flow into U.S. biotech companies in 2017, compared to 11% in 2016. And we’re expecting to see even larger numbers for 2018.

No other country has invested as much as China – and for good reason. China is home to the world’s largest population – a population that is aging more rapidly than almost any other country in recent history, according to the United Nations. The country faces rising medical needs, both from its aging population and a high prevalence of diabetes and lung cancer, which is putting greater strains on the healthcare system and the economy at large. In fact, 36% of world’s lung cancer diagnoses came from China in 2015, yet the country’s cancer survival rate was 17% below the global average, according to the Chinese Journal of Cancer. Because of these factors plus the opportunity to invest in a mature, growing industry, the Chinese government has been investing heavily in biotech.

While China’s investments in biotech are growing rapidly, the country does not have the same level of company creation and innovation as we do in the U.S., especially in Massachusetts where startups are spinning out from academia almost daily. The logical solution is to partner, invest in or acquire startups in the U.S., which is exactly what they’re doing. For the startup community, there are still major risks to consider when accepting Chinese investments, as the country is just now starting to modernize their drug review process and regulations and protections around IP. But we’re seeing more and more companies decide that the benefits of accepting Chinese investments or partnering in some way far outweigh the risks.

In 2019, I don’t see this trend changing but there is a major hurdle in the way. New regulations for increased federal scrutiny on foreign investments (CFIUS regulation) may hamper the flow of this capital. The CFUIS pilot program has already created great uncertainty for both investors and early-stage biotechs that rely on these funds, since there is real potential for CFIUS to delay or block foreign investments into the biotech industry, which falls under CFIUS’ list of 27 critical industries that require expanded review of foreign investments. Although it’s unlikely that these investments would stop altogether, it is very possible that these investments will go to other countries and/or other industries.

To learn more about the changing dynamics of the biopharma investment landscape, register for our State of Possible Conference, MassBio’s Annual Meeting. I hope to see you there!

  • Bob Coughlin, President & CEO of MassBio

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