Killing Chinese Life Sciences, Part III: Sequencing the DNA of US-China Ties

On September 9, the BIOSECURE Act, which this blog series has been covering since March, passed by a huge majority in the United States (US) House of Representatives. The essence of the act is the termination of direct and indirect US government dealings with five Chinese biotech companies (Complete Genomics, BGI, MGI, WuXi AppTec, and WuXi Biologics), with these firms denying any ties to the Chinese military or central government, data collection or leakages, and/or role in any human rights violations.[1] This Act represents the latest salvo in Washington’s expanding effort to limit life science ties between the US and China. This blog focuses on the specifics of those ties, though serious data gaps prevent the painting of a fine-grained, comprehensive portrait. The first blog in this series examined the motivations behind the Act, its potential downsides, and its potential business implications.[2] The second blog traced the development of the Chinese life sciences sector with a focus on biotech/pharmaceuticals and the heavy role played by the Chinese government in moving the sector forward.[3]

Looking at US-China trade in pharmaceuticals and biotech products, it runs into the billions of dollars. The US imports not just a large amount of drugs and biologics from China, but a very large percentage of active pharmaceutical ingredients (APIs), 75 percent, from China. Since US imports from other countries like India often incorporate extensive amount of Chinese APIs, actual US reliance is higher than 75 percent. The US also makes extensive use of Chinese biotech services like DNA sequencing as well as Chinese instruments, instrument components, and laboratory gear.[4] Bilateral ties also include US investment in Chinese life sciences. It is hard to quantify total investment, but publicly available information indicates that it runs into the billions of dollars. Notable investments include Amgen’s $2.7 billion investment in BeiGene in 2019 and Pfizer’s $200 million investment in Cstone in 2020.[5] US venture capital (VC) involvement in Chinese firms blossomed for almost 10 years between 2015 and 2022, but annual deals have declined notably, reaching a lowly $102.6 million in 2022.[6] Investment also takes the form of incubators such as Johnson & Johnson’s venture in Shanghai.[7] Chinese investment in US life sciences similarly experienced high growth for a period, reaching near $2 billion near the end of the 2010s versus an unimpressive $100 millions a decade before.[8] Stricter investment review processes in the US, US-China tensions, and VC industry woes were key dampeners. Chinese investments in the US have taken the form of mergers and acquisitions and greenfield investments by firms like WuXi Biologics, WuXi STA, and Beijing Gan & Lee Biotechnology. More recently, we find so-called “NewCo arrangements,” which entail the creation of startups with American VC firms where the Chinese firm licenses to and invests in the startup.[9]

Another intertwining of the US and China in life sciences exists in licensing. The total figure is unavailable, but clearly is massive. To illustrate, between 2020 and 2021, three American pharmaceutical and biotech giants (AbbieVie, Biogen, and Eli Lilly) alone signed $4.5 billion of licensing deals with Chinese companies.[10] Contract work and R&D in China constitute another a facet of US-China interactions in life sciences. American biotech companies rely heavily on Chinese entities like WuXi, which provide critical manufacturing capabilities. This is evidenced by the fact that since March 2024 more than twenty US biotech companies have highlighted their dependency on WuXi companies in their annual reports, with at least five already seeking alternative partners.[11] American players like Eli Lilly and Pfizer maintain large R&D centers in China and Bristol Myers Squibb has a deal to develop and commercialize Sichuan Biokin Pharmaceutical’s antibody-drug conjugate, a targeted anti-cancer treatment.[12] Aside from the above, there is extensive collaboration between top US research institutions and Chinese counterparts (often with corporate involvement) and, worth mentioning, collaboration can assume multiple forms.[13]

The above is more than simple background. It helps highlight the degree of dependency that currently exists, how complicated it may be to downsize or unwind US-China ties in the life sciences space, and what potential costs may flow from this downsizing or unwinding. For example, if American firms face limits on their dealings with Chinese ones then they may not be able to gain access to Chinese innovations that can both make them money and help them cure diseases. The above also suggests that data availability is a problem and that businesspeople and policymakers need more and better information in order to grasp the true extent of dependency as well as the costs (and benefits) of moving away from China; that is, if they are so inclined.

The Act awaits action in the US Senate. While the political climate there is supportive of passage, it may be slow in acting given there will be a new administration with, by all appearances, both a full as well as a highly evocative agenda. Even if the Senate passes the Act, modifications are possible along the way. It remains to be seen how newly elected President Donald Trump will respond if and when a bill lands on his desk. After all, while Trump generally embraces an adversarial stance towards China, he is mercurial and transactional.[14] The next and last blog in this series will reiterate American anxieties about US life science ties with China, identify how these concerns are shaping policymaking, and offer some suggestions to improve policymaking and help businesses minimize their risks.