What’s Behind the Numbers

Peter Sandys, Seroba’s Managing Partner, shines a light on a surprising new trend in the global life science investment landscape.

The value of investments in US biotech is expected to reach an all-time high in 2018. One of the main drivers in the record numbers is a surge in investment by Chinese VCs and corporates.

In September, Reuters reported that Chinese and Asian investors accounted for an incredible 42% of all investment in US biotech in the year to date1, up from just 11% in 2016.

38 Peter Sandys Chairman Irish Venture Capital Association And Managing Partner Seroba Life Sciences. Photo Karl Hussey Fennell Photography

Why the surge?

It seems to be part of the Made in China Initiative 2025, a State plan designed to increase indigenous innovation. Biopharmaceuticals is one of the key targeted sectors. The US believes that the Chinese plan may come at the expense of US and western companies with the goal of helping Chinese companies dominate international markets in coming years2.

The Trump administration is concerned and has designated biotechnology as a “critical technology” in scrutinizing investments which it deems to be threats to “national security”. On November 10, new pre-clearance rules3 for minority investments into US companies in certain biotech fields come into force. Specified fields include protein engineering, recombinant DNA, cloning and manufacturing of uncompounded medicinal chemicals and derivates such as enzyme proteins or antibiotics. Other fields such as CAR T therapies may be added.

What’s the impact for us?

It’s hard to know how this will play out in the US. To date, outside of the UK, there has been limited evidence of Chinese investment in Europe. Speculation as to why this is so, centres on priorities and on greater language and cultural barriers in Europe. If the US greatly inhibits Chinese access to technology, Chinese focus may well shift towards Europe. Get ready for Asian investors and corporates knocking on our doors.

1 As China builds biotech, cash floods U.S. startups - Robin Respaut, Julie Zhu, Reuters, 24 September 2018
2 US Trade Representative 2017 Report to Congress
3 The Foreign Investment Risk Review Modernization Act (FIRRMA)