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Despite the growing tension between China and the United States, worldwide pharmaceutical powerhouses are actively pursuing deals in China. The aim is to strengthen their drug pipelines and expand their presence in the world’s second-largest pharmaceutical market.
What Happened: Several significant deals have been signed this year. Notably, AstraZeneca (NASDAQ:AZN) bought China-based cell therapy developer Gracell Biotechnologies for $1.2 billion, and Novartis (NYSE:NVS) acquired the remaining shares of kidney disease therapy developer SanReno Therapeutics for an undisclosed sum, Reuters reported on Tuesday.
Bristol Myers Squibb (NYSE:BMY) and Sanofi (NASDAQ:SNY) are also reportedly scouting for potential deals in China, even as some competitors contemplate exiting the Chinese market due to COVID-induced supply chain disruptions, local economic slowdown, and price reductions to secure state insurance listing.
The increase in foreign interest in Chinese drugmakers is a blessing for struggling local firms and investors seeking to cash out on their investments, particularly as regulators tighten IPO rules, making it harder for companies to raise money for their research work.
However, the move is not without risks. “Hawkishness on China is a form of rare bipartisan consensus (in the U.S.),” cautioned Manas Chawla, CEO of global political risk advisory firm London Politica.
Larry Merizalde, CEO of South Africa-based Aspen Pharmacare revealed that the company is expanding to markets beyond China to counter risks posed by geopolitical and economic tensions.
“I think that if there is any major conflict or there is any major economic downturn, we will be impacted because any of those issues will impact the overall pharmaceutical market, so we manage those risks as a company,” Merizalde said.
As of July 16 this year, announced acquisitions of Chinese healthcare companies totaled $6.8 billion, the lowest in a decade for the same period. Foreign acquisitions accounted for $720 million in value, down 52% year-on-year, according to LSEG data.
“Multinational companies are keen to look at potential acquisition targets in biotech, innovative drugs and the top-ranked companies in other sectors,” said Sophia Wu, a managing director and head of China healthcare at investment bank BDA Partners.
Why It Matters: In 2023, AstraZeneca, Merck, and GSK signed a record $44.1 billion in biotech licensing deals with struggling Chinese drugmakers. This trend continued into 2024, with $9.8 billion worth of deals in the first quarter. These Western pharma companies are looking to expand their product pipelines as they face patent expirations of lucrative drugs.
In May, Eli Lilly secured Chinese approval for its diabetes drug tirzepatide, setting the stage for increased competition in the crucial Asian market.
However, in the same month, the U.S. imposed new trade restrictions on 37 Chinese firms, including those in the healthcare sector, escalating the Sino-US tensions. This political landscape poses a significant risk to the global pharma giants’ Chinese ambitions.
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Image by HJBC via Shutterstock
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
