Drug giants seek deals in China amidst rising Sino-US tensions

Global pharmaceutical companies are actively pursuing deals in China, undeterred by the mounting tensions between the United States and China.

These drug giants are looking to replenish their drug pipelines and strengthen their presence in the second-largest pharmaceutical market in the world.

Despite challenges such as COVID-related supply chain disruptions, an economic slowdown, and price cuts, companies like AstraZeneca, Novartis, Bristol Myers Squibb, and Sanofi are actively seeking opportunities in China.

The interest from foreign companies is a boon for struggling local firms and investors looking to cash out on their investments.

Acquisitions provide a way for multinational pharmaceutical companies to reduce costs, tap into innovative companies, and gain access to China’s vast consumer market. However, there are risks involved, as hawkishness towards China is a rare bipartisan consensus in the United States.

Historically, the majority of buyers of Chinese healthcare companies have been domestic. However, data shows that announced acquisitions of Chinese healthcare companies have been relatively low this year, with foreign acquisitions down 52% compared to the previous year.

Bristol Myers Squibb, facing challenges from patent expiries, is specifically looking for “bolt-on opportunities” in China, such as antibody-drug conjugates for cancer treatment. Sanofi also expressed interest in acquiring biotechnology companies in China. Other areas of growth attracting investor interest include women’s health, aesthetics, neurology, and auto-immunity.

For multinational companies to complete an acquisition in China, they must navigate a lengthy regulatory process involving antitrust scrutiny, equity transfer, and intellectual property transfer. There are also concerns about the potential extension of China’s data transfer restrictions to investments, as the United States seeks to reduce its supply chain dependence on China.

Despite the risks and challenges, pharmaceutical companies see China as a crucial market for growth and innovation.

The pursuit of deals in China reflects their long-term strategic goals and their confidence in the potential of the Chinese pharmaceutical market.