The United States may tighten cross-border mergers and acquisitions of pharmaceutical companies, and there will be no winners after the gunshots

At the moment of the delicate international situation, the domestic pharmaceutical industry continues to receive "care" from the United States

On September 15, the Biden administration signed a new policy to tighten cross-border biopharmaceutical mergers and acquisitions, requiring the Committee on Foreign Investment in the United States to strengthen risk reviews

Although this is not for domestic pharmaceutical companies, domestic pharmaceutical companies will inevitably be affected

On the day Biden signed the new bill, U.

On September 18, Kai Laiying issued an announcement that the project of acquiring overseas Snapdragon company was directly aborted

Under the political game, the pharmaceutical market is gradually wrapped up in it, and the development of the domestic pharmaceutical industry will inevitably be affected

But in fact, in today's globalized world, there will be no winners

/ 01 /

Stopped mergers and acquisitions of Chinese and American pharmaceutical companies

In the past few days, the overseas mergers and acquisitions of two domestic pharmaceutical companies, namely Gloria Ying and China Biopharmaceutical, have encountered successive obstacles

It has clearly failed CXO company Gloria Young

In February this year, Gloria Ying announced the acquisition of Snapdragon, an innovative drug API company

According to Kailaiying's vision, the acquisition of Snapdragon will further expand its business overseas, and the latter can also use Kailaiying's Tianjin plant to increase the scale

However, this win-win business did not go

The reason for the regulation is blocked by the Committee on Foreign Investment in the United States (CFIUS) from the U.

CFIUS, the agency responsible for reviewing U.

Transactions previously blocked by CFIUS have mainly involved computer systems, semiconductors and other electronic products, and there has been no inclusion of chemical or pharmaceutical-related technologies as being

But on September 15, Biden signed an executive order that gave instructions on the risk factors that CFIUS should consider when reviewing M&A deals

One of the risk factors is:

Certain transactions affect U.
S.
technology leadership in national security, including but not limited to microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, and climate adaptation technologies
.

The presence of biotechnology and biomanufacturing today means that CFIUS is getting wider and wider
.
From this point of view, CFIUS's obstruction of Gloria In's M&A transaction is not without basis
.

In fact, the U.
S.
government's sniping at the rise of biotechnology and biomanufacturing is not limited to CXO
.
Domestic pharmaceutical companies going overseas to acquire the business of American Biotech may also have variables
.

In June, China Biopharma planned to acquire F-star
for $161 million.
Now, as the U.
S.
tightens M&A deals, the plan has had to be postponed
.

According to recent disclosures from F-star, CFIUS' review of the deal is expected to last another 45 days
.
After 45 days, we will get an answer
to how the United States reacts to the cross-border merger and acquisition of domestic drugs by overseas pharmaceutical companies.

/ 02 /

The difficulty of domestic pharmaceutical companies going to sea to pick up leaks has been upgraded

For domestic biopharmaceutical players, if the United States tightens its policy on cross-border mergers and acquisitions, it is definitely not good news
.

First of all, going abroad to pick up pipelines with excellent quality is a shortcut to widening pipelines for many domestic pharmaceutical companies
.

In the past period of time, the global biotechnology market has declined, and the price of many excellent pipelines of pharmaceutical companies has dropped to a reasonable range
.
In particular, many overseas Biotechs have valuations much lower than domestic Biotech
.

At the same time, large domestic pharmaceutical companies have abundant cash flow in their hands, and choosing to buy some assets with excellent quality at this time is undoubtedly a cost-effective business
.
It is also for this reason that many domestic players have gone overseas to pick up leaks
.

For example, after January this year, Qiming Medical completed the acquisition of Cardioval, a catheter mitral valve tricuspid valve innovative therapy company; For example, Sihuan Pharmaceutical announced in January that its subsidiary has acquired all the shares of Genesis in the United States, expanding the company's medical aesthetic product pipeline
.

It can be said that cross-border mergers and acquisitions are the most convenient and efficient choice for many domestic pharmaceutical companies to broaden their pipelines
.

Nowadays, with the tightening of US policies and the closure of this fast channel, for domestic pharmaceutical companies, it is natural to lack a high-quality "purchase" channel
.

Secondly, for domestic pharmaceutical companies that want to go overseas, the merger and acquisition of overseas pharmaceutical companies has also been a good springboard
.
Compared with domestic pharmaceutical companies, overseas pharmaceutical companies have a better understanding
of various systems such as market operation in the United States and the listing of new drugs.

Through mergers and acquisitions, to some extent, it can better complete internationalization with its strength, which is also a good choice
for domestic pharmaceutical companies to efficiently layout internationalization.

Today, the tightening of cross-border mergers and acquisitions in the United States has indeed increased the difficulty
of domestic pharmaceutical companies going overseas to a certain extent.

Of course, there are always two sides to everything, and from another point of view, the tightening of US policy is not all bad
.

On the one hand, the tightening of the policy of cross-border mergers and acquisitions in the United States will force the progress
of innovative drugs in China.

The reduction of channels for introducing excellent pipelines from abroad is bound to test the self-research ability
of innovative drug players.
And this may force the survival of the fittest
of domestic innovative pharmaceutical companies.
Those who do not have the ability to develop innovative drugs will retreat, and vice versa, they will continue to move forward
.

In fact, the research and development progress of many innovative drugs in China has been at the forefront of the world, and the dependence on overseas is gradually weakening
.

On the other hand, the tightening of cross-border mergers and acquisitions will also promote the maturity
of the domestic M&A ecosystem.

Since cross-border acquisitions cannot be made, large pharmaceutical companies that do not lack money in their hands will naturally go to China to find high-quality targets, which will promote the maturity
of the domestic M&A ecology.

In fact, the number of examples of domestic large pharmaceutical companies and domestic Biotech is also increasing
.
In February this year, CSPC Pharmaceutical Group acquired Mingkang Biologics; In August this year, CR Shuanghe acquired a 50.
11% stake in Shenzhou Biologics
.

In general, it is naturally best
to be able to pick up leaks from overseas pharmaceutical companies and accelerate the development of innovative drugs in China.
However, the development of China's innovative drugs is not impossible to leave the United States, and after this road is blocked, domestic innovative drugs will still move forward
.

/ 03 /

There are no winners in the politically entrenched pharmaceutical market

Restricting the development of the domestic pharmaceutical industry, the United States may not be affected
.
Take the supply chain repatriation, for the development of innovative drugs in the United States, the benefits do not necessarily outweigh the disadvantages
.

In the context of the declining return on pharmaceutical research and development, pharmaceutical companies have to break every penny into two halves
.
The rise of the domestic CXO industry is essentially because China's labor costs are more advantageous
.

The per capita cost of China's head CXO is less than one-third of that of its head CXO peers in the United States, and the per capita cost of multinational CXOs in 2021 will be 100,000-120,000 US dollars, and the per capita cost of major domestic CXO companies will be 30,000-40,000 US dollars
.

It is not difficult to imagine that if the supply chain returns to the United States, the cost of American pharmaceutical companies will also increase
significantly.

As we all know, the United States has been plagued by high drug prices for many years
.
If, after the supply chain returns to the United States, the cost of drug development will continue to grow
.
In the end, it is the United States
that pays for the development of high-priced innovative drugs.

At the same time, restricting the development of domestic biotechnology companies will also bring the same side effects
.
Medicine has no borders, and China's innovative drugs in the future can not only benefit the Chinese, but also bring the gospel
to more American people.

At present, this situation has already happened
.
Many innovative pharmaceutical companies in China have set their sights on the United States, bringing not only me too innovative drugs, but also innovative drugs that meet the unmet clinical needs, such as "orphan drugs"
.

Restricting the development of China's biotechnology industry will inevitably cause American patients to lose some of the earliest opportunities
to use innovative drugs.
At the same time, the lack of Chinese innovative drugs as a "catfish" is bound to be detrimental to the "cost control"
of the US innovative drug market.

In the current globalization, the development of China's pharmaceutical industry will benefit the
global market.
Blindly interfering through political means affects everyone, not just Chinese companies
.