Biotech is set for a geopolitical stress test
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February 07, 2023

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TUESDAY, FEBRUARY 07, 2023
Biotech is set for a geopolitical stress test

Tech

Reuters
15 January, 2022, 12:30 pm
Last modified: 15 January, 2022, 01:02 pm

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Biotech is set for a geopolitical stress test

Chinese entrepreneurs who moved abroad are coming home to find favourable government policies and ample funding awaiting

Reuters
15 January, 2022, 12:30 pm
Last modified: 15 January, 2022, 01:02 pm
A medical worker prepares to administer a dose of a coronavirus disease (Covid-19) vaccine to a woman at a vaccination site, during a government-organised visit, following the coronavirus disease (Covid-19) outbreak, in Shanghai, China, 19 January, 2021. PHOTO: REUTERS/Aly Song
A medical worker prepares to administer a dose of a coronavirus disease (Covid-19) vaccine to a woman at a vaccination site, during a government-organised visit, following the coronavirus disease (Covid-19) outbreak, in Shanghai, China, 19 January, 2021. PHOTO: REUTERS/Aly Song

Diseases have no borders, but biotechnology companies do. The sector has been immune to US-China tensions so far, but political risks are building.

The industry is entering a golden age in the People's Republic. Chinese entrepreneurs who moved abroad are coming home to find favourable government policies and ample funding awaiting. Rising mRNA technology star Suzhou Abogen Biosciences, led by a former Moderna scientist, raised over $1 billion last year alone from backers like SoftBank's Vision Fund and Temasek. Consulting firm ChinaBio reckons investments into Chinese healthcare hit $38 billion in 2021, up by a third from the previous year.

International partnerships have buoyed rising stars like $27 billion BeiGene. Founded in China over a decade ago, the group boasts three listings in Shanghai, Hong Kong and New York, and three global headquarters; it operates in over 20 countries. It unveiled an up-to-$1 billion agreement with Novartis for its innovative cancer treatment in late December. Of the 500-plus pharmaceutical and biotech collaborations in China in 2021, over 60% were cross-border, according to November data from ChinaBio.

It's a pleasant contrast to the dramatic financial decoupling underway in China's technology sector, prompted by diplomatic spats over accounting oversight, national security and other issues.

Markets are worried Chinese biotech's exception won't last. A media report that the industry might be targeted by US sanctions triggered a huge selloff in December. Contract drugmaker Wuxi BioLogics, which generated over 50% of its first-half revenue in North America, shed over $10 billion in market value in a single day; BeiGene's Shanghai stock tumbled 16% on their debut.

Nothing has come of the rumours so far, but the sector is vulnerable. Companies that don't allow American regulators to inspect their audit work for three years can be kicked off New York bourses, putting BeiGene's Wall Street ticker at risk. In December, Beijing updated its list of sectors where foreign investment is banned or restricted, and left gene diagnostics and therapeutic technologies on it. That forces companies developing promising treatments like US-listed Legend Biotech to rely on complex tenuous workarounds. A geopolitical stress test looks imminent.

Top News / World+Biz / China

Biotechnology / geopolitics / Chinese Technology / US-China Tensions

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